Rural area classification under exemption notification upheld where competent revenue records supported the factory's rural status.

Small scale exemption depended on whether the factory site qualified as a rural area under the notification, which treated a village in land revenue records as rural unless it fell within excluded local bodies or an area notified as urban. The record did not show that the village was covered by any excluded urban category under the relied-upon urban land law. The jurisdictional revenue authority clarified that the village was situated in a rural area, and that competent classification supported the exemption claim. The departmental challenge therefore failed, and the exemption was sustained on the basis of the village's rural revenue classification.

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Issues: Whether the respondents were entitled to small scale exemption on the footing that the factory was located in a rural area.

Analysis: The exemption notification defined "rural area" with reference to a village in the land revenue records while excluding areas falling within specified local bodies or areas notified as urban by the Central or State Government. The record did not establish that the village concerned fell within any urban category under the relied-upon urban land law. On the contrary, the jurisdictional revenue authority clarified that the village was situated in a rural area, and such clarification from the competent authority supported the respondents' claim.

Conclusion: The respondents were entitled to the small scale exemption and the department's appeal failed.

Final Conclusion: The exemption claim was sustained on the basis of the competent revenue classification of the village as rural, and the departmental challenge was rejected.

Ratio Decidendi: Where the exemption turns on rural-area status, the competent revenue authority's classification and clarification will prevail unless the department proves that the location falls within an excluded urban category under the notification.

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