Unit-wise exemption compliance bars clubbing production of an expansion unit with the original unit under sales tax rules.

A unit-specific sales tax exemption condition required the beneficiary industrial unit to maintain production for the next five years at not below the average production of the preceding five years. The Supreme Court held that an expanded unit and the original unit were independent for this purpose, so their production could not be clubbed to show compliance. The expansion and eligibility provisions could not override the clear language of the post-exemption condition in Rule 28A(11), and liberal construction of exemption rules did not permit aggregation of separate units. Breach of the production requirement therefore triggered the prescribed consequence under Rule 28A(11)(b), and the assessee could not avoid that result.

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Issues: Whether the production of an expansion unit could be clubbed with the original unit for satisfying the post-exemption production requirement under Rule 28A(11)(a)(i) of the Haryana General Sales Tax Rules, 1975, and whether failure to maintain production at the prescribed level attracted the consequences under Rule 28A(11)(b).

Analysis: The exemption granted under Rule 28A was unit-specific. The requirement in Rule 28A(11)(a)(i) was that the beneficiary industrial unit must continue its production for the next five years at not below the average production of the preceding five years. The Court held that the expanded unit and the original unit were independent for the purpose of this condition, and their production could not be combined to show compliance. Rule 28A(2)(d) and Rule 28A(2)(f), which deal with expansion and eligibility, could not override the clear stipulation in Rule 28A(11). Once the production condition was violated, the consequence prescribed in Rule 28A(11)(b) followed. The Court also held that liberal construction of exemption provisions could not justify reading into the rule a permission to club separate units.

Conclusion: The production of the expansion unit could not be clubbed with the original unit, and the assessee was liable to suffer the consequences for breach of Rule 28A(11)(a)(i).

Final Conclusion: The appeal succeeded, the High Court's interference was unsustainable, and the orders of the tribunal and the assessing authorities were restored.

Ratio Decidendi: A tax exemption condition requiring continued production by a beneficiary unit must be applied unit-wise, and production of a separate expansion unit cannot be aggregated to avoid the statutory consequence of breach.

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