Area based exemption continues after transfer, relocation, and addition of a product when eligible manufacturing activity remains unchanged.

An eligible industrial unit does not lose area based exemption merely because it is transferred to a new owner, shifted to another premises within the exempted area, or begins manufacturing an additional product, if the original eligible manufacturing activity continues and the governing notification or circulars do not prohibit such changes. The accepted engineer's certificate and transfer of capital goods supported the conclusion that the unit remained eligible after relocation. The Board circulars were read as permitting alteration of plant and machinery, change in ownership, and continuation of exemption for the balance period. On that basis, denial of the exemption was unsustainable.

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Issues: Whether an assessee that purchased and took over an eligible industrial unit could continue to claim area based exemption for the remaining period, despite shifting the unit to a new premises and manufacturing an additional product.

Analysis: The evidence showed that the earlier unit was taken over along with its capital goods, which were transferred and installed in the new premises. The chartered engineer's certificate regarding the nature and installation of the machinery was accepted, there being no convincing material to discard it. The relevant Board circulars clarified that the notification did not bar addition or alteration of plant or machinery, manufacture of a new product, or continuance of exemption where ownership of an eligible unit changed. They also supported shifting of the eligible unit to a new location within the exempted area. Since the original eligible manufacturing activity continued in the new unit, the mere addition of a new product did not defeat the exemption.

Conclusion: The denial of area based exemption was unsustainable and the assessee remained entitled to the benefit for the balance period.

Final Conclusion: The impugned order was set aside and the assessee succeeded in the appeal.

Ratio Decidendi: An eligible unit does not lose area based exemption merely because it is transferred to a new owner, shifted to another premises within the exempted area, or adds a new product, so long as the eligible manufacturing activity continues and the notification or governing circulars do not prohibit such changes.

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