Area-based exemption cannot be denied for incidental non-notified land where manufacturing is substantially within the notified industrial area.

Area-based exemption under Notification No. 50/2003-C.E. could not be denied merely because incidental or ancillary portions of a manufacturing unit fell in khasra numbers not expressly mentioned, where the unit was located in the notified industrial area and the manufacturing activity was substantially carried on there. The reference to khasra or plot numbers was treated as identifying the industrial area, not as requiring every part of the unit to fall within the listed numbers. On the facts, the main production activity was within the notified khasra numbers, so denial of exemption was unsustainable and the assessee was held entitled to the area-based benefit.

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Issues: Whether exemption under Notification No. 50/2003-C.E. could be denied merely because some ancillary portions of the unit fell in khasra numbers not specifically mentioned in the notification, where the manufacturing activity was carried on in the notified industrial area.

Analysis: The notification was read as granting area-based exemption to units located in the specified industrial growth centres, industrial estates and industrial areas, and the reference to khasra or plot numbers was treated as a means of identifying the industrial area rather than confining exemption to every individual plot number forming part of a unit. On a harmonious construction, the decisive consideration was the location of the unit in the notified industrial area and the substantial location of the manufacturing activity within the specified area. The record also showed that the main production activity was within the notified khasra numbers, and the non-specified portions were only incidental.

Conclusion: The denial of exemption on the ground that some non-notified khasra numbers were involved was unsustainable, and the assessee was entitled to the area-based exemption.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential benefit in accordance with law.

Ratio Decidendi: In an area-based exemption scheme, where the notification identifies an industrial area by khasra or plot numbers, exemption cannot be denied merely because incidental or ancillary portions of the unit fall outside those numbers if the unit is located in the notified area and the manufacturing activity is substantially carried on there.

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