Industrial exemption cannot be withdrawn when closure results from market collapse beyond the unit's control.

An industrial exemption under Rule 28A could not be withdrawn where the unit stopped production because of genuine business conditions beyond its control. The record showed that the product had lost market demand and that similar units in the area had also closed after buyers began manufacturing the finished product themselves. On those facts, the closure was treated as a consequence of market collapse rather than a voluntary or mala fide abandonment of the unit, so the proviso protecting failures caused by reasons beyond control applied. The exemption-related withdrawal orders were therefore unsustainable and the assessee obtained relief.

---

---

Issues: Whether the closure of the industrial unit and the consequent fall in production were due to circumstances beyond the control of the assessee so as to protect the exemption benefit and invalidate the withdrawal orders.

Analysis: The exemption was granted for a fixed period, but the assessee availed only a small part of the eligible benefit before the unit stopped production. The record showed that the assessee's product had lost market demand and that similar units in the area had also faced closure because their buyers began manufacturing the finished product themselves. On these facts, the closure was treated as arising from business conditions and market loss rather than a voluntary or mala fide abandonment of the unit. The governing proviso to Rule 28A accepted that non-fulfilment of production conditions would not attract withdrawal where the failure was explained as due to reasons beyond the control of the unit.

Conclusion: The issue was decided in favour of the assessee. The closure and loss of production were held to be beyond the assessee's control, and the withdrawal orders could not be sustained.

Final Conclusion: The exemption-related orders were set aside and the assessee was granted relief.

Ratio Decidendi: Where an industrial unit fails to maintain production or continues business due to genuine market collapse or comparable circumstances beyond its control, the exemption benefit cannot be withdrawn merely because the unit stopped operations before the expiry of the exemption period.

---