Legalcops – Legal Blog – Business Registrations & Tax Compliances

Hi there,

Whether diversification will be considered if goods of different natures are produced?


The appellant established a unit of manufacture of “Spun Line Crown Cork” which is used for packing glass bottles.

The appellant was granted the eligibility certificate under ‘modernisation’ instead of the eligibility certificate under the ‘diversification’ scheme by joint spot inquiry.

It is required to be noted that if the goods manufactured would have been considered as a new product under the diversification scheme, the appellant was entitled to the exemption under Section 4-A(5) of the Act.

The appellant aggrieved went to the tribunal, high court but the appeals got dismissed. Hence this appeal before the Supreme Court.


When the provisions of the Act unequivocally provide that the “diversification” can be considered only in a case where “goods of different nature” are produced, and only then the exemption shall be available. The goods manufactured on “diversification” must be “different”, “distinct” and a “separate” goods in nature. In the present case, the goods manufactured on the use of advanced and/or modern technology, cannot be said to be a different commercial activity at all. The High Court has not committed any error in refusing to grant an exemption to the appellant. We are in complete agreement with the view taken by the High Court


  1. A person claiming an exemption must satisfy all the conditions of the exemption provision.
  2. Exemption provisions are to be read as they are and to be construed literally and should be given a literal meaning.


Dismissed. No costs

Link to the official judgment –

Delineated by Advocate Hemdeep Moran

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