Firm order requirement for sales tax exemption cannot be denied merely because advance payment was small.

A self-financed new industrial unit seeking sales tax exemption under the Kerala General Sales Tax Act was not required by the notification to make any minimum advance payment when placing firm orders for plant and machinery before the cut-off date. The effective-steps condition was satisfied by the existence of a firm order, and the size of the advance depended on the parties' contractual terms. A rejection based solely on the fact that the advance was only a small fraction of the machinery cost was therefore unsustainable, and the exemption claim had to be reconsidered in accordance with law.

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Issues: Whether, for claiming sales tax exemption as a self-financed new industrial unit, the requirement of having taken effective steps by placing firm orders for purchase of the necessary plant and machinery before the cut-off date could be rejected merely because only a small advance had been paid.

Analysis: The relevant notification, issued under Section 10 of the Kerala General Sales Tax Act, 1963, granted exemption to new industrial units that had taken effective steps before the cut-off date. For self-financed units, the specified mode of taking effective steps was placing firm orders for the necessary plant and machinery before the cut-off date, followed by commencement of commercial production within the stipulated time. The notification did not prescribe any minimum advance payment as a condition for recognising a firm order. The amount of advance depended on the contractual terms between the parties, and the existence of only a small advance could not by itself negate the fact that a firm order had been placed.

Conclusion: The rejection of the eligibility certificate on the ground that the advance payment was only a small fraction of the plant and machinery cost was unsustainable, and the assessee was entitled to the benefit of the exemption application being reconsidered in accordance with law.

Ratio Decidendi: Where a sales tax exemption notification requires a self-financed industrial unit to have placed firm orders for plant and machinery before a cut-off date, the absence of a minimum advance payment condition means that the existence of a firm order cannot be denied merely because the advance paid was small.

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