Industrial tax exemption: effective steps may be proved by bona fide project actions, not only by advance payments.

Under the Kerala sales tax exemption scheme for new industrial units, "effective steps" before 1 January 2000 could be shown by bona fide project activity such as acquisition of land and placement of firm orders for machinery, especially for self-financed units. The notification's reference to advance payments was only one evidentiary mode and did not make substantial advance payment mandatory unless the text clearly said so. The rejection of exemption on the premise that full or substantial advance payment for all machinery was required was treated as unsustainable, and the matter was directed for fresh, reasoned consideration on the petitioner's evidence without being bound by the impugned clarification.

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Issues: Whether the petitioner had taken "effective steps for setting up new industrial unit" before 1 January 2000 so as to qualify for sales tax exemption under the relevant notifications, and whether the rejection order passed on that basis was sustainable.

Analysis: The exemption scheme under section 10 of the Kerala General Sales Tax Act, 1963, as modified by the later notifications, extended benefits to new industrial units that had either commenced production before the cut-off date or had taken effective steps before that date. For self-financed units, the notification treated acquisition of land and placement of firm orders for necessary plant and machinery before 1 January 2000 as sufficient indicia of effective steps, and the deeming clause regarding advance payments was only one mode of proving firm orders, not the exclusive mode. The expression "any advance payments" indicated that the quantum of advance was not decisive by itself; what mattered was whether the materials showed serious, bona fide steps towards setting up the unit. The rejection order was found unsustainable because the authority had treated the case as if advance payment for all machinery in substantial amounts was mandatory, had relied on irrelevant considerations, and had not independently examined the petitioner's documents in the light of the notification scheme. The decision was also tainted by jurisdictional and procedural defects, since the statutory authority abdicated its function in favour of the State Level Committee without proper hearing.

Conclusion: The petitioner's claim required fresh consideration and the rejection order was set aside.

Final Conclusion: The matter was remitted for a fresh, reasoned decision on the exemption application after independent consideration of the petitioner's evidence and without being bound by the impugned clarification.

Ratio Decidendi: Under an industrial incentive notification, "effective steps" may be established by bona fide acts showing serious commencement of the project, and a deeming clause concerning advance payments is not exhaustive of the means of proof unless the notification clearly so provides.

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