Pepsico India Holdings P.Ltd vs State Of Kerala & Ors

Appellant is a private limited company. It intended to set up a medium scale industrial unit at Kanjikode, Palakkad in the State of Kerala for manufacturing soft drinks under the brand name `Pepsi'. Such a decision was taken purported to be relying on or on the basis of a policy decision taken by the State of Kerala to grant exemption from payment of sales tax with a view to attract more investment in the State. The said policy decision was issued by way of a Notification bearing SRO No.1729/1993 issued under Section 10 of the Kerala General Sales Tax Act, 1963 (hereinafter referred to for the sake of brevity as, "the said Act") providing for exemption to New Industrial Units set up in the State of Kerala, the relevant clauses whereof read as under :

6. Indisputably, KSIDC by its letter dated 13.5.1999 confirmed that the new industrial unit would be exempted from payment of sales tax for the first seven years subject to a ceiling of 100% of capital investment.

7. The Chairman of KSIDC by its letter dated 4.6.1999 informed the appellant that all promotional support and possible assistance under the State Government's industrial policy would be extended to the proposed new industrial unit, stating:

11. Indisputably again, the new industrial unit of the appellant commenced commercial production on and from 6.3.2001. Appellant, however, was not granted the eligibility certificate.

Revenue recovery proceedings in connection with the provisional sales tax assessment for the month of April 2000 were also started wherefor a notice of demand for a sum of Rs.47,83,769/- was issued to the appellant on 17.5.2001. Appellant replied thereto, stating that it was exempt from payment of any sales tax having fulfilled all the requirements in terms of the aforementioned exemption notification. It also applied for grant of sales tax exemption on 20.6.2001.

Yet again, the said authority by a letter dated 25.7.2002 informed the Director of Industries & Commerce stating that the term `necessary plant 13 and machinery' need not be the entire plant and machinery and further that the appellant could be held to have taken effective steps as per the said notifications. The Director of Industries & Commerce, however, could not pass an appropriate order in terms of the direction of the learned single judge and sought for an extension which was allowed by an order dated 1.8.2002.

15. During pendency of the said writ petition, the Director of Industries & Commerce by its order dated 8.6.2003 rejected the prayer for grant of eligibility certificate made by the appellant, stating:

Respondents preferred a writ appeal thereagainst which was dismissed by the Division Bench of the said Court by an order dated 15.6.2004. A 17 Special Leave Petition being SLP No. 17308 of 2004 filed thereagainst has also been dismissed.

Another writ petition being W.P. (C) No. 3115 of 2007 was filed by the appellant. By an order dated 30.11.2007, the said writ petition was dismissed. An intra court appeal preferred thereagainst has been dismissed by reason of the impugned judgment.

(3) The finding in Ext. P24 that the activity carried on by the petitioner does not tantamound to manufacture is fundamentally erroneous."

32. This brings us to the question of interpretation of the notifications.

38. Appellant's bonafide is not in dispute. The fact that it had set up an industry and started commercial production nine months prior to the cut-off date, viz., 31.12.2001 is also not disputed.

Furthermore, in this case, the appellant admittedly has even not realized any tax from its purchasers. Keeping in view the facts and circumstances of the case, we are of the opinion, that the respondents must, thus, be held to be bound by the doctrine of promissory estoppel.

43. For the reasons aforementioned, the impugned judgment is set aside. The appeal is allowed. However, in view of the fact that the appellant had instructed the Senior Counsel not to appear in the matter despite the fact that the same was heard in part, we not only deny cost to it but also direct that the appellant must pay a sum of rupees one lakh to the Kerala State Legal Services Authority within four weeks from date. 45

May 11, 2009