# PEPSICO INDIA HOLDINGS P. LTD v. STATE OF 1075

- **Citation:** [2009] 8 S.C.R. 1073
- **Court:** Supreme Court of India
- **Decided:** 2009-05-11
- **Case number:** Civil Appeal No. 3456 of 2009
- **Bench:** S.B. Sinha, Dr. Mukundakam Sharma
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/pepsico-india-holdings-p-ltd-v-state-of-1075-26023
- **Pages:** 42

## Headnote

..
"'
Kera/a General Sales Tax Act, 1963 - s. 10 - Sa/es Tax
- Exemption from, to new industrial units - By a Notification
- By further Notification, exemption withdrawn - However, c
withdrawal notification not applicable to industries already
..•
having commenced production or taken effective steps to
establish the unit before the cut off date - Company in
question taking effective steps for setting up its unit after
•
getting assurance from the competent authority that it would
D
get the tax exemption - Revenue issuing show cause notice
to the company for payment of sale tax - Challenge to the
same upheld upto Supreme Court -
Despite grant of
Eligibility Certificate by the competent authority, Revenue
denied grant of exemption to the Company - Held: The
E
company was entitled to sale tax exemption - Revenue is
_.
bound by the doctrine of promissory estoppel.
Practice and Procedure - Cost - Denial of payment of,
to successful litigating party - On the ground that it instructed
F
its counsel not to appear in the case despite the fact that the
case was part-heard.
A policy decision was taken by State of Kerala by
way of a Notification dated 3.11.1993 providing exemption·
to new industrial unit set up in the State from payment G
,,
of sales tax with a view to attract more investment in the
State. The Notification provided for issuance of Eligibility
Certificate in respect of medium and large scale industry
by Director of Industries and Commerce assisted by
1073
H
1074
SUPREME COURT RE:PORTS [2009] 8 S.C.R.
A Kerala State Industrial Development Corporation (KSIDC)
or Kerala Financial Corporation on appiication made by
the units.
Appellant company, relying on the policy decision,
8 intended to set up a medium scale industrial unit in the
State. On getting the assurance from KSIDC that the new
industrial unit would be exempted from paymel1t of sales
tax as per the Notification, appellant-company entered
into an agreement for lease in respect of land for setting
up the unit. It paid a sum towards the amount of
c considetation for acquisition of the land by a demand
draft on 24.12.1999: It also took steps for procurement of
machinery etc. in December, 1999.
The Notification dated 3.11.1993 was amended by
D Notification dated 31.12.1999 notifying to withdraw the
exemptions. However, the exemption, thereby was not
withdrawn in respect of units which had already
commenced commercial production, set up or taken
effective steps to set up industrial units prior to 1.1.2000
E etc.
A further amendment was made to the Notification
dated 31.12.1999 by a notification dated 31.3.2000. It was
explained thereby, that the unit shall be deemed to have
placed firm orders for the purchase of plant, machinery
F etc., if the unit had made advance payments therefor by
means of demand draft/cheque which had been credited
to the account of seller prior to 1.1.2000.
Appellant-company though
commenced
its
G commercial production on 6.3.2001, it was not granted
the Eligibility Certificate. In revenue recovery proceedings
for provisional sales tax assessment, demand notice was
issued to the appellant. The liability was denied stating
that the company was exempt from payment of sales tax
H having fulfilled all the requirements of exemption
-
'I"
PEPSICO INDIA HOLDINGS P. LTD. v. STATE OF 1075
KERALA & ORS.
..
Notification.
A
...
The order of demand was also challenged in writ
petition, which was disposed of directing the competent
authority to decide the application for exemption from
payment of sales tax. Special Secretary (Taxes)
B
addressed a letter to Commissioner of Commercial taxes
clarifying that appellant was eligible for grant of sales tax
;~
"i
exemption. Principal Secretary (Industries) also wrote a
letter to the Director of Industries and Commerce reconfirming that it was eligible for sales tax exemption. c
However, the application was not decided and extension
of time for disposal of the same was granted.
_.
f
Thereafter, Provisional Assessment No

## Text

_Characters 0–39,993 of 73,532. This is a partial read: ask again with offset=39993 for what follows._

' ,,
[2009] 8 S.CR. 1073
PEPSICO INDIA HOLDINGS P. LTD.
A
-
v.
STATE OF KERALA & ORS.
(Civil Appeal No. 3456 of 2009)
MAY 11, 2009
B
[S.B. SINHA AND DR. MUKUNDAKAM SHARMA, JJ.]
..
"'
Kera/a General Sales Tax Act, 1963 - s. 10 - Sa/es Tax
- Exemption from, to new industrial units - By a Notification
- By further Notification, exemption withdrawn - However, c
withdrawal notification not applicable to industries already
..•
having commenced production or taken effective steps to
establish the unit before the cut off date - Company in
question taking effective steps for setting up its unit after
•
getting assurance from the competent authority that it would
D
get the tax exemption - Revenue issuing show cause notice
to the company for payment of sale tax - Challenge to the
same upheld upto Supreme Court -
Despite grant of
Eligibility Certificate by the competent authority, Revenue
denied grant of exemption to the Company - Held: The
E
company was entitled to sale tax exemption - Revenue is
_.
bound by the doctrine of promissory estoppel.
Practice and Procedure - Cost - Denial of payment of,
to successful litigating party - On the ground that it instructed
F
its counsel not to appear in the case despite the fact that the
case was part-heard.
A policy decision was taken by State of Kerala by
way of a Notification dated 3.11.1993 providing exemption·
to new industrial unit set up in the State from payment G
,,
of sales tax with a view to attract more investment in the
State. The Notification provided for issuance of Eligibility
Certificate in respect of medium and large scale industry
by Director of Industries and Commerce assisted by
1073
H
1074
SUPREME COURT RE:PORTS [2009] 8 S.C.R.
A Kerala State Industrial Development Corporation (KSIDC)
or Kerala Financial Corporation on appiication made by
the units.
Appellant company, relying on the policy decision,
8 intended to set up a medium scale industrial unit in the
State. On getting the assurance from KSIDC that the new
industrial unit would be exempted from paymel1t of sales
tax as per the Notification, appellant-company entered
into an agreement for lease in respect of land for setting
up the unit. It paid a sum towards the amount of
c considetation for acquisition of the land by a demand
draft on 24.12.1999: It also took steps for procurement of
machinery etc. in December, 1999.
The Notification dated 3.11.1993 was amended by
D Notification dated 31.12.1999 notifying to withdraw the
exemptions. However, the exemption, thereby was not
withdrawn in respect of units which had already
commenced commercial production, set up or taken
effective steps to set up industrial units prior to 1.1.2000
E etc.
A further amendment was made to the Notification
dated 31.12.1999 by a notification dated 31.3.2000. It was
explained thereby, that the unit shall be deemed to have
placed firm orders for the purchase of plant, machinery
F etc., if the unit had made advance payments therefor by
means of demand draft/cheque which had been credited
to the account of seller prior to 1.1.2000.
Appellant-company though
commenced
its
G commercial production on 6.3.2001, it was not granted
the Eligibility Certificate. In revenue recovery proceedings
for provisional sales tax assessment, demand notice was
issued to the appellant. The liability was denied stating
that the company was exempt from payment of sales tax
H having fulfilled all the requirements of exemption
-
'I"
PEPSICO INDIA HOLDINGS P. LTD. v. STATE OF 1075
KERALA & ORS.
..
Notification.
A
...
The order of demand was also challenged in writ
petition, which was disposed of directing the competent
authority to decide the application for exemption from
payment of sales tax. Special Secretary (Taxes)
B
addressed a letter to Commissioner of Commercial taxes
clarifying that appellant was eligible for grant of sales tax
;~
"i
exemption. Principal Secretary (Industries) also wrote a
letter to the Director of Industries and Commerce reconfirming that it was eligible for sales tax exemption. c
However, the application was not decided and extension
of time for disposal of the same was granted.
_.
f
Thereafter, Provisional Assessment Notice for the
·period April, 2002 to December 2002 was challenged in
.._
another writ petition. During pendency of the writ petition,
D
grant of Eligibility Certificate was denied to the appellant.
The writ petition was decided in favour of the appellant
upto Supreme Court. Thereafter, appellant was granted
Eligibility Certificate by Director of Industries and
Commerce. Despite that, Deputy Commissioner (General)
E
Commercial Tax denied the benefit of sales tax exemption
on the ground that the appellant failed to take effective
"
steps in terms of relevant notifications. Writ petition was
;..
filed challenging the denial of exemption benefit which
was dismissed by High Court. Intra-Court appeal was also
F
dismissed. Hence the present appeal.
Allowing the appeal, the Court
_,
HELD: 1.1 In the facts and circumstances of the
case, the respondents must, thus, be held to be bound
G
..
by the doctrine of promissory estoppel. [Para 42] [1113G-H]
Kusumam Hotels (P) Ltd. v. Kera/a State Electricity Board
and Ors. 2008 (9) SCALE 448; Mis. Badri Kedar Paper Pvt.
H
~
1076
SUPREME COURT REPORTS (2009] 8 S.C.R.
A Ltd. v. U.P. Electricity Regulatory Commn. and Ors. 2009 (1)
•
SCALE 137; A.P. Steel Re-Rolling Mill Ltd. v. State of Ketala
...
and Ors. (2007) 2 SCC 725; U.P. Power Corporation Ltd. ahd
Anr. v. Sant Steels and Alloys (P) Ltd. and Ors. (2008) 2 SCC
771, relied on.
B
Tata Iron and Steel Co. Ltd. v. S,ate of Jharkhand and
Ors. (2005) 4 SCC 272, distinguished.
.-
1.2. The Notification dated 3.11.1993 was issued in
terms of an industrial policy, pursuant whereto exemption
c was to be granted for a period of seven years. Appellant
had placed orders for supply of plant and machinery both
with advances and without advances. What was
necessary was to take effective steps for setting up of
...
new industrial units. A deeming provision existed in terms
D whereof the effective steps would be considered to have
.J
been taken; if it has: (a)obtained provisional registration
(applicable only in the case of SSI units); (b) owned or
acquired or has been allotted land for establishing the
industrial units and applied for financial support from any
E regular financial institution/ Government before 1.1.2000;
or (c) in the case of self financed units acquired or placed
firm orders for the purchase of the necessary plant and
machinery before 1.1.2000. [Para 32] [1105-C-H]
1.3. It is in the aforementioned context, applications
F for grant of exemption by the self-financed units are
required to be taken into consideration. They are either
to acquire or place firm orders for the necessary plant
and machinery. It is not that order for entire machinery
and equipment were required to be placed for, before the
G first day of January, 2000. Even in relation thereto, a legal
fic;tion has been created stating that if such unit had
~
...
made any advance payments therefor by means of
I.-
demand draft or cheque, the requirements would stand
satisfied. The Director of Industries and Commerce,
H opined that apart from a few items, firm orders have been
J
='
PEPSICO INDIA HOLDINGS P. LTD. v. STATE OF 1077
'
KERALA & ORS.
placed in respect of some machineries by means of A
•
demand draft or cheques and the same has been
credited to the account of the sellor prior to the first day
of January, 2000. [Paras 32 and 33) [1106-B-E]
1.4. The exemption Notification dated 3.11.1993 was
withdrawn by a Notification dated 31.12.1999, subject of B
course to an exception carved out therein, viz., the
~
industries which had been set up on or before 1.1.2000
and which have already commenced commercial
production, set up or taken effective steps to establish c
industrial unit prior to 1.1.2000 were to be allowed the
benefit of exemption. That Notification stood amended on
31.3.2000 in terms whereof some benefits had been given
to an entrepreneur like the appellant. Appellant need not
have questioned the validity thereof as the Notification in
D
..
question was issued by relaxing the conditions imposed
in the Notification dated 31.12.1999 which was one of
,,
withdrawing the grant of earlier benefit&. Thus, by.reason
--<
of the said notification, certain benefits had been
confirmed on it. [Paras 34 and 35) (1108-A-D]
E
1.5. Only because the procedural sanction of grant
of financial exemption was to be received from the
Deputy Commissioner (General) Commercial Taxes, the
same, would not mean that the conditions had not been
satisfied. In any event, the certificate granted by the
F
Director deserved serious consideration. Both the Single
Judge as also the Division Bench did not consider this
aspect of the matter. [Para 36) [1108-E-F]
·
1.6. Although payment of advance in respect of some
G
machinery and plant would subserve the requirements for
the purpose of obtaining the eligibility certificate, the
Single Judge read the word 'any' to be synonymous to
the word 'all', whereas the Division Bench considered it
to be "substantial". It is in that view of the matter the
H
1078
SUPREME COURT REPORTS [2009] 8 S.C.R.
A opinion of the Single Judge in first round of litigation
assumes importance. [Para 37) [1108-G-H; 1109-A]
2. Although a contention has been raised that despite
opportunities granted, the appellant had not adduced the
8 additional evidence to establish compliance of the
conditions precedent for grant of eligibility certificate, it
has not been denied or disputed that even in the first
round of litigation, the requisite documents formed part
,,.
of the writ petition. The Deputy Commissioner (General)
C Commercial Taxes, even if it be assumed that he was not
totally bound by the observations made in the first round
of litigation, should have taken into consideration the
interpretation of the Notification adverted to by the Single
Judge of High Court in the first round of litigation. [Para
31) [1104-G-H; 1105-A-B]
D
3. Ordinarily, this Court would not have gone into the
findings of the fact arrived at by the statutory authorities
but was only required to consider the correctness of
judgment of the Single Judge as also the Division Bench
E of the High Court. However, even in a case of this nature,
the authorities stuck to their own stand which is not
expected from a statutory authority. [Para 39) [1109-E-F]
K.I. Shephard and Ors. v. Union of India and Ors. (1987)
4 SCC 431; Rajesh Kumar and Ors. v. Dy. CIT and Ors.
F (2007) 2 SCC 181; State of Rajasthan and Anr. v. Mahaveer
Oil Industries and Ors. (1999) 4 SCC 357, referred to.
Case Law Reference:
G
(1999) 4 sec 357
referred to.
Para 33
(1987) 4 sec 431
referred to.
Para 39
(2001) 2 sec 181
referred to.
Para 39
(2005) 4 sec 212
distinguished.
Para 40
H
..
PEPSICO INDIA HOLDINGS P. LTD. v. STATE OF 1079
KERALA & ORS.
2008 (9) SCALE 448
relied on.
Para 41
2009 (1) SCALE 137
relied on.
Para 41
(2001) 2 sec 12s
relied on.
Para 42
(2ooa) 2 sec 111
relied on.
Para 42
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
3456 of 2009.
From the Judgment & Order dated 11.12.2008 of the High
Court of Kerala in Writ Appeal No. 2922 of 2007.
Harish N. Salve, Amar Gupta, C.S. Lodha, Andhya Kumar,
Vibha Datta Makhija, Purvez Bilimoria-in-person for the
Appellants.
Dushyant Dave, P.V. Dinesh, Santhosh Krishnan and
Anirudh Rajput for the Respondents.
The Judgment of the Court was delivered by
S.B. SINHA, J. Leave granted.
1. Interpretation of an exemption notification dated
3.11.1992 issued by the State of Kerala dated 3.11.1993 as
modified by notifications dated 31.12.1999 and 31.3.2000 is
in question herein.
2. The said question arises in the following factual matrix.
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
A
B
c
D
E
F
G
H
1080
SUPREME COURT REPORTS [2009] 8 S.C.R.
A No.1729/1993 issued under Section 1 O of the Kerala General
Sales Tax Act, 1963 (hereinafter referred to for the sake of
brevity as, "the said Act") providing for exemption to N1:!w
Industrial Units set up in the State of Kerala, the relevant clauses
whereof read as under :
B
c
D
E
F
"4. In the case of new Industrial Units under Medium and
Large Scale Industries, there shall be an exemption for a
period of seven years from the date of commencement of
commercial production-
(a) · in respect of the tax payable by such units under the
Kerala General Sales Tax Act, 1963-
(b)
(i)
On the turnover of sale of goods
manufactured and sold by them within the
state; and
(ii)
On the turnover of goods, taxable at the point
of last purchase in the State, which are use1d
by such units for manufacturing other goods
for sale within the State or inter-state; and
in respect of the Surcharge payable under Section
3 of the Kerala Surcharge on Taxes Act, 1957 (Act
11 of 1957) in relation to the goods referred to in
sub-clause (a) above."
3. The said notification provided for issuance of eligibility
certificate in respect of medium and large scale industries
assisted by the Kerala State Industrial Development
Corporation ("KSIDC" for short) or the Kerala Financiail
Corporation inter alia by the Director of Industries and
G Commerce on application made by such units, and orders of
exemption issued by the Secretary, Board of Revenue (Taxes),
Thiruvananthapuram. It is stated that in stead and place of
Secretary, Board of Revenue (Taxes), Thiruvananthapuram, the
H
, .
J
PEPSICO INDIA HOLDINGS P. LTD. v. STATE OF 1081
KERALA & ORS. [S.B. SINHA, J.]
said jurisdiction of the Board was being exercised by Deputy
A
Commissioner (General) Commercial Taxes.
4. Appellant is said to have written a letter to the Principal
Secretary, Department of Industries, Government of Kerala on
or about 11.5.1999 seeking confirmation of the benefits, such
B
as incentive of sales tax exemption on the goods produced etc.,
available to the proposed new unit, stating:
"Proposal for Investments in Kera/a State
PepsiCo in India
c
PepsiCo Inc. has set up a fully integrated operation in India
- manufacturing, research and development marketing,
distribution, exports and franchise - covering fruit/
vegetable processing, snack foods and beverages.
Presently, our activities provide direct/indirect employment
D
to over 60,000 persons. We are also one of the large
exporters in the country.
PepsiCo activities in Kera/a
PepsiCo India Holdings Ltd. revived the closed and sick
manufacturing unit of Contract Bottling Company Ltd. at
Angamaly, by entering into an arrangement for the
manufacture of soft drinks.
EWe now propose to make substantial investments of over
F
Rs.50 crores in the first two phases spread over three
years in setting up a new unit in Kerala for the manufacture
of soft drinks with the full range of Pepsi brands. We expect
the project will generate substantial direct/indirect
employment opportunities and also stimulate other related
G
economic activities. The Greenfield unit will either be set
up directly or, by assisting a local entrepreneur.
H
A
B
c
D
E
F
1082
SUPREME COURT REPORTS [2009] 8 S.C.R.
CONFIRMATION REQUESTED
1. Availability of Sa/es Tax exemption benefit
As per the State Government's Industrial policy, new
industrial Units under the medium and large scale sector
are eligible for exemption from sales tax, purchasu tax,
surcharge and central sales tax for a period of seven
years, upto aggregate financial limit of upto 100% of the
value of fixed capital investments of the unit. Soft drinks
has been notified as a thrust industry in the list of food
processing industries notified by the Government. We
request your confirmation that the proposed green field
unit, which will be set by the Company directly, or through
a nominee entrepreneur, will be eligible for Sales Tax
exemption.
2. Allotment of land for setting up new unit
In our discussions with the Hon'ble Finance Ministur and
the State Industries Development Corporation, we were
assured that the Government would speedily allocate land
(approx. 25 to 30 acres) with adequate water supply,
power etc. in Kerala. The preferred location for us is
Walayar or Kanjikode. Kindly confirm that we can get
possession of land within 4 weeks, as we propose to put
up the plant in 9 months from the date of land allocation."
5. A meeting took place by and between the
mpresentatives of the appellant and the authorities concerned.
By a letter dated 12.5.1999, Kerala Industrial Infrastructure
Development Corporation replied to the appellant's
G aforementioned letter dated 11.5.1999 in the following terms:
H
"This is with reference to your letter dated 11th May 1999
addressed to Mr. K. Mohandas, Principal Secretary
(Industries). We are extremely delighted to find your
proposal for investment in the State of Kerala.
)
PEPSICO INDIA HOLDINGS P. LTD. v. STATE OF 1083
KERALA & ORS. [S.B. SINHA, J.]
As regards the two points which have asked in your letter,
A
i.e. availability of sales tax exemption benefit and allotment
of land for setting up of the unit, I wish to inform you the
following:-
1. Availability of Sales Tax exemption benefit:
8
We are requesting the KSIDC to clarify the position. You
may kindly discuss with the Managing Director, KSIDC.
2. Allotment of land for setting up the new unit:-
,
Regarding this, as we discussed, we offer to give you the c
required land in the Districts of either Palakkad, Ernakulam
or Kozhikkode, as per your choice. The land can be made
available as per the time frame you have indicated in your
letter."
D
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.
E
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:
"As per your telephonic talk with me a few days ago,
F
recently while I was in Thiruvananthapuram I briefly
discussed with the Hon'ble Minister of Industry, Kerala Smt.
Suseela Gopalan about your plans for investing in Kerala
for setting up a bottling plant and allied facilities. The
Principal Secretary, Dept. of Industry was also present
G
during the discussion.
The Hon'ble Minister has assured that all
promotional support and possible assistance under the
State Govt.'s Industrial policy will be extended to the new
H
1084
SUPREME COURT REPORTS [2009] 8 S.C.R.
A
venture you are planning to set up.
B
Please rest assured that our Co-operation, KINFRA,
and the District Industries Centre, Palakkad will extend
their co-operation to your executives concerned."
8. Pursuant or in furtherance of the said assurance given
to the appellant, it entered into an agreement for lease in
respect of 50 acres of land for setting up the new industriall unit
at Kanjikode in the district of Palakkad on 28.12.1999. For the
aforementioned purpose, a sum of Rs.2,77,64,000/- towards
C the amount of consideration for acquisition of the said land was
paid on 24.12.1999 by a demand draft. It furthermore took
steps for procurement of machinery, etc. being:
D
E
F
G
H
(a)
Filed IEM with SIA vide SIA ACK/2655/SIA/IMO/
1999 dated 28.12.1999.
(b)
Obtained the necessary consent from the Kerala
State Pollution Control Board on 20.12.1999
(c)
Placed firm orders for supply of large numbe!r of
plant and machinery and in some cases made
advance payments through cheques. The fact that
in cases where advances payments were made,
the payment was credited prior to January 1, 2000
was confirmed by Deutsche Bank by their le!tter
dated September 29, 2000. This included the
following, apart from several others:
Pet conveyor systems on 28.12.1999
Blow Moulder, including installation and
commissioning thereof, on 20.12.1999
Paramix Plant, Deaeration Plant, Mixing Plant,
Beverage Chilling Plant, Carbonation Plant and
Switch & Control Unit & Frame on 28.12.1999.
•
'\
PEPSICO INDIA HOLDINGS P. LTD. v. STATE OF 1085
KERALA & ORS. [S.B. SINHA, J.]
9. The aforementioned Notification dated 3.11.1993,
A
-
however, was amended by a notification dated 31.12.1999,
stating:
"Government have decided to withdraw the exemptions/
deferment in respect of tax under the Kerala General Sales
Tax Act, granted to Industrial Unit as per Notification SRO
B
No. 1729/93 in respect of Industrial Units which are set up
...
on or after 1.1.2000, existing units which undertake
diversification, expansion or modernization and also in
respect of small scale industrial units which are registered c
as sick unit~ on or after 1.1.2000. But in the case of units
which have already commenced commercial production,
set up or taken effective steps to set up industrial units prior
to 1.1.2000 or which have been registered as sick, units
prior to 1.1.2000, will be allowed the benefit of exemption
D
or deferment, as the case may be, granted as per
notification SRO No. 1729/93.
This notification is intended to achieve the above object."
10. Yet again an amendment was effected by issuance of E
a notification dated 31.3.2000, which is in the following terms:
"S.R.O. NO. 29512000: - In exercise of the powers
conferred by Section 10 of the Kerala General Sales Tax
Act, 1963 (15 of 1963) the Government of Kerala, having
considered it necessary in the public interest so to do,
F
hereby make the following amendments to notification
issued in GO (P) No. 181/99/TD dated 31st December,
1999 and published as SRO No. 1092/99 in the Kerala
Gazette Extraordinary No. 2433 dated 31st December,
1999, namely:-
G
~ •
AMENDMENT
In the said Notification,
(i) in sub-clause (ii), for the words, figures and brackets,
H
A
B
c
D
1086
SUPREME COURT REPORTS [2009] 8 S.C.R.
"(b) owned or acquired" or has been allotted land for
establishing the industrial unit and (c) applied for financial
support from any regular financial institution/Government
of acquired the necessary plant machinery provided that
the unit "commences commercial production on or before
31st day of December, 2000", the following shall be
substituted, namely:-
"(b) owned or acquired or has been allotted land for
establishing the industrial units and applied for financial
support from any regular financial institution/government
before 1.1.2000 or (c) in the case of self financed units
acquired or placed firm orders for the purchase of the
necessary plant and machinery, before 1.1.2000 provided
that the unit commences commercial production on or
before the 31st day of December, 2001".
(ii) in sub-clause (iii), for the words, figures "acquired
necessary plant and machinery" and equipments before
the first day of January 2000, provided that such units
"commences commercial products under such
E
diversification, expansion or modernization or before the
31st day of December 2000", the following shall be
substituted, namely:-
F
G
"(a) or acquired necessary plant and machinery and/or
equipments or (b) has owned or acquired or has been
allotted land and has applied for loan from any regular
financial institution and/or (c) has placed firm order,; for the
purchase of such plant and machinery and equipments
before the 1st day of January 2000 provided that such unit
commences commercial production of'such diversification,
expansion or modernization on or before the 31st day of
December, 2001.
A unit shall be deemed to have placed firm orders
for the purchase of plant, machinery and equipments if
H
such unit had made any advance payments therefore by
-
-
)
PEPSICO INDIA HOLDINGS P. LTD. v. STATE OF 1087
KERALA & ORS. [S.8. SINHA, J.]
+
means of demand draft of Cheque which has been
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credited to the account of the seller prior to 1st January
2000. The onus of proving that an industrial unit had
placed firm order for purchase of such plant, machinery
and equipments prior to 1st January 2000 shall be on
such industrial unit:
8
(iii) after sub-clause (iv), the following sub-clause
shall be inserted, namely:-
"(v) where on enquiry it is found that any industrial unit
had secured exemption by furnishing false information or c
forged documents, the authority which issued the
--
exemption order, shall, after affording such industrial unit
a reasonable opportunity of being heard, cancel the
exemption"."
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(emphasis supplied)
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
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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.
F
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.
A writ petition marked as O.P. No. 20675 of 2001 was filed
G
.,.
by it before the Kerala High Court in July 2001 questioning the
aforementioned order of assessment dated 17.5.2001. By
re.ason of an order dated 7.9.2001, the aforementioned writ
petition was disposed of, directing:
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J._ .
1088
SUPREME COURT REPORTS [2009] 8 S.C.R.
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"Petitioner submits that his Ext. P6 application for
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exemption from payment of sales tax is pending before the
second respondent. In the meanwhile, steps have already
been taken for assessment and completed as p~r Ext. P7
whereby huge amounts are to be paid. There is already a
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stay granted by this Court and the same is pending from
13.07.2001 onwards. The only grievance is regarding the
delay in disposal of Ext. P6 application. In the above
circumstances there is no purpose in keeping the original
petition pending. Therefore, the original petition is
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disposed of directing the second respondent to take up
for consideration Ext. P6 application on merits and pass
appropriate orders thereon, in accordance with law, within
a period of two months from today. Petitioner will
_:-
immediately produce a copy of this order along with a copy
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of this judgment before the second respondent. It is made
'
clear that Ext. P. 7 order will be subject to the orders
passed by the second respondent on Ext. P6 application.
Till such time orders are passed by the second
respondent, interim order passed by this Court will
continue."
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12. Pursuant thereto or in furtherance thereof, the matter
was placed before the Special Secretary (Taxes) who by
reason of a letter dated 15.11.2001 addressed to the
Commissioner of Commercial Taxes clarified that the appellant
/
F was eligible for grant of sales tax exemption.
13. The Principal Secretary (Industries) also wrote a letter
to the Director of Industries & Commerce on or about
21.12.2001 reconfirming that it was eligible for sales tax
G exemption.
Yet again, the said authority by a letter dated 25.7.2002
~
.._.
informed the Director of Industries & Commerce stating that the
term 'necessary plant and machinery' need not be the entire
plant and machinery and further that the appellant could be held
(
H to have taken effective steps as per the said notifications. The
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PEPSICO INDIA HOLDINGS P. LTD. v. STATE OF 1089
KERALA & ORS. [S.8. SINHA, J.]
Director of Industries & Commerce, however, could not pass
A
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.
14. The Sales Tax Officer, Palakkad, however, issued
8
Provisional Assessment Notice for the period April 2002 to
December 2002 on or about 7.2.2003. Questioning the legality
and/or validity of the said notice and the order of assessment,
the appellant filed writ petition being O.P. No. 8563 of 2003 in
the Kerala High Court.
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:
" .... In tum vide letter No. 29815/82/02/ID dt. 23.12.2002
Government have clarified that there is no need to issue
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a general clarification for SRO No. 1092/99 and 295/2000
regarding STE. This position was reported to the State
Level Committee held on 15.3.2003 for clarification. Also
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the views in the matter contained in letter No. 23364/83/
2000/TD dt. 15.11.2001 of the Special Secretary to
Government (Taxes) to the Commissioner of Commercial
Taxes, Thiruvananthapuram and in Lr. No. 36693/82/01/
ID dated 21.12.2001 of the Principal Secretary to
Government (Industries) were also presented before the
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State Level Committee for its consideration. As per SRO
No. 29/99 dated 6.1.1999 the Government have authorized
the State Level Committee, under Section 10 of the KGST
Act, as the competent authority to issue clarifications,
wherever necessary, regarding the scheme of tax
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exemption.
The State Level Committee examined the above
issues and held that in the case of Mis Pepsicola India
Marketing Company, the purchase orders and the other
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SUPREME COURT REPORTS [2009] 8 S.C.R.
documents related to payment of actvance to machinery
suppliers do not show that the Company has fully satisfied
the definition of "Effective steps" as required and as
stipulated in SRO No. 1092/99 as modified by SRO No.
295/2000.
ORDER
In the above circumstances and for the foregoing
reasons, the claim of Mis Pepsicola India Marketing
Company, Kanjikode, Palakkad for getting Eligibility
Certificate for STE vide their application dated 30.5.2001
(Ext. P6 in OP No. 20675/2001) stands rejected."
16. A learned single judge of the High Court disposed of
the writ petition filed by the appellant being O.P. No. 8563 of
D 2003.
In coming to its conclusion, the learned judge took into
consideration the averments contained in paragraphs 6, 7, 8,
9, 12 and 13 of the counter affidavit filed on behalf of the State
that the appellant had not complied with the essential conditions
E for grant of exemption from payment of sales tax as advance
payment in the specified manner had not been made by it
before 1.1.2000 having regard to the fact that the Notification
required such payments in respect of 'necessary plant and
machinery and/or equipments' and not to any or 'certain or a
F small portion of the plant and machinery necessary for the
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H
project', to hold:
"31. The latter part of Sub-clause (iii) which is applicable
to Sub-clauses (ii) and (iii) alike is a deeming provision
as per which if any advance payments are made by means
of demand drafts or cheque for the purchase of plant,
machinery and equipments which have been credited to
the account of the seller prior to January 1, 2000, it shall
be deemed that firm orders have been placed by the unit
for the purchase of such plant, machinery and equipments.
PEPSICO INDIA HOLDINGS P. LTD. v. STATE OF 1091
KERALA & ORS. [S.B. SINHA, J.]
This deeming provision, if complied with, it must be noted,
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only dispenses with the requirement of establishing that
-
firm orders have been placed by the unit for the purchase
of plant, machinery and equipments which are required for
setting up the unit and for commencing commercial
production. This, however, does not mean that the above
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is the only means for establishing that "firm orders have
been placed". The last sentence in Clause (iii) latter part
•
states that "the onus of proving that an industrial unit had
placed firm order for purchase of such plant, machinery and
equipments prior to 1st January, 2000 shall be on such c
industrial unit". This makes the position clear that it is open
to the industrial unit to independently establish by
producing other materials that firm orders for purchase of
plant, machinery and equipments are placed before
January 1, 2000."
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>.
It was furthermore held:
"33. In the case of small-scale industrial unit, if it has
~
obtained provisional registration prior to January 1, 2000,
--"<
it could be said that the said unit has taken effective steps.
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Similarly, an industrial unit can be considered to have taken
effective steps, if it has owned or acquired or has been
allotted land for establishing the industrial unit and also
applied for loan from any regular financial institution/
-(
Government before January 1, 2000. Similarly, in the case
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of self financed units acquired or placed firm orders for the
purchase of necessary plant and machinery before January
1, 2000, it can be considered to have taken effective steps
provided the unit commences commercial production on
or before December 31, 2001. Regarding the third
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situation, it is stated that a unit shall be deemed to have
-
placed firm orders for the purchase of plant, machinery and
•
equipments if such units had made any (emphasis
supplied) advance payments therefor by means of demand
draft or cheque which have been credited to the account
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1092
SUPREME COURT REPORTS [2009] 8 S.C.R.
A
of the seller prior to the first day of January, 2000. Here it
must be noted that Sub-clauses (ii) and (iii) provide for the
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circumstances under which an industrial unit can be
..;...
considered/deemed to have taken effective steps but it is
not exhaustive. The burden is on the industrial unit to
B
establish that the unit had placed firm orders for purchase
of plant, machinery and equipments prior to January 1,
2000."
The learned judge furthermore opined that the doctrine of
c promissory estoppel shall be applicable in a case of this nature.
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 Special Leave Petition being SLP
No. 17308 of 2004 filed thereagainst has also been dismissed.
D
~
The Director of Industries & Commerce thereafter granted
an Eligibility Certificate to the appellant stating that it was also
eligible for grant of sales tax exemption. Despite the same,
however, the Deputy Commissioner (General) Commercial
E . Taxes denied the grant of benefit of sales tax exemption on the
premise that it had failed to take effective steps)n terms of the
relevant notifications by an order dated 5.1.2007.
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
,
F writ petition was dismissed. An intra court appeal preferred
thereagainst has been dismissed by reason of the impugned
judgment.
17. Before adverting to the rival contentions of the parties,
G we may place on record a disturbing fact. This case, on being
mentioned by a Senior Counsel of this Court, this Court, by an
order dated 5.01.2009 directed the matter to be placed at the
~ -
top of the Board, subject to overnight part-heard. It was taken
up for hearing out of turn.
H
PEPSICO INDIA HOLDINGS P. LTD. v. STATE OF 1093
KERALA & ORS. [S.B. SINHA, J.]
'
Mr. H.N. Salve, learned Senior Counsel, started his
A
j.
submissions on 3.3.2009. On the next day, i.e. on 4.3.2009, he
made a statement that he had been instructed not to argue.
The proceeding sheet of this Court reads as under:
"Mr. Harish Salve, learned senior counsel appearing
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on behalf of the petitioner states today that he has been
instructed not to appear in this case. Ms. Vibha Datta
Makhija, Advocate-on-record also states that in that view
of the matter she too would withdraw herself from this
case. Thus, there is no representation on the part of the c
petitioner.
Mr. Purvez Bilimoria, Executive Director (Legal)
appearing for the petitioner company seeks adjournment
in this matter. Keeping in view the facts and circumstances
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..
of this case, we are of the opinion that this Court can not
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allow the same.
J
We called upon Mr. Bilimoria to argue the matter as
a party in-person. He expresses his inability to do so. We
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refuse to adjourn the matter and call upon the learned
senior counsel appearing on behalf of the State of Kerala
to proceed with the arguments. However, any written
, submissions filed on behalf of the petitioner shall be
entertained."
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18. However, after the arguments of Mr. Dave were over,
Mr. Bilimoria sought permission to appear in the case. W~
have, despite such a reprehensible conduct on the part of the
~
appellant, allowed its representative to argue the case on behalf
of the appellant-in-person.
F
19. Mr. Purvez Bilimoria would urge:
i.
Eligibility certificate ha\{ing been granted by .the
authorities of KSIDC arid the Director of Industries
and Commerce, the Secretary of State could not
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1094
SUPREME COURT REPORTS [2009) 8 S.C.R.
have sit in appeal over their decisions particularly
when the High Court itself had gone into the issues.
ii.
Grant of Eligibility Certificate could have been
denied only when the conditions other than those
noticed by the Kerala Finance Corporation were
not satisfied.
iii.
Having regard to the findings of the High Court in
Writ Petition being O.P. No. 8563 of 2003, the writ
appeal and the Special Leave Petition
whereagainst were dismissed; the State could not
have taken a contrary stand.
iv.
The State having regard to the promises made to
the appellant pursuant whereto it altered its position
was bound thereby.
v.
The amen.ded notifications and in particular the
notification dated 31.3.2000 being benevolent
ones, the same should have been construed
liberally.
vi.
Appellant, pursuant to or in furtherance of the
promise, having not collected any tax from its
consumers, a purposive interpretation to the sajd
notification should have been rendered by the High
F
Court.
20. Mr. Dushyant Dave, learned senior counsel appearing
on behalf of the respondents, on the other hand, would contend:
(i)
A finding of fact having been arrived at by the
G
authorities that the appellant had not placed firm
orders of necessary plant and machinery within the
meaning of the provisions of exemption notification
which having been affirmed by both the learned
Single Judge as also the Division Bench of the
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High Court, no interference therewith is warranted.
PEPSICO INDIA HOLDINGS P. LTD. v. STATE OF 1095
KERALA & ORS. [S.B. SINHA, J.]
(ii)
The judgment an'd order dated 7.9.2001 in O.P. No.
A
20675 of 2001 cannot be held to be binding upon
the Director of Industries as also the Deputy
Commissioner (General) Commercial Taxes as by
reason thereof the said authorities were merely
asked to consider the matter relating to grant of
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eligibility certificate.
(iii)
The Director of Industries having issued a
certificate, subject to the concurrence of the Deputy
Commissioner (General) Commercial Taxes, the
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same was not conclusive.
(iv)
The exemption granted under the notifications being
conditional, the said condition being imperative in
character requires a strict interpretation.
21. The exemption notification was issued for the purpose
of achieving the economic growth in the State. The letters
exchanged by and between the appellant and the authorities
D
of the State, which we have noticed heretobefore, in no
uncertain terms, show that the appellant was intending to set
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up a plant in the State of Kerala pursuant to the provisions
made by the State.
22. It is beyond any doubt or dispute that pursuant to or in
furtherance of the said assurance, the appellant altered its
position. It made a huge investment. It entered into an
F
agreement of lease with the authorities of the State for which it
had expended a sum of Rs. 2,77,64,000/-. The lease is for a
period of 99 years with an option of renewal for another period
of 99 years.