PEPSICO INDIA HOLDINGS P. LTD. versus STATE OF KERALA & ORS.

Citation: [2009] 8 S.C.R. 1073 · Decided: 11-05-2009 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

' ,, 
[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- By further Notification, exemption withdrawn - However, c 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 re-
confirming 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 pet

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