SC: Pepsi entitled to sales tax exemption in Kerala

The Supreme Court has held that Pepsico India Holdings Private Limited is entitled to Sales tax exemptions in the state of Kerala as per the state government notification dated November 3, 1992, vide which the state government had invited investment assuring that all new industrial units, medium and big, will be given Sales tax exemption in the state.

Pepsico, manufacturers of soft drink under the brand name of Pepsi, took 50 acres of land on lease in the Palakkad district of Kerala for Rs 2,77,64,000 after having been assured by the state government in 1999 that they will be given Sales tax exemption for the first seven years subject to a ceiling of 100 per cent of capital investment. Later the government backed out from its promise and the Kerala High Court also did not grant any relief to the appellant. By that time Pepsico had invested Rs 30,46,94,552. The Commissioner, Sales Tax, denied the benefit of exemption to Pepsi.

A bench comprising Justices S B Sinha and Mukundakam Sharma while allowing the appeal of Pepsico Private Limited held, ‘Furthermore, in this case, the appellant admittedly has even not realised any tax from its purchaser.’ ‘Keeping in view the facts and circumstances of the case, we are of the opinion that the respondent, thus, must be held to be bound by the doctrine of promissory estoppel,’ the court held.

The apex court, however, imposed a fine of Rs one lakh on the appellant for instructing its counsel not to appear before the Supreme Court inspite of the fact that the matter was part heard and directed Pepsico to deposit the amount with the Kerala State Legal Services Authority within four weeks.