The Hindu Business Line : Kerala HC fiat on Pepsi plea for sales tax exemption

THE Kerala High Court on Friday directed the Director, Industries and Commerce, to "independently" consider afresh the application submitted by the Pepsi Indian Holdings Pvt Ltd seeking sales tax exemption for its plant at Kanjikode in Palakkad.

Mr Justice G. Sivarajan, while quashing the orders of the Director as well as the State-Level Committee rejecting the company's request for sales tax exemption, also directed the Director to take a decision on the application within two months. Till such time, the proceedings initiated for recovering tax for the months of December to April 2002 had been stayed.

The application seeking five-year sales tax exemption given to the industries set up prior to January 1, 2000, had been rejected on the ground that the company had not acquired the necessary plant and machinery before that date .

The Government contended that payment of a meagre advance of less than 1 per cent of the total estimated cost of the plant and machinery could not be regarded as "effective steps" as contemplated under the government notification concerned for the purchase of the plant and machinery.

In fact, the order rejecting the company plea was passed by the State-Level Committee. The court observed that the Director had abdicated "the jurisdiction vested in him to decide on the issue."

The Director had only communicated the decision taken by the State-Level Committee to the company. The Committee did not appear to have given any opportunity to the petitioner to substantiate its claim before the committee.

Though there was reference to the documents given by the petitioner to establish that it had placed firm order, there was "no independent consideration of all those documents to find out whether the company had satisfied the requirement of effective steps."

Even in cases where no advance payment had been made, it could be established by other means. It was not necessary that advance payment had to be made to the seller through cheques or demand drafts. It would depend on the credibility, creditworthiness and relationship between the purchaser and the seller, the court said.

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