Hindustan Coca-Cola Beverages Pvt. Ltd. v. Director of Industries and Commerce, Government of Kerala, and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM** **THURSDAY, THE 15TH DAY OF DECEMBER 2011/ 24TH AGRAHAYANA 1933** **OP.No. 34257 of 2001 (C) -----------------------------------** **PETITIONER:** **-------------------** **HINDUSTAN COCA-COLA BEVERAGES PVT. LTD., MOOLATHARA VILLAGE, CHITTOOR, PALAKKAD – 678 534, REPRESENTED BY ITS FINANCE MANAGER SRI. V. PADMANABHAN.** **BY SRI.M.PATHROSE MATTHAI, SENIOR ADVOCATE, ADVS. SRI.SAJI VARGHESE, SRI.A.KUMAR.** **RESPONDENTS:** - **------------------------** **1. DIRECTOR OF INDUSTRIES AND COMMERCE, GOVERNMENT OF KERALA, TRIVANDRUM.** **2. ASSISTANT COMMISSIONER (ASSESSMENT), SPECIAL CIRCLE II, TRIVANDRUM.** **3. DEPUTY COMMISSIONER (APPEALS), DEPARTMENT OF COMMERCIAL TAXES, KOLLAM.** **4. DEPUTY TAHSILDAR (R.R), TRIVANDRUM.** **5. THE DEPUTY COMMISSIONER (GENERAL), DEPARTMENT OF COMMERCIAL TAXES, TRIVANDRUM.** **6. THE GOVERNMENT OF KERALA, REPRESENTED BY SECRETARY, TAXES (B) DEPARTMENT, TRIVANDRUM.** ## **R1 TO R6 GOVERNMENT PLEADER SRI. SOJAN JAMES.** **THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 15-12-2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **Prv.** **O.P. NO.34257/2001-C:** **APPENDIX** ## **PETITIONER'S EXHIBITS:** - **EXT.P.1: COPY OF THE S.R.O. NO.1729/1993.** - **EXT.P.2: COPY OF THE S.R.O. NO.1092/1999.** - **EXT.P.3: COPY OF THE SRO. NO.295/2000.** - **EXT.P.4: COPY OF THE APPLICATION DTD. 18/08/2000 AND ACKNOWLEDGEMENT DT. 28/09/2000.** - **EXT.P.4.A: COPY OF THE SUMMARY STATEMENT OF INVOICES.** - **EXT.P.4.B: COPY OF THE BANK STATEMENTS.** - **EXT.P.5: COPY OF THE JUDGMENT IN O.P.NO.6133/2001 DTD. 23/02/2001.** - **EXT.P.6: COPY OF THE PROCEEDINGS OF THE R.1. DTD. 22/10/2001.** - **EXT.P.7: COPY OF THE AGREEMENT TO SELL DTD. 21/05/1999.** - **EXT.P.8: COPY OF THE AGREEMENT TO SELL DTD. 20/09/1999.** - **EXT.P.9: COPY OF THE AGREEMENT FOR APPOINTING CONSULTANT DTD. 25/02/1999.** - **EXT.P.10: COPY OF THE STATEMENT SHOWING THE PAYMENTS MADE TO CONSULTANTS.** - **EXT.P.11: COPY OF THE STATEMENT SHOWING THE AMOUNT OF RS.626.48 LACS CREDITED TO THE ACCOUNT OF CONSOLIDATED CONSTRUCTION CONSORTIUM LIMITED.** - **EXT.P.12: COPY OF THE LETTER OF APPROVAL FROM CHIEF INSPECTOR, DIRECTOR OF FACTORIES AND BOILERS VIDE LETTER NO. D2/9446/99/F&B/R.DIS.** - **EXT.P.12.A: TRUE ENGLISH TRANSLATION EXHIBIT.P.12.** - **EXT.P.13: COPY OF THE CERTIFICATE OF STABILITY DTD. 31/01/2000.** - **EXT.P.14: COPY OF THE CERTIFICATE OBTAINED FROM ASSISTANT EXECUTIVE ENGINEER, SIDCO.** - **EXT.P.15: COPY OF THE CENTRAL EXCISE REGISTRATION CERTIFICATE DT. 08/09/1999.** - **EXT.P.16: COPY OF THE LETTER NO.2377/SIA/IMO/1999 DTD. 10/12/1999.** - **EXT.P.17: COPY OF THE CONSENT TO ESTABLISH GRANTED BY POLLUTION CONTROL BOARD NO.PCB/CE/153/99 DTD. 21/07/1999.** - **EXT.P.18: COPY OF THE CONSENT TO OPERATE ISSUED BY POLLUTION CONTROL BOARD VIDE LETTER NO.PCB/PLKD/AIR/166/2000 DTD. 19/02/2000.** - **EXT.P.19: COPY OF THE LETTER NO.181/99 DTD. 20/07/1999 FROM THE BOILER INSPECTOR.** **O.P. NO.34257/2001-C:** - **EXT.P.19.A: TRUE ENGLISH TRANSLATION OF EXT.P.19.** - **EXT.P.20: COPY OF THE LETTER DTD. 30/12/1999 FOR PERMISSION TO INSTALL DG SETS TO ELECTRICITY BOARD.** - **EXT.P.21: COPY OF THE PERMISSION GRANTED BY THE ELECTRICITY BOARD VIDE LETTER NO.B4-30357/99/CEI DTD. 27/01/2000.** - **EXT.P.22: COPY OF THE LICENSE GRANTED BY DIRECTOR OF FACTORIES VIDE REGISTRATION NO.PGT/09/449/2000 DTD. 29/02/2000.** - **EXT.P.22.A: TRUE ENGLISH TRANSLATION OF EXT.P.22.** - **EXT.P.23: COPY OF THE LETTER DTD. 15/12/1999.** - **EXT.P.24: COPY OF THE LETTER SRO 1092/1999 DTD. 31/12/1999.** - **EXT.P.25: COPY OF THE LETTER DTD. 05/05/2000 SENT BY PETITIONER.** - **EXT.P.26: COPY OF THE STATEMENT SHOWING THE DETAILS OF PURCHASE ORDERS PLACED UP TO 31/12/1999 SUCH AS DETAILS OF INDIVIDUAL PLANT AND MACHINERY, NAME OF SUPPLIER, VALUE OF THE ORDER, DATE OF THE ORDER, AMOUNT AND DATE OF PAYMENT ETC.** - **EXT.P.27: COPY OF THE STATEMENT SHOWING THE DETAILS OF PAYMENTS TO SUPPLIERS OF PLANT AND MACHINERY FROM 27/01/1999 TO 31/12/1999.** - **EXT.P.28: COPY OF THE PANCHAYATH ORDER DTD. 27/01/1999 VIDE NO.5/463/99.** - **EXT.P.29: COPY OF THE FIRST EXCISE INVOICE DTD. 29/03/2000.** - **EXT.P.30: COPY OF THE STATEMENT SHOWING INVOICE WISE DETAILS AGAINST EACH OF THE RELEVANT PURCHASE ORDERS.** ## **RESPONDENTS' EXHIBITS: NIL.** ## **//TRUE COPY//** ## **P.A. TO JUDGE.** **Prv.** ## **C.K.ABDUL REHIM, J.** --------------------------------O.P.No.34257 OF 2001 --------------------------------Dated this the 15[th] day of December, 2011 ## **J U D G M E N T** Issue involved in this writ petition pertains to eligibility for Sales tax exemption with respect to industrial unit of the petitioner company, set up at Chittoor in Palakkad District, which is engaged in the manufacture of soft drinks. Provisions relating to grant of Sales Tax Exemption is governed by Ext.P1 notification, which was superseded by Ext.P2 and subsequently amended through Ext.P3. Petitioner is challenging Ext.P6 proceedings of the first respondent through which Sales Tax Exemption was declined to the petitioner. In an earlier round of litigation with respect to the very same issue this court in the judgment in OP No.6133 of 2001, dated 23-2-2001 directed the respondents to dispose of the application for Sale Tax exemption within a time limit. In Ext.P6, it is indicated that the State Level Committee while considering eligibility of O.P.No.34257 OF 2001 2 the petitioner had opined that the petitioner failed in satisfying the conditions stipulated in Ext.P3, because the investment alleged to have been made prior to 1/1/2000 was not proved through any documentary evidence, and the investment made for which evidence produced do not constitute even 10% of the total investment on plant and machinery. Therefore it was held that such an investment cannot be considered as an effective step taken for setting up of the industry, as envisaged in Exts.P1 to P3 Notifications. 2. Before evaluating the merits of the contentions, it may be beneficial to consider the requirements for eligibility contemplated under Ext.P3, which is the latest Notification. Clause 1(ii) (a)(b) and ( c) of Ext.P3 notification reads as follows. “(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 orders for the purchase of such plant and machinery and equipments before the 1[st] day of January,2000 provided that such unit commences commercial production of such diversification , expansion or modernisation on or before the 31[st] day of December,2001.” O.P.No.34257 OF 2001 3 Clause (c) of the above quoted provision stipulates that the industrial unit should have placed firm orders for purchase of plant and machinery and equipments before 1-1-2000 and that such units should have commenced commercial production on or before 31-12-2001. In Ext.P6 it is admitted that the petitioner had produced debit advice bank statements /copy of cheques/ Demand Draft as proof of advance payments made on or before 1-1-2000. It is further admitted that such payments will come to an amount of Rs.2.4Crores. But the State Level Committee found that the investment made prior to 1/1/2000, for which documentary evidences were produced, do not constitute even 10% of the total investment on plant and machinery. 3. Question is as to whether there is any requirement under sub clause (c) for payment of any particular percentage of advance for purchase of plant and machinery is relevant. The question already stands settled through a Division Bench decision of this court in **State of Kerala and others vs Pepsico India Holdings Pvt.Ltd.** O.P.No.34257 OF 2001 4 **(144(2006)STC 442).** This court held that a plain reading of sub clause (c) leaves no room for any doubt that in the case of self financed industrial unit under the large and medium category which had placed firm orders for purchase of necessary plant and machinery before 1-1-2000, would be entitled to claim exemption provided it commences commercial production on or before 31-12-2001. The said clause does not insist upon any amount which the industrial unit has to pay by way of advance to the seller while placing order for purchase of plant and machinery. How much amount is paid as advance will depend upon the terms and conditions of the contract between the parties. What is necessary is a firm order placed for purchase of plant and machinery required for setting up of the industry. Therefore it cannot be said that, merely because the company deposited only a small percentage of the amount as advance it has not placed firm order for purchase of plant and machinery. Hence it is held that the reasoning given for rejection is erroneous and O.P.No.34257 OF 2001 5 cannot be sustainable. 4. The dictum laid in the Pepsico's case (cited supra) squarely applies to the facts of this case. In Ext.P6 it is conceded that the petitioner had produced evidence regarding payment of advance, to the tune of Rs.2.4 Crores. The State level committee was not right in denying benefit of the notification, assigning the reason that such advance will constitute only a smaller percentage of the total investment for plant and machinery. Hence I am of the considered opinion that the reason for rejection mentioned in Ext.P6 is totally unsustainable. 5. Learned Senior Counsel appearing for the petitioner company had drawn my attention to a decision of the H **on'ble Supreme court in Pepsico India Holdings P.Ltd vs. State of Kerala and Others in (2009) 24 VST 67 (SC) & (2009) 17 KTR 383)** . While considering sustainability of a decision with respect to denial of Sales Tax Exemption despite production of eligibility certificate on the ground that the unit had failed to take effective O.P.No.34257 OF 2001 6 steps,the honourable Supreme Court held that the respondents are bound by the doctrine of estoppel. Reversing the findings arrived by this court confirmed in a writ appeal, the apex court found that the scope of the wordings in the notification, “necessary plant and machinery and/or equipments”, cannot be narrowed down in any manner by interpreting that it will not take in any certain or smaller portion of the plant and machinery necessary to be purchased . Analysing the factual aspects pertaining to various steps taken for establishment of the industrial unit and also analysing the extent of various investments made by unit before the cut off date, the Honorable Supreme court observed that what is meant by effective steps contemplated under the Notifications is only effective steps intended for establishment of the industrial unit and intended towards starting commercial production, irrespective of the fact whether such investment will constitute any considerable portion of the total cost or not. 6. Learned Senior counsel for the petitioner had 7 O.P.No.34257 OF 2001 drawn my attention to various factual aspects which entitle them for the Sales Tax Exemption. According to the petitioner, as enumerated in Ext.P4 the break ups given will indicate that there is a total investment of Rs.47.46 Crores. It is further pointed out that as evident from Exts.P26 and P27, firm orders for purchase of plant and machinery was placed to the tune of Rs.23.98 Crores as on 31-12-1999 and to the tune of Rs. 8.10 Crores as on 31/12/1999. The petitioner had pointed out various documents in support of their claim that they have invested a total amount of Rs.27.32 Crores in plant and machinery as shown in Ext.P4 application. They have acquired other fixed capital investment having valuation to the extent of Rs.20.13 Crores as land, land development, electrification of building, pre-operative expenses and other items. Based on parameters enumerated by the Hon'ble Supreme Court in the case cited above, contention of the petitioner is that the details furnished and the documents produced in support of the claim will definitely satisfy ingredients to fulfill the O.P.No.34257 OF 2001 8 conditions in sub clause (3) of clause 2 in Ext.P3. It is further pointed out that, the industrial unit in question had commenced commercial production on 13/3/2000. It is contented that, commencement of commercial production during March, 2000 will definitely indicate that the petitioner had taken all effective steps for establishment of the industry well in advance prior to 1/1/2000. Therefore the petitioner company is entitled to get eligibility certificate for Sales Tax Exemption, is the contention. 7. While considering the issue involved, I find that the reasoning in Ext.P6 for rejection of the application is unsustainable. It is evident that in spite of an admission contained in Ext.P6 to the effect that the petitioner was successful in proving payment of advance to the tune of Rs.2.4 crores for the purchase of plant and machinery, neither the 1st respondent nor the State level committee has gone deep into the details of various aspects furnished through Ext.P4 application regarding other effective steps taken for establishment of the unit and also not considered 9 O.P.No.34257 OF 2001 the fact that the unit have started commercial production on 13/3/2000. Therefore, I am of the view that it is for the competent authority to reconsider the matter on evaluating such details furnished by the petitioner, supported with the documentary evidence. The competent authority is bound to take a reasonable decision in this regard after evaluating such evidence with due regard to the legal principle settled by the Division Bench of this court as well as the hon'ble Supreme Court in the cases of M/s **Pepsico India Holdings P.Ltd** (cited supra). 8. In the result, the writ petition is allowed and Ext.P6 order is hereby quashed. The first respondent is directed to take up Ext.P4 application and to dispose of the same afresh on the basis of the observations made herein above, after affording a reasonable opportunity of hearing to the petitioner, at the earliest possible, at any rate within two months from the date of receipt of copy of this judgment. If eligibility certificate is issued to the petitioner, the 5[th] respondent or any other competent authority in the O.P.No.34257 OF 2001 10 Commercial Tax Department shall take necessary steps for granting exemption to the petitioner, without any further delay. ## **C.K.ABDUL REHIM JUDGE** ## **smm** O.P.No.34257 OF 2001 11