PepsiCo India Holding today filed a petition in the Supreme court challenging a Kerala high court judgment that denied sales tax exemption to the soft drink major.

Admitting the plea, a bench headed by Justice S B Sinha also directed the state government not to take any coercive measure till the final hearing of the case, which was posted for 3 March.

The Kerala government had issued a notification in 1993 granting sales tax exemption to new small-, medium-and large-scale industrial units for up to seven years from the date of starting commercial production.

However, the state government withdrew the exemption except for those that had taken steps to set up industrial units prior to 1 January 2000, or which had commenced commercial production on or before 31 December  2001.

PepsiCo claims that it started production much before the scheduled date, but the high court had upheld the deputy commissioner of commercial tax's order against the company's tax exemption claims.

The company said that sales tax exemption is given as an incentive for promoting industrialisation, and economic growth and development, and that any subsequent notification should further the objective.

The soft drinks major had acquired more than 50 acres on lease for 90 years for Rs2.77 crore from the government for setting up a plant for manufacturing aerated and non-aerated beverages and other food products and their packaging material.

PepsiCo, meanwhile, got a waiver of a special disinvestment condition imposed in 1997 with the Cabinet Committee on Economic Affairs (CCEA) deleting the condition of divestment of 49 per cent stake in its downstream bottling arms, to Indian parties.

It has also approved PepsiCo India Holdings' proposal for an additional equity investment of up to $50 million.