SC rejects Pepsico petition against sales tax demand

The Supreme Court has dismissed the petition of beverages major Pepsico that challenged the imposition of sales tax on rentals collected from its distributors for glass bottles and crates.

A Bench comprising justices Munkundakam Sharma and AR Dave dismissed the petition of Pepsico India, a unit of the US-based foods and beverages major, challenging the direction of the taxing official to pay sales tax on the rentals.

The sales tax department of Uttar Pradesh had directed the company to pay the duty on Rs 8.5 crore collected from its distributors in 1999-2000.

The officials also directed Pepsico to pay interest on the sum acquired from rentals of glass bottles and crates.

Pepsico contended that it did not constitute a sale under the UP Trade Tax Act. Rental on glass bottles and crates did not amount to transfer of right to use the goods for value.

However, the Supreme Court rejected the contentions of Pepsico by observing that the company in its accounts itself mentioned the revenue generated from it.

"In the present case, the appellant (Pepsico) has themselves mentioned in their account the turnover in respect of rentals by distributors of glass and crates. However, Pepsico has disputed that the said turnover is liable to tax," the Bench said.

Earlier, Pepsico had approached the Lucknow Bench of the Allahabad High Court seeking revision of the tax demand, which dismissed its petition in December 2007.

Following it, Pepsico approached the Supreme Court, which has also dismissed its petition.