Where am I wrong?
I'm sorry to tell you you're wrong end-to-end. You're missing the whole point of the analysis (the wording of the book doesn't help either).
"P.D. across the Capacitor Plates = Applied EMF" is just a fancy (and confusing for any newbie) way to say "Let's apply an AC voltage to the capacitor and see what happens then with other magnitudes like current through it". I.e.:
simulate this circuit – Schematic created using CircuitLab
Putting things this way makes easy to answer this question of you:
[...], how can it be true that the given statement (1) is true at any instant?
Well, it's true because we're forcing it to be like that so we can see what happens then with the current through the capacitor.
Next step is finding how V and I are related. One could expect that if we force the potential between the capacitor plates to vary with time, then the current through the capacitor will somehow a similar behaviour.
We recall, as does the book, that:
$$
Q=CV
$$
and
$$
I=\dfrac{dQ}{dt}
$$
So with the help of a little math, finally we arrive at:
$$
I={\omega}{C}{\xi_0}\sin({\omega}t+\frac{\pi}2)
$$
Which, in a mathematical sense, means that current is also sinusoidal and that there is a \$\dfrac{\pi}2\$ phase difference between V and I.
However, what does it mean in a physical sense? Well, somehow your intuition about it wasn't bad after all:
the Current is 0 at π/2 and at odd multiples of π/2 where the Applied Emf corresponds to its Peak Value.So Capacitor becomes fully charged at these instances
That's it! When the capacitor is fully charged, no current flows to it. When it's fully discharged, maximum current flows to it in order to charge it. And the capacitor oscillates through those states all the time while we keep applying an AC voltage to it.
EDIT:
After reading your comment to my answer, I understand where your problem is: your mathematical approach is flawed.
You look at the instant value of \$V\$ and think than you can take an interval of time \${\Delta}t\$ small enough so \$V\$ can be considered constant, that is, \${\Delta}V{\approx}0\$. Then you assimilate this situation with DC (which is also wrong because in DC you charge the capacitor through a resistor, which is absent here) and deduce that if \${\Delta}V=0\$ then \$I=0\$ so no current flows. You then extrapolate that deduction to every possible \$t\$ and conclude that no current flows at all and that the capacitor must be fully charged at all times at the peak value of the applied EMF.
Well, this is mathematically wrong for a number of reasons:
If you're dealing with intervals, then apply them to ALL magnitudes involved. Your flaw resides in considering \$I=0\$ when you should be considering \${\Delta}I=0\$ instead (which isn't true either, continue reading to see why).
When looking at what happens around any arbitrary time \$t_1\$, your \${\Delta}t\$ is an increment to that \$t_1\$. The same thing goes for \$V\$ and \$I\$: your \${\Delta}V\$ will be an increment to \$V_1=V(t_1)\$, and \${\Delta}I\$ will be an increment to \$I_1=I(t_1)\$. Think of \$V_1\$ and \$I_1\$ as initial conditions at the start of interval \${\Delta}t\$. It's wrong to assume \$V_1\$ and \$I_1\$ are equal to zero. Also, it's wrong to think about \${\Delta}V\$ as the difference between the applied EMF and the voltage at the capacitor. As it has been said, there is no difference between the applied EMF and the voltage at the capacitor, it's just forced to be equal.
For very small \${\Delta}t\$ intervals, you'll have \${\Delta}V{\approx}0\$ and \${\Delta}I{\approx}0\$. But that doesn't mean at all that the concatenation of time intervals where \${\Delta}I{\approx}0\$ will yield \$I=0\$ and from there conclude that "no current flows, so the capacitor must be charged and \$V\$ must be constant". It's wrong to think like that. Differential Calculus and Infinitesimal Calculus tells us how to deal with things when \${\Delta}t{\rightarrow}0\$. And someone smarter than you and me already used them to work it up for us to build upon it:
$$
I=\dfrac{dQ}{dt}
$$