Authority: Supreme Court of India, Civil Appellate Jurisdiction
Order Date: 5 October 2026
Case Overview
- Appeals No. 9788‑9789 of 2013 filed by the Additional Commercial Tax & Ors. (appellants) against Cadila Health Care Ltd & Anr. (respondents).
- The appeals challenged the High Court of Madhya Pradesh judgment dated 3 August 2011, which had upheld classification of the respondents’ “GRD Powder” and “GRD Mix” under the residuary entry of Schedule II of the Madhya Pradesh Commercial Tax Act, 1994, attracting an 8 % tax for Assessment Year 1997‑1998.
- The appellants argued that the goods, by virtue of labeling and instructions to dilute with milk or water, should be classified as “Non‑Alcoholic Drinks and Beverages” under Entry 20(ii), Part IV, Schedule II, attracting a 10 % tax.
- Respondents contended that the goods are sold as powder and biscuit and therefore fall under the residuary entry (8 %).
- Relevant statutory entries:
- Entry 20(ii) – All kinds of non‑alcoholic drinks and beverages (including syrups, cordials, distilled juices, essences) – 10 % tax.
- Entry 1 (Part VII) – All other goods not included in Schedule I or any other part – 8 % tax.
- Under the Entry Tax Act 1976, three phases existed in AY 1997‑1998:
1. 1‑30 April 1997 – only the residuary entry applicable at 1 %.
2. May‑September 1997 – no entry applicable.
3. 1 Oct 1997‑31 Mar 1998 – competing entries: Entry 14 (non‑alcoholic drinks, ice‑cream, kulfi, ice candy) at 2 % and the residuary entry under Schedule III at 1 %.
- Arguments presented:
Appellants (counsel Mr Akraj Kumar) relied on three classification tests – common‑use & functional‑character, basic nature, and popular‑meaning – and cited precedents such as Atul Glass Industries (Pvt.) Ltd v. Collector of Excise (1986), Indian Aluminum Cables Ltd. v. Union of India (1985), Pioma Industries v. State of Kerala (2008), Hamdard (Wakf) Laboratories v. Commissioner, Commercial Tax, U.P. (2026 SCC OnLine SC 306), and S. Samuel M.D., Harrisons Malayalam v. Union of India (2004).
Respondents (counsel Mr Vivek Sarin) argued that the statute limits tax to goods expressly listed in Schedule II, that the residuary entry applies where no specific entry fits, and that end‑use is irrelevant (citing Dunlop India Ltd. v. Union of India (1976)). He also referenced Hamdard Wakf Laboratories v. Collector of Central Excise (1999) stating beverages must be liquids at the taxable event.
Reasoning
- The Court reiterated that taxing statutes must be strictly construed; no intention can be read into ambiguous language.
- It held that the taxable event is the act of supply and the incidence of tax is determined by the nature of the good as it is sold (i.e., powder/biscuit), not by the consumer’s later use.
- The Court emphasized that while tax rates differ for powders, concentrates, and ready‑to‑drink beverages, the authorities must levy tax based on the form at the point of sale.
- Entry 20(ii) was interpreted to refer to liquids; the enumerated items (syrups, cordials, distilled juices, essences) are all liquid preparations. The expression “including” does not expand the entry to powders.
- The principle of ejusdem generis was applied: the general term “beverages” must be read in the context of the specific liquid items listed, excluding powders.
- The Court rejected the appellant’s reliance on functional‑character, basic‑nature, and popular‑meaning tests where they would override the clear statutory language.
- Precedents cited by the appellants (Pioma Industries, S. Samuel M.D.) were distinguished as inapplicable because the legislatures had expressly chosen not to include powders in the beverage entry.
Conclusion
- The goods, at the taxable event, exist as powder and biscuit; therefore they do not fall within the definition of “beverage” under Entry 20(ii).
- Consequently, the appropriate classification is the residuary entry, attracting an 8 % tax rate for AY 1997‑1998.
- The appeals are dismissed, and any pending applications, if any, are disposed of.
Topics: Tax Classification, Commercial Tax