2026-VIL-103-SC
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VAT Supreme Court Cases

M.P. Commercial Tax Act, 1994 - Taxable event and relevance of form of goods at the time of sale - Classification on form of good and not end use – Respondent-assessee manufactured and marketed powder and biscuit products, which the Appellants-Department sought to classify as non-alcoholic drinks and beverages on the ground that the packaging required the consumer to dilute the product with milk or water, while the Respondent contended that, being sold across the counter as powder and biscuit, the goods fell under the residuary entry - High Court upheld classification under the residuary entry - Whether the taxing authorities are required to levy tax based on the form of the good at the time of sale or on the end product - HELD - Taxing statutes are strictly construed and nothing can be read in or implied beyond the plain language. The taxable event is the act of supply and the incidence of taxation is determined by the nature of the good in the form in which it is sold. The tax authorities are bound to look at what is supplied and not at its end use, and the subsequent use by the consumer in mixing the powder with water or milk does not alter the taxable event, as liability is determined at the point of supply. Classification must be based on the form of the good at the time of sale and not on the manner in which the consumer may later choose to use it, as a powder mix is taxed as a powder while a ready-to-drink beverage is taxed as a beverage - The authorities must levy tax on the basis of the form of the good at the time of sale - Classification of ‘GRD Powder’ and ‘GRD Mix’ under entry for non-alcoholic drinks and beverages or residuary entry - Whether the goods can be classified as non-alcoholic drinks and beverages or fall in the residuary entry - Appellants relied on common parlance, functional character and basic nature tests, the use of the word "including" in the entry, and decisions on powders and tea, while the Respondent relied on the plain language of the charging provision and the absence of any reference to use in the entry - HELD - The expression "beverages" is followed by syrups, cordials, distilled juice, ark and essences, all of which denote liquids or liquid preparations, and under the rule of ejusdem generis the general word derives its meaning from the class constituted by the associated words and cannot be interpreted to encompass goods of a different physical form. The entry makes no reference to end use but classifies goods by physical characteristic and form, and the common parlance, functional or basic nature tests cannot be applied to import the end use concept to override clear and unambiguous language - The expression "including" cannot be taken to mean all encompassing. The decisions relied on by the Revenue are distinguishable - Goods which do not answer the description of a specific entry must fall within the residuary entry and cannot be forced into an inapposite specific entry merely to attract a higher rate of tax - At the time of the taxable event the goods exist in the form of powder and biscuit and do not fall within the expression beverage. While it is possible that the goods may ultimately be used to make a beverage or a solid preparation, at the point of taxable event, they remain in powder form. Consequently, they do not fall within the expression ‘beverage’ - The appeals are dismissed
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