Tax/Taxation – M.P. Commercial Tax Act, 1994 – Entry Tax Act 1976 – What is the taxable event and whether the taxing authorities are required to levy tax based on the form of the good at the time of sale or on end product:
Held: Taxing incidence is the nature of the good as it is sold – 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 – Tax rates vary depending on whether the good is classified as a powder, concentrate or beverage – However, the tax authorities are bound to levy tax based on the form of the good at the time of sale – The tax authorities are bound to look at what is supplied and not at what is the ‘end use’ of the good – The subsequent use by the consumer in mixing the powder with water or milk to prepare a drink does not alter the taxable event, for liability is determined at the point of supply – The classification which determines the applicable rate of tax 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 – The goods in the present case, at the time of taxable event, exist in the form of powder and biscuit – 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’. [Paras 16-19, 29]
M.P. Commercial Tax Act, 1994 – Entry Tax Act 1976 – High Court upheld the classification of ‘GRD Powder’ and ‘GRD Mix’, manufactured and marketed by the Respondent, under the residuary entry of Schedule II to the 1994 Act, thereby subjecting them to tax at the rate of eight per cent for the Assessment Year 1997-1998 – Challenge to – Plea of the appellants that the indications on the goods ‘GRD Powder’ and ‘GRD Mix’, both in terms of graphical representation and the accompanying instructions, require the consumer to dilute the good with milk or water – Consequently, the goods are classifiable as ‘Non-Alcoholic Drinks and Beverages’ falling u/Entry 20(ii), Part IV, Schedule II of the 1994 Act, thereby attracting tax at the rate of ten per cent (10%) – However, respondents contended that the said goods being sold across the counter in the form of powder and biscuit, are exigible to tax at the rate of eight per cent (8%) under the residuary entry: Held: In Entry 20(ii), the expression ‘beverages’ is followed by ‘syrups, cordials, distilled juice, ark and essences’, all of which denote liquids or liquid preparations – The common thread running through these enumerated items is that they are liquid substances capable of being bottled, stored and consumed or otherwise utilised in liquid form – Further, Entry 20(ii) does not make any reference to the ‘end use´ of the goods – Consequently, what has been specified by the legislature is classification of goods not by reference to its end use, but by reference to their physical characteristic and form – The identity of the goods at the time of taxable event, namely, sale, must be the determinative factor for the purpose of classification under the taxing statute – Common parlance test, functional test or basic nature test cannot be applied to import end use concept to override or bypass explicit or implicit statutory guidance, particularly, where the language of the entry is clear and unambiguous-like in the present appeals – Rule of ejusdem generis requires a general word to be construed in the context of specific words accompanying it – The expression ‘beverages’ must derive its meaning from the class constituted by these associated words and cannot be interpreted in isolation so as to encompass goods of an altogether different character or physical form – The goods which do not answer the description of a specific entry must necessarily fall within the residuary entry – They cannot be forced into an inapposite specific entry merely to attract a higher rate of tax – The goods in the present case, at the time of taxable event, exist in the form of powder and biscuit – 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 Legislature, despite being aware that powders could be expressly included in the category of non-alcoholic beverages by way of deeming fiction, chose not to do so in the present case – Appeals dismissed – Rule of ejusdem generis. [Paras 20-24, 26, 29] Words and Phrases – ‘including’:
Held: The expression ‘including’ cannot be taken to mean ‘all encompassing’ and covering ‘all and sundry goods’ – The expression ‘beverages’ must be construed in the context of specific words accompanying it and cannot be interpreted so as to encompass goods of an altogether different character or physical form – Tax/ Taxation. [Para 28]
Tax/Taxation – Taxing statutes to be construed strictly: Held: Court cannot assume any intention beyond what is manifest in the plain language of the provision – Nothing can be read in or implied from the statute and unless the language suffers from any ambiguity or absurdity, the Court must adopt a literal interpretation. [Para 15]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Divya Pandey. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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