1. Dispute over liability for entry tax on beer and Indian Made Foreign Liquor under the M.P. Entry Tax Act, 1976, involving supplies through State Government warehouses. (Para 1 , 2 , 3 , 4 , 5 )
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2025 Supreme(SC) 1051
SUPREME COURT OF INDIA
J.B. Pardiwala, K.V. Viswanathan, JJ.
M/s United Spirits Ltd. – Appellant
Versus
The State Of Madhya Pradesh & Ors. - Respondent
Civil Appeal No. 5113 of 2025 With Civil Appeal No. 5114 of 2025
Decided On : 14-07-2025
Important Points
Manufacturers of goods are liable for entry tax as they cause the entry of goods into local areas under the Madhya Pradesh Entry Tax Act, 1976.
Subject
Tax Law - Entry Tax
Act Referred
CENTRAL SALES TAX ACT: S.5(2)
ENTRY TAX ACT: S.3(b)
MADHYA PRADESH ENTRY TAX ACT: S.3(1)(a), S.2(1)(a)(a), S.2(1)(b), S.2(3), S.3, S.14
MADHYA PRADESH FOREIGN LIQUOR RULES: R.14(1)
MADHYA PRADESH STHANIYA KSHETRA ME MAL KE PRAVESH PAR KAR ADHINIYAM: S.3
MADHYA PRADESH VALUE ADDED TAX ACT: S.2(1)(m), S.2(i), S.2(s), S.3
ENTRY TAX ACT: S.3(b)
MADHYA PRADESH ENTRY TAX ACT: S.3(1)(a), S.2(1)(a)(a), S.2(1)(b), S.2(3), S.3, S.14
MADHYA PRADESH FOREIGN LIQUOR RULES: R.14(1)
MADHYA PRADESH STHANIYA KSHETRA ME MAL KE PRAVESH PAR KAR ADHINIYAM: S.3
MADHYA PRADESH VALUE ADDED TAX ACT: S.2(1)(m), S.2(i), S.2(s), S.3
Headnote
(A) Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 - Section 3 - Levy of entry tax on manufacturers for beer and IMFL sales; High Court repelled the challenge of appellants. (Paras 1, 20, 30)
(B) Entry tax defined as tax on entry for consumption/use/sale; burden on dealers who cause goods to enter local areas. (Paras 28, 29)
Facts of the case:
The appellants challenged the levy of entry tax, arguing that the State warehouses were responsible for causing the entry of goods, thus not liable for the tax. (Paras 2-4)
Findings of Court:
The appellants caused entry of goods into the local area; entry tax levied correctly as per statutory obligations. (Paras 31, 32)
Issues: Whether the appellants caused to effect the entry of goods into local areas.
Ratio Decidendi: The Court held that the sale to the warehouse constituted a cause for entry into the local area under Section 3, thereby affirming tax liability. (Paras 31, 32)
Result: Civil Appeals dismissed.
(B) Entry tax defined as tax on entry for consumption/use/sale; burden on dealers who cause goods to enter local areas. (Paras 28, 29)
Facts of the case:
The appellants challenged the levy of entry tax, arguing that the State warehouses were responsible for causing the entry of goods, thus not liable for the tax. (Paras 2-4)
Findings of Court:
The appellants caused entry of goods into the local area; entry tax levied correctly as per statutory obligations. (Paras 31, 32)
Issues: Whether the appellants caused to effect the entry of goods into local areas.
Ratio Decidendi: The Court held that the sale to the warehouse constituted a cause for entry into the local area under Section 3, thereby affirming tax liability. (Paras 31, 32)
Result: Civil Appeals dismissed.
Legal Category Hierarchy
Advocates appeared:
For the Appellant(s) : Ms. Manjeet Kirpal, AOR Mr. Akshat Shrivastava, AOR Mr. Pooja Shrivastava, Adv. Mr. Palash Pareek, Adv. Mr. Vibhor Jain, Adv.
For the Respondent(s): Mr. Nachiketa Joshi, Sr. A.A.G. Mr. Pashupathi Nath Razdan, AOR Mr. Sidhartha Sinha, Adv.
For the Appellant(s) : Ms. Manjeet Kirpal, AOR Mr. Akshat Shrivastava, AOR Mr. Pooja Shrivastava, Adv. Mr. Palash Pareek, Adv. Mr. Vibhor Jain, Adv.
For the Respondent(s): Mr. Nachiketa Joshi, Sr. A.A.G. Mr. Pashupathi Nath Razdan, AOR Mr. Sidhartha Sinha, Adv.
Table of Contents
2. Whether manufacturers or State warehouses are the dealers causing entry of goods and whether a notification under Section 3B is mandatory for tax collection. (Para 16 , 17 , 18 , 19 )
3. The court found two independent transactions occurred and that the manufacturers' sale to the warehouse caused the entry of goods into the local area. (Para 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 )
4. A dealer who sells goods to an intermediary causes the entry of those goods into a local area, triggering liability under the entry tax statute. (Para 31 )
5. Civil appeals dismissed, upholding the levy of entry tax on the manufacturers. (Para 36 )
6. When does a transaction involving a canalising agency constitute two independent sales rather than one inseverable transaction?
If an independent canalising agency enters into back-to-back contracts and there is no direct linkage or causal connection between the original supplier and the ultimate local users, the integrity of the transaction is disrupted, resulting in two independent sales. (Para 24 , 25 , 27 )
7. Does selling goods to a warehouse that subsequently sells to retailers constitute causing the entry of goods into a local area?
Yes, by selling goods to a warehouse for further distribution, the manufacturer occasions the entry of those goods into the local area for consumption, use, or sale, thereby triggering entry tax liability. (Para 28 , 29 , 30 , 31 )
8. Is a notification under a special enabling provision mandatory for tax collection if a general assessment provision exists?
No, an enabling or machinery provision does not foreclose the operation of general assessment and collection powers unless a notification is issued that specifically overrides the general procedure. (Para 32 , 33 , 34 )
JUDGMENT :
K.V. Viswanathan, J.
1. A short and interesting question falls for consideration in these appeals. The issue is whether the appellants are liable for the payment of entry tax under Section 3 of the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 [hereinafter referred to as the ‘M.P. ENTRY TAX ACT , 1976’]. The High Court has repelled the challenge of the appellants. Aggrieved, they are in appeal(s) before us.
BRIEF FACTS: -
CASE OF THE APPELLANTS: -
2. In the writ petition filed by the appellants, their case was that they are involved in bottling and supplying of Beer and Indian Made Foreign Liquor (for short ‘IMFL’). The appellants hold license under the M.P. Excise Act, 1944 to manufacture and supply beer and IMFL. They supply the said goods after obtaining a No Objection Certificate [NOC] from the officer-in-charge posted at the factory. It was contended that the goods are transported to the State Government warehouse and the transportation pass is issued in the name of the concerned warehouse. According to the appellants, the sales are made by the warehouse in charge to the authorized retailers, who are also license holders for retail sale of IMFL and beer.
3. The appellants averred that under the M.P. Excise Act, FL-9 license is to manufacture IMFL products and FL-9A license is to produce franchisee products. FL-9 and FL-9A licensees can sell to FL- 10 licensees only. According to the appellants, the FL-10 licensee in M.P. is the Excise Department, which runs the State Government warehouse. The retailers hold the FL-1 license and they purchase from FL-10 licensee after issuance of NOC by the respective District Excise Officers. According to the appellants, the sale is made by the Government warehouses to the retailers through the sale bill issued in the name of the retailers; that the Government warehouses deposit the amount payable to the appellants in their bank accounts and send intimation in respect of the goods sold in respect of the appellants to the Commissioner, who in turn transfers the amount from the bank of the Department to the appellants’ bank account. The appellants submit that the retailers pay license fee in equal installments and at that point were paying 6% ‘Parivahan Shulk’ (transportation expenses) by depositing the same with the Treasury. The appellants contend that the transaction is between the Government warehouses and the retailers.
CASE OF THE RESPONDENT- STATE: -
4. In the return filed by the State, they contended that the State Government neither purchases nor sells the liquor. The State referred to three documents that had a crucial bearing on the disposal of the present case.
i) First is the communication issued by the Additional Secretary, (Finance Department), Government of M.P. to the Excise Commissioner under the subject “Collection of Indian Made Foreign Liquor and provision of its supply to its retail licensees”. The communication states that the Manufacturing Units are allowed to store liquor in the departmental godowns. The Manufacturing units declare the Ex-godown price of their liquor in due course and supply of liquor is effected to retail contractors by adding 5% additional fee on this cost. Retail contractors would deposit the amount with the specified bank and the bank would deposit the amount through the treasury in the government account. The Deputy Commissioners would be sent the statement of the amount deposited twice every month. Out of the amount collected during the previous month, payment of amount due to the manufacturing unit would be made by the Excise Commissioner and the expenditure would be debited from the expenditure account pertaining to the Commercial Tax Department.
ii) The second communication also dealt with the same issue as above with certain minor changes which are not material. There was a clarification that the 5% amount would be transferred to the departmental head, and the remaining amount to the concerned manufacturing uni
