Tax Follows the Form at Sale, Not End Use: Supreme Court Rules Drink-Mix Powder Is Not a Beverage

For Assessment Year 1997-98 the Revenue sought to tax the respondent's ‘GRD Powder’ and ‘GRD Mix’ at 10% as non-alcoholic drinks and beverages under Entry 20(ii), Part IV, Schedule II of the 1994 Act, because the packaging told consumers to mix them with milk or water (paras 2-3). The respondent said goods sold over the counter as powder and biscuit fell in the residuary entry at 8% (para 2). The Madhya Pradesh High Court upheld the residuary classification, and the State appealed (para 1).

The Court began from the rule that taxing statutes are strictly construed and nothing may be read in or implied (para 15). The taxable event is the act of supply, so tax must follow the form of the goods at the time of sale and not their end use (paras 16-17). A protein powder may be drunk or used in barfi; a consumer's later mixing with milk or water cannot change the taxable event (paras 18-19). Entry 20(ii) lists syrups, cordials, distilled juices, ark and essences, all liquids, and says nothing of end use (paras 20-21). Common parlance, functional or basic-nature tests cannot import end use where the entry is clear (para 22). Read ejusdem generis, ‘beverages’ cannot cover goods of a different physical form, and goods outside a specific entry fall in the residuary entry rather than being forced into a higher-rated one (paras 23-24). Pioma Industries, S. Samuel and Hamdard (2026) were distinguished: Pioma's entry expressly included powders, and the Hamdard sharbat was liquid (paras 25-28).