Citation: Additional Commissioner Commercial Tax & Ors. v. Cadila Health Care Ltd. & Anr., Civil Appeal Nos. 9788-9789 of 2013, Supreme Court, decided on 05.10.2026 | 2026 INSC 1078
The Supreme Court has held that powder and biscuit products meant to be mixed into milk or water are not “beverages” for sales tax, and must be taxed under the residuary entry at 8% and not as “non-alcoholic drinks and beverages” at 10%.
The dispute concerns Cadila Health Care’s “GRD Powder” and “GRD Mix” for the assessment year 1997-98 under the M.P. Commercial Tax Act, 1994. The tax department argued that the packaging shows the goods to be health drinks, with instructions to mix them with milk or water and drink them hot or cold, so they fall under Entry 20(ii) at 10%. Cadila said they are sold across the counter as powder and biscuit, and so fall under the residuary entry at 8%. The Madhya Pradesh High Court upheld the 8% rate, and the department appealed. Justices Manmohan and Arun Palli dismissed the appeals. They held that tax law is strictly interpreted and that the taxable event is the sale, so classification depends on the form of the goods when they are sold, not on what the buyer later does with them. A protein powder, for example, could be mixed into a drink or used to make a sweet like barfi, and that later use cannot change the tax. The court also held that everything listed in Entry 20(ii), such as syrups, cordials, juices and essences, is liquid, and under the rule of ejusdem generis, “beverages” must also be read as liquids. The entry says nothing about end use, so the common parlance and functional character tests cannot be used to import it. The court distinguished the cases cited by the department. In the Pioma case, the entry expressly included powders used for making drinks, which the Legislature had not done here. In S. Samuel there were no competing entries, and in Hamdard the sharbat was a liquid. It added that goods which do not fit a specific entry must go to the residuary entry and cannot be forced into a higher-taxed entry.
For taxing purposes, goods are classified according to the form in which they are sold, and not by their end use or how the consumer later uses them. A powder that must be mixed with milk or water before drinking is not a “beverage” under an entry that lists liquids, and goods that do not fit a specific entry fall under the residuary entry and cannot be pushed into an inapt entry only to attract a higher rate.