[BREAKING] Entry Tax Leviable on United Spirits under Madhya Pradesh Entry Tax (Amendment) Act: Supreme Court [Read Judgement]

The apex court dismissed the appeals filed by United Spirits challenging the imposition of entry tax on its products entering the local market in Madhya Pradesh.

The dispute centered on whether United Spirits, as a manufacturer, was liable to pay entry tax under Section 3 of the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (M.P. Entry Tax Act) after the 2007 amendment which specifically added Indian made foreign liquor and beer to the taxable goods list at a rate of 2%.

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United Spirits argued that their products were transported to and stored in state government warehouses, which then sold these goods to licensed retailers. According to the company, the sale was between the warehouse (an FL-10 licensee under the M.P. Excise Act) and the retailers, not between the manufacturer and retailers directly. They contended that since the warehouse caused the entry of goods into the local area, the entry tax liability should lie with the warehouse, not the manufacturer.

However, the State of Madhya Pradesh refuted this, contending that the warehouses merely supervise sales and that United Spirits effectively causes the entry of goods into the local market. The State also relied on government communications and guidelines indicating that the warehouses do not purchase or sell liquor but facilitate supply under state supervision.

The Supreme Court bench of Justice J. B. Pardiwala And Justice K. V. Viswanathan, after analyzing the transaction flow and statutory provisions, ruled that there were two independent transactions—one between United Spirits and the state warehouse, and another between the warehouse and retailers. The Court found that United Spirits did cause the entry of goods into the local area and thus was liable for entry tax.

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Further, the Court clarified that the absence of a notification under Section 3B of the Entry Tax Act, which deals with the manner of collection, did not bar the State from levying entry tax using the general machinery under Section 14. Section 3B was deemed a procedural provision and not a substantive bar.

The judgment confirms that manufacturers like United Spirits, who initiate the movement of taxable goods into a local area, are liable for entry tax regardless of intermediary storage or distribution arrangements.

The Supreme Court dismissed United Spirits’ appeal with no order as to costs, reinforcing the State’s power to levy entry tax on IMFL and beer manufacturers in Madhya Pradesh.

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