Summary of the Judgment M/S United Spirits Ltd. vs. State of Madhya Pradesh & Ors.

Case Name: M/S United Spirits Ltd. vs. State of Madhya Pradesh & Ors.

Citation:

2025 INSC 833

Judges:

• J. B. Pardiwala

• K. V. Viswanathan

Date of Judgment:
July 14, 2025

Related Law:
Madhya Pradesh Shaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (M.P. Entry Tax Act, 1976) and its Amendment Act of 2007, along with the Madhya Pradesh VAT Act, 2002.

Background and Issue

The Supreme Court addressed whether M/S United Spirits Ltd. (the appellant) is liable to pay entry tax under Section 3 of the M.P. Entry Tax Act, 1976, for the entry of Indian Made Foreign Liquor (IMFL) and beer into local areas of Madhya Pradesh. The High Court had ruled in favor of the State, holding the appellant liable, which led to this appeal.

Key Facts

1. Appellant’s Argument:
   The appellant, a manufacturer of IMFL and beer, supplied goods to State Government warehouses under licenses issued under the M.P. Excise Act, 1944.
   The warehouses then sold the goods to retailers, with no direct privity between the appellant and retailers.
   The appellant contended that the State Government warehouses, acting as dealers, were responsible for the entry tax as they caused the movement of goods into local areas.

2. State’s Argument:
   The State argued that the warehouses merely supervised the sale from manufacturers to retailers and did not purchase or sell the goods themselves.
   The State asserted that the appellant, as the manufacturer, caused the entry of goods into local areas, making them liable for the entry tax.

Statutory Provisions

• Section 3 of the M.P. Entry Tax Act, 1976: Levies entry tax on goods specified in Schedule-II entering a local area for consumption, use, or sale.

• Section 3B (Introduced by 2007 Amendment): Allows the State to specify the manner of collecting entry tax on IMFL and beer.

• Section 14: Provides the general machinery for assessment and collection of entry tax.

• Definition of "Dealer" (M.P. VAT Act, 2002): Includes entities involved in the business of buying, selling, or distributing goods.

Supreme Court’s Analysis

1. Nature of Transactions:
   The Court examined whether the transactions between the appellant and the State warehouses, and between the warehouses and retailers, were inseverable.
   Applying precedents like K. Gopinathan Nair v. State of Kerala, the Court concluded there were two independent transactions:
   Sale by the appellant to the State warehouse.
   Sale by the warehouse to retailers.

2. Liability for Entry Tax:
   The Court held that the appellant, by supplying goods to the warehouses, "caused to be effected the entry of goods" into local areas, as per Section 2(3) of the M.P. Entry Tax Act.
   The State warehouses' role did not negate the appellant’s liability, as the appellant’s actions directly occasioned the entry of goods.

3. Validity of Levy Without Notification Under Section 3B:
   The Court rejected the appellant’s argument that the absence of a notification under Section 3B barred the levy.
   It ruled that Section 3B is an enabling provision, and Section 14 could operate independently for tax collection.

Conclusion

The Supreme Court upheld the High Court’s decision, dismissing the appeal and confirming that:

• The appellant, as the manufacturer, was liable for entry tax under the M.P. Entry Tax Act.

• The State’s failure to issue a notification under Section 3B did not invalidate the levy, as Section 14 provided the necessary machinery for tax collection.

Final Order:
The civil appeals were dismissed with no order as to costs.