MP Entry Tax Act | Manufacturers Liable For Entry Tax As They “Cause Entry” Of Liquor Into Local Areas : Supreme Court

The Supreme Court upheld the MP High Court's decision to levy the 'entry tax' on the beer and Indian Made Foreign Liquor (“IMFL”) manufacturers for transporting goods into local areas for sale.

The Court reasoned that the liquor manufacturers "cause entry" of goods into local areas, making them liable for tax under Section 2(3) of the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (“M.P. Entry Tax Act, 1976”), even if sales occur through state-controlled warehouses.

The bench comprising Justice JB Pardiwala and Justice KV Viswanathan heard the case where the dispute arose when Madhya Pradesh's Revenue Department imposed entry tax on IMFL/beer manufacturers under the MP Entry Tax Act, 1976.

The appellant-manufacturers contended that it was the state-run warehouses that qualified as the actual importers, as the sales were affected by the warehouse in charge of licensed retailers authorized to sell IMFL and beer. They further argued that, in the absence of any privity of contract between the manufacturers and the end retailers, the responsibility for bearing the entry tax should rest with the warehouses, not the manufacturers.

Thus, the Court considered the question of whether manufacturers, who transported goods into local areas for subsequent sale, could be held liable for the tax despite the involvement of state-run warehouses.

Affirming the High Court's decision, the judgment authored by Justice Viswanathan drawing from earlier decisions in K. Gopinathan Nair & Ors. v. State of Kerala, (1997) 10 SCC 1 and Coffee Board, Bangalore v. Joint Commercial Tax Officer, Madras & Anr., (1969) 3 SCC 349, reiterated that tax incidence attaches at the point of immediate causation, and here, it was the manufacturers who triggered the entry into local areas, therefore the entry tax liability was lawfully imposed on the manufacturers, noting that the procedural or supervisory role of the state warehouses did not shift the point of tax incidence.

“Reverting back to Sections 3(1) read with 2(1) (aa) and 2(1)(b) and 2(3), it is clear that the appellants by the sale to the warehouse caused to be effected the entry of goods and the entry was occasioned on the account of the sale into the local area for consumption, use or sale therein. It is also not disputed that the appellant is a dealer as defined under the Madhya Pradesh VAT Act 2002, as it stood then. The only contention of the appellants is this that the State warehouse is also a dealer. That makes no difference since it cannot be disputed that the appellants certainly occasioned the entry of goods and the levy of entry tax on them, which could always be passed on, is perfectly justifiable in law.”, the court observed.

In terms of the aforesaid, the Court dismissed the appeal.

Case Title: M/S UNITED SPIRITS LTD. VERSUS THE STATE OF MADHYA PRADESH & ORS.

Citation : 2025 LiveLaw (SC) 727

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Appearance:

For Petitioner(s) : Mr. Rohan Shah, Sr. Adv. Mr. Akshat Shrivastava, Adv Mr. Satvic Mathur, Adv. Ms. Manjeet Kirpal, AOR Mr. Sumit Nema, Sr. Adv. Mr. Akshat Shrivastava, AOR Mr. Satvic Mathur, Adv. Mrs Pooja Shrivastava, Adv.

For Respondent(s) : Mr. Nachiketa Joshi, Sr. A.A.G. Mr. Pashupathi Nath Razdan, AOR Mr. Sidhartha Sinha, Adv.