The Supreme Court has dismissed the appeals filed by United Spirits challenging imposition of entry tax on products entering the local market.
The bench of Justice J. B. Pardiwala and Justice K. V. Viswanathan while upholding the decision of Madhya Pradesh High Court has observed that United Spirits (USL) is liable to pay entry tax under the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam 1976, which levied such tax on the entry of goods into a local area for use, consumption or sale.
The appellant, United Spirits are involved in bottling and supplying of Beer and Indian Made Foreign Liquor (IMFL). The appellants hold license under the M.P. Excise Act, 1944 to manufacture and supply beer and IMFL. They supply the said goods after obtaining a No Objection Certificate [NOC] from the officer-in-charge posted at the factory. It was contended that the goods are transported to the State Government warehouse and the transportation pass is issued in the name of the concerned warehouse.
According to the appellants, the sales are made by the warehouse in charge to the authorized retailers, who are also license holders for retail sale of IMFL and beer.
The appellants averred that under the M.P. Excise Act, FL-9 license is to manufacture IMFL products and FL-9A license is to produce franchisee products. FL-9 and FL-9A licensees can sell to FL- 10 licensees only. According to the appellants, the FL-10 licensee in M.P. is the Excise Department, which runs the State Government warehouse. The retailers hold the FL-1 license and they purchase from FL-10 licensee after issuance of NOC by the respective District Excise Officers. According to the appellants, the sale is made by the Government warehouses to the retailers through the sale bill issued in the name of the retailers; that the Government warehouses deposit the amount payable to the appellants in their bank accounts and send intimation in respect of the goods sold in respect of the appellants to the Commissioner, who in turn transfers the amount from the bank of the Department to the appellants’ bank account. The appellants submit that the retailers pay license fee in equal installments and at that point were paying 6% ‘Parivahan Shulk’ (transportation expenses) by depositing the same with the Treasury. The appellants contend that the transaction is between the Government warehouses and the retailers.
The department contended that Officer-in-charge would ensure that necessary particulars of the liquor/beer, date and time of leaving vehicle, amount of duty, challan number and period given to take liquor to the place of destination are recorded on the permit. Only after ensuring compliance of the above-said process, the Officer-in-charge would give permission to vehicle loaded with liquor/beer to move from the store.
The department held that at the end of each and every working day, stock verification would be carried out. The complete accounts statement of wine/liquor supplied up to 25th of each and every month would be prepared. All the accounts of the amount lying deposited in the collection account of the manufacturing units would be tallied. Officer-in-charge would submit the said accounts before the concerned Deputy Commissioners and Deputy Commissioners would direct the bank as to how much amount is to be transferred by them in their accounts out of the collection accounts of each and every manufacturing unit and how much amount would be deposited in the government treasury. Thereafter, Deputy Commissioners would issue directions to the bank to first of all deposit that much amount in the government treasury and the remaining amount would be credited to the accounts of the manufacturing unit. The available stock was to be insured.
The Apex court has held that High Court has rightly held that Section 3B is only a machinery provision and in the teeth of Section 14 of the M.P. Entry Tax Act, it is not correct to say that there cannot be any assessment or collection of Entry Tax merely because there is no notification under Section 3B.
“Section 3B of the M.P. Entry Tax is an enabling provision. Further, the ‘non-obstante’ in Section 3B will not foreclose the operation of Section 14, since Section 3B will override only if there is a contrary provision. In the absence of any notification under Section 3B, there is nothing contrary in Section 14 for the non-obstante in Section 3B to be invoked to override Section 14,” the court said.
Case Details
Case Title: M/S United Spirits Ltd. Versus State of M.P.
Case No.: CIVIL APPEAL NO. 5113 OF 2025
Date: CIVIL APPEAL NO. 5113 OF 2025
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