The Supreme Court has held that tax classification must be determined by the form in which goods exist when sold, not by how a buyer may later use them.
In Additional Commissioner, Commercial Tax v Cadila Health Care Ltd, decided on 5 October 2026, the Court examined GRD Powder and GRD Mix under Madhya Pradesh’s commercial-tax regime. The revenue argued that consumers dilute the products with milk or water, bringing them within the entry for non-alcoholic drinks and beverages.
Justices Manmohan and Arun Palli rejected that approach. The products were sold as powder and biscuit, while the statutory entry referred to drinks and beverages in liquid form. Consumer preparation after sale could not import an end-use test into an otherwise clear classification provision.
The Court said goods that do not answer a specific entry must fall within the residuary category and cannot be forced into a higher-tax entry. It dismissed the revenue’s appeals, preserving the eight per cent classification applied by the High Court.