Health Drink Powders Cannot Be Taxed as Beverages Merely Because They Are Mixed with Milk or Water: Supreme Court Upholds Residuary Classification of Cadila’s GRD Products.

Case Name: Additional Commissioner, Commercial Tax & Others v. Cadila Health Care Ltd. & Another.

Date of Judgment: 5 October 2026.

Citation: 2026 INSC 1078.

Bench: Justice Manmohan and Justice Arun Palli.

Held: The Supreme Court held that the classification of Cadila’s “GRD Powder” and “GRD Mix” must be determined by their identity and physical form at the time of sale, rather than by the beverage a consumer may subsequently prepare from them. Goods sold in powder or biscuit form do not fall within Entry 20(ii), Part IV, Schedule II of the Madhya Pradesh Commercial Tax Act, 1994, covering non-alcoholic drinks and beverages. They attract tax under the residuary entry at 8%, rather than the 10% rate applicable to the beverage entry. Goods cannot be forced into an inapplicable specific entry merely to attract a higher tax rate.

Summary: The Supreme Court dismissed the Revenue’s appeals against the Madhya Pradesh High Court’s judgment dated 3 August 2011, which upheld the residuary classification of Cadila’s GRD products for Assessment Year 1997–1998. The dispute concerned whether products sold in powder and biscuit form could be classified as non-alcoholic drinks and beverages because their packaging instructed consumers to mix them with milk or water.

The Revenue argued that the products’ packaging, promotional imagery and functional character identified them as health drinks. It relied on the common parlance, functional character and basic nature tests, contending that goods intended for preparation as drinks should fall within the beverage entry even when sold in powder form. Cadila maintained that the relevant entry contained no reference to end use and that classification had to follow the goods’ condition at the taxable event.

Rejecting the Revenue’s approach, the Court reiterated that taxing statutes must be strictly construed and that words cannot be added to an unambiguous provision. The authorities must examine what is supplied at the time of sale. A consumer’s subsequent decision to mix a powder with milk or water does not transform the goods retrospectively into a beverage for taxation. The Court also observed that such powders could be used in solid preparations, including milk-based fudge or barfi, demonstrating why subsequent use could not determine classification.

Examining Entry 20(ii), the Court identified a common characteristic among the enumerated syrups, cordials, distilled juices, ark and essences: they are liquids or liquid preparations. Applying the rule of ejusdem generis, it held that “beverages” must be construed in the context of those associated words. The expression “including” did not make the entry unlimited or extend it to goods of an altogether different physical form. Common parlance and functional tests could not import an end-use criterion that would override the statutory guidance in this entry.

The judgment also recorded the period-specific entry-tax position for Assessment Year 1997–1998. During April 1997, the applicable residuary rate was 1%; from May to September 1997, no entry covered the goods and they were not amenable to entry tax. For October 1997 to March 1998, the competing classifications were the beverage entry attracting 2% and the residuary entry attracting 1%. The Court’s rejection of beverage classification preserved the basis for treating the products under the applicable residuary entry.

Decision: The Supreme Court dismissed the Revenue’s appeals, leaving undisturbed the High Court’s ruling that the GRD products were taxable under the residuary entry at 8% under the Madhya Pradesh Commercial Tax Act, 1994, for Assessment Year 1997–1998. Pending applications were disposed of. The ruling concerns the wording of the statutory entries before the Court; it does not establish a universal classification for health drink powders under other tax enactments.