Substance-over-form test denies country liquor exemption where medicinal ingredients and preparation show medicated wine

For exemption entries covering country liquor, the decisive test is the commodity's substance as shown by its ingredients, preparation and ordinary use. Mritasanjibani Sura was found to be prepared by fermenting medicinal herbs with molasses and distilling the mixture into a liquor used for medicinal purposes, so it was treated as medicated wine and not ordinary country liquor. Because medicated wine fell outside the exemption notification, the sales tax assessment was upheld and the disputed turnover remained taxable.

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Issues: Whether Mritasanjibani Sura, having regard to its ingredients and method of preparation, was country liquor exempt from sales tax under the relevant notification, or medicated wine liable to tax.

Analysis: The exemption notification covered country liquor, including toddy and pachwai, but excluded medicated wine. The composition and distillation process of Mritasanjibani Sura showed that it was made by mixing and fermenting medicinal herbs with molasses and then distilling the mixture into a liquor used for medicinal purposes. Its essential character was determined from its ingredients, preparation, and use, not from the fact that excise duty had been levied on it as country liquor. On that basis, it was treated as a liquor with medicinal properties and not as ordinary country liquor within the meaning of the exemption entry.

Conclusion: Mritasanjibani Sura was held to be medicated wine and not exempt country liquor, so the sales tax assessment was valid and the answer was against the assessee.

Final Conclusion: The references were answered in favour of the State, and the disputed turnover was held liable to sales tax.

Ratio Decidendi: For exemption entries, the decisive test is the substance of the commodity as revealed by its ingredients, preparation, and ordinary use; a liquor having medicinal properties is not country liquor merely because it contains alcohol or has been treated as such for excise purposes.

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