The Supreme Court on Thursday held that “Sharbat Rooh Afza” qualifies as a “fruit drink/processed fruit product” under Entry 103 of Schedule II, Part A of the Uttar Pradesh Value Added Tax Act, 2008. The product will attract VAT at the concessional rate of 4%.
A Bench of Justice B.V. Nagarathna and Justice R. Mahadevan set aside the Allahabad High Court judgment. The High Court had treated the product as an unclassified commodity. It had applied 12.5% VAT under the residuary entry.
The Court held that Rooh Afza falls squarely within Entry 103. It rejected the Revenue’s reliance on the residuary classification. The Bench ruled:
“Accordingly, it is held that ‘Sharbat Rooh Afza’ is classifiable under Entry 103 of Schedule II, Part A of the UPVAT Act as a fruit drink / processed fruit product and is exigible to VAT at the concessional rate of 4% during the relevant assessment years. The impugned judgment(s) affirming classification under the residuary entry and levy at 12.5% are set aside.”
Dispute over classification under UPVAT (2008–2012)
The dispute involved “Sharbat Rooh Afza” manufactured by M/s Hamdard (Wakf) Laboratories. It covered the period from January 1, 2008 to March 31, 2012.
Entry 103 covers processed or preserved fruits and vegetables. It also includes fruit jam, jelly, pickle, squash, paste, fruit drink, and fruit juice. The entry attracts 4% VAT.
The Revenue invoked Entry 1 of Schedule V instead. That residuary entry covers goods not listed in Schedules I to IV. It attracts 12.5% VAT.
For assessment years 2007–08 and 2008–09, Hamdard paid VAT at 4%. It filed monthly returns on that basis. Later, the assessing authority made provisional assessments for several months. It treated Rooh Afza as unclassified. It then applied 12.5% VAT.
Hamdard challenged the assessments. However, the Commercial Tax Tribunal, Ghaziabad dismissed the appeals. The Tribunal said Rooh Afza was not a fruit drink. It described it as a “sharbat.” It therefore placed it in the unclassified category.
High Court relied on common parlance, licence, and FSSAI communication
Before the Allahabad High Court, Hamdard cited earlier Supreme Court rulings. It relied on decisions under the Fruit Products Order, 1955. It also referred to the Central Excise Tariff Act, 1985. Hamdard argued that Rooh Afza stood recognised as a fruit-based beverage.
The Revenue relied on the common and commercial parlance test. It argued that consumers view Rooh Afza as “sharbat,” not a fruit drink. It also cited decisions that treated similar products as sugar concentrates or syrups.
The UPVAT Act does not define “fruit drink” or “fruit juice.” The High Court therefore applied common parlance. It said consumers do not ask for Rooh Afza as a fruit drink. It also said sellers would not supply it as a fruit drink.
The High Court also relied on manufacturing documents. The licence described the product as “Non Fruit Syrup/Sharbat.” An FSSAI communication treated it as “Non Fruit Syrup” because it had 10% fruit juice. On that basis, the High Court upheld the residuary classification. Hamdard then approached the Supreme Court through SLPs.
Supreme Court: regulatory labels cannot decide tax classification
Before the Supreme Court, the Bench noted the product’s composition. It contains 10% fruit juice. That includes 8% pineapple and 2% orange. It also contains around 80% invert sugar syrup. It has small quantities of distillates and extracts too.
The Bench also examined an FSSAI clarification dated July 31, 2009. The clarification said a “fruit syrup” must contain at least 25% fruit juice. It therefore treated Rooh Afza as a “non-fruit syrup containing 10% fruit juice.”
The Revenue relied on the FSSAI clarification. It also relied on the manufacturing licence under the Fruit Products Order. It used these to argue against Entry 103.
The Supreme Court rejected that approach. It said regulatory standards and fiscal statutes operate in different domains. It held that tax classification must follow the language of the taxing law. External definitions matter only if the statute adopts them.
“It is trite that a fiscal statute must be interpreted in its own language… Regulatory enactments such as the FPO or standards framed by the Food Safety and Standards Authority of India operate in a distinct domain… They are neither determinative nor conclusive for purposes of fiscal classification unless a taxing statute expressly incorporates or adopts such definitions.”
Common parlance needs market material, not labels alone
Since UPVAT does not define “fruit drink,” the Court applied the common/commercial parlance test. However, it insisted on supporting material. It said nomenclature alone cannot decide classification.
The Court listed relevant indicators. It pointed to composition, label, product literature, character, use, and market understanding.
Here, the Court found a key gap. The Revenue mainly relied on licensing terminology and regulatory norms. It did not produce trade enquiries, market evidence, or consumer-facing material.
The Court also placed the burden on the Revenue. It said the Revenue must justify use of the residuary entry. The Revenue failed to discharge that burden. So the residuary classification could not stand.
Essential character: fruit constituents give the beverage its identity
The Court then applied the “essential character” test. It accepted that invert sugar syrup forms about 80% by volume. Still, it said the syrup acts mainly as a carrier and preservative.
The Court said the fruit juice and distillates shape the product’s identity. They give flavour, aroma, and beverage character. The Bench warned against a purely quantitative approach. It observed:
“The flavour, aroma and beverage character are derived from the fruit juice component and allied distillates… Mechanical reliance upon the quantitative predominance of invert sugar syrup would therefore be misplaced. Classification must follow the component that confers upon the product its essential beverage character.”
The Bench also referred to Chapter Note 3 of Chapter 21 of the Central Excise Tariff Act. The note defines “sharbat” as a sweetened beverage or syrup. It may contain not less than 10% fruit juice. It may also use non-fruit flavours.
The Court read Entry 103 broadly. It noted that the entry uses inclusive wording. It also noted that the entry sets no minimum fruit-content threshold. The Court refused to read a rigid percentage into the entry. It said the Legislature did not provide any such requirement.
“Entry 103… is couched in inclusive terms… The Entry does not prescribe any minimum threshold of fruit content… In the absence of any quantitative stipulation, it would not be appropriate to read into the entry a rigid percentage requirement that the Legislature has consciously not provided.”
Other States’ treatment has evidentiary value
The Court also noted how other States taxed Rooh Afza. Authorities in Delhi, Gujarat, West Bengal, Madhya Pradesh and Andhra Pradesh taxed it under fruit-based beverage entries. They applied concessional rates of 4% to 5%.
The Court said those classifications do not bind Uttar Pradesh. Still, it treated them as relevant. It said they help assess market perception and trade practice.
Consequential relief
The Supreme Court held that Rooh Afza falls under Entry 103. It also said authorities can use the residuary entry only when no specific entry applies.
The Court set aside the impugned judgments. It directed consequential relief in accordance with law. This may include refund or adjustment of excess tax.
Case Title: M/s Hamdard (Wakf) Laboratories v. Commissioner of Commercial Tax
