Supreme Court Holds Sharbat Rooh Afza Is A Fruit Drink

The Supreme Court has held, "Sharbat Rooh Afza” is classifiable under Entry 103 of Schedule II, Part A of the UPVAT Act as a fruit drink or processed fruit product and is exigible to VAT at the concessional rate of 4% during the relevant assessment years.

A bench of Justices BV Nagarathna and R Mahadevan emphasized the test of essential character requires the identification of that component which imparts to the finished product its distinctive identity and functional utility. "Quantitative predominance of a particular ingredient is not decisive if such ingredient merely performs a facilitating role in formulation, preservation or dilution,'' the court said.

The bench allowed an appeal filed by M/s Hamdard (Wakf) Laboratories against the Allahabad High Court's 2018 judgment, which dismissed the revisions preferred by the appellant and affirmed the order of the Commercial Tax Tribunal, Ghaziabad holding that the appellant’s product “Sharbat Rooh Afza” was liable to Sales Tax or Value Added Tax at the rate of 12.5% under the residuary entry contained in Schedule V of the Uttar Pradesh Value Added Tax Act, 2008.

Court has held the fiscal statute must be interpreted in its own language. Regulatory enactments such as the FPO (Food Products Order) or standards framed by the Food Safety and Standards Authority of India operate in a distinct domain namely quality control, safety, and licensing. They are neither determinative nor conclusive for purposes of fiscal classification unless a taxing statute expressly incorporates or adopts such definitions.

The bench pointed out, in the absence of a statutory definition, the settled principle of interpretation mandates application of the common parlance test, namely, how the product is understood in commercial and popular sense by those who deal with it.

"Classification must be determined on the basis of how the product is understood in common or commercial parlance, having regard to tangible material such as its composition, product literature, label, character, and user, and not merely on technical or regulatory description,'' the bench said.

The court held, where a commodity reasonably fits within a specific entry, it ought not to be consigned to a residuary entry and where the Revenue seeks to classify a product under a residuary or entry different from that claimed by the assessee, the burden lies squarely upon it.

It has emphasised on classification based on common parlance test cannot rest on mere conjecture or assumption, which must be founded upon cogent and objective material demonstrating how the goods are understood in trade and in the commercial world. This principle assumes greater significance where the Revenue seeks to classify a product under the residuary entry, it said.

The court underscored, recourse to a residuary clause is permissible only when the goods cannot reasonably be brought within the ambit of any specific entry. "Such inability must be established by the Revenue on the basis of relevant material; the residuary entry cannot be invoked merely because the specific entry is construed narrowly or because some ambiguity is perceived,'' the bench said.

In the case, the court found the product contained declared fruit juice and derived its essential beverage identity from fruit-based constituents. "Entry 103 of Schedule II, Part A of the UPVAT Act is illustrative and inclusive in character and does not prescribe any quantitative threshold of fruit content. Regulatory or licensing classification cannot control or curtail the interpretation of a fiscal entry,'' the bench has said.

The court held, the revenue has failed to discharge the burden of proving that the product falls outside Entry 103 and within the residuary entry; and resort to the residuary entry is impermissible where classification under a specific entry is reasonably and sustainably possible.

Case Title: M/s Hamdard (Wakf) Laboratories Vs Commissioner, Commercial Tax, UP Commissioner

Bench: Justices B V Nagarathna and R Mahadevan

Date of Judgment: February 25, 2026