A Bench of Justice BV Nagarathna and Justice R Mahadevan allowed the appeals filed by Hamdard (Wakf) Laboratories
Overturning the Allahabad High Court view that treated the product as an unclassified item taxable at 12.5 per cent, the Supreme Court has held that “Sharbat Rooh Afza” falls within the category of fruit drink or processed fruit product under the Uttar Pradesh Value Added Tax Act, 2008. The decision brings the tax rate down to 4 per cent.
A Bench of Justice BV Nagarathna and Justice R Mahadevan allowed the appeals filed by Hamdard (Wakf) Laboratories. The dispute concerned the assessment years between 2007 and 2012. During this period, the manufacturer paid Vat at 4 per cent under Entry 103 of Schedule II, Part A of the Act. The Revenue disagreed and applied the residuary entry under Schedule V.
“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 per cent during the relevant assessment years. The impugned judgment(s) affirming classification under the residuary entry and levy at 12.5 per cent are set aside,” the court said.
The core issue was classification. Entry 103 covers processed or preserved vegetables and fruits, including fruit jams, jelly, pickle, fruit squash, paste, fruit drink and fruit juice. The revenue argued that “sharbat” is not expressly mentioned. It relied on the product licence and FSSAI clarification describing it as “non-fruit syrup” with 10 per cent fruit juice.
The High Court applied the common parlance test. It held that a consumer asking for fruit drink would not receive Rooh Afza. It also relied on regulatory descriptions. On that basis, it upheld the higher tax rate. The Supreme Court rejected that approach. It said that regulatory standards do not govern fiscal classification unless the statute adopts them.
