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 percent. It overturns the Allahabad High Court view that treated the product as an unclassified item taxable at 12.5 percent.
A Bench of Justice B.V. 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 percent under Entry 103 of Schedule II, Part A of the Act. The Revenue disagreed and applied the residuary entry under Schedule V.
For the assessment years 2007–08 and 2008–09, Hamdard had been paying VAT at the lower rate of 4 percent for Rooh Afza sales, arguing that it fell under the category covering processed or preserved fruits, fruit squash, fruit drink, and fruit juice.
However, tax authorities disagreed and classified the product as unclassified, subjecting it to higher VAT. Hamdard’s appeals to the first appellate authority and the Commercial Tax Tribunal were unsuccessful, with the tribunal asserting that the product is commonly recognized as “sharbat” rather than a fruit drink.
In July 2018, the Allahabad High Court dismissed several revisions filed by Hamdard, siding with the tribunal’s perspective. The High Court largely relied on the “common parlance test,” stating that consumers asking for fruit juice or fruit drink would not receive Rooh Afza.
Additionally, it referenced regulatory material indicating that the product contains approximately 10 percent fruit juice and is labeled as a “non-fruit syrup/sharbat,” supporting the conclusion that it does not meet the criteria for classification as a fruit drink, fruit juice, or processed fruit under the VAT schedules.
Hamdard subsequently appealed to the Supreme Court, bringing the long-standing classification dispute before the apex court.
The Supreme Court dismissed the reasoning of the tax authorities and the High Court, finding the concurrent findings subject to appellate review. It concluded that those findings were flawed due to a clear legal misdirection and relied on an incorrect application of established fiscal classification principles.
Hamdard’s legal representation included Senior Advocate Arvind Datar along with a team from King Stubb & Kasiva: Aditya Bhattachrya (Partner), Vipin Upadhyay (Partner), Simran Tandon (Associate Partner), Ritwik Tyagi (Senior Associate), and Akriti Sharma (Associate). The Tax Department was represented by advocate Bhakti Vardhan Singh.
