Case Note & Summary
The Supreme Court allowed appeals filed by Appellants challenging the classification of their product under the Uttar Pradesh Value Added Tax Act, 2008 (UPVAT Act) -- The appellant had classified the product as 'fruit drink' under Entry 103 of Schedule II attracting 4% tax for the period 01.01.2008 to 31.03.2012 -- The revenue authorities classified it under residuary entry in Schedule V attracting 12.5% tax -- The High Court upheld the revenue's classification -- The Supreme Court examined statutory definitions under the Central Excise Tariff Act, 1985 and Fruit Products Order, 1955 which defined 'sharbat' as containing not less than 10% fruit juice -- The Court applied the common parlance test and essential character test, holding that fruit content imparted the essential character to the product -- The Court found that the revenue failed to discharge the burden of proving classification under residuary entry -- The impugned judgments were set aside and the product was held to be classifiable as 'fruit drink' under Entry 103 of Schedule II of the UPVAT Act
Headnote
The Supreme Court allowed the appeals filed by Appellants against the judgments of the High Court of Judicature at Allahabad -- The dispute pertained to the classification of the product for Value Added Tax purposes under the Uttar Pradesh Value Added Tax Act, 2008 (UPVAT Act) -- The appellant had classified the product as 'fruit drink' under Entry 103 of Schedule II attracting 4% tax -- The revenue authorities classified it under residuary entry in Schedule V attracting 12.5% tax -- The High Court upheld the revenue's classification -- The Supreme Court held that the product qualified as 'fruit drink' under Entry 103 based on statutory definitions, common parlance test, and essential character test -- The Court emphasized that the fruit content imparted the essential character to the product despite sugar syrup being the predominant ingredient -- The burden was on revenue to prove classification under residuary entry which was not discharged -- The impugned judgments were set aside and the appeals were allowed
Issue of Consideration
Whether the product 'Sharbat Rooh Afza' manufactured by the appellant qualifies as 'fruit drink' under Entry 103 of Schedule II of the Uttar Pradesh Value Added Tax Act, 2008 (UPVAT Act) or falls under the residuary entry in Schedule V
Final Decision
The Supreme Court allowed the appeals -- Set aside the impugned judgments of the High Court -- Held that 'Appellants Product' qualifies as 'fruit drink' under Entry 103 of Schedule II of the Uttar Pradesh Value Added Tax Act, 2008 (UPVAT Act) -- Directed classification under Entry 103 attracting 4% tax
Law Points
- Classification of goods under tax statutes must be based on statutory definitions and common parlance test
- The essential character test determines classification based on the ingredient that imparts distinctive identity to the product
- Burden of proof lies on revenue to establish classification under residuary entry when taxpayer claims specific entry
- Supplementary notes in tariff schedules and allied statutory instruments provide guidance for classification
- Judicial precedents on classification principles are binding authorities
Case Details
2026 LawText (SC) (02) 62
Civil Appeal Nos. 2557-2578 of 2026 [Arising out of SLP (C) Nos. 6074-6095 of 2019] with Civil Appeal No. 2579 of 2026 [Arising out of SLP (C) No. 16125 of 2022]
B. V. NAGARATHNA J. , R. MAHADEVAN J.
M/s Hamdard (Wakf) Laboratories
Commissioner, Commercial Tax, U.P. Commercial
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Nature of Litigation
Tax classification dispute under the Uttar Pradesh Value Added Tax Act, 2008 (UPVAT Act)
Remedy Sought
Appellant seeking classification of 'Sharbat Rooh Afza' as 'fruit drink' under Entry 103 of Schedule II of UPVAT Act attracting 4% tax instead of residuary entry in Schedule V attracting 12.5% tax
Filing Reason
Appellant challenged High Court judgments upholding revenue's classification under residuary entry
Previous Decisions
Assessing Authority classified product under residuary entry -- Appellate Authority dismissed appeals -- Tribunal dismissed second appeals -- High Court dismissed revisions upholding classification under residuary entry
Issues
Whether 'Sharbat Rooh Afza' qualifies as 'fruit drink' under Entry 103 of Schedule II of the Uttar Pradesh Value Added Tax Act, 2008 (UPVAT Act)
Whether the revenue discharged the burden of proving classification under residuary entry
Submissions/Arguments
Appellant contended product contains 10% fruit juice and qualifies as fruit drink under Entry 103 based on statutory definitions
Appellant argued High Court failed to apply essential character test which shows fruit content imparts distinctive identity
Appellant submitted revenue failed to discharge burden of proving classification under residuary entry
Appellant relied on statutory definitions under Central Excise Tariff Act, 1985 and Fruit Products Order, 1955
Ratio Decidendi
Classification of goods under tax statutes must be determined by applying statutory definitions and common parlance test -- The essential character test requires examination of which ingredient imparts distinctive identity to the product -- Burden lies on revenue to establish classification under residuary entry when taxpayer claims specific entry -- Supplementary notes in tariff schedules and allied statutory instruments provide guidance for proper classification
Judgment Excerpts
The dispute pertains to the period from 01.01.2008 to 31.03.2012
The appellant manufactured and sold the said product and paid VAT at the rate of 4% on the sales thereof along with its monthly returns, treating the product as 'Fruit Drink' or 'Processed Fruit' covered under Entry 103
Supplementary Note 3 to Chapter 21 of the Central Excise Tariff Act, 1985 defines 'Sharbat' as a non-alcoholic sweetened beverage or syrup containing not less than 10% fruit juice
The essential character test mandates that classification must be determined on the basis of the constituent that imparts the product its essential character
Procedural History
Assessing Authority made provisional assessments classifying product under residuary entry -- Appellate Authority dismissed first appeals -- Tribunal dismissed second appeals -- High Court dismissed revisions upholding classification under residuary entry -- Supreme Court granted leave and heard appeals
Acts & Sections
- Uttar Pradesh Value Added Tax Act, 2008: Schedule II Entry 103, Schedule V residuary entry
- Central Excise Tariff Act, 1985: Chapter 21 Supplementary Note 3
- Fruit Products Order, 1955: Rule 2(j)
