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Tax & Customs LawSupreme Court of India

M/S. Hamdard (Wakf) Laboratories v. Commissioner of Commercial Tax

Civil Appeal · 2026 INSC 195Decided 25 Feb 2026
C.A. No.-002557-002578 - 2026
Justice B.V. Nagarathna · Justice R. Mahadevan · Justice Ahsanuddin Amanullah

Background

Hamdard, the maker of the popular drink "Sharbat Rooh Afza," paid Uttar Pradesh VAT at the concessional 4% rate applicable to "fruit drinks." Tax authorities instead classified the product as an unclassified item taxable at 12.5%, reasoning that under food-safety licensing rules a drink needs at least 25% fruit juice to be labelled a "fruit drink," while Rooh Afza contains only about 10%. The Allahabad High Court upheld this higher tax across multiple years of assessment (2008-2012).

Decision Breakdown

The Supreme Court sided with Hamdard, holding that a food-safety licensing definition cannot be imported wholesale into a tax statute that itself does not prescribe any minimum fruit-content threshold. Applying the "common parlance" and "essential character" tests long used in tax classification, the Court found that although sugar syrup makes up 80% of the product by volume, the fruit juice and related extracts give Rooh Afza its true identity as a fruit-based beverage. It also noted the tax department had produced no market or consumer evidence to justify treating the product as an "unclassified" residuary item, and that several other states already tax the same product as a fruit drink. The appeals were allowed, the higher-tax orders set aside, and a refund of the excess tax directed.

Lesson Learnt

When goods can reasonably fit a specific tax entry, authorities cannot fall back on the catch-all "residuary" category without proving otherwise: the burden is on the tax department, not the taxpayer, and unrelated regulatory definitions (like food-labelling rules) don't automatically control tax classification.

M/S. Hamdard (Wakf) Laboratories v. Commissioner of Commercial Tax – Legal Case Shots | LegalAware