The Supreme Court of India has held that “Rooh Afza,” the popular beverage concentrate produced by Hamdard Laboratories, should be classified as a “fruit drink” rather than an unclassified “sharbat” for Value Added Tax (VAT) purposes.
The judgment, delivered on Wednesday by a bench comprising Justices BV Nagarathna and R Mahadevan, clarifies that the true nature and composition of a product take precedence over its marketing labels or regulatory descriptions when determining tax categories.
The Legal Dispute
The case originated from a disagreement between Hamdard Laboratories and the Uttar Pradesh tax authorities. Under the UPVAT Act, “fruit drinks” were eligible for a concessional tax rate of 4% (Entry 103). However, the tax department insisted that Rooh Afza belonged in a “residuary entry,” which attracted a much higher tax rate of 12.5%.
The authorities argued that since the product was licensed as a “non-fruit syrup” under food safety regulations and marketed as a “sharbat,” it did not qualify for the lower tax bracket reserved for fruit-based beverages. The Allahabad High Court had previously upheld this view, prompting the manufacturer to appeal to the apex court.
The “Essential Character” Test
The Supreme Court set aside the High Court’s order, emphasizing the “essential character” of the product. While the tax authorities pointed out that sugar syrup constitutes roughly 80% of Rooh Afza by volume, the Court noted that the sugar serves primarily as a carrier and preservative.
“The flavor, aroma, and beverage character are derived from the fruit juice component and allied distillates,” the Court observed. Justice Mahadevan, authoring the judgment, stated that mechanical reliance on quantitative predominance (the volume of sugar) is misplaced. Instead, classification must follow the component that gives the product its distinctive identity.
Key Takeaways from the Judgment
- Nature Over Nomenclature: The Court held that labels used for marketing or licensing under other statutes (like food safety laws) are not determinative for taxation. What matters is the product’s composition and how it is perceived in common parlance.
- Consistency Across States: The bench noted that several other states—including Delhi, Gujarat, West Bengal, and Madhya Pradesh—already treat Rooh Afza as a fruit-based preparation. The Court found no reason for Uttar Pradesh to deviate from this widely accepted commercial understanding.
- Specific vs. General Entry: The Court reiterated the legal principle that if a product reasonably fits a specific description (like a “fruit drink”), it cannot be pushed into a general or “residuary” category just because of its branding.
By allowing the appeal of M/S Hamdard (Wakf) Laboratories, the Supreme Court has provided much-needed clarity on fiscal classification. The ruling ensures that Rooh Afza will be taxed at the concessional rate of 4% for the relevant assessment years, marking a victory for the manufacturer and setting a precedent for how “hybrid” food products are categorized under Indian tax law.
Case Title: M/S HAMDARD (WAKF) LABORATORIES v. COMMISSIONER, COMMERCIAL TAX, U.P. COMMERCIAL
Citation: JURISHOUR-122-SUPREMECOURT-2026(SC)
Case No.: CIVIL APPEAL NO(S). 2557-2578 OF 2026
Date: 25 February 2026
