Supreme Court of India settled a decade-long tax battle by ruling that the iconic beverage Rooh Afza is classifiable as a “fruit drink” rather than a “sugar syrup.”
This landmark decision means that Hamdard (Wakf) Laboratories will only be liable for a 4% Value Added Tax (VAT) rate under the Uttar Pradesh VAT Act, rather than the 12.5% rate demanded by the state’s tax department.
The “Common Parlance” vs. “Sugar Syrup” Debate
The dispute centered on whether Rooh Afza—which contains 10% fruit juice (8% pineapple and 2% orange) mixed with herbal distillates and invert sugar syrup—qualified as a fruit-based product.
- The Revenue’s Argument: The UP Tax Department argued that because sugar syrup constitutes 80% of the volume, the product is essentially a “sharbat” or sugar concentrate. They relied on food safety licensing (FPO) which requires 25% fruit juice for a “fruit syrup” label.
- The Court’s Ruling: A bench of Justice B.V. Nagarathna and Justice R. Mahadevan rejected the mechanical reliance on volume. They applied the “Essential Character Test,” holding that while sugar syrup is the carrier and preservative, the product’s identity, aroma, and flavor are derived from its fruit and herbal components.
Key Highlights of the Verdict
The Supreme Court set aside earlier judgments from the Allahabad High Court, citing several critical legal principles:
| Principle | Supreme Court Observation |
| Common Parlance | The court found no evidence from the Revenue (like consumer surveys) to prove that the public doesn’t consider Rooh Afza a fruit-based beverage. |
| Regulatory vs. Fiscal | Food safety laws (FPO) are for quality control and do not dictate tax categories unless the tax law explicitly says so. |
| Residuary Entry | The 12.5% “catch-all” tax can only be used if a product cannot be reasonably fit into any other category. The Court ruled Rooh Afza fits perfectly into Entry 103 (Fruit Drinks). |
| Inter-State Uniformity | The bench noted that states like Delhi, Gujarat, and West Bengal already tax Rooh Afza at the lower 4-5% rate, supporting its status as a fruit drink. |
Financial Impact for Hamdard
The ruling provides significant retrospective relief for the assessment period of 2008 to 2012.
- Refund: The Court has directed the Uttar Pradesh authorities to grant consequential relief, including the refund or adjustment of excess tax paid under protest.
- Precedent: This sets a strong precedent for other concentrated beverages that use sugar as a base but derive their value from fruit or herbal extracts.
“Once it is demonstrated that the product is a fruit-based beverage preparation intended for dilution and consumption, it bears a reasonable and substantial claim to classification as a ‘fruit drink’.” — The Supreme Court Bench.
