M/s Hamdard (Wakf) Laboratories vs. Commissioner, Commercial Tax, U.P Commercial (2026 INSC 195) – Decided on 25th February 2026

In this case, the Appellant is engaged in the manufacture of “Sharbat Rooh Afza”, a non-alcoholic sweetened beverage made from invert sugar and combined with fruit juices, vegetable extracts, and added flavours. For the relevant assessment years, the appellant manufactured and sold this product with 4% VAT on the sales thereof along with its monthly returns, treating the product as “Fruit Drink” or “Processed Fruit” covered under Entry 103 of Part A of Schedule II of the UPVAT Act. However, the Joint Commissioner (Corporate Circle), Commercial Tax, Ghaziabad, passed provisional assessment orders treating “Sharbat Rooh Afza” as an unclassified commodity liable to tax at 12.5% under the Residuary Entry in Schedule V. Being aggrieved by this, the Appellant filed first appeals, which were rejected by the Additional Commissioner (Appeals), Commercial Taxes Range, Ghaziabad. The second appeals preferred before the Tribunal was also dismissed. The Appellant thereafter filed revisions before the High Court challenging the Tribunal’s orders. By the impugned judgments, the High Court dismissed the revisions and upheld the concurrent findings recorded by the authorities below. Consequently, the Appellant approached the Hon’ble Supreme Court.

The Hon’ble Supreme Court observed that 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” within Entry 103. It cannot be relegated to the residuary entry merely because it is marketed as a “sharbat”.

The Court further observed that “though invert sugar syrup constitutes approximately 80% by volume, its function is essentially that of a carrier, sweetening medium and preservative base. It does not determine the commercial or beverage identity of the product. The flavour, aroma and beverage character are derived from the fruit juice component and allied distillates, which together impart to the product its distinctive character as a flavoured sharbat intended for dilution and consumption as a refreshing drink. Mechanical reliance upon the quantitative predominance of invert sugar syrup would therefore be misplaced. Classification must follow the component that confers upon the product its essential beverage character.”

The Court therefore held that the expression “fruit drink” occurring in Entry 103 cannot be confined solely to ready-to-consume bottled beverages. In common trade understanding, fruit squashes, concentrates, and sharbat preparations intended for dilution are all capable of being understood as fruit drink preparations. The nomenclature “sharbat” does not strip the product of its essential character as a fruit-based beverage concentrate, particularly where its composition and intended use align with that understanding. The Court ruled that regulatory or licensing classification cannot control or curtail the interpretation of a fiscal entry. It further held that the Revenue has failed to discharge further held that the burden lies on the Revenue to justify classification under a residuary entry, which was not discharged in the present case. Lastly, the Court held that resort to the residuary entry is impermissible where classification under a specific entry is reasonably and sustainably possible.