In a ruling that slices through the syrupy debate over tax labels, the Supreme Court has made it clear: what a product is matters more than what it’s called.
At the centre of the dispute was Rooh Afza, the deep crimson concentrate long poured into glasses of milk and water across Indian homes. Marketed as a “sharbat,” it had been taxed in Uttar Pradesh at 12.5% under a residual VAT category. The manufacturer argued otherwise — that it qualified as a fruit-based beverage preparation and deserved the lower 4% rate.
The bench of Justices B.V. Nagarathna and R. Mahadevan agreed.
Label vs. Liquid
Tax authorities had leaned heavily on how the product was described under food regulations — a “non-fruit syrup/sharbat.” But the Court brushed that aside, underscoring a basic principle of fiscal law: branding does not control tax treatment.
Instead, judges turned to composition, purpose and how the product is understood in everyday trade. If it behaves like a fruit drink, tastes like one and is consumed as one, then it cannot be pushed into a higher tax bracket merely because its label says “sharbat.”
The 80% Sugar Question
One of the State’s key arguments was mathematical. Roughly 80% of the formulation is invert sugar syrup. Shouldn’t that define the product?
Not quite, said the Court.
Sugar, the bench noted, plays a supporting role — it sweetens, preserves and carries flavour. The defining identity of the drink flows from its fruit juice content (around 10%) and herbal distillates, which give it aroma, taste and character. In legal terms, the “essential character” of the beverage lies not in the bulk ingredient but in what gives it its distinctive appeal.
To classify it based purely on volume would be mechanical and misleading. Tax classification, the judges stressed, must follow the element that gives the product its commercial identity.
A Wider Pattern
The ruling also pointed to consistency across states. Delhi, Gujarat, West Bengal, Madhya Pradesh and Andhra Pradesh have treated the drink under fruit-based beverage entries. That broader commercial understanding, the Court said, carries weight.
With that, the earlier rulings of the Allahabad High Court were set aside, and the appeal by Hamdard Laboratories was allowed. The Court held that “Sharbat Rooh Afza” falls under Entry 103 of Schedule II, Part A of the UPVAT Act — taxable at 4% during the relevant years.
The Takeaway
The judgment sends a crisp message to tax departments and businesses alike: regulatory descriptions and marketing language are not decisive. What counts is the product’s real-world identity — its ingredients, its use and how consumers perceive it.
In this case, beneath the ruby-red syrup and nostalgic branding, the Court found a fruit drink. And that made all the difference.
