Arham Jain
In an order dated 4 March 2025, the Gauhati High Court carbonated fruit drinks sold by Guwahati-based manufacturer XSS Beverages are classified as “fruit pulp or fruit juice based drinks” and are therefore subject to a 12 percent goods and services tax (GST), rather than other tariff categories like “aerated water,” which are subject to a higher 28 percent GST.
According to Justice Soumitra Saikia, if a fruit-based beverage contains more than 10% fruit, the mere existence of carbonated water in such bubbly fruit juices does not qualify it as “aerated water.”
In order to reduce and escape from its GST liability to 12%, the Revenue Department filed a lawsuit against XSS Beverages, claiming that the company had incorrectly classed its carbonated beverages under tariff item 2202 99 20 (fruit pulp or fruit juice-based drinks).
The Revenue Department argued that carbonated beverages, including those produced by petitioner XSS Beverages, ought to be subject to a 28 percent GST under tariff category 2202 10 90 (aerated waters).
Justice Sakia didn’t agree. According to the judgment, the petitioner’s beverages met the requirements for being classified as fruit-based drinks under the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 as they included more than 10% fruit juice.
He underlined that these drinks were different from aerated waters because of the fruit juice component, which gave them their basic flavor.
“The sole basis for rejecting the assessee’s classification under Sub-head 2202 99 is that these subject products contained carbonated water. However, such conclusions by the Revenue that merely because it contains carbonated water, the subject products are to be treated under classification ‘water’ or ‘aerated water’ is completely fallacious,” the High Court ruled.
The decision mainly drew from Supreme Court precedents in other cases that were similar to this one, like APPY FIZZ (Parle Agro Pvt. Ltd. vs. Commissioner of Commercial Taxes) Click here to access the judgement, where it was decided that drinks that contained fruit juice in excess of certain thresholds would be categorized as fruit juice-based drinks, even if they contained carbonated water.
The Revenue Department’s claim that XSS Beverages could not use laboratory testing or Food Safety and norms Authority of India (FSSAI) norms to identify the nature of their goods was also dismissed by the Court. The Court made it clear that these tests might be used to classify a goods under the GST.
The Court stated that the Revenue has also not suggested any alternative methods or means by which such test results were undertaken leading to contradictory findings to that of the test results conducted under the FSSAI.
The Court ruled that XSS Beverages had appropriately categorized its goods under tariff item 2202 99 20, which imposes a 12 percent GST on fruit-based drinks, and so dismissed the Revenue authorities’ show-cause notice against the petitioner.
Senior Advocate A Saraf assisted by advocate PK Bora represented the petitioner.
Standing Counsel for Finance and Taxation for Assam B Gogoi represented The Revenue Department.
Case Name- X’SS Beverage Co. v The State of Assam
Case Number- W.P(C) 5347/2022
Bench- Justice Soumitra Saikia
Click here to access the order
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