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Bombay High Court: In a reference made by the Maharashtra Sales Tax Tribunal (Tribunal), under Section 61 of the Bombay Sales Tax Act, 1959, to determine whether “Coffee and Instant Drinks Nescafe Premix” is classifiable under Entry C-II-3 (tax 8%) or Entry C-II-18(2) (tax 16%) of Schedule C, a Division Bench of M.S. Sonak and Advait M. Sethna, JJ., upheld the Tribunal’s view that Nescafe Premix is covered by Entry C-II-3 and therefore taxable at 8%, not 16%.
Factual Matrix
Nestle India Ltd., a registered dealer, marketed Nescafe Premix, a product used in vending machines. The product contains — Soluble Coffee Powder — 8.5%, Sucrose — 54%, Partially Skimmed Milk Powder — 37% and Maltodextrin — 0.5%.
Nestle India-respondent had filed a petition before the Commissioner of Sales Tax (Commissioner) for seeing determination on the rate of tax on “Coffee and Instant Drinks ‘Nescafe Premix’.” The Commissioner observed that the impugned product is not instant coffee and held that the “coffee and Instant Drinks Nescafe Premix” would be powder from which no alcoholic beverages are prepared and covered by Schedule Entry C-II-18(2) liable for sales tax at the rate of thirteen paise in a rupee. The Maharashtra Sales Tax Tribunal set aside that determination and classified the product under Entry C-II-3.
Nestle India contended that the product is understood in common parlance as “instant coffee”, since Nescafe is prepared by merely adding hot water. The Commissioner rejected this argument, finding that due to the “miniscule 8.5%” coffee content, the product is “not instant coffee” but a powder from which non-alcoholic beverages are prepared, covered by Entry C-II-18(2).
Moot Point
Whether “Coffee and Instant Drinks — Nescafe Premix” is covered by Entry 18(2) of Schedule C-II, or by Entry C-II-3 of Schedule C-II of the Bombay Sales Tax Act, 1959?
Court’s Observation
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Percentage of ingredients not decisive
The Court rejected the Commissioner’s reasoning that the premix contained only “miniscule 8.5%” soluble coffee powder and therefore could not be regarded as instant coffee. The Court approved the Tribunal’s reliance on the Forge & Co. v. Municipal Corpn. of Greater Bombay, (1999) 8 SCC 577), where the Supreme Court held that “the percentage of the ingredients is also not decisive in such matters.” The Court quoted the example that if the contrary view were accepted, “a pinch of salt added in preparing food cannot be regarded as an item of food.”
The Court held that for the purpose of imposition of levy of octroi one has to see whether an item in question is enumerated in the Schedule or not. If the item is mentioned therein, then irrespective of the heading under which it is contained, the Corporation would be entitled to levy octroi on the import of the said item. The Court further held that ingredient proportions cannot dictate classification when the statute uses words of everyday understanding.
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Application of the Common Parlance Test
The Court emphasised that the classification must rest on popular and commercial understanding, and observed that
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The product is expressly presented as ‘Nescafe Premix’.
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It is used to prepare Nescafe by simply adding hot water.
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The resultant product, in the perception of the consumer, “was nothing but Nescafé.”
The Court held that “Entry C-II-3 includes not just ‘coffee’ but also ‘instant coffee’. Thus, in common parlance, this was nothing, but an ‘instant coffee’ prepared by pouring hot water into the premix.” Therefore, the product is understood by traders and consumers as instant coffee, not as a generic beverage powder.
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Specific entry prevails over general entry
The Court emphasised on the well-settled principle established in Bharat Forge & Press Industries (P) Ltd. v. CCE, 1990 (1) SCC 532, that specific entries override general entries.
“A general entry may be resorted to only when the goods cannot be classified under a specific tariff entry.”
Applying this rule, the Court held that Entry C-II-3, being directly concerned with coffee and instant coffee, is clearly the special provision, whereas Entry C-II-18(2) is merely a general description covering beverage powders of all kinds. The Court held that “the product in question was liable to be classified under Entry C-II-3, which was a specific entry dealing with ‘coffee’ or ‘instant coffee’ rather than the general Entry C-II-18(2).”
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Application of trade and market understanding
Relying on CCE v. Connaught Plaza Restaurant, (2013) 18 GSTR 1 (SC), Commr. of Sales Tax v. La Bella Products, (1985) 59 STC 221 and Commr. of Sales Tax v. Ajay Industrial Packing (P) Ltd., (1995) 99 STC 35), the Court reaffirmed that words in taxing statutes must be construed according to their commercial or popular meaning, unless there is a technical definition to the contrary.
Accordingly, the Court held that “if the product ‘Nescafe premix’ by pouring hot water into it results in ‘coffee’ or ‘instant coffee’, the department cannot insist upon classifying the same under the general Entry C-II-18(2).”
Court’s Decision
The Court held that —
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The Tribunal was correct in classifying “Coffee and Instant Drinks — Nescafe Premix” under Entry C-II-3 of Schedule C-II.
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The Commissioner’s view that the product was not instant coffee due to low coffee content was unsustainable.
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The correct test is common parlance, under which the product is undeniably perceived and consumed as instant coffee.
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Entry C-II-3, being the specific entry, must apply over the general entry relating to beverage powders.
The Court answered the reference in favour of the respondent-assessee and against the Sales Tax Department and held that Nescafe Premix is taxable at 8% under Entry C-II-3, not at the higher 16% rate under Entry C-II-18(2).
[Commr. of Sales Tax v. Nestle India Ltd., Sales Tax Reference No. 24 of 2010, Decided on 27-11-2025]
*Judgment by Justice M.S. Sonak
Advocates who appeared in this case:
Ms. Jyoti Chavan, Addl. G.P, Counsel for the Applicant
Ms. Nikita Badheka a/w Lata Nagal, Counsel for the Respondent