Deekshitha Sharmile

The High Court of Bombay Division Bench of Justice M.S. Sonak and Justice Advait M. Sethna, in a judgment dated November 27, 2025, held that Nescafé Premix used in vending machines is a premix producing coffee and instant drinks and is therefore covered by the specific entry for coffee and instant coffee in Schedule C-II-3 of the Bombay Sales Tax Act, attracting sales tax at 8 per cent rather than 16 per cent. Applying the principle that a specific schedule entry prevails over a general one and examining how the product is understood in common parlance, the Court concluded that the assessee’s premix, traded and perceived as instant coffee, cannot be brought under the general entry for powders used to prepare non-alcoholic beverages.

The matter arose from a reference made under Section 61 of the Bombay Sales Tax Act, 1959 by the Maharashtra Sales Tax Tribunal to the High Court of Bombay. The dispute concerned the classification of the product “Nescafe Premix” sold by the respondent company. The product was used in vending machines to prepare coffee by adding hot water.

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The respondent contended before the Commissioner of Sales Tax that the product was instant coffee and therefore covered under Schedule Entry C-II-3, attracting sales tax at 8 percent. The Commissioner, however, held that the product was not instant coffee but a powder from which non-alcoholic beverages are prepared, classifiable under Entry C-II-18(2), attracting a higher rate of 13 percent.

The Commissioner based this conclusion on the composition of the product, which included soluble coffee powder (8.5%), sucrose (54%), partially skimmed milk powder (37%), and maltodextrin (0.5%). The Tribunal, on appeal, relied on Supreme Court precedent to hold that the percentage of ingredients was not decisive and that the product was instant coffee in common parlance. The Tribunal classified the product under Entry C-II-3. The Sales Tax Department sought reference to the High Court for determination of the correct classification.

The Court recorded: “Firstly, it was contended before us that the Commissioner was justified in holding that the product in question would not be classified as ‘coffee’ or ‘instant coffee’ because the percentage of coffee in this premix was ‘Miniscule 8.5%.’”

The Court noted the Tribunal’s reliance on precedent and stated: “The Hon’ble Supreme Court has firstly held that for the imposition of the levy, what has to be seen is that the article in question is enumerated in the Schedule to the statute imposing the tax. If the article is enumerated therein, then regardless of the heading under which it is mentioned, the authority concerned would be entitled to levy tax in respect of the article.”

The Court further recorded: “Secondly, the Hon’ble Supreme Court has also held that the percentage of the ingredients is also not decisive in such matters.” The Court observed: “The Court observed that if this reason of the learned Single Judge was correct, it would mean that a pinch of salt which is added in preparing food cannot be regarded as an item of food because of the small quantity which is used in the said preparation.”

The Court stated: “Ultimately, in all such matters, we must go by the common parlance test. Admittedly, the product was not only styled as an ‘Nescafé premix’, but it was also used to prepare a ‘Nescafé’ vended through a vending machine. Such Nescafé was being prepared by simply pouring hot water into the premix. The resultant product, in common parlance, was nothing but Nescafé.”

The Court recorded: “Therefore, the Tribunal reasoned that once the final product after pouring hot water into the premix, at least, in common parlance was regarded as, ‘coffee’ or ‘instant coffee’, the product in question was liable to be classified under Entry C-II-3, which was a specific entry and not under Entry C-II-18(2) which was, a general entry in the context of powders from which nonalcoholic beverages are prepared.”

The Court observed: “One of the fundamental tests in the matter of classification is that specific entries would prevail over the general entries.” The Court stated: “On applying the commercial parlance or the popular meaning test, we are satisfied 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).”

The Court recorded: “Therefore, if the product ‘Nescafé 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).”

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The Court directed: “For all the above reasons, we answer the question referred to us in favour of the respondent assessee and against the sales tax. The reference is disposed of in the above terms. No costs.”

Advocates Representing the Parties

For the Petitioners: Ms. Jyoti Chavan, Addl. G.P
For the Respondents: Ms. Nikita Badheka a/w Lata Nagal

Case Title: The Commissioner Of Sales Tax Maharashtra State, Mumbai Versus M/s Nestle India Ltd.
Neutral Citation: 2025:BHC-OS:23169-DB
Case Number: Sales Tax Reference No. 24 of 2010
Bench: Justice M.S. Sonak, Justice Advait M. Sethna