Bombay HC Rules Nescafé Premix Is “Instant Coffee”; Classifiable Under Entry C-II-3 at 8% Tax

This reference under Section 61 of the Bombay Sales Tax Act, 1959 arose from a dispute regarding the correct classification of “Nescafe Premix” sold by Nestlé India Limited. The product, used in vending machines by adding hot water, contains 8.5% soluble coffee powder along with sugar, skimmed milk powder, and maltodextrin. Nestlé had sought a determination that the product be treated as “instant coffee” under Entry C-II-3 of Schedule C Part II, taxable at 8%. The Commissioner, however, held that since coffee constituted only 8.5% of the premix, it could not be regarded as “instant coffee” in common parlance and instead classified it under Entry C-II-18(2), covering powders from which non-alcoholic beverages are prepared, taxable at 16%.

Aggrieved, Nestlé appealed to the Maharashtra Sales Tax Tribunal. The Tribunal applied the common parlance test and concluded that the premix, which yields Nescafé upon adding hot water, is understood by consumers as instant coffee. The Sales Tax Department then sought reference to the High Court.

Main Issue: Whether “Nescafe Premix” should be classified as “instant coffee” under Entry C-II-3 (8% tax) or as a beverage powder under Entry C-II-18(2) (16% tax) of Schedule C Part II of the Bombay Sales Tax Act.

High Court Decided: The Hon’ble High Court upheld the Tribunal’s view, holding that the common parlance and commercial perception of the product must guide its classification. The Court noted that despite coffee forming only 8.5% of the premix, the final prepared drink is universally regarded as Nescafé or instant coffee. It emphasized that ingredient percentage cannot be the determining factor in classification. The Court observed that Entry C-II-3 specifically covers “coffee” and “instant coffee,” while Entry C-II-18(2) is a general entry for beverage powders; hence, the specific must prevail over the general.

Applying the “common parlance test,” the Court concluded that Nescafe Premix is nothing but instant coffee for the purpose of taxation. Therefore, it answered the reference in favor of the assessee, affirming classification under Entry C-II-3 at the lower 8% tax rate.

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