The Gujarat High Court (HC) on Thursday admitted FMCG major Nestle India Ltd's petition challenging state government's decision to levy value added tax (VAT) on sale on its noodles in Gujarat sold under brand name 'Maggi'.

A division bench of Justice Akil Kureshi and Justice Sonia Gokani has scheduled the matter for final hearing which will be notified in due course. They also directed Nestle to deposit 4 per cent of the total recoverable VAT as calculated by the deputy commissioner of commercial tax, with the court.

According to deputy commissioner of commercial tax, the VAT recoverable from the company for the assessment year 2008-09 was over Rs 3.25 crore. Hence, the amount company has to deposit with the bank comes to about Rs 13 lakhs. Upon compliance with this direction, the court has asked the state government not to take any coercive action against the company the dispute is resolved.

In a special civil application filed in the High Court Nestle India Ltd had challenged the order of the Deputy Commissioner Commercial Tax (VAT) issued in October this year, seeking recovery of VAT for the assessment year 2008-2009 for the sale of noodles in Gujarat.

The company has contended in its petition that the noodles falls under the category of 'sev' made out of wheat flour which is exempted from VAT as per the order of the September 9, 1986, judgement of the Gujarat Sales Tax Tribunal.

It has further contended that noodles, which falls under classification of 'sev' were exempted from VAT during previous assessment years of 2006-07 and 2008-07 by the same authority which is now seeking VAT on the food product at the rate of 12.5 per cent under the residuary entry of the Gujarat Value Added Tax Act.