The Food Standards Agency has banned sales of a low alcohol wine, claiming it breaches European regulations.
The Wine Standards Branch (WSB) of the Agency insists that Sovio, an 8% abv wine, infringes European regulations because it is produced using unauthorised technology.
The dispute was sparked by Sovio's use of a technology that reduces the product's alcohol content via a method called the Spinning Cone Column.
The technique is legal in France and Spain, where Sovio removes the alcohol, but it is illegal to export it to Britain.
Croydon-based Sovio claims the decision could force it out of business and has vowed to take legal action to halt the sales freeze.
How ironic it is that they are banning a product that champions more moderate drinkingTony CassSovio
"How ironic it is that they are banning a product that champions more moderate drinking, a cause that the Government claims to support," said Sovio Operations Manager Tony Cass.
"Thanks to the WSB's bloody-mindedness, a small British company has in effect been prevented from trading with a legitimate product that the public wants.
"Unless this unfair decision is reversed, further job losses and redundancy will become unavoidable. If that happens, the WSB will surely have blood on their hands. We have no choice but to take our dispute to the very highest level."
Sovio can not call its product wine as it is under 9% abv but it claims Trading Standards had cleared its wine-based descriptor name.
The company is being backed by the Wine and Spirit Trade Association. Chief executive Jeremy Beadles said: "The Government wants the alcohol drinks industry to provide a wider range of lower alcohol products. To ban a lower alcohol wine such as Sovio is simply not in the consumers' best interest."
A spokeswoman for the FSA said: "Sovio wines uses an experimental technique called spinning cone which is currently not allowed to be sold in the UK, according to regulations set down by Europe.
"Although currently labelled as semi-sparkling it does not meet the criteria of a wine product.
"If relabelled under a different name, not using the term wine in any way that may cause confusion with wine or table wine produced traditionally, it might be able to be sold in the UK, provided it complies with food labelling legislation."