A division bench of the Meghalaya High Court comprising Chief Justice Sanjib Banerjee, and Justice W. Diengdoh has observed that ‘rusk’ cannot be classified as ‘bread’ for the purpose of Meghalaya VAT Act and therefore, the tax exemption for bread cannot be extended to ‘rusk’.
The petitioner, M/s Saj Food Products Ltd, manufactures rusk. Rusk is a form of toasted bread that, unlike untoasted bread which is soft, is crunchy and it is consumed more as a biscuit than as bread or even toasted bread. Bread is exempted from value added tax in the State. The petitioner passed off its product as a form of bread and took advantage of the exemption. Upon the Department regarding rusk as different from bread and seeking to impose VAT under the miscellaneous entry which pertains tounspecified products, the petitioner challenged the same.
The division bench observed that the petitioner may be using the same raw material as in the manufacture of bread, whereupon the petitioner manufactures a form of bread and refines the same to rusk.
“The process has been explicitly described at page 9 of the petition as quoted above. Thus, it is plain to see that the petitioner manufactures bread and subjects such bread to a further process, which activity falls within the meaning of “manufacture” as used in the said Act for an altogether different product to be produced,” the Court said.
Observing the product, rusk would attract VAT, the bench held that “the final products were not cast iron but the cast iron produced by the assessee was subjected to a further process of manufacture to be converted into pipes or manhole covers or bends. Just as the Supreme Court held in Vasantham Foundry that cast iron casting could not be regarded as cast iron since the manufactured cast iron was subjected to a further process ofmanufacture to be converted into cast iron castings, in the present case, the same ingredients that go into the manufacture of bread may, doubtless, be used by the petitioner but upon bread being manufactured by the petitioner, the petitioner subjects such bread to a further process of manufacturing activity to arrive at its finished product of rusk.”
“As a consequence, it cannot be said that the petitioner’s product rusk is bread or the VAT exemption available to bread in the State must be extended to rusk. Several of the Supreme Court judgments placed also applied a common parlance test. Upon applying the common parlance test in this case, the question that arises is whether a person desirous of buying bread would ask for rusk or whether a person who goes to a shop and asks for rusk would be given bread in its place. The answer is obvious: bread is bread and rusk is rusk and never may the twain be equated,” the Court said.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.
