Rusk Is Different From Bread, VAT Exemption Available To Bread Can't Be Extended To Rusk: Meghalaya High Court

The petitioner/assessee is in the business of manufacturing a product that is generically known as rusk. Rusk is a form of toasted bread that, unlike untoasted bread, which is soft, is crunchy and is consumed more as a biscuit than as bread or even toasted bread.

Bread is exempted from VAT in the state. The petitioner passed off its product as a form of bread and took advantage of the exemption.

The Department said that rusk was different from bread and sought to impose VAT under the miscellaneous entry which pertains to unspecified products, which was challenged by the petitioner.

At the end of the adjudication at three levels before the Department and the Board of Revenue, the petitioner failed to impress the authorities that rusk had to be treated as bread and the exemption was permitted.

The petitioner relied on the decision in the case of Kayani and Co., in which the question that fell for determination was "whether double roti, shirmal, parata, chapathi, etc.", can be called bread for the purpose of attracting sales tax. The Supreme Court refused to presume that the legislature had intended the word "bread" to imply the article of food going by that description in European countries and held that roti, shirmal, parata, and chapathi and the like in India had to be seen to be included within the meaning of the word "bread" in the relevant entry.

The court noted 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. 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 Meghalaya Value Added Tax Act, 2003, for an altogether different product to be produced.

The court relied on the decision of the Supreme Court in the case of Vasantham Foundry, in which the final products were not cast iron, but cast iron produced by the assessee was subjected to a further process of manufacture to be converted into pipes, 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 of manufacture to be converted into cast iron castings, in the present case, the same ingredients that go into the manufacture of bread may, doubtlessly, be used by the petitioner, but upon such 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. Quite obviously, some value is added to bread to make it into rusk, and that would attract VAT," the court said.

The court observed that upon applying the common parlance test, 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. Accordingly, there is no flaw found in the appellate judgement.

Case Title: M/s Saj Food Products Pvt. Ltd. Versus State of Meghalaya & ors

Citation: 2022 LiveLaw (Meg) 7

Case No.: CRP No.32/2019 with MC (CRP) No.17/2019

Counsel For Petitioner: Senior Advocate A Saraf

Counsel For Respondent: Advocate General A Kumar

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