"Rusk is not bread; value added to bread to make rusk:" Meghalaya High Court refuses VAT exemption for rusk

The Meghalaya High Court on Monday stated that the Value Added Tax (VAT) exemption granted to bread in the State cannot be extended to rusk as rusk is different from bread..A Bench of Chief Justice Sanjib Banerjee and Justice W Diengdoh noted that the petitioner-company subjects bread to further manufacturing activity to prepare rusk, thus adding value to attract VAT."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," the Court said.Thus, bread is bread and rusk is rusk and the two cannot be equated, the Court underlined.The Bench thus upheld the Income Tax Appellate Tribunal's judgment and the Meghalaya Revenue Board's orders under challenge, as it saw no ground to interfere with the same. .The Bench at the outset elaborately dwelt on the maintainability of the revision petition by the petitioner, a rusk manufacturing company, given the inordinate delay since the 2015 order of the State denying him VAT exemption.It permitted the same on grounds that can be summarised as under:The petitioner had initially gone to the wrong forum but the same was not done deliberately or malafide;Provisions of the act governing VAT in Meghalaya do not expressly forbid the High Court from condoning such delays..On the merits of the case, the High Court observed that the argument of the petitioner was that since rusk is merely a form of bread slightly modified to the extent that it is dried, it is entitled it to the VAT exemption that bread enjoys in Meghalaya."At first blush, the argument put forth by the petitioner appears to be attractive; after all, it is nobody‟s case that the petitioner buys bread from the market and manufactures rusk therefrom," the Court said.However, it noted that it was clear that the petitioner was manufacturing bread and subjecting the same to certain processes to create a different product altogether. The Bench then relied on the Supreme Court decision in Vasantham Foundry.In that case, 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. The Supreme Court in that judgment had held 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.The same applies to bread and rusk as well, the Court said."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 ... 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 judgment said.It, thus, refused to interfere with the orders of the fora below..Senior Advocate Dr A Saraf appeared for the petitioner. Advocate General A Kumar with Government Advocate S Laloo appeared for the respondents. [Read judgment]