Allowability of VAT Exemption to Rusk as the same was classifiable as ‘Bread’

S.S. Food Kather Vs State of Himachal Pradesh (Himachal Pradesh High Court)

Conclusion: VAT exemption was allowable to Rusk also as same as Bread because the raw material as also the manufacturing process for Bread and Rusk was same and thereafter only the moisture was extracted, would not term that activity to be falling within the meaning of “manufacturer” as used in the Act.

Held: The common question of law related to the classification adopted by assessee on sale of ‘Bread-Rusk’ under Entry 9 of Schedule B under the HPVAT Act as “Bread”, exempted from VAT. Whereas the officer held that Bread-Rusk was not classifiable and did not fall under Entry 9 of Schedule B of the HPVAT Act and was classified as an unlisted item under the residual entry i.e. Part III of Schedule A of the HPVAT Act and subject to VAT @ 12.5% (subsequently increased to 13.5%), whereas Assessing and Taxing Authority including the Tax Tribunal had proceeded to levy VAT @ 13.5% by treating it an unlisted item and not as Bread, which was exempted under the VAT. It was held that preparation of Rusk was baked in a manner whereby in the process of baking it was dehumidfication to remove the moisture contents. The majority of the ingredients in Rusk and Bread were the same and the difference of ingredients in two products were minuscule. The process of baking Bread was for a lesser period so that moisture content did not finish. On the other hand, the Rusk was baked for a longer period of time and the moisture content was reduced to the minuscule by adopting the process of dehumidification. Once the Court agreed that the raw material as also the manufacturing process for Bread and Rusk was same and thereafter only the moisture was extracted, would not term that activity to be falling within the meaning of “manufacturer” as used in the Act. Therefore, the VAT exemption was allowable to Rusk also.

FULL TEXT OF THE JUDGMENT/ORDER OF HIMACHAL PRADESH HIGH COURT

The common question of law arises in these petitions including the civil revision petition, which relates to the classification adopted by the petitioner on sale of ‘Bread-Rusk’ under Entry 9 of Schedule B under the HPVAT Act as “Bread”, exempted from VAT. It is the case of the respondents that Bread-Rusk is not classifiable and does not fall under Entry 9 of Schedule B of the HPVAT Act and is classified as an unlisted item under the residual entry i.e. Part III of Schedule A of the HPVAT Act and subject to VAT @ 12.5% (subsequently increased to 13.5%), whereas the Assessing and Taxing Authority including the Tax Tribunal has proceeded to levy VAT @ 13.5% by treating it an unlisted item and not as Bread, which is exempted under the VAT.

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