Rusk is not bread and will not get exemption from Value Added Tax (VAT), a High Court has ruled.

“...Some value is added to bread to make it into rusk and that would attract VAT,” a division bench comprising Chief Justice Sanjib Banerjee and Judge W Diengdoh of Meghalaya High Court said.

The petitioner, Saj Food Products Private Limited manufactures rusk which is a form of toasted bread.

Unlike untoasted bread which is soft, rusk is crunchy and it is consumed more as a biscuit than as bread or even toasted bread.

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

According to the State Tax Department, since rusk is different from bread it attracts VAT under the miscellaneous entry which pertains to unspecified products. The petitioner has challenged the Department’s view.

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. Accordingly, the petitioner moved the High Court.

In the High Court, the petitioner submitted that there is no manufacturing process that can be said to have taken place making the item rusk as separate from bread.

It is a form of bread which can last longer as its moisture content is reduced by toasting the sliced bread to a given specification, the petitioner said

“For preparing rusk neither any ingredients are added to bread nor the chemical composition of bread gets changed in any manner,” the petitioner added.

Two different processes

After hearing the arguments, the court observed that the petitioner may be using same raw material for rusk and bread, but these are produced using two different manufacturing processes.

Applying the common parlance test, the court has questioned that 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 (two) be equated,” the bench said and upheld appellate judgment.