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of <h1>Court Upholds Ruling: Rusk and Toast Classified as Bread, Tax-Exempt under VAT Law</h1> <h3>STATE OF CHHATTISGARH AND ANOTHER Versus SAJ FOOD PRODUCT (P) LTD. and KESHARWANI ENTERPRISES</h3> STATE OF CHHATTISGARH AND ANOTHER Versus SAJ FOOD PRODUCT (P) LTD. and KESHARWANI ENTERPRISES - [2019] 69 G S.T.R. 67 (Chhattisgarh) Issues Involved:1. Classification of rusk/toast under the Chhattisgarh Value Added Tax Act, 2005.2. Applicability of the residuary entry for taxation purposes.3. Burden of proof for classification under the residuary entry.Issue-wise Detailed Analysis:1. Classification of rusk/toast under the Chhattisgarh Value Added Tax Act, 2005:The primary issue was whether rusk/toast should be classified under entry 7 under the head 'Bread' in Schedule I of the VAT Act, 2005, which would make them tax-free, or whether they should fall under the residuary entry in Part IV of Schedule II, which would subject them to taxation. The learned single judge concluded that rusk and toast are essentially forms of bread, sharing the same ingredients and manufacturing process, with the only difference being the moisture content. The judge emphasized that since toast/rusk were not separately listed for taxation, they should be interpreted under the broad head of 'bread,' thus carrying zero per cent duty.2. Applicability of the residuary entry for taxation purposes:The State argued that rusk and toast should be classified under the residuary entry in Part IV of Schedule II. The learned single judge rejected this argument, citing judicial precedents which state that an item should only be classified under the residuary entry if it cannot be reasonably classified under any specific entry. The judge referenced the Supreme Court's rulings, emphasizing that the residuary entry should be a last resort. The judge concluded that rusk and toast should be classified under the broader category of bread, exempting them from tax.3. Burden of proof for classification under the residuary entry:The judgment highlighted that the burden of proof lies with the State to conclusively establish that an item cannot be classified under any specific entry before resorting to the residuary entry. The judge noted that the State failed to provide strong evidence that rusk and toast could not be classified as bread. Various judicial decisions were cited to support this principle, including the Supreme Court's ruling that the revenue must prove the correct classification of a product. The judge concluded that the State did not meet this burden, and thus rusk and toast should be classified as bread.Conclusion:The appeals by the State were dismissed, affirming the learned single judge's decision that rusk and toast fall under the entry for bread in Schedule I of the VAT Act, 2005, and are therefore exempt from taxation. The judgment emphasized the established legal principle that the residuary entry should only be used when no other classification is possible, and the burden of proof for such classification lies with the State. The court found no error in the learned single judge's order, and thus, all appeals were rejected.
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