TaxTMI 
TaxTMI 
TaxTMI 
2022 (6) TMI 1210
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....n 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. 2. It is contended by Shri R. Jawahar Lal, learned counsel for the petitioner(s) that the Rusk is also a Bread and is made up of the same ingredient by adopting the same method of manufacturing. It is ultimately the moisture content, which makes the distinction between the Bread or Rusk. Therefore, since the Taxing Authority has not notified Rusk as Bread in any one of the Schedules thereof, then the thumb rule of interpretation would be required to apply. The rusk is akin ....
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.... be a relevant factor. 56. We, therefore, are of the opinion that if there is a conflict between two entries one leading to an opinion that it comes within the purview of the tariff entry and another the residuary entry, the former should be preferred." 7. As regards the contention of the respondents that the Rusk would fall under residuary entry, the burden of proof is on the respondents and the onus also lies on them to first establish conclusively that by no conceivable process of reasoning can the said product be brought under any of the tariff items and hence the product was being brought under any of the tariff items, hence the product was being brought under the residuary item. 8. In taking this view, we are fortified by the judgment rendered by the Hon'ble Supreme Court in Commissioner of Central Excise, Calcutta vs. Sharma Chemical Works, 2003 (5) SCC 60, wherein in para 12, it was held as under:- "12. We have heard the parties and considered the submissions made by them. We have also read the opinion of the majority Bench and the minority opinion of the Technical Member. It is a settled law that the onus or burden to show that a product fall within a particula....
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.... is also different. The rusk will be baked twice whereas bread is not to be baked like rusk. Thirdly, the rusk cannot be used in place of bread. The user test is also not qualified by rusk. The bread is a raw-material for small entrepreneurs who sell bread pakora, bhondas, bread rolls, butter slices, sandwich, butter toasts and so many other items. Whereas rusk is itself a final product and cannot be further used except for eating as it is, bread is duly required and commonly used in families at the break-fast or in routine during morning time. A labourer takes halfbreak alongwith tea like-wise, it also fails the user tests. 4. The bread has to be consumed within a period of two days or three days, whereas rusk has a stock capacity for a longer period and further the Legislature wisdom has to be obeyed and the entry in the Schedule is plain, unambiguous and clear and Legislature did not want to equate bread with other items like rusk which does not qualify the test of bread. Bread cannot include the rusk or read for the work rusk by any stretch of interpretation. The Legislature is very clear that the bread or similar item which stands to the test of bread only be tax-free. Brea....
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...., the burden or onus is on the respondent authorities to establish by placing on record cogent, convincing and substantive evidence to show that Rusk is not Bread so as to bring it under the residuary entry under Part-IV of Schedule-B so as to impose tax on Rusk and Toast at the rate specified under the residuary entry. 19. Now adverting to the issue in question, it would be noticed that in the year, 1953, the High Court of Hyderabad while dealing with the similar issue in the case of Kayani and Co. vs. Commissioner of Sales Tax, 1953 (4) STC 387, while considering the definition of bread under the provisions of Hyderabad General Sales Tax Act, in paragraph No. 2, it was observed as under:- "When the Legislature uses a term relating to any article of food, we must construe it in the sense in which it is understood in this country and not elsewhere. In fact bread which is commonly lebelled as a loaf of bread in Europeon countries has a particular name in this country and is called a "double roti" thereby distinguishing it from ordinary "roti" which is synonymous with a loaf of bread. In this country, it is not unusual for a descriptive prefix to cannote the kind of bread such as ....
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....nate. The manufacturing process is also the same. The flour is sifted and the raw materials are mixed with water to form a dough. It is then fermented and remixed. The remixed dough is allowed a short resting period before it is divided to form each bread or bun. It is then founded, moulded, panned, pruned to the required volume and baked. The baked bread is cooled to room temperature and sliced and packed. The cooled bun is directly packed without slicing. In bun the percentage of yeast is more than bread." 11. The variety of the breads made and sold by the petitioners is reflected in the enumeration: "White bread, sweet bread, Kairali special, milk bread and fruity". The ingredients are virtually the same with marginal difference in their percentage. Bun contains more of yeast. Additional ingredients are there in milk bread and in fruity. A document daily production and raw material control report-has been produced along with the affidavit to demonstrate the ingredients of each variety of bread and bun. That statement confirms the correctness of the allegations of the petitioner." 21. In M/s S. R. Foils and Tissues Limited vs. The State of Haryana and another decided in VATA....
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....e, raw materials used in the process of manufacturing as well as machinery used for Bread and Rusk were the same and further took note of the question adopted and accepted (classified Bread-Rusk as Bread) under various States held that Bread-Rusk is classifiable as Bread. 25. Aggrieved by the judgment rendered by the learned Rajasthan Tax Board, the State of Rajasthan filed a revision petition before the Hon'ble Rajasthan High Court being case Reference No. 136/2016, titled as Assistant Commissioner vs. M/s Britannia Industries Ltd., and the same was dismissed by observing as under:- 14. Taking into consideration the aforesaid, intent of the other various States cannot be ignored when a similar product is being considered under the Act. Taxing statute has to be strictly construed does not mean the product can be differentiated merely because the Assessing Officer say so and in my view "Rusk" can be said to be falling within the ambit of bread and it cannot be carried to any other entry or Schedule V as claimed by counsel for the revenue. 15. In my view it does not make any difference whether it is sold by the present assessee or by a small manufacturer/producer of "Rusk" ....
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....n of proof is squarely upon the Revenue. If the Department intends to classify the goods under a particular heading or sub-heading different from that claimed by the assessee, the Department has to adduce proper evidence and discharge the burden of proof. In the present case the said burden has not been discharged at all by the Revenue. On the one hand, from the trade and market enquiries made by the Department, from the report of the Chemical Examiner, CRCL and from HSN, it is quite clear that the goods are classifiable as "Denatured Salt" falling under Chapter Heading No. 25.01. The Department has not shown that the subject product is not bought or sold or is not known or is dealt with in the market as Denatured Salt. Department's own Chemical Examiner after examining the chemical composition has not said that it is not denatured salt. On the other hand, after examining the chemical composition has opined that the subject matter is to be treated as Sodium Chloride." 44. In Sun Export Corporation v. Collector of Customs, Bombay reported in 1997 (93) ELT 641 (SC), the Supreme Court reiterated the well settled principle that if in a matter of classification of goods two views....
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....ision of the Learned Single Judge needs to be interfered with by treating Rusk and Toast as different items to be brought under residuary entry and allow the Taxing Authorities to assess such items as such and demand tax." 28. As against the aforesaid judgments, Shri Ajay Vaidya, learned Senior Additional Advocate General, would rely upon a recent judgment rendered by learned Division Bench of the High Court of Meghalaya in CRP No. 32/2019, titled as M/s Saj Food Products Pvt. Ltd. vs. State of Meghalaya & Ors., which incidentally again has been given in M/s Saj Food Products Pvt. Ltd. (respondents before the Chattisgarh High Court (supra), wherein it was observed as under:- "38. The matter, therefore, progresses to the business end for consideration on merits and as to whether the exemption applicable to bread in the State may be availed of by the petitioner for its manufacture of rusk which may contain the same material that goes into bread. 39. 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. According to the petitioner, the acti....
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....d rice than that applicable to ordinary rice. In Kayani and Co., 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 this country had to be seen to be included within the meaning of the word 'bread' in the relevant entry. Similarly, in Alladi Venkateswarlu, the Court applied the dictum in the judgment reported at (1961) 2 SCR 14 (Tungabhadra Industries Ltd. v. C.T.O.) to hold that merely because chemical changes had been brought about in parched rice and puffed rice, it would not imply that such varieties cease to be rice within the meaning of the relevant entry. In Mamta Surgical, the issue was somewhat different, and, as such, the dictum therein may not be applicable to the present case. It was the admitted position in that case that the appellant before the Supreme Court carried on business of procuring cotton and transforming it into surgical cotton. Apart from the Supreme Court holding that cotton and surgical cotton were completely different products, it is evident that the raw material procured by th....