No sales tax exemption for Bakery products sold in a snack bar: Madras High Court

A division bench of the Madras High Court recently held that bakery products do not fall under the exemption notification for sales tax.

High Court's bench of Justices SM Subramaniam and CS Saravanan noted, "Holistic reading of the above items stipulated under Sl.No.9 to 1st Schedule would indicate that the bakery products are not included and thus would not fall under the exemption notification. In fact, the bakery products are stated in I Schedule of Part B of Sl.No.11. The said Sl.No.11 of part B of I Schedule has not been exempted under the notification. Therefore, the petitioner's case would not fall under the exemption notification. Therefore this Court has no hesitation in arriving at a conclusion that the Original Authority and the appellate Tribunal has rightly interpreted the exemption notification and the scope of its applications.".

Before the High Court, a petition was filed by Cakes N Bakes, a restaurant at No.32, Nungambakkam High Road, Chennai, which was involved in the activity of preparation of food and drinks. Admittedly, the food and drinks were not sold under any brand name and the eating house was selling bakery products to its customers.

The eating house contended before the High Court that pursuant to the notification in G.O.P.No.570 dated 10th June 1987, selling of bakery products in a snack bar was exempted and therefore, the petitioner was entitled for the benefit of exemption under the said notification.

The case arose after the Taxation Special Tribunal had made a finding that bakery products sold by the assessee would fall under the heading “food and drinks” mentioned in the said Government Order and those items are being sold from a restaurant licensed by the Corporation of Chennai.

In a challenge to the said order, contrary to the said finding of the Tamil Nadu Taxation Special Tribunal, Tamil Nadu Sales Tax Appellate Tribunal ruled that the petitioner was not eligible to avail the notification and thus a Writ Petition came to be instituted before the High Court.

High Court was told that the petitioner would squarely fall under Entry 48 of III Schedule and therefore, the selling of bakery products are not covered under the exemption clause. Only tea, coffee, green tea as stipulated under Entry 48 of Schedule III alone are covered under the exemption notification and thus the appellate Tribunal was right in rejecting the claim of the petitioner, court was further told.

On a perusal of the provision cited before High Court, its was found that the products exempted were: "(i) Coffee, that is to say, any one of the forms of coffee such as coffee-beans, coffee seeds whether or not cured or roasted or decaffeinated, coffee powder, excluding coffee drink (ii) Instant coffee in granule or powder form (iii) French coffee (on the turnover relating to components thereof namely coffee and chicory which have not already suffered (iv) Chicory (v) Tea, that is to say, any one of the forms of tea in which it is sold but not including tea drink or green tea leaves (vi) Instant tea (other than instant tea drink) (vii) Tea waste other than denatured."

It thus confirmed the order of the Tribunal and dismissed the petition before it.

Case Title: Cakes N Bakes vs. The Commercial Tax Officer and Ors.

Judgment Date: September 1, 2025

Bench: Justices SM Subramaniam and CS Saravanan