Haldiram Snacks Pvt. Ltd. Vs Commissioner (CESTAT Allahabad)
In a significant ruling, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad, has held that service tax is not applicable to the sale of food items through “Take Away” or “Pick Up” from restaurants. The tribunal’s decision in the case of Haldiram Snacks Pvt. Ltd. versus Commissioner reinforces the distinction between the provision of restaurant services and the mere sale of goods.
The case originated from an audit of Haldiram Snacks Pvt. Ltd. in Noida for the period of April 2013 to March 2015. Auditors observed that while Haldiram, registered for both central excise and service tax (for restaurant services in an air-conditioned facility), was paying service tax on dining-in services, it was not doing so for “Take Away” or “Pick Up” sales.
This led to the issuance of a show cause notice in February 2017, proposing a service tax demand of over Rs. 23 lakh, along with interest and penalty. The Revenue argued that the preparation and packaging of food for “Take Away” constituted a service element liable for taxation under the ‘Restaurant Services’ category.
The Assistant Commissioner confirmed the demand in March 2019, a decision subsequently upheld by the Commissioner (Appeals) in October 2020. Aggrieved by these orders, Haldiram Snacks Pvt. Ltd. filed an appeal before CESTAT Allahabad.
Haldiram contended that “Take Away/Pickup Service” is fundamentally a sale of goods and does not involve the provision of restaurant services. They argued that the legislative intent was to tax services offered within a restaurant setting, and in the absence of such services in a “Take Away” transaction, service tax should not be levied.
The tribunal, in its assessment, noted that the issue was not novel and had been previously addressed by other judicial forums. It placed significant reliance on the Final Order No. 55921 of 2024 dated June 7, 2024, passed by CESTAT Delhi in the case of M/s Bikanervala Foods Pvt. Ltd. V/s Commissioner of CGST, Customs & Central Excise, Delhi-East.
The Bikanervala case, which involved identical facts and circumstances, had examined whether “Take Away” and “Home Delivery” activities amounted to taxable restaurant services. The Delhi bench of CESTAT in that case had referred to an earlier decision concerning Haldiram Marketing Pvt. Ltd. and relevant circulars from the Central Board of Excise and Customs (CBEC).
The Bikanervala order highlighted a clarification issued by CBEC on August 13, 2015, which stated that transactions involving “Pick-up” or “Home Delivery” of food items by restaurants are not liable to service tax as they are in the nature of sale. The clarification emphasized that no amount is typically charged for free delivery, and the dominant nature of the transaction is sale, with no significant element of service usually offered in a restaurant setting being provided.
Crucially, the Bikanervala judgment also cited the Madras High Court’s ruling in the case of Anjappar Chettinad A/C Restaurant Vs. Joint Commissioner. In this 2021 decision, the Madras High Court had unequivocally held that service tax would not be leviable in the case of “Take Away” of food items.
The Madras High Court in the Anjappar Chettinad case had delved into the nature of restaurant services that attract taxation. It clarified that the levy is on services provided in relation to serving food and beverages in specified restaurants (those with air-conditioning or central heating). These services encompass aspects like seating arrangements, décor, music, the services of staff, and the use of crockery and cutlery.
The High Court had distinctly pointed out that in “Take Away” or parcel sales, these attributes are conspicuously absent. Customers collect food from a separate counter, and consumption does not occur on the restaurant premises. The court concluded that the provision of food to be taken away in parcels amounts to the sale of food and drink and does not fall under the ambit of service tax.
Based on these judicial pronouncements, the CESTAT Delhi in the Bikanervala case had concluded that “Take Away” of food items is a sale of goods and does not involve any element of service. The preparation and packaging of food for “Take Away” were considered conditions of the sale, where the customer’s intent is solely to purchase the packaged product, not to avail themselves of restaurant services.
Applying this established legal position to the present case, the CESTAT Allahabad found that the facts of Haldiram Snacks Pvt. Ltd.’s appeal were “squarely covered” by the Bikanervala decision and the precedents cited therein. The tribunal reiterated that the activity of selling food items through “Take Away” or “Home Delivery” is a clear instance of the sale of food, devoid of a service element that would attract service tax.
Accordingly, the CESTAT Allahabad set aside the Order-In-Appeal passed by the Commissioner (Appeals) and allowed Haldiram Snacks Pvt. Ltd.’s appeal. The ruling provides clarity on the taxability of “Take Away” food under the erstwhile service tax regime, affirming that such transactions are to be treated as the sale of goods.
This decision aligns with the principle that taxation should reflect the true nature of a transaction. While dining in a restaurant involves a bundled supply of goods (food) and services (ambiance, service staff, etc.), a “Take Away” transaction is predominantly the transfer of title in goods, which falls outside the purview of service tax as it existed. The judgment is expected to bring relief to food businesses offering “Take Away” options.
FULL TEXT OF THE CESTAT ALLAHABAD ORDER
