Bakery selling eatables on take away basis cannot be treated as restaurant

In Assistant Commissioner, CGST & Central Excise Vs. M/s. Pioneer Bakers (GST AAAR Odisha)

During the P.H., the Jurisdictional Officer, Sri Goutam Kumar Biswas(Appellant), Asst. Commissioner, CGST, Sambalpur-I Division stated that the applicant is running a bakery business, where different items likes cakes, bakery items, ice creams, chocolates, drinks & other eatable products are sold on take away basis. The facilities provided by the applicant in their outlets cannot be treated as restaurant service.

On the subject issue of Restaurant Service, the latest notification issued i.e. Notification No.20/2019-Central Tax(Rate) dt.30.09.2019(SI.No.7, (ii) ) where the rate of duty & condition is prescribed mentioned below:

“(xxxii) “Restaurant service” means supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied.

(xxxvi) “Specified premises” means premises providing “hotel accommodation” services having declared tariff of any unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent.”

On the plain reading the definition of Restaurant Service as defined in the notification clearly speaks that supply, by way of or as part of any services of goods, being food or any other article for human consumption or any drink, provided by a restaurant will be considered as Restaurant Service. In the present case, the nature of establishment/premises/outlets, which are running by the applicant M/s.Pioneer Bakers, whether can be treated as Restaurant or not, is the main question before us. But the ambiguity persists on the subject issue because the Restaurant Service is defined under CGST Act, 2017/SGST Act, 2017 but what is restaurant is not defined under CGST/SGST Act, 2017.

The meaning of the restaurant is provided in the Cambridge Dictionary, where it is defined as, a restaurant is a place where meals are prepared & served to the customer. The appellant, the Jurisdictional Officer has categorically stated that the applicant is running a bakery business where different items are sold on take away basis. Most of the items are not prepared in their premises. The serving of the items to the customer for taking the food in the premises is done to very few customers. Therefore, the establishment running by the applicant M/s.Pioneer Bakers cannot be considered as Restaurant. The concerned Officer, Deputy Commissioner, CT & GST, Odisha also put forth their submissions on the similar grounds. The Concerned Officer submitted that, in the instant case, it is a bakery outlets where ready to each items are sold & mere facility is provided to take it from the shop. The applicant has only prepared birthday cakes, as per order for take out service and they do not prepare birthday cakes immediately from the customers order. Those who wants to take within the premises, they merely supply the readily available cakes. They do not serve food to the Customer table & in most cases sold the items from the counter. Therefore, the applicant should not be considered as Restaurant Services.

 We examined the submission made by the applicant. We have also gone through the above verification put forth by the Jurisdictional Officer & the Concerned Officer. Examining all the factors, we are in view that the establishments/outlets/premises of the applicant cannot be treated as restaurant. Consequently, the activities carried out by the applicant from their premises/outlets cannot be considered as restaurant Service.

FULL TEXT OF ORDER OF APPELLATE AUTHORITY OF ADVANCE RULING, ODISHA

Present for the Applicant (P.H. attended through Video Conference)

1. Sri Suresh Kumar Tibrewal, Advocate

2. Sri Saurav Tibrewal, Advocate

Jurisdictional Officer:

1. Sri Goutam Biswas, Asst. Commissioner, CGST & Central Excise, Sambalpur 1 Division

Concerned Officer:

1. Sri Sibasis Sahoo, Deputy Commissioner of CT & SGST, CT & SGST Circle- I Sambalpur.

BRIEF FACTS OF THE CASE:

1.0. The Assistant Commissioner, CGST & Central Excise, Sambalpur 1 Division,

At-Danipalli, PO- Budharaja, Dist-Sambalpur(Odisha)(the Jurisdictional officer) has filed an appeal on dated 28.04.2021 under Section 100 of CGST Act, 2017 and under Section 100 of the OGST Act, 2017 in Form GST ARA 03 before the Appellate Authority for Advance Ruling, Odisha(hereinafter referred to as “AAAR”) against the Advance Ruling Order No. 06/ODISHA-AAR/2020-21 dated 09.03.2021 passed by the Authority for Advancing Ruling, Odisha.

2.0. In the instant case, the applicant M/s.Pioneer Bakers, At-Sahayog Nagar, P.O.-Budharaja, Dist-Sambalpur, Odisha having GSTIN No.21AAQFP6408F1ZB is a partnership firm filed an application for Advance Ruling on 04.05.2020. M/s.Pioneer Bakers submitted that they are operating under the Brand name of “Go-Cool” since the year 1997. They have established as a brand “Go-Cool” in the field of bakery items and especially in cakes. They have several outlets operating in the State of Odisha and offers a wide range of goods and services in the business of bakery items. Their principal business is producing and selling of bakery products viz cakes, artisan cakes, pastries, pizza, patties, sandwich, self manufactured ice-creams, handmade chocolates, cookies, beverages etc.. They offer a number of customization options to mere customers with respect to the above mentioned products.

2.1. M/s.Pioneer Bakers has submitted that the bakery products are manufactured either in the premises of the outlets itself and served to the customers or in its workshop which is located nearby to the premises of the outlet of the applicant. Generally the raw materials such as raw chocolates, cookies, etc. are manufactured in the workshops as these goods require heavy machinery and are labour intensive in nature and due to these features the same are prepared in the nearby workshop and brought to the outlets for further customization. No items is sold directly from the workshop and each and every item is brought to the outlet for sale. The outlets are equipped with all the facilities to dine such as table and chairs, air conditioner, drinking water, stylish lights for providing a nice ambience which provide an overall good experience to the customers. The customers are provided with the option of either enjoying their food in the outlets itself by utilizing the facilities present in the outlets or they are at the liberty to take away their food.

2.2. The Authority for Advance Ruling, Odisha after thoroughly examining the submission made by the applicant, their presentation during PH on dt.04.12.2020 & based upon the existing rules and regulations passed the ruling as follows:-

Q.(a) Whether supply of Cakes, bakery items, ice creams, chocolates, drinks and other eatable products prepared at the premises of the applicant and supplied to the customers from the counter with the facility to consume the same in the air-conditioned premises itself covered under the restaurant services?

Ans: Yes, answer is in the affirmative .

Q(b) Whether supply of items such as birthday stickers, candles, birthday caps, snow sprays etc related items which are essentially used in birthday celebration can be classified as Composite Supply defined under Section 2 (30) of the CGST Act, 2017 and Section 2 (30) of the OGST Act, 2017 wherein the principal supply of goods consists of bakery items, chocolates while the supply of services include the supply of air conditioned place to sit and to celebrate birthday?

Ans: The answer is in the ‘Negative”.

Q(c) Whether the sale of handmade chocolates which are manufactured in the workshop of the Applicant and are utilised for the purpose of providing other services such as shakes, brownies and are also retailed by packing in different containers as per the choice of the customer will be covered under the restaurant services?

Ans: Yes, answer is in the affirmative.

Q(d) What is the nature and rate of tax applicable to the following items supplied from the premises of the Bakery shop of the applicant?

(i) Items such as Birthday caps, knife, decorative items which are bundled along with the cakes and are utilised by the Customers in the premises of the outlets. Ans: Rates applicable as per Notification No.01/2017-Central Tax(Rate) dated 28.06.2017 as amended from time to time.

(ii) Items such as Birthday caps, knife, decorative items which are bundled along with the cakes and are taken away by the Customers from the outlets.

Ans: Rates applicable as per Notification No.01/2017-Central Tax(Rate) dated 28.06.2017 as amended from time to time.

(iii) Items such as chocolate, cookies which are prepared in the nearby workshop of the applicant and then processed / customized in the outlets of the applicant before selling to the customers.

(iv) Items such as chocolate, cookies which are prepared in the nearby workshop of the applicant and then processed / customized in the outlet as per the choice and consumed in the premises itself.

Ans: The supply of the items as mentioned in Clause (iii) & (iv) from the premises of the Bakery shop of the applicant qualifies as ‘composite supply’ under Section 2(30) of the CGST Act . The said composite supply shall be deemed to be a supply of service as per the Entry 6(b) of Schedule II to the CGST Act and more specifically the ‘Restaurant Service’ and rate of tax is 5% without any input tax credit ( 2.5% for CGST and 2.5% for SGST ).

(e) Supposing, the applicant’s firm is covered under the Composite Scheme then in such cases what will be the tax liability charged on goods which are tax free without opting for composite scheme such as bread etc.

Ans: Since the applicant is a manufacturer of ‘Ice Creams’, he is not eligible for `Composition Scheme’.

(f) Suppose, the applicant’s firm is covered under composite Scheme, then in such circumstances whether the products which are prepared in the workshop but are sold only after certain customizations in the outlets will also be covered under the composite scheme or not?

Ans: Since the applicant is a manufacturer of ‘Ice Creams’, he is not eligible for `Composition Scheme’.

3.0. Aggrieved by the said order passed by the Authority for Advance Ruling, Odisha, the Jurisdictional Officer i.e. Asst. Commissioner, CGST, Sambalpur I Division, Sambalpur has filed the instant appeal on dt 28.04.2021 before the Appellate Authority for Advance Ruling, Odisha.

3.1. The Jurisdictional Officer briefly submitted that there is no dispute about the facts that the applicant is running a bakery business where different items like cakes, bakery items, ice creams, chocolates, drinks etc are sold on take away basis. However, the applicant is neither running presently any restaurant along with the subject bakery nor they are planning to do so in future. The instant rulings in relation to the Question Nos.(a),(c), (d)(iii) & (d)(iv) have been obtained by coloring of the facts by the applicant i.e. M/s.Pioneer Bakers as if they are either already running a restaurant along with their subject bakery or they are planning to do so in future. The aforesaid rulings have been obtained by way of coloring the facts, therefore, the said rulings are liable to be struck down.

3.2. Therefore, all Question Nos. (a),(c), (d)(iii) & (d)(iv) may be undertaken to change the ruling given by the original Advance Ruling Authority and to give a fresh ruling by the Hon’ble Appellate Authority to charge the individual rates of SGST and CGST as applicable as per the Notification No.01/2017-Central Tax(Rate) dated 28.06.2017 to individual items such as cakes, bakery items, ice creams, chocolates, drinks etc sold by the subject bakery of the applicant i.e. M/s.Pioneer Bakers.

Personal Hearing:

4.0. An opportunity for personal hearing was granted to the applicant M/s.Pioneer Bakers, the Jurisdictional Officer & the Concerned Officer, on dt.14.07.2021, at 4 P.M. through virtual mode. Sri Suresh Kumar Tibrewal, Advocate & Sri Saurav Kumar Tibrewal, Advocate, attended the personal hearing as authorized representative of the applicant, M/s. Pioneer Bakers. The Assistant Commissioner, CGST, Sambalpur-I Division and the Concerned Cfficer, Sri Sibasis Sahoo, Deputy Commissioner, State Tax, Sambalpur Circle-I attended the personal hearing.

4.1. The authorized representatives on behalf of M/s.Pioneer Bakers, reiterated that the submission made by them on dt 13.07.2021, before Honourable Appellant Authority, may please be considered. They argued that the Advance Ruling order having been passed on dt.09.03.2021. The Appellant was required to file the appeal within a period of 30 days of passing of the order as per Section 100(2) of the Central goods and Service Tax Act, 2017. However, the Appellant has been able to file the instant appeal only on 28.04.2021, i.e. after a delay of about 20 days but no reasons/grounds have has been assigned in the memorandum of appeal- for such delay which the appeal is barred on the grounds of limitation and is liable to be dismissed.

4.2. They pleaded that the appeal is filed, solely based upon inspection report. The inspection is not carried out in a proper & fair manner. The inspection only done for the outlet located in Sahayog Nagar, Sambalpur but the inspection was not carried out for other nine outlets. Moreover during the inspection time, COVID 19 pandemic restrictions were in force by Govt. of Odisha. So the respondents were only offering take away facilitation during the period. Therefore the material facts, submitted in the grounds of appeal is based on incomplete facts & half baked truth which is not maintainable at all. The respondent is running restaurants that offers dining as well as take away facilities to its customer. The customers are offered food/items which are prepared in the restaurant itself. The customers specifies their requirement and accordingly the food is prepared as per the demand. In such circumstances, no distinction can be drawn in the service offered by any restaurant and the services offered by the respondent. The authorized representatives prayed the Appellate Authority to consider their submission & dismiss the appeal.

4.3. During the P.H., the Jurisdictional Officer, Sri Goutam Kumar Biswas(Appellant), Asst. Commissioner, CGST, Sambalpur-I Division stated that the applicant is running a bakery business, where different items likes cakes, bakery items, ice creams, chocolates, drinks & other eatable products are sold on take away basis. The facilities provided by the applicant in their outlets cannot be treated as restaurant service.

4.4. The Concerned Officer, Sri Sibasis Sahoo, the Deputy Commissioner, CT & GST, Sambalpur Circle-I stated that, some people take the available food items inside the premises of the applicant, but they are not sold as per the order of the people. Rather it is a self service counter, where people are served with readymade food items as available at the outlet. Therefore, the applicant should not be considered as a Restaurant Service.

DISCUSSION & FINDINGS:

5.0. We have gone through the records of the case, the ruling was given by the Advance Ruling Authority vide their order No.06/Odisha-AAR/2020-21 dated 09.03.2021, the written submissions made by the Applicant, the Jurisdictional Officer and the Concerned Officer. We have taken note of the submission made by the authorized representatives of the applicant during the personal hearing through virtual mode on dt.14.07.2021. We have also taken into account of the submission made by the Jurisdictional Officer & Concerned Officer, during the personal hearing.

5.1. First of all, the question raised before as whether the appeal is time barred as claimed by the applicant during the personal hearing. The time limitation period is prescribed under sub section 2 of the Section 100 of CGST Act, 2017/SGST Act, 2017 that the appeal shall be filed within 30 days from the date of the communication of the order. On verification of records, we observed that, the order of the Authority for Advance Ruling was communicated to Jurisdictional Officer on dt.30.03.2021 & they have filed the appeal on dt.28.04.2021. The appeal is filed well within 30 days of the communication of the order. The applicant claimed that, the appeal is barred on the grounds of limitation by considering the 30 days from the date of passing order i.e. 09.03.2021, which is not legally correct. The time period of 30 days shall be considered from the date of communication of the order. Accordingly, we find that the appeal is not time barred & it was filed well within the prescribed time limit.

5.2. We have gone through the grounds of appeal made by the Jurisdictional Officer. The appeal made before us to revisit the ruling given by original Advance Ruling Authority of Odisha related to Question Nos.(a), (c), (d)(iii) & (d)(iv) to give a fresh ruling by charging, the individual rate of SGST & CGST as applicable as per the Notification No.01/2017-Central Tax(Rate) dt.28.06.2017(as amended) to the individual items as cakes, bakery items, ice creams, chocolates, drinks etc sold by the subject bakery by the applicant.

5.3. We have analysed the rulings made by the Advance Ruling Authority against to Question Nos. (a), (c), (d)(iii) & (d)(iv) vide their order No. 06/Odisha-AAR/2020-21 dated 09.03.2021. The Advanced Ruling Authority have given ruling that the facility provided by the outlets of the applicant will be treated as Restaurant Service, which will attracts 5% duty(2.5% CGST & 2.5% SGST) without input tax credit. Due to the appeal filed by the Jurisdictional Officer, now the question arised before us whether the ruling given by the Advance Ruling Authority on the subject facility as Restaurant Service is legally correct or needs to be changed.

5.4. On the subject issue of Restaurant Service, the latest notification issued i.e. Notification No.20/2019-Central Tax(Rate) dt.30.09.2019(SI.No.7, (ii) ) where the rate of duty & condition is prescribed mentioned below:

“(xxxii) “Restaurant service” means supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied.

(xxxvi) “Specified premises” means premises providing “hotel accommodation” services having declared tariff of any unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent.”

5.5. On the plain reading the definition of Restaurant Service as defined in the notification clearly speaks that supply, by way of or as part of any services of goods, being food or any other article for human consumption or any drink, provided by a restaurant will be considered as Restaurant Service. In the present case, the nature of establishment/premises/outlets, which are running by the applicant M/s.Pioneer Bakers, whether can be treated as Restaurant or not, is the main question before us. But the ambiguity persists on the subject issue because the Restaurant Service is defined under CGST Act, 2017/SGST Act, 2017 but what is restaurant is not defined under CGST/SGST Act, 2017.

5.6. The meaning of the restaurant is provided in the Cambridge Dictionary, where it is defined as, a restaurant is a place where meals are prepared & served to the customer. The appellant, the Jurisdictional Officer has categorically stated that the applicant is running a bakery business where different items are sold on take away basis. Most of the items are not prepared in their premises. The serving of the items to the customer for taking the food in the premises is done to very few customers. Therefore, the establishment running by the applicant M/s.Pioneer Bakers cannot be considered as Restaurant. The concerned Officer, Deputy Commissioner, CT & GST, Odisha also put forth their submissions on the similar grounds. The Concerned Officer submitted that, in the instant case, it is a bakery outlets where ready to each items are sold & mere facility is provided to take it from the shop. The applicant has only prepared birthday cakes, as per order for take out service and they do not prepare birthday cakes immediately from the customers order. Those who wants to take within the premises, they merely supply the readily available cakes. They do not serve food to the Customer table & in most cases sold the items from the counter. Therefore, the applicant should not be considered as Restaurant Services.

5.7. We examined the submission made by the applicant. We have also gone through the above verification put forth by the Jurisdictional Officer & the Concerned Officer. Examining all the factors, we are in view that the establishments/outlets/premises of the applicant cannot be treated as restaurant. Consequently, the activities carried out by the applicant from their premises/outlets cannot be considered as restaurant Service.

Ruling

(a) The appeal made by the Jurisdictional Officer is allowed;

(b) The ruling made by the Authority for Advance Ruling, Odisha vide their Order No.06/Odisha-AAR/2020-21 dt.09.03.2021 against the Question Nos-. (a), (c), (d)(iii) & (d)(iv) are set aside; and

(c) The items sold by the applicant M/s.Pioneer Bakers will attract the GST tariff rate as individual items.