Citation : Order of the High Court of Punjab and Haryana at Chandigarh in the matter of M/s CAP ‘N’ CHOPS Caterers Vs State of Haryana (GSTR No. 1 of 2009)
Court : Punjab & Haryana High Court
Brief Facts
· M/s Cap N Chops caterers (hereinafter referred as “the Taxpayer”) is in the business of catering. The Taxpayer entered into an agreement with the management of Staff Training Colleges of two banks for catering, housekeeping and maintenance of kitchen and utensils.
· The Taxpayer was obliged to sell cooked food to in-house resident trainees of Banks at rates fixed by the banks.
· The agreement inter-alia included service for purchase of raw materials for food, cooking of food, supply of food and maintenance of kitchen and utensils.
· The Taxpayer contended that the agreement with the banks, on account of conditions prescribing upkeep of kitchen, purchase and cooking of food, was in the nature of „works contract?. It was contended that supply of food was only incidental or ancillary transaction.
· The Sales Tax Department („Department?) contended that the agreement does not amount to works contract? and amount to „sale? vide section 2(l)(v) of the HGST Act (Please Refer Note-1).
· The first appellate authority and the Tribunal upheld the contention of the Sales Tax Department. The question of law was then referred to the Hon?ble Punjab and Haryana High Court as to whether the catering agreements with the banks were taxable within section 2(l)(v) of the HGST Act or as „works contract?.
Contentions of the Taxpayer
The Taxpayer put forth the following contentions:
· The agreement with the banks was in the nature of „works contract? as it required service for upkeep of kitchen, purchase and cooking of food, was in the nature of „works contract?. The supply of food was only incidental or ancillary transaction.
· The catering contracts by nature involve element of sales and service
· Total receipts from the catering contract could not be treated as taxable turnover and only that component of turnover which related to sale of goods could alone be covered by taxable turnover.
Contentions of the Department
The contentions of the Department were as follows:
· The agreement was for supply of meal to the college on regular basis against monetary consideration. Conditions which facilitated upkeep of the kitchen, purchase and preparation of food do not legitimize the claim for categorization under „works contract?.
· The service rendered by the Taxpayer was only incidental and ancillary to the main function of supply of food.
Observations of the Hon’ble Punjab & Haryana High Court
The following observations were made by the Hon?ble Punjab and Haryana High Court:
· Relying on the decision of the Hon?ble Supreme Court in the case of BSNL v. Union of India (2006) 3 SCC 1, the Hon?ble High Court observed that a catering contract involves a kind of service and sale at the same time.
· By including transactions of supply of goods being food and other articles for human consumption in the concept of deemed sale, supply of service could not be deemed to have been covered in definition of „sale and purchase of goods?.
· On the service element in a catering contract, service tax could be levied and sales tax could not be levied.
Conclusions
The questions of law for consideration were answered as follow:
· Catering includes rendering service as well as sale of goods. Hence, the catering agreements with the banks were taxable within section 2(l)(v) of the HGST Act.
· Entire turnover from a catering contract cannot be held to be taxable as sale of goods. The sales tax can be levied on the turnover of sale, after excluding the turnover attributable to service.
Note-
1. Under section 2(1)(v) of the Haryana General Sales Tax Act, 1973 (‘HGST Act’), ‘sale’ included supply, by way of or as part of any service or in any other manner whatsoever of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration.