Case Law Details
Bikanervala Foods Pvt. Ltd. Vs Commissioner of CGST (CESTAT Delhi)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi bench, has ruled that the sale of food items by way of “Take-Away” and “Home Delivery” from restaurants does not attract service tax under the category of ‘Restaurant Service’. The tribunal set aside a service tax demand confirmed against Bikanervala Foods Pvt. Ltd. on this issue.
The case involved Bikanervala Foods, which is registered for various services, including ‘Restaurant Service’. An audit observed that the company had claimed exemption on sales made through “Take Away” and “Home Delivery” from its air-conditioned restaurants during the financial years 2013-14 and 2014-15.
The department subsequently issued a show cause notice in January 2017, demanding service tax on these sales, treating them as taxable restaurant services. The demand was confirmed by the adjudicating authority and upheld by the Commissioner (Appeals).
Bikanervala Foods challenged this, arguing that “Take Away” and “Home Delivery” transactions constitute a pure sale of goods and do not involve the service element inherent in traditional restaurant dining.
The CESTAT, after hearing both sides, found that the issue was no longer unsettled, citing previous judgments. The tribunal relied heavily on its own decision in the case of Haldiram Marketing Pvt. Ltd. Vs. Commissioner of CGST, GST, Delhi East Commissionerate, which involved identical facts. In the Haldiram case, the tribunal had held that “Take Away” of food items amounts to a sale and does not involve any element of service.
The tribunal also referred to the Madras High Court judgment in Anjappar Chettinad A/C Restaurant Vs. Joint Commissioner. That ruling similarly held that service tax would not be leviable on “Take Away” food. The Madras High Court had noted that the definition of ‘service’ under Section 65B(44) of the Finance Act, 1994, excludes the transfer of title in goods by way of sale. It highlighted that in “Take Away” or parcel sales, service attributes typically found in dining, such as seating arrangements, decor, serving staff, crockery, and cutlery, are absent. The consumption of food does not occur on the restaurant premises.
Following these precedents, the CESTAT concluded that the activity of selling food items through “Take Away” or “Home Delivery” is clearly a sale of food. It does not involve the service elements associated with a restaurant service where food is served for consumption on the premises. The tribunal stated that the dominant nature of these transactions is that of a sale.
Accordingly, the CESTAT held that the activity of sale of food items by “Take Away” or “Home Delivery” by the appellant was not liable to service tax. The impugned order confirming the demand was set aside, and the appeal was allowed.
FULL TEXT OF THE CESTAT DELHI ORDER
1. The appellant has assailed the order-in-appeal no.52-ST-APPL-I-NORTH-2018-2416 dated 29.10.2018, whereby the demand of service tax was confirmed in respect of sale of food items by way of “Take-Away” and “Home Delivery” under Restaurant Services.
2. The appellant was registered with Service Tax under the taxable category of ‘Restaurant Service’, ‘Franchisee Service’, ‘Sponsorship Service’, ‘Business Auxiliary Services’, ‘ Sale of Space or Time for Advertisement’, ‘Business Support Services’, ‘Works Contract Services’, ‘Manpower Recruitment or Supply Agency’s Services’, ‘Transport of Goods by Road Service’ and ‘Security/Detective Agency Service’.
3. During the course of audit, the audit team observed that the appellant was providing Restaurant Service from the Restaurant having air conditioning facilities and had taken exemption on sale of food by way of “Take Away” or “Home Delivery” during the Financial year 2013-14 and 2014-15 amounting to INR 12,96,88,205 (INR 5,50,62,291/- during the year 2013-14 and INR 7,46,25,914 during the year 2014-15), and for which taxable value after abatement of 60% works out to be INR 5,18,75,282.
4. Show cause notice dated 05.01.2017 was issued by the Department raising demand of service tax on sale of food by “Take Away” or “Home Delivery” together with interest and penalty by treating the same as restaurant services. On adjudication, the demand was confirmed along with interest and penalty invoking the extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994.1 On appeal, the Commissioner (Appeals) confirmed the order-in-original by the impugned order Hence, the present appeal has been filed by the appellant.
5. Heard Shri Sukhpal Singh and Shri Vishal Jain, learned Chartered Accountants for the appellant and Shri S.K. Meena, learned Authorised Representative for the respondent/Revenue.
6. The issue that arises in the present case is whether the activity of “Take Away” and “Home Delivery” tantamount to taxable service under the category of Restaurant Service. We find that the issue is no longer res integra and has been decided by this Tribunal in the case of Haldiram Marketing Pvt. Ltd. Vs. Commissioner of CGST, GST, Delhi East Commissionerate 2, where the facts and circumstances are identical and hence, the present case is squarely covered by the observations made therein.
7. In the case of Haldiram Marketing Pvt. Ltd. (supra), the brief facts noted are that they were engaged in running food outlets, where packaged food items could be purchased and also availed restaurant dining facilities. Additionally, the appellant there also provided the facility of “Take Away “ of food items. On audit, it was noticed that the appellant was providing services in respect of “Take Away” orders by way of preparing and packaging food items for the customers. The Tribunal, after considering the provisions of Section 65 B(44) read with 66E of the Finance Act also considering the Circular No.334/3/2011-TRU dated 28.02.2011 and the clarification issued thereafter on 13.08.2015 that the transaction involving “Pick-up” or “Home Delivery” of the food items sold by the restaurants are not liable to service tax, being in the nature of sale only and no amount is charged for free delivery of food as the dominant nature of the transaction is that of sale and not service, as the food items are not served at the restaurant and there is no other element of service, which is normally offered at the restaurant. Referring to the earlier decision of the Madras High Court in Anjappar Chettinad A/C Restaurant Vs. Joint Commissioner 3 , where also, it was held that service tax would not be leviable in case of “Take Away” of food items. The relevant paragaraphs of the said decision are as follows:-
“5. According to the petitioners, there is no liability for sale of food at the take-away counter or by parcel. They would state that the sale of packaged food constitutes pure trading activity and there is no component of service involved therein. They rely on the definition of ‘service’ under Section 65B(44), which excludes the transfer of title in goods by way of sale. In the light of this exclusion, parcel sales or take away food would stand outside the ambit of service tax.
6. According to them, in parcel sales, there could be no artificial splitting of transactions between one of ‘service’ and one of ‘sale’ with the attempt to bring the same under the purview of the former. The petitioners rely on letter bearing No.DOF 334/3/2011-TRU dated 28.02.2011 which had, according to them, clarified that service tax is not intended to cover sale of food that is collected or picked up for consumption elsewhere.
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26. Thus, not all services rendered by restaurants in the sale of food and drink are taxable and it is only certain specified situations that attract tax. The sale of food and drink simplicitor, services of selection and purchase of ingredients, preparation of ingredients for cooking and the actual preparation of the food and drink would not attract the levy of tax. Only those services commencing from the point where the food and drinks are collected for service at the table till the raising of the bill, are covered. This would encompass a gamut of services including arrangements for seating, décor, music and dance, both live and otherwise, the services of Maître D’Or, hostesses, liveried waiters and the use of fine crockery and cutlery, among others. The provision of the aforesaid niceties are critical to the determination as to whether the establishment in question would attract liability to service tax, and that too, only in an air-conditioned restaurant.
27. In the case of take-away or food parcels, the aforesaid attributes are conspicuous by their absence. In most restaurants, there is a separate counter for collection of the take-away food parcels. Orders are received either over telephone, by e-mail, online booking or through a food delivery service such as swiggy or zomato. Once processed and readied for delivery, the parcels are brought to a separate counter and are picked up either by the customer or a delivery service. More often than not, the take-away counters are positioned away from the main dining area that may or may not be air-conditioned. In any event, the consumption of the food and drink is not in the premises of the restaurant. In the aforesaid circumstances, I am of the categoric view that the provision of food and drink to be taken-away in parcels by restaurants tantamount to the sale of food and drink and does not attract service tax under the Act.
28. The petitioners have brought to my notice several orders passed by the Appellate Commissioners stationed in Chennai and any other parts of the State who have taken a view that take away services would not attract liability to Service tax. (Order in Appeal No.445 of 2018 dated 28.09.2018 passed by the Commissioner (Appeals), Chennai, Order in Appeal No.147 of 2019 dated 25.03.2019 passed by the Commissioner (Appeals), Coimbatore and Order in Appeal No.16 of 2020 dated 23.03.2020 passed by the Commissioner (Appeals), Coimbatore. In some cases, I am informed that appeals have not been filed by the Department and thus the prevailing view, even within the Department is that there would be no service tax liability on take away food.
In view of the aforesaid observations, the Tribunal concluded that no service tax can be levied on the activity of “Take Away of food items as it amounts to sale and does not involve any element of service, inter alia, observing as under:-
“19. It is seen that in case of take-away of food, the appellant sells the food/packaged items, as chosen by the customer, over the counter and this would amount to sale of goods. Services such as dining facility, washing area, clearing of the tables after the food has been eaten are, therefore, not involved. The activities of preparation of food and packing thereof by the appellant in case of take-away items are conditions of sale of such food, wherein the intention of the customer is to merely buy such packaged product from the appellant, and not to avail any restaurant services.”
Since the facts of the present case are absolutely identical and give rise to the issue of taxability of sale of food items through “Take Away” or “Home Delivery”, the activity is clearly of sale of food and does not involve any service element and, therefore, following the ratio of the judgements referred above, the activity of sale of food items by “Take Away” or “Home Delivery” by the appellant is not liable to service tax. Accordingly, the impugned order deserves to be set aside and the appeal is allowed.
Order pronounced on 07.06.2024.
Notes:
1 Act, 1994
2 2023 (71) GSTL 414 (Tri.-Del.)
3 2021 (6) TMI 226 – Madras High Court
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