2017 (4) TMI 1026 - AT - Service Tax

Outdoor catering service - whether the appellant is providing the service of outdoor catering as contended by the Department or involved in trading, that is running a restaurant as contended by the appellant? - Held that - the activity of the appellant is running a restaurant - in the case of restaurant, the customer s choice of food is limited to the menu card - Sales Tax have been paid on the sale of food items in the restaurant and service tax is not leviable as Sales Tax and Service Tax are mutually exclusive - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Determining whether the appellant is providing outdoor catering service or running a restaurant.

Analysis:
The appeal revolves around the question of whether the appellant is engaged in providing outdoor catering service or operating a restaurant. The agreement in question involved a security deposit and commission for outdoor catering services, where the caterer received payments directly from customers. The club provided staff, equipment, and approved menu cards, indicating a personalized service to the club rather than individual members. The Commissioner (Appeals) highlighted that the club determined the terms, prices, and manner of service, suggesting a service tailored to the club's needs.

The Commissioner (Appeals) relied on the Supreme Court's ruling in a similar case to assert that outdoor catering services differ from restaurant services. In outdoor catering, customers have more freedom to choose food, time, and location, negotiating each aspect with the caterer. The appellant argued that the fixed menu approved by the club restricted choice, similar to a restaurant setting. Citing precedents, the appellant contended that the supply of food in outdoor catering should be treated as a sale of goods, exempt from service tax if VAT or sales tax is paid.

The Revenue supported the Commissioner's findings and referenced the Supreme Court's ruling and the agreement terms. The appellate tribunal, after considering both sides, concluded that the appellant's activity resembled running a restaurant rather than outdoor catering. Citing precedents where sales tax was paid on food items, the tribunal ruled that service tax was not applicable as sales tax and service tax are mutually exclusive. Consequently, the appeal was allowed, and the impugned order was set aside, entitling the appellant to benefits as per the law.

In summary, the judgment clarifies the distinction between outdoor catering and restaurant services based on the level of customer choice and negotiation. It emphasizes the importance of payment of sales tax or VAT in determining the applicability of service tax. The decision provides clarity on the classification of services and tax liabilities in similar scenarios, ensuring adherence to legal principles and precedents.