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2018 (6) TMI 1365 - AT - Service TaxService or sale - sale of packed food to the airlines, on which VAT already discharged - whether the said activity amounts to Service and is liable to Service Tax or not? - Held that - The invoice of the appellant is showing sale of food separately from the charges of other services rendered in addition to supply food. Apparently and admittedly, appellant is not serving the said food on board hence as far as supply of food is concerned property therein stands transferred the moment it is loaded on the air craft trolley - Since the appellant was simply supplying the food and was not serving the same to the passengers on board, it was specifically a sale of goods, Appellant has already discharged the VAT liability thereof. The same cannot be the outdoor catering services - demand set aside - appeal allowed - decided in favor of appellant.
Issues:
1. Service Tax demand confirmation for the period from April 2004 to March 2007 along with interest and penalty imposition. 2. Interpretation of legal provisions regarding the liability of Service Tax on the cost of food supplied to airlines. 3. Applicability of Notification No.12/2003-ST and Article 366(29A) of the Constitution of India. 4. Analysis of the 46th Amendment to the Constitution and its impact on the tax on the supply of goods like food or drinks. 5. Comparison with legal precedents such as K. Damodharaswamy Naidu and Brothers Vs. State of Tamil Nadu, Tamil Nadu Kalyana Mandapam Association Vs. Union of India, Indian Railways Catering and Tourism Corporation case, Narang Hotels and Resorts Vs. State of Maharashtra, and Gannan Drunkerley's case. Detailed Analysis: 1. The judgment concerns an appeal against the confirmation of a Service Tax demand amounting to ?2,79,83,203 for the period from April 2004 to March 2007, along with interest and penalty imposition. The appellant, engaged in providing food services to airlines, was asked by the Revenue to include the cost of food supplied to airlines in the value of services for tax purposes. 2. The appellant argued that they were selling packed food to airlines and paying VAT on it, emphasizing an exemption under Notification No.12/2003-ST and Article 366(29A) of the Constitution of India. The Revenue contended that the appellant was liable to pay Service Tax on the value of food supplied, citing a 2006 Notification allowing 50% abatement for outdoor catering services. 3. The Tribunal analyzed the 46th Amendment to the Constitution, which treated the supply of food or drinks as part of any service as a sale or purchase of goods. Referring to the Supreme Court's decision in K. Damodharaswamy Naidu case, it highlighted that Sales Tax is leviable on the entire amount charged for food supply in restaurants. 4. The judgment discussed the introduction and withdrawal of service tax on outdoor catering, reinstated in 2004. It compared the distinction between services rendered by outdoor caterers and those in restaurants, emphasizing the choice and manner of food selection by customers. 5. Legal precedents such as the Indian Railways Catering and Tourism Corporation case, Narang Hotels and Resorts case, and Gannan Drunkerley's case were cited to support the Tribunal's decision. The judgment concluded that since the appellant was only supplying food and not serving it to passengers on board, it constituted a sale of goods, and the VAT liability had been discharged. The demand for Service Tax was deemed unsustainable, and the appeal was allowed.
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