2021 (8) TMI 267 - AAAR - GST

Maintainability of appeal - time limitation - classification of services - restaurant services or not - 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 - supply of items such as birthday stickers candles birthday caps snow sprays etc related items which are essentially used in birthday celebration - composite supply or not - 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 - Section 2 (30) of the CGST Act 2017 and Section 2 (30) of the OGST Act 2017 - 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 - nature and tax applicable on 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 - rates applicable as per Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 on 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 - tax liability charged on goods which are tax free without opting for composite scheme such as bread etc. - 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? Time Limitation - Whether the appeal is time barred as claimed by the applicant during the personal hearing? - HELD THAT - 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 time period of 30 days shall be considered from the date of communication of the order - the appeal is not time barred it was filed well within the prescribed time limit. Restaurant Service or not - HELD 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 of AAR set aside - appeal of the revenue allowed.

Summary

Issues Involved:
1. Classification of the supply of bakery items as restaurant services.
2. Classification of birthday-related items as composite supply.
3. Classification of handmade chocolates under restaurant services.
4. Tax rate applicable to items sold from the bakery.
5. Eligibility for the Composition Scheme for tax liability.

Detailed Analysis:

1. Classification of the Supply of Bakery Items as Restaurant Services
The applicant, a bakery firm, sought clarification on whether their supply of cakes, bakery items, ice creams, chocolates, drinks, and other eatables, served in air-conditioned premises, qualifies as "restaurant services." The Authority for Advance Ruling (AAR) initially affirmed this classification. However, the Appellate Authority for Advance Ruling (AAAR) overturned this decision, stating that the applicant's establishment does not meet the definition of a restaurant. The AAAR referenced the Cambridge Dictionary definition of a restaurant as a place where meals are prepared and served to customers, noting that the applicant primarily operates a bakery with take-away services and does not prepare most items on-site.

2. Classification of Birthday-Related Items as Composite Supply
The AAR ruled that items like birthday stickers, candles, and caps, which are used in birthday celebrations, do not constitute a composite supply under Section 2(30) of the CGST Act, 2017. The AAAR upheld this decision, agreeing that these items are not inherently linked to the principal supply of bakery items and do not form a composite supply.

3. Classification of Handmade Chocolates Under Restaurant Services
The AAR initially ruled that handmade chocolates, used in shakes and brownies or sold separately, fall under restaurant services. The AAAR overturned this, concluding that the applicant’s operations do not qualify as restaurant services, thus the handmade chocolates should not be classified as such.

4. Tax Rate Applicable to Items Sold from the Bakery
The AAR had ruled that items like birthday caps, knives, and decorative items bundled with cakes, whether consumed on-premises or taken away, should be taxed as per Notification No. 01/2017-Central Tax (Rate). The AAAR agreed with the jurisdictional officer's appeal that these items should be taxed individually, not under the composite supply or restaurant services framework. The AAAR emphasized that the bakery's operations do not qualify as restaurant services, and thus, each item should attract the GST tariff rate applicable to individual items.

5. Eligibility for the Composition Scheme for Tax Liability
The AAR ruled that the applicant is ineligible for the Composition Scheme due to their status as an ice cream manufacturer. The AAAR upheld this decision, confirming that the applicant cannot opt for the Composition Scheme under the CGST Act, 2017.

Conclusion:
- The AAAR allowed the appeal made by the jurisdictional officer.
- The previous rulings by the AAR regarding the classification of services and applicable tax rates were set aside.
- The items sold by the applicant will attract the GST tariff rate as individual items, not under the composite supply or restaurant services classifications.
- The applicant remains ineligible for the Composition Scheme due to their manufacturing of ice creams.