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2023 (2) TMI 783 - AT - Service TaxInvocation of extended period of limitation - non-payment of service tax - activity of take-away of food (take-away food items over the counter and not serving on the tables) - rent shared by the associated enterprise - privity of contract - composite services - period involved in the appeal is from April 2014 to June 2017 - HELD THAT - The Circular dated 28.02.2011 issued by Ministry of Finance at the time when restaurant service was made taxable mentions that the levy was intended to be confined to the value of services contained in the composite contract and was not to cover either the meal portion of the composite contract or mere sale of food by way of pickup or home delivery. The clarification letter dated 13.08.2015 issued by the Deputy Commissioner also clarifies that in case of transaction involving pickup or home deliveries of the food sold by the restaurant, the dominating nature of the transaction is that of sale and not service, as the food is not served at the restaurant and no other element of service is offered. The said transaction would, therefore, not be leviable to service tax, being in the nature of sale only. The Madras High Court in ANJAPPAR CHETTINAD A/C RESTAURANT, M/S RSM FOODS (P) LTD, M/S. THALAPAKATTI HOTELS PVT. LTD, M/S PRASANAM FOODS (P) LTD. VERSUS JOINT COMMISSIONER, THE COMMISSIONER OF GST AND CENTRAL EXCISE, THE ADDITIONAL COMMISIONER OF GST AND CENTRAL EXCISE 2021 (6) TMI 226 - MADRAS HIGH COURT , after examining the aforesaid Circular dated 28.02.2011 and the clarification letter dated 13.08.2015, also held that in take-away of food items service tax would not be leviable as it would be a case of sale. In the present case, when the department has accepted the decision of the Commissioner (Appeals) that no service tax is leviable on take-away food items, it is not open to the department to take a contrary stand in this appeal - it has to be held that no service tax can be levied on the activity of take-away of food items as it would amount to sale and would not involve any element of service. Levy of service tax - consideration received under the category of renting of immovable property - privity of contract - Whether permitting an associated enterprise to use a part of the premises for the sale of the product would amount to sub-letting? - HELD THAT - It needs to be noted that the appellant had entered into a rental agreement with DIAL for leasing out premises at the airport, for which it paid a rental amount to DIAL. It also transpires that from the property leased out to the appellant, the appellant sells its own goods as well as goods of the associated enterprise purchased by the appellant - The associated enterprise is also not a party to the agreement between the appellant and DIAL for renting out the premises of the appellant. It is for this reason that the appellant claims that in the absence of a contractual relationship between the associated enterprises either with the appellant or DIAL, the amount paid by the associated enterprise cannot be subjected to service tax. According to the appellant, the amount paid by the associated enterprise to the appellant is not for any service but cost sharing between the associated enterprise and the appellant. The contention of the appellant that the consideration received by the appellant from the associated enterprise would not be leviable to service tax under the category of renting of immovable property deserves to be accepted. Appeal allowed.
Issues Involved:
1. Levy of service tax on take-away food items. 2. Levy of service tax on rent shared by the associated enterprise. 3. Invocation of the extended period of limitation. Detailed Analysis: 1. Levy of Service Tax on Take-Away Food Items: The appellant, Haldiram Marketing Private Limited, argued that the activity of take-away food items does not attract service tax as it is a pure sale transaction without any service element. The Commissioner, however, confirmed the demand for service tax on take-away food items, asserting that the activity involves the provision of restaurant services, which is a declared service under Section 66E(i) of the Finance Act, 1994. The Tribunal examined various provisions and circulars, including Section 65B(44) defining 'service' and Section 66E(i) dealing with declared services. The Circular dated 28.02.2011 clarified that the levy of service tax was intended for high-end restaurants providing substantial services, not for mere sale of food via take-away or home delivery. The Tribunal also referenced the clarification dated 13.08.2015, which stated that take-away or home delivery transactions are primarily sales and do not attract service tax. The Tribunal cited the Madras High Court judgment in Anjappar Chettinad, which held that take-away food transactions are sales and do not involve service elements. The Tribunal concluded that the preparation and packing of food for take-away are conditions of sale and do not constitute restaurant services. Therefore, no service tax can be levied on take-away food items. 2. Levy of Service Tax on Rent Shared by the Associated Enterprise: The appellant contended that the amount received from the associated enterprise was for sharing space and not for sub-letting the premises. The Commissioner had treated this arrangement as sub-letting, thereby attracting service tax under 'renting of immovable property' service. The Tribunal noted that the appellant had leased premises from DIAL and sold both its own goods and those of the associated enterprise from the same premises. The associated enterprise shared a portion of the rent as it benefited from the space. The Tribunal accepted the appellant's argument that this was an internal cost-sharing arrangement without any privity of contract between the associated enterprise and DIAL. The Tribunal referenced the Supreme Court decision in Gujarat State Fertilizers & Chemicals Ltd. vs. Commissioner of C. Ex. and the Tribunal's decision in M/s. Historic Resort Hotels (Pvt.) Ltd. vs. CCE, Jaipur-II, which held that sharing of expenses does not constitute a service. Consequently, the Tribunal concluded that the consideration received from the associated enterprise was not subject to service tax. 3. Invocation of the Extended Period of Limitation: The show cause notice alleged that the appellant had intentionally suppressed facts to evade tax, justifying the invocation of the extended period of limitation under the proviso to Section 73(1) of the Finance Act. The appellant argued that the extended period could not be invoked as there was no willful suppression of facts. Given the Tribunal's findings that no service tax was leviable on both take-away food items and the rent shared by the associated enterprise, the question of invoking the extended period of limitation became moot. The Tribunal did not find it necessary to delve further into this issue. Conclusion: The Tribunal set aside the impugned order dated 11.03.2022, allowing the appeal and concluding that no service tax was leviable on the take-away food items or the rent shared by the associated enterprise. The appeal was allowed, and the Tribunal pronounced the order in open court on 13.02.2023.
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