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2024 (3) TMI 283 - AT - Service TaxLevy of service tax - Catering services - declared service or not - supply of meals and other food items by the respondent to the airlines - SCN dated 15.02.2017 for the period is from 01.07.2012 to March 2016 - HELD THAT - It would be seen that section 65B (44) defines service to mean any activity carried out by a person for consideration, and includes a declared service, but shall not include, amongst others, an activity which constitutes merely such transfer, delivery or supply of any goods which would be deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution - Section 65B (51) of the Finance Act defines a taxable service to mean any service on which service tax is leviable under section 66B. Though the notification dated 20.06.2003 was rescinded on the introduction of the negative list regime, but the legal position would not change in view of the definition of service under section 65B(44) of the Finance Act and the provisions of article 366(29A) of the Constitution. This is also clear from the Education Guide issued by CBEC on 19.06.2012. Paragraph 2.6.4 clarifies the reason for deletion of the notification dated 20.06.2003. It would also be pertinent to refer to the decision of the Tribunal in HALDIRAM MARKETING PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS AND SERVICE TAX, GST DELHI EAST COMMISSIONERATE, NEW DELHI 2023 (2) TMI 783 - CESTAT NEW DELHI . The Division Bench held that activities of preparation of food items by engaging chefs, packaging and delivery and selling them as take-away food items over the counters would amount to sale and, therefore, not be leviable to service tax. In INDIAN RAILWAYS CATERING TOURISM CORPORATION LTD VERSUS GOVT OF NCT OF DELHI ORS 2010 (7) TMI 174 - HIGH COURT OF DELHI , the Delhi High Court examined whether service tax could be leviable on foods and beverages supplied on board the trains and it was held that the transaction between the petitioner-company and Indian Railways for providing food and beverages to the passengers, on board the trains, is a transaction of sale of goods by the petitioner-company to Indian Railways. It is neither a contract for providing services nor a composite contract for supply of goods and providing of services. In the present case also, the respondent supplies foods to the airlines. The food is loaded in the aircraft at the airport but the respondent does not provide any catering service, which in fact is provided by the airline crew - service tax would not be leivable on the supply of food items to the airlines. The impugned order dated 31.01.2018 passed by the Commissioner, therefore, does not call for any interference in this appeal - appeal dismissed.
Issues Involved:
1. Whether the supply of meals and other food items by the respondent to the airlines constitutes a 'declared service' under section 66E of the Finance Act. 2. Whether the ancillary services provided by the respondent, such as handling and transportation, are naturally bundled with the supply of food. 3. Applicability of section 66E(i) of the Finance Act to the respondent's activities. 4. Applicability of Rule 2C of the Service Tax (Determination of Value) Rules, 2006. Summary of Judgment: Issue 1: Declared Service The Commissioner concluded that the respondent had not provided any service in relation to the supply of food. The quality check and packing of the food were done by the Airlines staff, indicating that the respondent either made a direct sale of food to the airlines or sold the food on a BOB (Buy on Board) basis through the airline's staff to the passengers. Therefore, the respondent did not provide 'outdoor catering service' as alleged in the show cause notice. Issue 2: Bundled Services The Commissioner found that the agreements between the respondent and the airlines referred to the contracts as 'inflight catering agreements' but provided separate prices for the supply of food and ancillary services like transportation and handling. The terms of the contract represented a divisible contract for the supply of food and provision of ancillary services. The clients were not obliged to take ancillary services mandatorily, indicating that these were separate activities and not naturally bundled. Issue 3: Applicability of Section 66E(i) of the Finance Act The Commissioner noted that ordering food as per the client's requirement does not affect the nature of the transaction, which remains a sale transaction. The preparation of food as per the order of the clients is not a service and would not be covered under entry (i) of section 66E of the Finance Act. Issue 4: Applicability of Rule 2C of the Service Tax (Determination of Value) Rules, 2006 The Commissioner held that Rule 2C would apply in situations where the service portion in the activity envisaged in section 66E(i) is not ascertainable. Since the service portion and sale portion were separately identifiable in this case, Rule 2C was not applicable. Conclusion: The appeal was dismissed, and the Commissioner's order dated 31.01.2018, which dropped the proceedings against the respondent, was upheld. The Tribunal found that the supply of food items to the airlines did not constitute 'outdoor catering service' and that service tax was not leviable on these transactions. The ancillary services were also considered separate from the supply of food and not naturally bundled.
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