2025 (4) TMI 1112 - AT - Service Tax

Nature of transaction - sale or service - activity of providing Take Away or Pick Up food services by a restaurant - HELD THAT - The issue is no more res-integra and has been decided by the Tribunal in the case of M/s Bikanervala Foods Pvt. Ltd. V/s Commissioner of CGST Customs Central Excise Delhi-East 2024 (6) TMI 504 - CESTAT NEW DELHI where it was held that Since the facts of the present case are absolutely identical and give rise to the issue of taxability of sale of food items through Take Away or Home Delivery the activity is clearly of sale of food and does not involve any service element and therefore following the ratio of the judgements referred above the activity of sale of food items by Take Away or Home Delivery by the appellant is not liable to service tax. Conclusion - The activity of sale of food items by Take Away or Home Delivery by the appellant is not liable to service tax. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered by the Tribunal was whether the activity of providing "Take Away" or "Pick Up" food services by a restaurant amounts to a taxable service under the category of Restaurant Service for the purpose of service tax liability under the Finance Act, 1994. Specifically, the Tribunal examined if the sale of food items through "Take Away" or "Pick Up" involves any element of service that attracts service tax, or whether it constitutes merely a sale of goods, which is outside the ambit of service tax.

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Whether "Take Away" or "Pick Up" of food items by a restaurant constitutes a taxable service liable to service tax under the Finance Act, 1994.

Relevant Legal Framework and Precedents: The Tribunal analyzed the issue in light of the provisions of the Finance Act, 1994, particularly Section 65B(44) defining 'service' and Section 66E relating to taxable services. The Tribunal also considered Circular No. 334/3/2011-TRU dated 28.02.2011 and subsequent clarifications issued on 13.08.2015, which clarified that transactions involving "Pick-up" or "Home Delivery" of food items sold by restaurants are not liable to service tax as these are in the nature of sale only. Additionally, the Tribunal relied on the precedent set by its own earlier decisions, including the case of M/s Bikanervala Foods Pvt. Ltd. and Haldiram Marketing Pvt. Ltd., as well as the Madras High Court decision in Anjappar Chettinad A/C Restaurant Vs. Joint Commissioner.

Court's Interpretation and Reasoning: The Tribunal reiterated that the dominant nature of the transaction in "Take Away" or "Pick Up" is the sale of goods and not the provision of service. The Tribunal observed that the definition of 'service' under Section 65B(44) excludes the transfer of title in goods by way of sale, which directly applies to the sale of food items in "Take Away" transactions. The Tribunal emphasized that the taxable service under the category of restaurant service is limited to services rendered from the point where food and drinks are served at the table till the raising of the bill, including ancillary services such as seating arrangements, d'ecor, and wait staff services, especially in air-conditioned premises.

Key Evidence and Findings: The audit report and show cause notice highlighted that the appellant was not paying service tax on "Take Away" food sales despite having air-conditioned restaurant facilities. However, the Tribunal found that the "Take Away" counter is usually separate from the main dining area and that the food is consumed outside the restaurant premises, thus lacking the service elements that attract service tax. The Tribunal noted that the preparation and packaging of food for "Take Away" are conditions of sale and do not constitute a separate service.

Application of Law to Facts: Applying the legal framework and precedents to the facts, the Tribunal concluded that the appellant's activity of selling food items through "Take Away" or "Pick Up" is a sale of goods and not a taxable service. The absence of any service elements such as seating, serving, or other hospitality services in the "Take Away" context meant that service tax was not leviable. The Tribunal distinguished between the restaurant dining service, which is taxable, and the mere sale of packaged food items for consumption elsewhere, which is not.

Treatment of Competing Arguments: The Revenue's contention was that service tax was payable on "Take Away" food sales as part of restaurant services, especially since the restaurant was air-conditioned. The appellant argued that "Take Away" sales are pure sales of goods and not services. The Tribunal rejected the Revenue's argument by relying on statutory definitions, circulars, and judicial precedents that clarified the exclusion of sale of goods from service tax and held that "Take Away" food sales do not attract service tax.

Conclusions: The Tribunal held that no service tax is leviable on "Take Away" or "Pick Up" food sales by restaurants as these transactions amount to sale of goods without any service element. Consequently, the impugned order demanding service tax and penalty was set aside, and the appeal was allowed.

3. SIGNIFICANT HOLDINGS

"The issue that arises in the present case is whether the activity of 'Take Away' and 'Home Delivery' tantamounts to taxable service under the category of Restaurant Service. We find that the issue is no longer res integra and has been decided by this Tribunal... where the facts and circumstances are identical and hence, the present case is squarely covered by the observations made therein."

"The transaction involving 'Pick-up' or 'Home Delivery' of the food items sold by the restaurants are not liable to service tax, being in the nature of sale only and no amount is charged for free delivery of food as the dominant nature of the transaction is that of sale and not service."

"Not all services rendered by restaurants in the sale of food and drink are taxable and it is only certain specified situations that attract tax... In the case of take-away or food parcels, the aforesaid attributes are conspicuous by their absence... the provision of food and drink to be taken-away in parcels by restaurants tantamount to the sale of food and drink and does not attract service tax under the Act."

"It is seen that in case of take-away of food, the appellant sells the food/packaged items, as chosen by the customer, over the counter and this would amount to sale of goods... The activities of preparation of food and packing thereof by the appellant in case of take-away items are conditions of sale of such food, wherein the intention of the customer is to merely buy such packaged product from the appellant, and not to avail any restaurant services."

The Tribunal conclusively held that "the activity of sale of food items by 'Take Away' or 'Home Delivery' by the appellant is not liable to service tax" and set aside the impugned order with consequential relief to the appellant.