In-flight Food and Beverages supply to airlines classifies as ‘Outdoor Catering Services’

[Bimal jain]

The Hon’ble Supreme Court in the case of COMMISSIONER OF CGST AND CENTRAL EXCISE DELHI I VERSUS AMBASSADOR SKY CHEF - 2025 (1) TMI 351 - SC ORDER, dismissed the writ petition on the ground of delay as well as on merits.

The appeal was against the CESTAT ruling which held that the supply of food and beverages to the international as well as domestic flights is not outdoor catering services. These are rather sale of food and beverages. The Assessee was providing food to various airlines alongwith the responsibility of packing and handling of food. There was no activity of serving the food. The Hon’ble CESTAT on earlier occasion found no more res-integra and dismissed the Revenue appeal.

The Principal Bench of CESTAT, Delhi in COMMISSIONER OF CENTRAL GOODS, SERVICE TAX & CENTRAL EXCISE-DELHI I VERSUS AMBASSADOR SKY CHEF - 2024 (4) TMI 822 - CESTAT NEW DELHI held as under:

• Observed that, for an activity to be called as outdoor catering, there has to be the preparation of food, supply of food and serving of the food. However, providing/supplying food to various airlines alongwith the responsibility of packing and handling of food, loading in transportation thereof alongwith the requisite equipments and of providing the laundry services. This admitted fact is sufficient shown that there is no activity of serving the food.
• Relied on, the Hon’ble Supreme Court in the case of TAMIL NADU KALYANA MANDAPAM ASSN. VERSUS UNION OF INDIA  - 2004 (4) TMI 1 - SUPREME COURT has held that a tax on services rendered by outdoor caterers is in pith and substance a tax on services and not a tax on sale of goods or on hire purchase activities.
• Relied on, Bombay High Court in the case of NARANG HOTELS AND RESORTS PVT. LTD. VERSUS STATE OF MAHARASHTRA AND OTHERS  - 2003 (10) TMI 620 - BOMBAY HIGH COURT has held that the sale by a flight kitchen of eatable or goods is complete when the goods are loaded in the supply unit and despatched when the supplied food is served simultaneously it is outdoor catering else it is merely sale of goods more so in the case when invoice shows it as a separate element.
• Relied on, Karnataka High Court in the case of COMMISSIONER OF SERVICE TAX VERSUS LSG SKY CHEF INDIA (P.) LTD. - 2011 (4) TMI 911 - KARNATAKA HIGH COURT  where it was held that held that outdoor catering consists of goods namely, the articles of food etc, which would constitute sale. Hence, the value of the food articles are liable for sales tax which the State Government is liable to impose. The other part of outdoor catering is the service rendered by the assessee in bringing the food articles to a place designated by the client. The service so rendered by the assessee, which also includes the cost of transporting the food articles constitutes service Therefore, to this extent alone, the assessee is liable for service tax and for the entire cost received from the Airlines. Hence mere has to be a bifurcation with regard to the sale of goods and the service provided. However, it does not empower the State Government to levy tax on the entire amount mentioned in the bill. The entire sale price includes the transportation charges also and out of that sale price what is the service aspect and what is the sale aspect requires to be decided by the authorities. It is only thereafter that sales tax could be imposed on the cost of the food articles arrived at and the remaining extent including transportation is to be treated as liable for service tax. Therefore, the court declared that a contract for outdoor caterings composite contract which falls under sub-clause (f) of clause 29A of Article 366 of the Constitution of India and service tax payable on service aspect and sales tax is payable on deemed sales aspect and it is not an individual contract.
• Held that, the issue involved in the present case is no more res-integra that supply of F&B per se is not the ‘outdoor catering service‟. It rather amounts to sale of F&B. The Adjudicating Authority has considered most of the above said decisions while dropping the demand proposed by the impugned show cause notice.

Our Comments:

Section 66E of the Finance Act, 1994 (“the Finance Act”) lays emphasis on declared service as service portion in an activity wherein goods, being food and any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity.

Section 65 (76a) of Finance Act defines ‘outdoor caterer’ to mean a caterer engaged in providing services in connection with catering at a place other than his own but including a place provided by way of tenancy or otherwise by the person receiving such services.

section 65 (24) of the Finance Act also defined ‘caterer’ to mean any person who supplies either directly or indirectly any food edible preparations, alcoholic or non-alcoholic beverages or crockery and similar are articles or accoutrements for any purpose of the occasions.

In pari materia case before the Hon’ble Delhi High Court in the case of INDIAN RAILWAYS CATERING & TOURISM CORPORATION LTD VERSUS GOVT OF NCT OF DELHI & ORS - 2010 (7) TMI 174 - HIGH COURT OF DELHI held that the transaction of supply of food, snack and water to passengers in the train is not an outdoor catering service, there is no choice for passenger as he cannot ask for a different item or more items or substitute items. Thus, he has no role to play and hence there is no element of service except the heating of cooked food and serving the food and beverages. In fact the service component in a restaurant is more than the service component in a train. The property in the goods passes from IRCTC to Indian Railways when the food is loaded in the trains. The moment the food is loaded, the food belongs to Indian Railways. The fact that the food is served while the train is moving through another State is immaterial. It is not possible to accept that property in goods is transferred only when the food is served to the passenger as it would lead to impossible situations.

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