2021 (9) TMI 965 - AT - Service Tax

Levy of service tax - restaurant service or not - service tax on the food served in the rooms - HELD THAT - Reliance was placed on the Board Circular dated 10.05.2011, wherein the Board have clarified that food served in the hotel room is not liable to service tax. It was further held that for service of food in the hotel room, the said activity was not chargeable to service tax under the head restaurant service . Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant-hotel, also providing restaurant service, is liable to service tax on the food served in the rooms under the head 'restaurant service'.

Analysis:

The appellant, engaged in providing short-term accommodation and restaurant service, faced a show cause notice for not paying service tax on food served to guests in hotel rooms. The Assistant Commissioner initially dropped the demand of service tax, but the Commissioner reviewed and allowed the appeal filed by the department, confirming the service tax demand.

The appellant argued that serving food in hotel rooms constitutes a sale of goods, not a service, as VAT was charged on the value of food. They relied on a Tribunal judgment stating that VAT and service tax cannot be levied on the same value. Additionally, they cited the exclusion of sale of goods (food) from the definition of 'service' under the Finance Act, 1994, and a Supreme Court judgment supporting the same.

Moreover, the appellant referenced a Board Circular clarifying that when food is served in a room, it is not liable for service tax. They highlighted a Tribunal case where it was held that delivering food to customers in hotel rooms is a sale and not a composite transaction like in a restaurant. The appellant emphasized that there is no element of service involved in delivering food from the hotel kitchen to guests in rooms, unlike in a restaurant where service elements like music and ambience are present.

Ultimately, the Tribunal found in favor of the appellant, citing the Board Circular from 2011. The appeal was allowed, the impugned order was set aside, and the appellant was entitled to consequential benefits as per the law.

In conclusion, the judgment revolved around the interpretation of whether serving food in hotel rooms constitutes a sale of goods or a service, with the Tribunal ultimately ruling in favor of the appellant based on legal provisions and precedents.