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TMI Blog2019 (4) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 46/2017-Central Tax (Rate) (serial no. (i) entry no. 7) of the notification? 3. In case the supply is held to be "composite supply", whether the taxability of the same should be treated as supply of service in terms of entry 6(b) of the Schedule II of the CGST act, 2017 or should be taxable on the basis of nature of principal supply in accordance with Section 8 of the Act? 4. In case the supply is held to be a supply of service in terms of entry 6(b) of Schedule II to the CGST Act, 2017, would it be mandatory for the applicant to collect and pay CGST @ 26% inspite of the fact that entry 7(i) of Notification No. 11/2017 as amended by Notification No.46/2017-CentraI Tax is a conditional entry? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue streams have been described in detail.. Sale of ice-creams in retail packs 7. This mode accumulates the majority sales revenue of the applicant. The ice cream is sold as 500 grams retail packs. The sales mainly consist of sale of party packs or popularly known as "Tubs". These are packed in plastic containers bearing the details of product including maximum retail price (MRP) Of the product. The details of the product are printed on the packs in accordance with the provisions of the Legal Metrology Act, 2009. Sale of ice-cream by way of scoops 8. Under this method, the ice-cream scoops are sold to the customers who wish to consume Ice-creams on a take away basis. The franchisor supplies Ice-creams to the applicant in a wholesale pack to sell the same in scoops. These wholesale packs are emptied in steel containers at the outlet. Thereafter the ice-creams are sold over the counter and supplied in scoops in paper cups, regular cones or waffle cones. Further, at times the customer prefers more than one flavor of ice cream in different combinations commonly known as "Double Scoop" or "Triple Scoop". Accordingly, the ice creams are supplied in large cones or cups. In some cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es it away as the case may be. Within the store/shop, there are a few tables/chairs/benches for customers to sit, while waiting. Statement containing the applicant's interpretation of law and/or facts, as the case may be, in respect of the questions(s) on which advance ruling is required: 1. At the outset, the applicant submits that the ice-creams so procured from the franchisor are directly being sold to the final consumers through the applicant's outlet. No processing is being incurred on the same. The predominant nature of the transaction is that of supply of goods. Accordingly, in the view of the applicant, the transaction under consideration must be treated as the one of supply of goods and thus must be taxable accordingly, Supply under GST 2.1 As is being promoted, Goods and Services Tax (GST) is touted to be the single biggest tax reform to take place post independence. GST is applicable on supply of all goods and services in India, 2.2 Chapter III of the Central Goods and Service Tax Act, 2017 ("CGST Act") provides for levy and collection of GST. Section 7 of the CGST Act provides for the scope of supply. It is, inter alia, provided that "supply" includes: (a) all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termed as supply of goods or supply of service or a composite supply. 2.8 At the outset, on the basis of the business model and the factual matrix as discussed above, the applicant submits that the said supply should, in all pith and substance of the matter, be termed as "supply of goods". Reasons to support the said interpretation follow. Transfer of property 3.1 There could be no objection to this fact that the transaction under consideration involves transfer of property in movable goods. The applicant submits that, in the instant case, the customer approaches the applicant to buy Ice-cream. The customer accordingly, places the order from the menu and the same is delivered to them. In case of retail pack, the box is supplied as it is. However, in case of scoop, the flavor of choice is sold as per the customer preference i.e. in cup or cone. In either of the cases, the ice-cream received by the applicant from the franchisor is supplied as it is to the customer. No processing is done thereon, no customization is done. The applicants sells the said final products to the customer at agreed rates, as mentioned on menu cards. No extra money is charged from the customers. These fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no right to take away the goods. The supply of goods is only a part of the service contract. The Supreme Court observed that when meals were served to casual visitors in the restaurant the service must be regarded as providing for the satisfaction of a human need and could not be regarded as constituting a sale of food when all that the visitors were entitled to do was to eat the food served to them and were not entitled to remove or carry away uneaten food. Supporting consideration included the circumstance that the furniture and furnishing, linen, crockery and cutlery were provided, and there was also music, dancing and perhaps a floor show. 3.6 To similar effect is another decision of Apex court in the matter of State of Himachal Pradesh v. Associated Hotels of India (1972] 2 SCR 937 = 1972 (1) TMI 80 - SUPREME COURT OF INDIA. The ratio decedendi of the above judgment is that what is to be adjudged in each case is as to whether the dominant intention in a given transaction was of sale and purchase of eatables or drinks. Interpreting the above judgments Hon'ble high court of Andhra Pradesh in the matter of Durga Bhavan and Ors. (1981] 47 STC 104 (AP) = 1980 (9) TMI 260 - ANDHR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he labour cost. Hence, the involvement of skill is much less compared to the involvement of materials. Therefore, the activity is a transfer of goods i.e. ice-creams to the customers in cone and cup. The applicant would again reiterate that the service element contained in the entire supply is minimal or consequential. 3.10 To substantiate the above interpretation, the applicant also place reliance on the decision of the Rajasthan High Court in the matter of Govind Ram and ors. Vs, State of Rajasthan and ors reported as AIR 1982 Raj 265 = 1982 (1) TMI 209 - RAJASTHAN HIGH COURT wherein the Hon'ble High court has held that : "5. In cases of sales of foodstuffs or eatables made across the counter", they are obviously transactions of sale, even though some service may be rendered in packing the food-stuffs, yet it may be so insignificant or incidental that the transaction would essentially be one of sale. Similarly, if food stuffs or drinks are supplied to customers outside the hotel or restaurant, then also the transactions may amount to sale, In case where the owner of the hotel or restaurant or the eating house charges separate amount by way of service charge for the service rend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eable to the levy of GST-accordingly. Composite Supply or Not? 4.1 Assuming, whilst denying, that the transaction is a composite supply, applicant submits that the transaction would still be treated as the one of supply of goods. The reasons for the same are enumerated hereunder, 4.2 The term composite supply has been defined under Section 2(30) of the CGST act. As per the definition, following are the essential characteristic of a composite supply made taxable person to the recipient: (i) consists of two or more taxable supplies of goods or services or both, or (ii) any combination thereof, such Supplies are naturally bundled and supplied in conjunction with each other in the ordinary course of business, (iii) one of which is a principal supply; In order to eliminate any confusion the above definition has been accompanied with an illustration. The same reads as follows: "Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply" 4.4 Further, Section 8 of the CGST Act provides as follows: The tax liability on a composite or a mixed supply shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout prejudice, the same is not covered under Entry 6(b) of Schedule II 5.1 Schedule II of the CGST Act lays down a deeming fiction prescribing certain activities to be treated as supply of goods or supply of services. In this regard, Sr.No. 6(b) of the said schedule 11 may be relevant in the subject matter. The same reads as; "6. Composite supply The following composite supplies shall be treated as a supply of services, namely: (a).........;and (b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration." 5.2 On a plain language of the above provision, apparently, what could be gathered is that the same is applicable only in the case of composite supplies. However, as it has been repeated in the present application, the supply undertaken by the applicant is supply of goods and not a composite supply. Thus, the applicant submits that the above provision has no applicability over the transaction under consideration undertaken by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id entry. Admittedly, in the instant case, the supply has not been made by way of any service. The applicant's only intent is to sell the ice-creams. Here again the applicant submits that it is the pre-dominant intention of the supplier and the recipient of supply which must be the decisive factor in order to determine the nature of the supply. 5.6 The Legislature has consciously used the words "by way of". Had the intention of the Legislature been to cover all supplies of food or articles of human consumption under the said entry, the Parliament could have used the expression "supply of...." However, it has chosen not to do so. The meaning of the word of used in an item in a fiscal statute must be considered having regard to the intention of the maker thereof. The court shall, for the said purpose, put itself in the chair of the legislature. It would presume the legislation' to be reasonable. The legislature is a perfect legislative body. It is presumed to know all the laws and existing scenarios when it enacts any particular legislation. Hence, the said expressions have to be given their due meaning. Judgment of the Supreme Court in the case of Mauri Yeast India Private Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sufficient indication of a category that can properly be described as a class or genus, even though not specified as such in the enactment. Furthermore the genus must be narrower than the words it is said to regulate. The nature of the genus is gathered by implication from the express words which suggest 5.11 Thus, it becomes clear that the preceding words in the statutory provision which, under this particular rule of construction, control and limit the meaning of the subsequent words must represent a genus or a family which admits of a number of species or members, 5.12 in light of the above discussion, the meaning of the term "in any other manner whatsoever" has to be derived drawing reference from the meaning of by way of or as a part of service". The provision of service is the predominant nature of the supply covered under the said entry. Thus the applicant submit that no supply wherein the provision of service is not the predominant feature could be included under the said entry. Thus the applicant submits that the activity undertaken by them could not be said to be covered under the said entry. 6.1 Further, it is well settled that a deeming provision is a legal fiction a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the GST Law as a reseller and has provided "Ice creams" as the goods that it deals in. The GST registration certificate has been enclosed as Annexure-7. 7.2 It is mandatory for resellers of food and food service providers to obtain a license under the Food Safety and Standards Act, 2006. Our firm is registered under the said act as a "Retailer". Copy of the license issued under the above Act is enclosed here with as Annexure-8. 7.3 Further, each of the stores are registered under the Maharashtra Shops and Establishment Act, 1948 and holds a registration certificate issued by the Municipal Corporation. The registration certificate describes the nature of business of the store as "Sale of Ice-creams". A copy of the registration certificate is enclosed here with for your perusal and records as Annexure 9. Without prejudice to the above submission, the said notification prescribing the rate of GST on the supply is not a mandatory notification 8.1 Notification no. 11/2017-CT (Rate) dated 2806.2017, as amended from time to time, provides that Supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumpt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust be provided by a restaurant, eating joint including mess, canteen. The terms "Restaurant", "Eating Joints", "Mess" or "Canteen" have not been defined under the act. Further Section 2(120) provides that words and expressions used and not defined in this Act but defined in the Integrated Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act shall have the same meaning as assigned to them in those However, the said terms have not been defined under the above acts. Hence, one will have to look at the ordinary meaning of the said terms as understood in common parlance. 8.6 Oxford Dictionary defines the term "Restaurant" as - a place where people pay to sit and eat meals that are cooked and served on the premises. University of Cambridge defines the same - as a place where meals are prepared and served to customers. 8.7 Similarly, the term Canteen is defined under Oxford Dictionary as - a restaurant provided by an organization such as a college, factory, or company for its students or staff. On similar lines the University of Cambridge defines the term as- a place in a factory, office, etc. where food ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or personal hygiene or pleasure. The items which are excepted from this entry are toothpaste, tooth powder, soap and kum-kum. This exception also points to the same conclusion, viz., that only those articles of luxury, which are used for personal hygiene and pleasure were intended to be included in this entry. So the word "perfumery" in this context would not include dhoop and aggarbatti, which are never used for prsonal hygiene or pleasure, but are primarily used for religious ceremonies." 8.10 Accordingly, the term "Restaurant", "Eating Joints", "Mess" or "Canteen" has to be interpreted and understood on the common analogous sense i.e. a place where the consumer is served food at the tables to be consumed therein. However, in the instant case, the outlets of the applicant do not serve the ice-creams to their customers on the table. Rather the same has to be collected by the customer themselves from the counter. Further, on the cost of re-iteration, the applicant does not provide any sitting facility to the customers as well. Thus, a clear distinction can be drawn between the applicant's outlet and the terms mentioned under the aforesaid notification. Accordingly, the applicant s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for beverage or dish which they desire to eat or drink or even carry as a parcel. Moreover the food is served fresh by the waiter or waitress, it is manufactured on day to day basis. Here food manufactured in a restaurant is served on the same day while ice cream can be sold on next day also. Thirdly the licence issued by the sales tax department, FDA (FOOD) is of retailer/ reseller. Here it is to be considered that the restaurant dealers are registered as a manufacture or manufacturer [reseller. The part of service is incidental and not composite in case of ice cream parlour. Had it been a mall where goods are self collected from the rack and billed at the billing section. The major portion involved is sale of goods and not service unlike consultation. Hence liable under VAT/GST/ MGST/ CGST. Fourthly as per service tax act itself goods sold from cold storage are not liable to restaurant services. Hence in my opinion the applicant is replied in affirmative that ice cream parlour is not a restaurant nor restaurant service. The service part is incidental and not the prime function. 04. HEARING The Preliminary hearing in the matter was held on 13.03,2019, Sh. Bharat B. Raichanda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Scoop basis. These prices are fixed and consistent at all the outlets of the applicant as well as other franchisee owners of the franchisor. The applicant has also submitted that the franchisor quotes HSN code 2105 and charges GST @ 18% in terms of Notification No. 01/2017 -CT (Rate), dated 28.06.2017, as amended. To answer the main question raised by the applicant we refer to the various pertinent definitions as per the GST Laws. We have no doubt that the ice creams sold by the applicant are covered under the definition of 'goods' as defined under Section 2(52) of the CGST act, 2017. We also have no doubt that there is a supply in this case as defined under Section 7 of the CGST act, 2017. Section 2(101) of CGST Act, 2017 defines "Service" as "anything Other than goods,............... for which a separate consideration is charged" The only thing that is required to be addressed in this case is whether there is a supply of goods or services or both. In the case of sale of ice creams in tubs of 500 gms and at the MRP, we have no doubt that the same is sale of goods with no service being involved. Hence we discuss other scenario where the ice creams are sold in scoops, cones, et ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of goods i.e. ice creams, being the predominant element of the transaction. We find that in the subject case there is a transfer of title in ice creams from the applicant to their customers and therefore as per entry no. I(a) of the Schedule II of the CGST Act, the subject transaction is nothing but a supply of goods. Even the jurisdictional officer has agreed that in the subject case there is a sale of goods. Further we also find that the applicant was served with a Show cause Notice No. 3/ ST/ AC/Urban/2017 dated 10.10.2017 alleging that the applicant was running a business of cream parlour and evading tax on services provided under the category 'Restaurant Services'. This Show cause Notice was subsequently set aside by the Asstt. Commr. of Goods and Services tax Aurangabad, Urban Division vide Order No. VGN(30)70/DSCN-Arihant/17-18/19 Aurangabad dated 07.05.2018 with the following observation: "On the basis of discussions in para 7 to 10 in the 'Discussions and Findings' part, I conclude that the is not a restaurant but a dealer/re-seller of ice-cream and there is no element of service involved in the activity of the notice." In view of the above discussions we agree w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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