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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 ..... dominant object even in the case of ice cream in scoops as in the subject case, is a sale of goods. This transaction of selling ice cream received in bulk and selling them in scoops is akin to sales made by grocery shops in the case of sale of edible oil wherein the grocer sells such oil in various lesser quantities after receiving the same in bulk quantity of 20 litres, etc in tins/cans. Here the ice creams are sold in the same form as received by them and at agreed rates not exceeding the MRP and in most of the case the said ice creams appear to be consumed outside the premises of the applicant. Even if we consider the said transaction as a composite supply as per Section 2(30) of the CGST Act we find that the principal supply in the subject case is a sale of goods i.e. ice creams, being the predominant element of the transaction. 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. In the instant case t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced verbatim, could be seen thus- Statement of the relevant facts having a bearing on the question(s) on which the advance ruling is required May it please Your Lordships, The Humble Applicant most respectfully begs to submit the relevant facts relating to the activity proposed to be undertaken on which the advance ruling is required, as under: 1. M/s. Arihant Enterprises ( the applicant ) is a partnership firm duly incorporated under the provisions of Indian Partnership Act, 1932 and having its registered office at Flat No. 2, Ajit Building, Mahavir Park, Aundh, Pune 411007. 2. The applicant is, inter alia, engaged in the business of reselling Ice-creams in wholesale as well as retail sale packages. Accordingly, the applicant is duly registered under the provisions of Central Goods and Service Tax Act, 2017 bearing CST identification No. (GSTIN) 27AAUFA0033D1ZT. A copy of the said registration certificate is enclosed herewith as Annexure 4. 3. The applicant purchases the said goods from its sole manufacturer, M/s. Kamaths Ourtimes Icecreams Private Limited ( The franchisor ). The applicant exclusively deals in the ice-cream manufactured by the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m) and sold in paper cups/ paper glasses to the customer based on their demand. In such cases, only the form changes. Sometimes, the ice cream is topped with fruits, again based on demand from the customer, The Price is charged on per Scoop basis. These prices are fixed and consistent at all the outlets of the applicant as well as other franchisee owners of the franchisor. 9. In order to bring the clarity in the transaction, it is pertinent for us to explain the entire chain of event that takes place in the subject transaction: a. The applicant purchases the ice creams from the franchisor. The franchisor supplies the same in retail and the whole sale pack of ice creams under a Tax Invoice and collects GST (CGST + SGST or IGST depending on the place of supply]. It quotes HSN code 2105 and charges GST@ 18% in terms of Notification No. 01/2017 -CT (Rate), dated 28.06.2017, as amended. b. Due to the inherent nature of the product, the packages received from the manufacturer/franchisor are stored in a refrigerator located inside the retail store. c. Typically for better performance and life of the refrigerator the temperature around the refrigerator needs to be mainta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule 1, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. 2.3 Section 9 is the charging section. It provides for levy of tax called the CGST on all intra-state supplies of goods or services or both and at such rates, as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. 2.4 Section 2(52) of the CGST act, 2017 defines goods as: every kind of movable property other than money and securities but includes actionable claim, growing crops, grass things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply 2.5 Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No extra money is charged from the customers. These facts are not in dispute. 3.2 The intention of the parties and the understanding of the parties is that the same is a sale. The customer intends and accordingly, agrees to purchase the abovementioned final products from the applicant. There is no contract for provision of any service. The customers of the applicant are free to consume the ice-creams inside and outside the outlet. The customer could also carry the same home or any other desired location. There are no restrictions as regard to the place of consumption. 3.3 This contention is supported by the fact that none of the outlet provides the facility of serving/ dining to the customer. Every customer, irrespective of age or sex is required to collect the same from the delivery counter. Several outlets of the applicant do not even offer seating facility. Several others Offer a few, and those too are generally occupied by senior citizens and mothers who are accompanied by their toddlers. Few stores have two or three tables kept outside the stores which customers may occupy after they make their purchases, Accordingly, the applicant submits that the transaction is nothin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the matter of Durga Bhavan and Ors. (1981] 47 STC 104 (AP) = 1980 (9) TMI 260 - ANDHRA PRADESH HIGH COURT have summarized the ratio decedendi of the judgments and observed: 13. To summarise the position at the end of the three decisions of the Supreme Court discussed earlier appears to be as follows: 1. If there is no right to carry away the food there would be no sale in favour of the customer. 2. Even if there is a right to carry away if in essence the transaction is a transaction of service and not a transaction of sale it would not be exigible to tax. 3. If, however, where the customer has a right to take away the food if the dominant object is the sale of food and the rendering of service is merely incidental, then the transaction would be a transaction of sale and not a service contract. 4. The question whether the dominant object was the sale of food or rendering of service would depend upon the facts and circumstances of each case which has to be decided by the assessing authority in the light of the evidence before it. 3.7 Basis the above discussion the High court held that: 14. we may observe that sales across the courter wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the owner of the hotel or restaurant or the eating house charges separate amount by way of service charge for the service rendered by him besides the cost of the food-stuff supplied to the customer, then it would obviously appear that the transaction of sale of foodstuffs and service rendered by the hotelier or the owner of the restaurant have been separately charged. Moreover, it would also be a question of fact as to whether the customer has a right to take away the foodstuffs and in that case the assessing authority will have to decide as to whether the transaction would amount to sale or not. If the dominant object is the sale of eatables and drinks and rendering of service is merely incidental then the transaction may, amount to sale. But if, on the other hand, there is a transaction in which service is coupled with supply of foodstuffs and supply of, foodstuff is part of and incidental to the service. then the transaction may not amount to sale (emphasis supplied) 3.12 A similar view has been presented the Hon ble Madras High Court in the matter of Sangu Chakra Hotels Private Limited vs, State of Tamil Nadu reported in [1985] 60 STC 125 = 1985 (1) TMI 278 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 shall be determined in the following manner, namely: (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and (b) 4.5. First , on the basis of the above discussion, the applicant submits that the only supply involved in the above transaction is that of supply of goods i.e. ice cream, No significant service element is involved in the instant transaction. Even if it is assumed that there is some portion of provision of service involved, the same is incidental to the principal supply. 4.6 Second , on a conjoint reading of the above provisions, what could be gathered is that every composite supply, provided the same adheres to the definition of the same; acquires the nature and characteristic of principal supply involved in the transaction and the GST must be levied accordingly. In other words, what determines the nature of supply is whether the principal supply is that of supply of goods or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 them. 5.3 However, assuming, whilst denying, that the activity under consideration is a composite supply, the applicant submits that even then the same could not be made applied on the captioned transaction. 5.4 First , it is well settled that the intention of the legislature has to be gathered from the language used in the statue which means that attention should be paid to what has been said as also to what has not been said. It is well settled that it is not the duty of the court either to enlarge the scope of legislation or the intention of the legislature, when the language of the provision is plain. The court cannot add words to a statute or read words into it which are not there. Hence, it is the bounden duty and obligation to interpret the statute as it is . it is contrary to all rules of construction to read words into a statute which the legislature in its wisdom has deliberately not incorporated. In Union of India Another Vis Deok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislative 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 Vs CCE 2008 (225) ELT 321 (SC) =2008 (4) TMI 101 - SUPREME COURT refers. 5.7 Further the transaction under consideration seems to be more appropriately covered by the entry no. 1(a) of the Schedule II of the CGST act. The entry reads thus: 1. Transfer (a) any transfer of the title in goods is a supply of goods; 5.8 Accordingly, clearly the transaction under consideration is that of supply of goods even for the purpose of deeming fiction. Accordingly the supply of ice-cream at the applicant s outlet could not be covered under the aforesaid entry. 5.9 Second , the applicant further submits that the activity undertaken could also not be covered under the entry within the meaning of the terms in any other manner whatsoever . Here this is pertinent to note that the said term has been preceded by the phrase supply by way of or as a part of . It is ell settled that, in such a situation, the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply 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 and an admission of the non-existence of the fact deemed. The apex court vide Ajaib Singh V. Sirhind Coop. Marketing-cum-processing Service Society Ltd. Ors., (1999) 6 SCC 82 = 1999 (4) TMI 602 - SUPREME COURT OF INDIA held that it is the exclusive prerogative of the Legislature to create a legal fiction meaning thereby to enact a deeming provision for the - purpose of assuming the existence of a fact which does not really exist. Even if a legal fiction is created by the Legislature, the court has to ascertain for what purpose the fiction is created, and it must be limited to the purpose indicated by the context and cannot be given a larger effect. More so, what can be deemed to exist under a legal fiction are merely facts and no legal consequences which do not flow from the law as it stands. It is a settled legal proposition that in absence of any statutory provision, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission, 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 consumption or drink, where such supply or service is for cash, deferred payment or other valuable consideration, provided by a restaurant, eating joint including for mess, canteen , consumption on or away from the premises where such food or any other article for human consumption or drink is supplied, other than those located in the premises of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes having declared tariff of any unit of accommodation of seven thousand five hundred rupees and above per unit per day or equivalent is chargeable to GST at the rate of 2.5%. The same is applicable on the condition that the input tax charged on goods and services used in supplying the service has not been taken. 8.2 The above notification prescribed the rate of GST to be charged on the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bridge 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 and meals are sold, often at a lower than usual price. 8.8 Apparently the term eating joints has not received any formal recognition. However, the term Joint has been informally defined by Oxford Dictionary as - An establishment of a specified kind, especially one where people meet for eating: drinking, or entertainment. The University of Cambridge defines the term Joint as - a bar or restaurant that serves food and drink at Iow prices. Accordingly the term eating joints must be construed. Further, Blacks Law Dictionary defines the term eating house as - Any place where food or refreshments of any kind, not including spirits, wines, ale, beer, or other malt liquors, are provided for casual visitors, and sold for consumption therein. 8.9 On perusal of all the above definitions, what could commo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 submits that the said notification is not applicable over the transaction under consideration. On going through the above facts it is very clear that the dominant intention of the buyer and the seller is to sell the product and the service (if any) is purely ancillary to the sale of the product. At this juncture the applicant submits that the activity of supply of ice creams from the outlet is purely a contract for supply of goods and the GST must be levied accordingly. Additional submissions on 15.03.2019 At the out we thank both the members for having given us a patient hearing on 13.03.2019. In course of proceedings we have been requested us to submit the following additional details: 1. Photographs of the retail store from where the ice-creams are sold. The photographs of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. 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. Raichandani, Advocate, along with Sh. Chirag Mehta, C.A. and Shri Hemant Regmi, Manager appeared and requested for admission of application as per contentions made in their application. He is informed to submit photos of the premises. They have however made a request to finalize the matter at this stage as he has to say nothing more. Jurisdictional Officer was not present but submitted written submissions. The applicant has submitted photos of his premises on 15.03.2019. 05. OBERVATIONS We have gone through the facts of the case, submissions made by the applicant as well as the department and the documents on record. The main issue before us is whether the supply of ice-cream by the applicant from its retail outlets would be treated as sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ines 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, etc or sold after being topped with fruits. The applicant has submitted that their entire transaction involves transfer of property in moveable goods. The customer places the order from the menu and the same is delivered to them. 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 and is sold at agreed rates, as mentioned on menu cards. No extra money is charged from the customers who are free to consume the ice-creams inside or outside the outlet. No facility of serving/ dining is provided by the applicant. Only a few outlets of the applicant offer seating facility. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide 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 with the jurisdictional officer and hold that in the instant case the transaction is to be considered as a sale/ supply of goods. 05. In view of the extensive deliberations as held hereinabove, we pass an order as follows : ORDER (Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) NO.GST-ARA-126/2018-19/B-29 Mumbai, dt. 19/3/2019 For reasons as discussed in the body of the order, the questions are answered thus - Question:- 1 Whether supply of ice-cream by the applicant from its retail outlets would be treated as supply of goods or supply of service or a composite supply and subject to GST accordingly? An ..... X X X X Extracts X X X X X X X X Extracts X X X X
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