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TMI Blog2021 (6) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... llected from restaurants or eateries, in parcels. 2. All four petitioners run air-conditioned restaurants under the name and style of Anjappar Chettinad (A/c Restaurant), Thalapakkatti Hotels, RSM Foods and Prasanam Foods, the latter two being franchisees of Sangeetha restaurant, respectively. 3. The facts in common are that the petitioners hold service tax registration for providing restaurant services, outdoor catering services and mandap keeping services. Audit was undertaken in all the cases and the conclusion arrived at by the Department was that service tax had not been discharged in relation to 'take away/parcel services' for various periods upto June, 2017 when Goods Services Tax Act, 2017 came into force. 4. Heard Mr.Joseph Prabakar, learned counsel for the petitioner in W.P.No.13469 of 2020, Mr.Hari Radhakrishnan, learned counsel for the petitioner in W.P.Nos.28095 of 2019 and 1748 of 2021 and Mrs.P.Jayalakshmi, learned counsel for the petitioner in W.P.Nos.28789 of 2019 and 5935 of 2021 and Mr.Rajnish Pathiyil, learned Senior Standing Counsel for the respondents in W.P.No.13469 of 2020, Mr.A.P.Srinivas, learned Senior Standing Counsel for the respondents in W.P.Nos.28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 wherein the Bench, while deciding the question of taxability of the mandap keepers, makes a distinction between services rendered in a restaurant or a hotel, vis-à-vis services rendered by an outdoor caterer. 10. Then again, in 2017 (48) STR 97 Safety Retreading Co. (P) Ltd. V. Commissioner of Central Excise, Salem , the Supreme Court considered the taxability of a contract of re-treading of tyres and whether service tax would be leviable on the total amount charged including the value of machinery supplied and used in the execution of the re-treading contract. The Court concluded that the assessee in that case would be liable to pay tax only on service component which, under the Statute was quantified at 30%. 11. The Andhra Pradesh High Court in 2017 (3) GSTL 30 Bhimas Hotels Pvt. Ltd. V. Union of India considered the taxability of food supplied to workers at subsidised rates. While confirming that the same would be part of an employers' service as an overall part of an industrial obligation, the Court holds that the value of such food can, in no circumstances, be liable to service tax and the levy was thus quashed. 12. Per contra, the revenue would draw my atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to issue a clarification/direction as to how the value of the two components, i.e., sale and service, will be arrived at, as expeditiously as possible. 16. The revenue also relies on a decision in the case of 2016 (44) ELT 3 Federation of Hotels and Restaurants Association V. Union of India, where the challenge to provisions of Section 65 (105) (ZZZZV) and (ZZZZW) was considered by the Delhi High Court and rejected. Rule 2C of the Service Tax Rules, 2006 (in short 'Rules') provided for an artificial bifurcation of sale and service component, attributing 40% of the value of the composite contract of supply of food and drinks, to service component, and this was also challenged on the ground that it was arbitrary and without basis. 17. The challenge was rejected by the Bench holding that Rule 2C does not seek to arbitrarily determine the measure of tax, but only provides for abatement, particularly useful in matters where no accounts are maintained by an assessee. Moreover, Rule 2 C only provides for such methodology in cases where the assessee was unable to provide an exact manner of determining the value of service/sale and in a case where an assessee was able to demonstrate sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any drink (whether or not intoxicating) is supplied in any manner as a part of the activity. . . . . 24. In Circular 173/8/2013- ST dated 07.10.2013, the Board considers various representations raising doubts and queries in regard to the leviability of service tax in restaurants, both air-conditioned and non-air conditioned. The doubts raised and the clarifications provided are as follows: F.No.334/3/2013-TRU Government of India Ministry of Finance Department of Revenue Central Board of Excise& Customs Tax ResearchUnit North Block New Delhi, 7th October, 2013 To Chief Commissioners of Central Exciseand Customs (Ali), Director General (Service Tax), Director General (Central Excise Intelligence), Director General (Audit), Commissioners of Service Tax (All) Commissioners of Central Excise (Ali), Commissioners of Central Exciseand Customs (Ali). Madam/Sir, Subject: Restaurant Service- clarification -regarding As part of the Budget exercise 2013, the exemption for services provided by specified restaurants extended vide serial number 19 of Notification 25/2012- 5T was modified vide para 1 (iii) of Notification 3/2013-5T. This has become operational on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning, well-trained waiters, linen, cutlery and crockery, music, live or otherwise, or a dance floor. The customer also has the benefit of personalized service by indicating his preference for certain ingredients e.g. salt, chilies, onion, garlic or oil. The extent and quality of services available in a restaurant is directly reflected in the margin charged over the direct costs. It is thus not uncommon to notice even packaged products being sold at prices far in excess of the MRP. 1.2. In certain restaurants the owners get into revenue-sharing arrangements with another person, who takes the responsibility of preparation of food, with his own materials and ingredients, while the owner takes responsibility for making the space available, its decoration, furniture, cutlery, crockery and music etc. The total bill, which is composite, is shared between the two parties in terms of the contract. Here the consideration for services provided by the restaurants is more clearly demarcated. 1.3. Another arrangement is whereby the restaurant separates a certain portion of the bill as service charge. This amount is meant to be shared amongst the staff who attend the customers. Though this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of take-away or food parcels, the aforesaid attributes are conspicuous by their absence. In most restaurants, there is a separate counter for collection of the take-away food parcels. Orders are received either over telephone, by e-mail, online booking or through a food delivery service such as swiggy or zomato. Once processed and readied for delivery, the parcels are brought to a separate counter and are picked up either by the customer or a delivery service. More often than not, the take-away counters are positioned away from the main dining area that may or may not be air-conditioned. In any event, the consumption of the food and drink is not in the premises of the restaurant. In the aforesaid circumstances, I am of the categoric view that 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. 28. The petitioners have brought to my notice several orders passed by the Appellate Commissioners stationed in Chennai and any other parts of the State who have taken a view that take away services would not attract liability to Service tax. (Order in Appeal No.445 of 2018 da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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