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TMI Blog2023 (10) TMI 886X X X X Extracts X X X X X X X X Extracts X X X X ..... food and beverages sold by it as "sales of goods". Respondent- Department claimed that such activity of the Appellants constitutes "declared services" under Section 66E(i) of the Finance Act, 1994. Accordingly show-cause cum-demand notice dated 08.10.2014 and 27.09.2018 were issued for the period from 01.04.2013 to 30.09.2015 and from 01.10.2015 to 30.06.2017 respectively demanding Service Tax of Rs.23,60,44,800/- and Rs.29,37,52,642/- for the corresponding periods alongwith interest and penalties under various provisions of the Finance Act, 1994. Chief Finance Officer Mr. Upen Shah was also noticed with charge of personal penalty. Upon responses received from them, matter was adjudicated upon by the Commissioner confirming duty, interest and penalties as proposed vide two separate orders dated 07.02.2018 and 22.01.2019 respectively. He also confirmed personal penalty on the then Chief Finance Officer Mr. Upen Shah. The said orders are assailed herein in these three appeals. 3. Both sides contested on both facts and points of law. Constitutional validity of the provision introduced under Section 66E of the Finance Act, 1994 vis. a. vis. vires of Rule 2C of the Service Tax (Determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a that reads:- "(29A)(f) a tax on the 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 (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, (Underlined and highlighted to emphasise) and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made." (This seconds paragraph is meant for all sub-Clauses of Article 366(29A) and not meant for sub-Clauses (f) alone as the terminating Clause) Again a close reading of the above referred provision would clearly indicate that 'supply' which includes "any service in any manner whatsoever of goods being food" or any other article for human consumption or any drink shall be deemed to be a sale of goods by the person making such transfer, delivery or supply (that includes service of any kind) in any manner. This constitutional provision remains in force in its present form till date. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or this reason Composite activity of both sale and service were put under the category of 'deemed to be sale'. It would be appropriate to reproduce relevant part of the concurring judgment, authored by Hon'ble Justice Lakshmanan in BSNL Vs. Union of India reported in (2006) 3 SCC 1, 2006 (2) STR 161 (SC) that would enlighten us about the amendment to Article 366 and introduction of sub-Section (29-A) into it "105. The amendment introduced fiction by which six instances of transactions were treated as deemed sale of goods and that the said definition as to deemed sales will have to be read in every provision of the Constitution wherever the phrase "tax on sale or purchase of goods" occurs. This definition changed the law declared in the ruling in Gannon Dunkerley & Co. [State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., (1958) 9 STC 353 : AIR 1958 SC 560 : 1959 SCR 379] only with regard to those transactions of deemed sales. In other respects, law declared by this Court is not neutralised. Each one of the sub-clauses of Article 366(29A) introduced by the Forty-sixth Amendment was a result of ruling of this Court which was sought to be neutralised or modified. Sub-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b case as hereunder:- "71. For the reasons stated by us earlier we hold that the electromagnetic waves are not "goods" within the meaning of the word either in Article 366(12) or in the State legislations. It is not in the circumstances necessary for us to determine whether the telephone system including the telephone exchange is not goods but immovable property as contended by some of the petitioners." The findings of BSNL was that electromagnetic waves were not goods therefore, it has got nothing to do with 'deemed to be sale' of goods or food items if it encompasses within itself the service component of it. 9. The issue of taxability on food items has covered a checkered path and no definite reason can be attributed to it as to why the item is sometimes considered as sale of goods or service offered during supply of goods. As has been pointed out in the preceding paragraph, to curtail the avoidance of payment of tax in the restaurants against supply of food, by claiming the same to be not sale of goods, amendment to Article 366 of the Constitution was brought into force in putting the entire service component required for preparation and sale of food into the category of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very much clear that the entire service component against supply of food in a Restaurant, though charged as a composite fee against sale of food was treated entirely as taxable for it from the Restaurant's owner and apparently the purpose of introduction of sub-Clause (f) to Article 366(29-A) was to treat the entire event of 'supply' and 'sale' as one component by introduction of terminology called "deemed to be sale". However, introduction of Section 66E(i) in Finance Act, 1994 w.e.f. 1st July, 2012 read with mega exemption Notification No. 25/2012-ST dated 20th June, 2012 that exempted payment of Service Tax by Restaurants, eating joints or mess providing service in relation to food or beverages other than those having facilities of air conditioning or central air heating at any part of the establishment and subsequent Circular No. 334/3/2011 & Circular No. 173/8/2013 on Service Tax that had pin pointed on the exact nature of service offered in specific type of Restaurant, so as to cover them under Service Tax network would go to say that sale of food is completely separated from the rest of services associated with it to make the same complete and thereby the deeming provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed by the Hon'ble Madras High Court and dismissed the appeal of the K. Damodaraswamy Naidu & Bros. and Ors.challenging Service Tax on catering. Going by para 43 of the said order, it can be noticed that supply of any goods which is referred at the end of sub-Clause 29-A of Article 366 covering 6 components under sub-heading (a) to (f) (reproduced in the preceding paragraph no. 4) was taken and applied to sub-Clause (f) originally meant for supply of goods being food and drinks, that specified supply by way of or as part of any service in any other manner whatsoever, was missing out from the analysis apparently for the reason that sub- Clause 29-A was not placed before the Hon'ble Court in its proper prospective or else it was not argued in the way it was required to be argued. However, we lack both competency and jurisdiction to deal with the legality of the statutory provisions in the absence of empowering/enabling provision like order XXVII-A, XLVI and Section 113 of the Civil Procedure Code as available to the Civil Courts when both judicial discipline and binding precedent dictate us to go with the findings that service component towards supply of goods being food an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out by the learned Authorised Representative for the Respondent- Department Mr. Anand Kumar, entire premises of the Appellant was air conditioned, it has facility for heating and cooling the food on demand, provision for serving of food on plates with fork and spoon, addition of taste enhancer like chutney, mayonnaise and having facility for service of food inside theatre screen (through waiters/suppliers) and also permission for consumption of food and beverages therein and, therefore, the same fulfils the condition of a Restaurant with air conditioned ambience. Cleaning of area after consumption was also done by the Appellant's staff. This being so we have got no hesitation to go with the findings of the learned Commissioner that Service Tax for supply of food in an air condition Restaurant is leviable on the Appellant. Placing reliance on the judgment of Commissioner of CGST, CST, Delhi East Vs. Haldiram Marketing Pvt. Ltd. reported in 2023 (2) TMI 783-CESTAT NEW DELHI also affirmed by the Hon'ble Supreme Court, (2023) 11 Centax 23 (S.C.) will be of no help to the issue in hand since taxability on pickup/take away of packed food items without offering dining facility are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as initiated by an authority having no jurisdiction to issue showcause notice. In placing reliance on the judgment of Union of India Vs. Adani Exports Ltd. reported in 2001 (134) ELT (SC) and Deepak Agro Foods Vs. State of Rajasthan reported in 2008 (228) ELT 510 (SC), learned Counsel for the Appellant submitted that proceeding is initiated for improper application of law and jurisdiction being fundamental to the issue, the subsequent show-cause notice is bad in law and unsustainable. However, we refrain ourselves from given any finding on the issue as the Appellant was not able to substantiate that in such a circumstances the entire proceeding would be vitiated except placing reliance on the decision of the Hon'ble Supreme Court cited above where in it was observed that the said issue is required to be decided at the first instance, apart from the fact that allegation in detail is also found reflected in the subsequent show-cause notice issued on 27.09.2018 and show-cause notice dated 06.04.2016 issued by the Commissioner, which were apparently based on showcause notice dated 08.10.2014 while no indication is available in show-cause notice dated 06.04.2015 that it was issued U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Additionally, no penalty against CFO Mr. Upen Shah could be made out from the order of the Commissioner since it is not found from the said order about the exact nature of allegation concerning his involvement or his personal knowledge about the same as could be noticed from his order at para 10, besides the fact that they were waiting for the CBEC response to their query on taxability of sale of food made by them. Penalties against the Appellants company under Section 75 & 76 could also not stand for the reason aforesaid. Hence the order. THE ORDER 14. (i) Appeal in ST/86675/2018 is allowed in part, setting aside penalties imposed under Section 76, 77 and also under Section 78 of the Finance Act, 1994. The order passed by the Commissioner of CGST & Central Excise, Mumbai vide Order-in-Original No. ME/COMM/VR/37-39/2017-18 dated 7th February 2018 is hereby modified confirming the duty, liability and interest for the normal period only. (ii) Appeal in ST/86671/2018 is allowed and personal penalty of Rs.1,00,000/- imposed on Mr. Upen Shah, CFO by the Commissioner of CGST & Central Excise, Mumbai vide Order-in-Original No. ME/COMM/VR/37-39/2017-18 dated 7th February 2018 is her ..... X X X X Extracts X X X X X X X X Extracts X X X X
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