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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 ..... of the Constitution that explained as to what kind of transfer, delivery or supply of goods were treated as deemed sale and not subjected to Service Tax. To ensure that for both sale of food/drinks and its associated services required to be extended in a Restaurant but the payments collected by way of sales tax would go to the State Exchequers and primarily for this reason Composite activity of both sale and service were put under the category of deemed to be sale . 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 - 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 se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound for non-sustenance of the allegations raised in the show cause notice - HELD THAT:- Having regard to the submissions and points urged by the Appellant before the Adjudicating Authority which would go clearly to justify non-payment of Service Tax for the past period was not intended for tax evasion as after introduction of Section 66E(i) of the Finance Act, 1994, representation had been filed not only by Multiplex Association of India but by the Appellant himself in its individual capacity on 26.03.2013 before the CBEC seeking clarification as regards to applicability of Service Tax on food and beverages sold by the Appellants and the same representation remained unanswered till Appellant received the show-cause notice for the period October, 2015 onwards (para - 1.11 and para - 1.12) of the Order-in-Original). Therefore, the charge of suppression of fact with intention to evade payment of tax cannot be fastened against the Appellant even though it was diligently pursuing the matter before a wrong forum like CBEC and not before the concerned Commissionerate - extended period cannot be invoked. Penalties - HELD THAT:- No penalty against CFO Mr. Upen Shah could be made out from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntroduced under Section 66E of the Finance Act, 1994 vis. a. vis. vires of Rule 2C of the Service Tax (Determination of Value) Rules, 2006 were also questioned before the Commissioner with reference to judicial decisions and answered by him as per his own understanding. We, therefore, take up this issue of legality of the introduction and operation of Section 66E of the Finance Act, 1994 read with Rule 2C of the Service Tax (Determination of Value) Rules, 2006 vis. a. vis. Constitutional provision contained in Article 366(29-A)(f) in its entirety and with reference to the judicial decisions of the Hon'ble Supreme Court delivered on the issue. 4. To start with the definition of 'service', as has been given in Section 65B(44) of the Finance Act 1994, service means any activity carried out by a person for another for consideration and includes a declare service, but shall not include - (a) an activity which constitute merely, - - - (i) transfer of title in goods or immovable property by way of sale, gift or in any other manner or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of Clause (29A) of Article 366 of the constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any kind) in any manner. This constitutional provision remains in force in its present form till date. 5. At this juncture, it is worthwhile also to reproduce the provision of Section 66E(i) of the Finance Act, 1994, and to compare if there exist any contradiction between both the Constitutional provision and the Finance Act, 1994. It reads:- 66E - Declared Services The following shall constitute declared services, namely … … (i) Service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity. (Emphasis supplied) 6. Looking at both the provisions it would appear that they are contradictory to each other for the reason that Article 366 Clause (29A)(f) puts any and every kind of service portion associated with food, beverages and drink meant for human consumption within the definition of 'deemed sale' and with the presence of the constitutional provision such a provision in the Finance Act under Section 66E(i) would not stand, as apparently seems to be violative of the constitutional provision. However, constitutional validi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Forty-sixth Amendment was a result of ruling of this Court which was sought to be neutralised or modified. Sub-clause (a) is the outcome of New India Sugar Mills Ltd. v. CST, [(1963) 14 STC 316 : 1963 Supp. (2) SCR 459] and Vishnu Agencies (P) Ltd. v. CTO, [(1978) 1 SCC 520 : 1978 SCC (Tax) 31 : AIR 1978 SC 449]. Sub-clause (b) is the result of Gannon Dunkerley & Co. [State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., (1958) 9 STC 353 : AIR 1958 SC 560 : 1959 SCR 379]. Sub-clause (c) is the result of K.L. Johar and Co. v. CTO, [(1965) 2 SCR 112 : AIR 1965 SC 1082] . Sub-clause (d) is consequent to A.V. Meiyappan v. CCT, [(1967) 20 STC 115 (Mad.)]. Sub-clause (e) is the result of CTO v. Young Men's Indian Assn. (Regd.), [(1970) 1 SCC 462]. Sub-clause (f) is the result of Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi, [(1978) 4 SCC 36 : 1978 SCC (Tax) 198] and State of Punjab v. Associated Hotels of India Ltd. [(1972) 1 SCC 472 : (1972) 29 STC 474]". (Emphasis added) 8. It would be appropriate now to refer to the order passed by the Commissioner relating to the constitutional validity of Section 66E(i) of the Finance Act, 1994 and his findings with referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to force in putting the entire service component required for preparation and sale of food into the category of deemed to be sale and subjecting the same to be taxed by the states/federating units but subsequent changes introduced through legislation in stretching and including various activities as service and taking it out from the concept of 'deemed sale' to 'pure sale' and excluding its associated service component despite a clear constitutional mandate has created a lot of hegemony that could only be addressed by the highest legislative or judicial wing of the country. Before coming to the present position of law it is imperative to have a look at para 9 of the judgment of Hon'ble Supreme Court passed in the case of K. Damodaraswamy Naidu & Bros. and Ors. Vs. State of T.N. and Anr. Reported in (2000) 1 SCC 527 in which the reason has been elaborated that prompted introduction of deeming friction also for sub-Clause (f) relating to food and drink supplied in Hotels and Restaurants. It reads:- "9. The provisions of sub-clause (f) of clause (29A) of Article 366 need to be analysed. Subclause (f) permits the States to impose a tax on the supply of food and drink. The supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parated from the rest of services associated with it to make the same complete and thereby the deeming provision attached to such sale is taken away without making any alteration or amendment in the Constitutional provision. It is interesting to note that gist of specific paragraph of K. Damodaraswamy Naidu & Bros. and Ors. judgment, cited supra explaining the nature of service offered at Restaurant that was taken to be included under deemed sale in Article 366(29-A)(f) is re-phased in Circular No. 334/3/2011-TRU dated 28.02.2001 to make those activities taxable under Service Tax to be legislated by the Union. Para 1.1 of the said Circular, which is relied upon by the learned Counsel for the Appellant for another porpose namelyto justify its applicability, is reproduced below for a comparison with para 9 of K. Damodaraswamy Naidu & Bros. and Ors. judgement already noted above. "The term "restaurant" is not defined under Service Tax law. However, the scope of the said term has been set out by way of the CBIC Circular 334/3/2011 TRU dated 28.02.2011 for the purposes of the levy of Service Tax, in the following terms - 1.1 Restaurants provide a number of services normally in comb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... binding precedent dictate us to go with the findings that service component towards supply of goods being food and other articles can be taxed separately even with the presence of Article 366(29-A)(f) in the Constitution of India, for the reason that Section 66E(i) has not yet been declared as invalid nor repealed or amended. 10. Now going by the above findings that service component of sale of food in a Restaurant is taxable @ 40% of the value as per Rule 2C of the Service Tax (Determination of Value) Rules, 2006 and going by the kind of Restaurants excluded from mega Notification No. 25/2012 as well as meaning of Restaurant elaborated to CBIC Circular No. 334/3/2011, it can be said that application of Service Tax to a particular establishment from where food is sold/served would require factual analysis and not to be determined from the 'Wikipedia website', which cannot be considered as an authentic source in which every private individual is allowed to upload data/information in the way they intend, as has been done by the learned Commissioner. 10.1 During the course of hearing of these appeals learned Counsel for the Appellant Mr. Rohan Saha submitted that the activities unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue in hand since taxability on pickup/take away of packed food items without offering dining facility are dealt therein as sale of goods whereas in the case in hand, provision for supply and consumption of food items inside the Cinema Hall in the centrally air conditioned premises are available which can be equated with restaurant or eating joint hence, meeting the requirement of proviso to mega Notification No. 25/2012-ST. 11. There are two other legal issues raised by the Appellant that would be dealt in determining the legality of the levy of Service Tax on it. Appellant has contended that when VAT on the entire value has been discharged by the Appellant, Service Tax is not leviable. Learned Counsel for the Appellants in citing judicial decisions reported in 2022 (61) GSTL (4) (SC) in the case of Commissioner of Service Tax-V, Mumbai Vs. UFO Moviez India Limited, 2016 (44) STR 161 (Bom.) in the case of Mahyco Monsanto Biotech (India) P. L. Vs. Union of India, 2016 (42) STR 823 (P & H) in the case of Idea Cellular Ltd. Vs. Union of India, and 2017 (3) GSTL 30 (A.P) in the case of Bhimas Hotels Pvt. Ltd. Vs. Union of India submitted that it is a settled law that both servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 08.10.2014 while no indication is available in show-cause notice dated 06.04.2015 that it was issued U/s 73(1A) of the Finance Act, 1994. 13. Last but not the least, Appellants has urged limitation as a ground for non-sustenance of the allegations raised in the show cause notice. It has stated that there was no intent to evade tax as with bonafide belief that VAT was payable on the entire transaction amount, duty liability was discharged in placing reliance on the judgment of Padmini Products Vs. Collector of Central Excise reported in 1989 (43) ELT 195 (SC). Learned Counsel for the Appellant argued that entire issue at hand is based purely on interpretation of the transaction which was to be treated as "sale of goods" or "service". Further, with reference to judicial decisions of Collector of Central Excise Vs. Chemphar Drugs & Liniments 1989 (40) ELT 276 (SC), and Aanand Nishikawa Co. Ltd. Vs. CCE, Meerut 2005 (188) ELT 149 (SC), he argued that the entire turnover of sale of food/beverages had been disclosed in periodic VAT return and ST-3 return for which allegation of suppression is not maintainable. On the other hand, learned Authorised Representative for the Respondent- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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