Service tax cannot be levied on take-away/ parcel food items sold by restaurants: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) recently held that service tax cannot be levied on take-away/ parcel food items sold by restaurants [Haldiram Marketing Pvt Ltd vs Commissioner, Central Goods & Services Tax).A division bench of CESTAT President Justice Dilip Gupta and Member (Technical) PV Subba Rao noted that the Ministry of Finance had in February 2011 introduced the service tax for restaurant services and on August 13, 2015 it had clarified that the same would not be applicable on "pick-up" or "home delivery"."It has to be held that no service tax can be levied on the activity of take-away of food items as it would amount to sale and would not involve any element of service," the CESTAT ruled.Service tax would be applicable only when services such as dining facility, washing area and clearing of tables are involved, the tribunal underscored. "It is seen that in case of take-away of food, the Appellant sells the food or packaged items, as chosen by the customer, over the counter and this would amount to sale of goods. Services such as dining facility, washing area, clearing of the tables after the food has been eaten are, therefore, not involved. The activities of preparation of food and packing thereof by the appellant in case of take-away items are conditions of sale of such food, wherein the intention of the customer is to merely buy such packaged product from the appellant, and not to avail any restaurant services," the bench observed. It, therefore, held that no service tax can be levied on the activity of take-away of food items as it would amount to sale and would not involve any element of service..The order was passed on a plea filed by Haldiram Marketing Private Limited challenging a show cause notice issued by the Commissioner of Central Goods & Services Tax (CGST) on September 28, 2020 demanding payment of ₹23 crores as service tax, which it had failed to pay for take-away services. This amount charged was also inclusive of the rent that the company received from associated enterprises. The authority contended that the appellant was providing services in respect of take-away orders by way of preparing and packaging food items for the convenience of customers. It claimed that the customers availed services of the chef by placing customized orders and that it was not the case where theappellant was merely purchasing and selling food. As far as rent was concerned, it stated that appellant had sublet a certain portion of the space rented by it from Delhi International Airport Limited (DIAL) to its associated enterprise, and on such account, the company received one-third portion of the rent from the associated enterprise. Hence, the same was taxable, it was contended. Based on these contentions, the Commissioner, CGST had passed an order on March 11, 2022 asking Haldiram to pay ₹ 20,12,46,762 with interest and penalties. However, the demand of ₹ 2,96,98,555 was dropped on account of cum-tax benefit with respect to the demand on take-away of food items. .However, the CESTAT accepted the contention of the appellant that the consideration received by it from the associated enterprise would not be leviable to service tax under the category of renting of immovable property."The goods of the associated enterprises are also being sold fromsame premises and certain portion of the rent is received from the associated enterprise. The associated enterprises is benefiting with respect to the space," the bench opined. On the take-away services, the tribunal said that service tax cannot be levied on the same since it does not involve any service but would only amount to sale. Therefore, the bench quashed and set aside the order passed by the Commissioner, CGST in March 2022. .Advocates BL Narasimhan and Poorvi Asati appeared for the AppellantAdvocate Radhe Tallo represented the Authorities. .[Read Order]