Anjappar Chettinad A/C Restaurant vs Joint Commissioner, Office of the Commissioner of GST and Central Excise

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2021 Supreme(Mad) 1052

IN THE HIGH COURT OF JUDICATURE AT MADRAS
ANITA SUMANTH, J.
Anjappar Chettinad A/C Restaurant – Appellant
Versus
Joint Commissioner, Office of the Commissioner of GST and Central Excise – Respondent
W.P. Nos.13469 of 2020, 28789 & 28095 of 2019 and 1748 & 5935 of 2021 and WMP. Nos. 16637 of 2020, 28539, 27715 of 2019, 1951 & 6571 of 2021
Decided on : 20-05-2021

Advocates:
Advocate Appeared:
For the Appellant : Mr.Joseph Prabakar, Mr.Hari Radhakrishnan,
For the Respondents: Mr.Rajnish Pathiyil, Mr.A.P.Srinivas, V.Sundareswaran, adv

Headnote:
Standards of Weights and Measures Act, 1976 - Sections 65B(44), 65, 66, 65(105) and 67 - article of human consumption or any drink’ as a taxable service - Sales and service - 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 - Whether or not intoxicating - Whether service tax is leviable on goods sold on MRP basis across the counter as part of the Bill/invoice - Whether the establishment in question would attract liability to service tax, and that too, only in an air-conditioned restaurant - 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 Department was that service tax had not been discharged in relation to ‘take away/parcel services’ for various periods - learned counsel for the petitioner in Wlearned Senior Standing Counsel - there is no liability for sale of food at the take-away counter or by parcel. They would state that the sale of packaged food constitutes pure trading activity and there is no component of service involved therein. They rely on the definition of ‘service’ under Section 65B(44), which excludes the transfer of title in goods by way of sale - In the light of this exclusion, parcel sales or take away food would stand outside the ambit of service tax – Held, Sale of food and drink are taxable and it is only certain specified situations that attract tax. The sale of food and drink simplicitor, services of selection and purchase of ingredients, preparation of ingredients for cooking and actual preparation of the food and drink would not attract the levy of tax. Only those services commencing from the point where the food and drinks are collected for service at the table till the raising of the bill, are covered. This would encompass a gamut of services including arrangements for seating, décor, music and dance, both live and otherwise, the services of Maître D’Or, hostesses, liveried waiters and the use of fine crockery and cutlery, among others. The provision of the aforesaid niceties are critical to determination as to whether the establishment in question would attract liability to service tax, and that too - online booking or through a food delivery service such as swiggy or zomato. Once processed and readied for delivery, 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 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 – Court 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 - Writ Petitions are allowed

ORDER :

This batch of Writ Petitions involves an interesting question as to the liability to service tax under the Finance Act, 1994 (in short ‘Act’), on food that is ‘taken away’ or collected 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.28095 of 2019 and 1748 of 2021 and Mr.V.Sundareswaran, learned Senior Panel Counsel for the respondent in W.P.No.28789 of 2019.

5. According to the petitioners, there is no liability for sale of food at the take-away counter or by parcel. They would state that the sale of packaged food constitutes pure trading activity and there is no component of service involved therein. They rely on the definition of ‘service’ under Section 65B(44), which excludes the transfer of title in goods by way of sale. In the light of this exclusion, parcel sales or take away food would stand outside the ambit of service tax.

6. According to them, in parcel sales, there could be no artificial splitting of transactions between one of ‘service’ and one of ‘sale’ with the attempt to bring the same under the purview of the former. The petitioners rely on letter bearing No.DOF 334/3/2011-TRU dated 28.02.2011 which had, according to them, clarified that service tax is not intended to cover sale of food that is collected or picked up for consumption elsewhere.

7. Restaurant service, by definition means that all attributes of a restaurant such as organised seating, air-conditioning, service at the table, live music and enhanced hospitality are included. These attributes are absent in a transaction of take-away. In fact, service tax on restaurant services have itself been restricted only to service in air-conditioned restaurants.

8. The petitioners rely on the judgment of the Supreme Court in the case of Federation of Hotel and Restaurant Associations of India V. Union of India, (2018 (359) ELT 97, wherein the federation had sought a declaration that the provisions of the Standards of Weights and Measures Act, 1976 and allied enactments and rules were not applicable to services rendered in hotels/restaurants. While allowing the appeals, the Court observed, at paragraph 10, that there could be no artificial division or distinction made between the sale and service elements when it comes to service of food in a restaurant.

9. The petitioners also refer to the judgment of the Supreme Court in the case of Tamil Nadu Kalyana Mandapam Association V. Union of India, (2006 (3) STR 260) wherein the challenge was to the constitutional validity of Sections 65, 66 and 67 of the Act in terms of which, service tax was levied on mandap keepers and catering services. My attention is drawn to para 55 wherein the Bench, while deciding the question of taxability of the mandap keepers, makes a distinction between services rende

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2021 Supreme(Mad) 1052

Cases Referred (5)