Haldiram Not Liable To Pay Service Tax On Take-Away Of Food Items: CESTAT

The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that no service tax can be levied on the activity of takeaway food items.

The bench headed by Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) observed that the activity of takeaway of food items would amount to a sale and would not involve any element of service.

The appellant/assessee is engaged in running food outlets where customers can either purchase packaged foods like sweets or nankeen or avail of restaurant dining facilities. The appellant also provides the facility for "take-away" food items.

An audit of the appellant was conducted, and it was noticed that the appellant had failed to pay due service tax on the activity of takeaway of food items as well as on the share of rent received from the associated enterprise.

A show-cause notice proposing a service tax demand with interest and penalties was issued to the appellant.

The issue raised was the levy of service tax on the activity of takeaway food sales as well as on the rent shared by the associated enterprise.

The Circular dated February 28, 2011, issued by the Ministry of Finance at the time when "restaurant service" was made taxable, mentions that the levy was intended to be confined to the value of services contained in the composite contract and was not to cover either the meal portion of the composite contract or the mere sale of food by way of pickup or home delivery. The clarification letter dated August 13, 2015, issued by the Deputy Commissioner also clarifies that in cases of transactions involving pickup or home deliveries of the food sold by the restaurant, the dominant nature of the transaction is that of sale and not service, as the food is not served at the restaurant and no other element of service is offered. The transaction would, therefore, not be subject to service tax, being of the nature of a sale only.

The tribunal noted that in cases of takeaway food, the appellant sells the food or packaged items, as chosen by the customer, over the counter, and this would amount to the sale of goods. Services such as the dining facility, the washing area, and the clearing of the tables after the food has been eaten are, therefore, not involved. The activities of preparation of food and packing by the appellant in the case of takeaway items are conditions of the sale of such food. The intention of the customer is to merely buy packaged products from the appellant and not to avail of any restaurant services.

Case Title: Haldiram Marketing Pvt. Ltd. Versus Commissioner, Central Goods and Service Tax, GST Delhi East Commissionerate,

Citation: Service Tax Appeal No. 51555 Of 2022

Date: 13.02.2023

Counsel For Appellant: Advocates B.L. Narasimhan, Poorvi Asati

Counsel For Respondent: Radhe Tallo

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