Activity of Take away of Food Item not Involve Element of Service, No Service Tax: CESTAT [Read Order]

Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in its recent ruling held that the activity of taking away food items does not involve an element of Service and no service tax at all.

Haldiram Marketing Pvt. Ltd, the appellant is engaged in running food outlets where customers can either purchase packaged foods like sweets or namkeen or avail of restaurant dining facilities. Additionally, the appellant also provides the facility of “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 food items as well as on the share of rent received from the associated enterprise. A show cause notice dated 28.09.2020 proposing a service tax demand of Rs. 23,09,45,317/- with interest and penalties was issued to the appellant.

The Commissioner confirmed the demand of Rs. 20,12,46,762/- with interest and penalties. However, the demand of Rs. 02,96,98,555/- was dropped on account of cum-tax benefit concerning the demand on the takeaway of food items as well as on the double-taxation of the amount for the month of November 2015.

The appellant contended that it sells the takeaway food items over the counter whereas, in dining services provided to the customers, food is served on the tables and a host of services have to be provided.

In the case of Anjappar Chettinad, it was held that in the takeaway of food items service tax would not be leviable as it would be a case of sale. It is seen that in the case of takeaway of food, the appellant sells the food/packaged items, as chosen by the customer, over the counter and this would amount to the sale of goods.

A Coram comprising of Justice Dilip Gupta, President and Mr P V Subba Rao, Member (Technical) observed that services such as dining facility, washing area, and 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 the case of takeaway items are conditions of sale of such food, wherein the customer intends to merely buy such packaged product from the appellant, and not to avail of any restaurant services. 

It was held that no service tax can be levied on the activity of takeaway of food items as it would amount to sale and would not involve any element of service.

It was evident that the appellant had entered into a rental agreement with DIAL for leasing out premises at the airport, for which it paid a rental amount to DIAL. It also transpires that from the property leased out to the appellant, the appellant sells its goods as well as goods of the associated enterprise purchased by the appellant.

In M/s. Historic Resort Hotels (Pvt.) Ltd. vs. CCE, it was held that sharing of expenditure cannot be treated as a service rendered by one to another. While allowing the appeal, the Tribunal set aside the order passed by the Commissioner.

To Read the full text of the Order CLICK HERE

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