Separate supply of food as goods is a sale, not outdoor catering, so duplicate service tax cannot apply after VAT payment.

Food supplied separately by an air-catering provider was treated as a sale of goods, not outdoor catering service, where the invoice separately identified the food component and the supplier was not serving the food on board to passengers. The transaction was characterised by the passing of property in the goods, bringing it within the constitutional concept of a sale of food. Because VAT had already been discharged on that component, it could not be subjected again to service tax under the levy for outdoor catering. The service tax demand on the food component was therefore unsustainable.

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Issues: Whether the value of food supplied separately by an air-catering provider was liable to service tax as outdoor catering service, or whether it constituted a sale of goods on which VAT had already been discharged.

Analysis: The supply of food was treated as a sale of goods where the invoice showed food separately from other service charges and the appellant was not serving the food on board to passengers. The distinction between a sale of food and outdoor catering was drawn from the nature of the transaction and the passing of property in the goods. Article 366(29A) of the Constitution of India recognized supply of food as part of a sale transaction, while Notification No. 12/2003-ST and the levy under Section 65(105)(zzt) of the Finance Act, 1994 were considered in the context of service tax on outdoor catering. Since VAT had already been paid on the food component, that component could not again be subjected to service tax as outdoor catering.

Conclusion: The food component was a sale of goods and not outdoor catering service; the service tax demand on that component was unsustainable.

Ratio Decidendi: Where food is separately supplied as goods and property in it passes on loading, the transaction is a sale of goods and cannot be taxed again as outdoor catering service.

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