Appellant's Sale of Take-Away Food Not Liable for Service Tax

The Tribunal ruled that the appellant's sale of packed food as take-away does not constitute a service liable for service tax. The activity was deemed as purely a sale of food, not involving any service portion. Citing precedents, including a Madras High Court decision, it was established that service tax applies only to services provided in air-conditioned restaurants with additional amenities, not to the sale of take-away food. Consequently, the Tribunal set aside the demand for service tax, interest, and penalties, allowing the appeal with consequential relief.

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Issues Involved:
1. Whether the activity of cooking and supplying packed food as parcels constitutes a service liable for service tax.
2. Applicability of Section 66E of the Finance Act, 1994, and Rule 2C of Service Tax (Determination of Value) Rules, 2006.
3. Interpretation of the term "service portion" in the context of food supply.
4. Consideration of precedents and judicial pronouncements relevant to the case.

Detailed Analysis:

Issue 1: Whether the activity of cooking and supplying packed food as parcels constitutes a service liable for service tax.
The appellant, M/s Hotel Utsav, engaged in providing catering services at a restaurant, was scrutinized by CERA Audit for the period from 2013-14 to 2017-18. It was noticed that while the appellant paid service tax on food served in the restaurant, they did not pay service tax on food cooked and supplied in packages to customers. A show cause notice dated 09.09.2019 was issued, contending that the activity of cooking and supplying food as parcels is a declared service under clause (i) of Section 66E of the Finance Act, 1994. The adjudicating authority confirmed the demand for service tax, interest, and penalties, which was upheld by the Commissioner (Appeals). The appellant argued that packed food sold as take-away does not involve any service and is purely a sale of food, referencing the Hon'ble High Court of Madras decision in Anjappar Chettinad A/C Restaurant.

Issue 2: Applicability of Section 66E of the Finance Act, 1994, and Rule 2C of Service Tax (Determination of Value) Rules, 2006.
According to Section 66E, the service portion in any activity involving the supply of food is a declared service. Rule 2C specifies the value of the service portion in activities where food is supplied at a restaurant or as outdoor catering. The show cause notice argued that the appellant's activity of supplying packed food falls under these provisions and is thus liable for service tax.

Issue 3: Interpretation of the term "service portion" in the context of food supply.
The appellant contended that the sale of packed food does not constitute a service. The Tribunal observed that the appellant was discharging service tax for food served in the restaurant but not for packed food sold as take-away. The Tribunal relied on the Hon'ble Madras High Court judgment, which clarified that the sale of food and drink in packed form for take-away does not attract service tax. The High Court emphasized that only services provided in an air-conditioned environment with additional amenities (e.g., seating, decor, music) attract service tax, while mere sale of food for take-away does not.

Issue 4: Consideration of precedents and judicial pronouncements relevant to the case.
The Tribunal referred to the Madras High Court judgment, which detailed the scope of service tax on restaurant services. It was noted that service tax is applicable only to services provided in air-conditioned restaurants and not to the sale of take-away food. The judgment highlighted that take-away food lacks the additional services provided in a dine-in setting and thus does not constitute a service liable for service tax.

Conclusion:
The Tribunal concluded that the appellant's activity of selling packed food as take-away is purely a sale of food and does not involve any service. Therefore, it does not fall under the category of declared service and is not liable for service tax. The impugned order was set aside, and the appeal was allowed with consequential relief.

Pronouncement:
The judgment was pronounced in the open court on 07.03.2022.

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