Sale of packaged or reheated cinema food is sale of goods not taxable service; Service Tax Rules, 2006 inapplicable

CESTAT (New Delhi) held that sale of packaged or ready-to-eat food and beverages at cinema counters, sold over the counter or reheated and handed to patrons, constitutes sale of goods and not a taxable service; service tax is not leviable and the Service Tax (Determination of Value) Rules, 2006 do not apply. The tribunal distinguished premium seats where attendant service (ordering, table delivery, crockery collection) is provided, treating that as taxable service. The impugned order was set aside and the appeal allowed.

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Issues Involved:
1. Whether the supply of food and beverages in the cinema complex falls within the definition of 'service' and 'declared service' under Section 65B(44) and Section 66E of the Finance Act, 1994.
2. Whether service tax is leviable on the sale of food items in packed form or by reheating in cinema halls.

Summary:

Issue 1: Definition of 'Service' and 'Declared Service'
The appellant argued that the supply of food and beverages in the cinema hall is a pure transaction of sale without any service element, distinguishing it from scenarios involving dining facilities, washing areas, and table clearing. The Revenue contended that the activity involves an element of service, making it taxable under Section 66E(i) of the Finance Act, 1994. The Tribunal examined definitions under Section 65B(44) and 66E, noting that 'service' excludes mere transfer of title in goods. Circulars clarified that transactions amounting to the sale of goods are not subject to service tax unless an element of service is involved.

Issue 2: Levy of Service Tax on Sale of Food Items in Cinema Halls
The Tribunal referenced several decisions and circulars, including those clarifying that takeaway food and packaged items sold over the counter amount to the sale of goods without service elements. The Tribunal observed that in the case of PVR Cinemas, the sale of ready-to-eat food items during movie intervals, where customers purchase and consume food at their seats, does not involve service elements. The Tribunal distinguished this from scenarios where additional services, such as waiters serving food at seats, are provided, which are taxable. The Tribunal concluded that the sale of food items in cinema halls is equivalent to takeaway food transactions and thus not subject to service tax.

Conclusion:
The Tribunal set aside the impugned order, ruling that service tax is not leviable on the sale of food items in packed form or by reheating in cinema halls, as there is no element of service involved. Consequently, the provisions of the Service Tax (Determination of Value) Rules, 2006, and issues of interest and penalty do not apply. The appeals were allowed.

Order Pronounced on 30th November, 2023.

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