TaxTMI 
TaxTMI 
2026 (7) TMI 1249
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....ssimilar provisions, a reference to the CGST Act, 2017 would also mean reference to the corresponding similar provisions in the SGST Act, 2017. 1. This appeal has been filed by M/s Indian Wire Products Company (19AAAFI7075H2Z5) (hereinafter referred to as the 'Appellant') against the Ruling passed by the West Bengal Advance Ruling Authority (hereinafter referred to as WBAAR) vide Advance Ruling Order No. 33/WBAAR/2025-26 dated 27.02.2026. 2. The Appellant submitted that it is a partnership firm duly incorporated under the provisions of the Indian Partnership Act, 1932, and having its registered office at 38EM, Sanjeeva Garden, Thakdari Road, Dhapa Manpur, North Twenty-Four Parganas, New Town, West Bengal, 700156. It runs a restaurant under the name of "Pappu Chaiwala", situated at MB690, Mahishbhatan, North Twenty-Four Parganas, Kolkata-700102. In the course of operating the said restaurant, the applicant also proposes to serve hookah, whether herbal or tobacco based, to customers within the restaurant premises as part of the overall dining experience. In this background, the Appellant sought a ruling from the WBAAR by filing an application under sub-section (1) of Section 97....
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....s is sanitised, assembled, charcoal is ignited and disposable mouthpieces are provided. In the case of tobacco-based hookah, nicotine is added without altering the essential preparation process. The hookah apparatus remains the property of the restaurant and is not transferred to the customer. According to the Appellant, what is supplied is the overall experience of preparation, presentation and service within the restaurant premises. iv. The Appellant relied upon CBIC Circular No. 164/20/2021-GST dated 06.10.2021 to contend that a distinction has been drawn between preparation of food by restaurants and mere sale of manufactured goods by ice cream parlours. It was submitted that hookah flavours are prepared and assembled in-house in response to customers' orders and, therefore, the activity is comparable to preparation of food rather than sale of pre-manufactured goods. v. Reliance was further placed upon the judgment of the Hon'ble Karnataka High Court in Sri R. Bharath v. State of Karnataka, wherein, according to the Appellant, the Court recognised that hookah consumption inherently involves rendering of service since it cannot be consumed without specialised a....
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....at serving herbal as well as tobacco-based hookah within the restaurant premises, along with food and/or beverages, constitutes a composite supply of restaurant service falling within the ambit of Clause 6(b) of Schedule II to the CGST Act, 2017 and is liable to GST at the rate prescribed for restaurant services, namely 5%, subject to the conditions specified in Notification No. 11/2017-Central Tax (Rate), as amended from time to time. Submission of the Revenue before the WBAAR 4. The Revenue, in their submissions made before the WBAAR, inter alia, highlighted the following issues: i. The Revenue submitted that several restaurants operating as "hookah bars" are predominantly engaged in supplying hookah services in addition to ancillary food items while discharging GST at the concessional rate of 5% applicable to restaurant services. According to the Revenue, such practice warrants strict scrutiny since the principal supply in such establishments is not food or beverages but the supply of assorted hookah flavours. ii. It was submitted that hookah flavours, commonly packed in tins or jars, are classifiable under Heading 2403 11 10 and attract GST at the applic....
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....icable to restaurant services to hookah supplied in restaurants would result in misuse of the notification and consequent loss of revenue. It was argued that if hookah were treated as an article for human consumption eligible for concessional taxation, similar claims could be advanced in respect of other tobacco products such as cigarettes, pan masala and gutka, which, according to the Revenue, could not have been the legislative intent. viii. On the aforesaid basis, the Revenue submitted that the principal supply in the present case is the supply of hookah flavours classifiable under HSN 2403 11 10 attracting GST at 28% along with Compensation Cess at 72%, and not restaurant service taxable at 5%. Observation of the WBAAR and its Order 5. The WBAAR, upon consideration of the facts of the case, the submissions of the applicant, the views of the Revenue and the applicable legal provisions, arrived at the following observations and findings while passing the impugned ruling: i. The WBAAR noted that the Appellant is engaged in providing restaurant services and proposes to serve herbal as well as tobacco-based hookah to its customers within the restaurant premis....
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....on within the meaning of Clause 6(b) of Schedule II. vii. The impugned ruling rejected the Appellant's contention that service of hookah is merely incidental to restaurant service. It was held that, notwithstanding the condition that hookah would be supplied only along with food or beverages, both supplies retain their independent identity. The WBAAR further observed that restaurants are generally smoke-free establishments under the Cigarettes and Other Tobacco Products Act, 2003, except where designated smoking areas are permitted, and consequently service of hookah cannot be regarded as naturally incidental to the service of food and beverages. viii. The WBAAR further held that the expression "any other article for human consumption" covers edible accompaniments or consumable articles ordinarily supplied with meals and does not extend to tobacco or non-tobacco products intended for smoking. On that basis, it concluded that supply of hookah falls outside the ambit of Clause 6(b) of Schedule II and cannot be treated as restaurant service. ix. The WBAAR observed that the supply of hookah comprises both goods and service elements, namely, supply of tobacco ....
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....llant has urged that the WBAAR has failed to appreciate the true nature of the impugned transaction by treating the supply as one of goods. According to the Appellant, serving hookah is predominantly an experience-based, labour-intensive and skill-driven activity involving preparation, assembly, customisation, continuous monitoring, assistance by trained personnel and post-consumption cleaning and sanitisation, all of which impart to the transaction the essential character of a service rather than a sale of goods. ii. The Appellant has further submitted that the various ingredients used in preparing hookah merely constitute raw inputs and are never supplied as such to the customer. It has been argued that, in the same manner as vegetables, spices and other ingredients used in preparation of food do not constitute independent supplies of goods, the ingredients used for preparing hookah merely facilitate rendering of the final service and are transformed through a systematic process involving skill, labour, hygiene and timing. iii. It has been contended that the WBAAR has erred in identifying the principal supply as the supply of tobacco or non-tobacco hookah flavou....
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....ended by Notification No. 46/2017-Central Tax (Rate), expressly excludes hookah from the ambit of restaurant service. It has been argued that the WBAAR has impermissibly introduced an exclusion not contemplated by the Legislature. Reliance has also been placed upon the principles governing strict interpretation of taxing statutes and harmonious construction, as explained in Union of India v. Hansoli Devi, Sultana Begum v. Prem Chand Jain, CIT v. Hindustan Bulk Carriers, Cape Brandy Syndicate v. IRC and Ajmera Housing Corporation v. CIT. viii. The Appellant has additionally contended that the WBAAR has overlooked the legislative intent underlying the concessional 5% GST scheme applicable to restaurant services. According to the Appellant, the object of Notification No. 46/2017-Central Tax (Rate) was to provide a simplified and uniform tax treatment for the composite hospitality experience ordinarily provided by restaurants. It has been argued that segregating hookah from the restaurant service defeats the very object of the notification and reintroduces the complexity which the concessional scheme sought to remove. In support thereof, reliance has been placed upon Union of ....
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....and taxed accordingly. Submission of the Revenue made before the WBAAAR 7. The Revenue has not filed any written submission or advanced any additional contention before this Appellate Authority in response to the present appeal controverting the grounds urged by the Appellant. Consequently, its stand in the present appeal proceedings remains confined to the submissions recorded by the WBAAR in the impugned ruling. Personal Hearing 8. The present appeal was initially listed for personal hearing on 15.06.2026 and 30.06.2026. On both occasions, the Appellant sought adjournment citing certain reasons and, accordingly, the personal hearing could not be conducted. Although the provisions of Section 75 of the CGST Act, 2017 relate to adjudication proceedings before the proper officer and are not strictly applicable to proceedings before this Appellate Authority, the legislative intent reflected in sub-section (5) thereof, which limits the grant of adjournments to not more than three occasions where sufficient cause is shown, is indicative of the legislative policy that proceedings under the Act should not be prolonged indefinitely. Keeping in view the principles of natural jus....
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....be covered by definition of food just as chewing gum may be kept in the mouth for some time." 11. In order to justify his argument that hookah is served in a restaurant and hence should be treated as a part of the restaurant services, the appellant has further cited the Rulings pronounced by various Advance Ruling and Appellate Advance Ruling Authorities namely, i. HRPL Restaurants Pvt. Ltd. [GUJ/GAAR/R/2023/08 dt 22.02.2023; Order date 22-02-23] ii. Summit Hotels & Resorts Private Limited [WBAAR 10 of 2025-26 vide Order dated 31-07-2025] iii. Kundan Misthan Bhandar [Order No, 4 2018-19 dated Feb 27. 2019, UPAAAR] iv. Gangaur Sweets (2023) 2 Centax 280 (AAR GST Chh.) v. MFAR Hotels & Resorts (AAR, Tamil Nadu 2020 42 G.S.T.L. 470(AAR - GST - T.N.) where it has been held that when an item is billed under the restaurant sales head and has a direct nexus with the restaurant service, it forms a composite supply with restaurant service as the principal supply and hence, supply of cold drinks and food items in restaurant is part of restaurant service. 12. Citing these case judgments and Rulings, the appellant has further submitted that....
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.... applicable thereto. 15. The Revenue, on the other hand, has contended that the predominant supply in the present case is the supply of hookah flavours classifiable under Tariff Item 2403 11 10 and not restaurant service. It has further submitted that restaurants operating as hookah bars are misclassifying such supplies as restaurant service so as to avail the concessional rate of GST, whereas hookah flavours are liable to tax in accordance with their applicable tariff classification and other applicable levies, and therefore cannot be taxed at the rate prescribed for restaurant services. 16. We have carefully considered the Grounds of Appeal, the written submissions filed by the Appellant, the submissions of the Revenue as recorded before the West Bengal Authority for Advance Ruling (WBAAR), the impugned Advance Ruling, the records of the proceedings, the relevant provisions of the Central Goods and Services Tax Act, 2017 and the West Bengal Goods and Services Tax Act, 2017 (hereinafter referred to as "the GST Acts"), the notifications and circulars issued thereunder, and the judicial authorities relied upon by the Appellant. 17. The principal issue arising for determinat....
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.... confined to supplies of goods answering the statutory description of food or any other article for human consumption or drink, where such supplies are made by way of or as part of a service. Thus, the provision contemplates the coexistence of two conditions, namely, the existence of a service element and the supply of goods falling within the specified statutory class i.e., food or any other article for human consumption or drink. Neither condition can be dispensed with while determining the applicability of paragraph 6(b). 21. The present appeal, therefore, does not turn merely upon the extent of service involved in preparing or supplying hookah, nor upon the tariff classification or rate of tax applicable to the products supplied. The primary enquiry is whether the supplies in question fall within the class of supplies which Parliament has chosen to treat as a supply of services vide paragraph 6(b) of Schedule II and further qualify to be a 'restaurant service' as defined supra. The answer to the aforesaid issue necessarily requires an examination of the statutory provisions relating to composite supply, principal supply and the applicable rate notifications, which shall now ....
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....action or the presence of substantial service elements is, by itself, determinative of the controversy before us. The statutory provisions relating to composite supply undoubtedly govern the consequences flowing from a transaction which otherwise falls within the relevant statutory category. They do not, however, dispense with the necessity of first determining whether the transaction answers the statutory description of the category in question. 27. The Appellant's submissions thus necessitate an examination of the true scope and ambit of paragraph 6(b) of Schedule II to the GST Acts. It is, therefore, appropriate to consider the meaning of the expression "food or any other article for human consumption or any drink", occurring therein, before examining the remaining submissions advanced in the appeal. 28. The controversy in the present appeal essentially turns upon the interpretation of the expression "food or any other article for human consumption or any drink" occurring in paragraph 6(b) of Schedule II to the GST Acts. The legislature has not defined the aforesaid expressions under the GST Acts. Their scope must, therefore, be gathered from the language of the provision ....
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....ression employed in a taxing statute is not specifically defined, it must ordinarily be understood in the sense in which it is commonly understood in trade, commerce and by persons dealing with the subject, unless the statute indicates a different intention. Applying this well-established principle, the expressions "food", "drink" and "hookah" possess distinct and well-recognised meanings in common parlance. A person visiting a restaurant would ordinarily understand food to be eaten, drink to be consumed by drinking and hookah to be smoked. Likewise, a person ordering hookah would not ordinarily understand himself as ordering food or drink merely because both are supplied in the same establishment. In the absence of any statutory indication requiring a departure from their ordinary meaning, the expressions employed in paragraph 6(b) of Schedule II must receive their popular and commercial meaning. The common parlance test, therefore, also supports the conclusion that hookah, whether tobacco-based or herbal, cannot ordinarily be regarded as "food or any other article for human consumption or any drink" within the meaning of paragraph 6(b) of Schedule II. 34. Considerable emphasis....
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....enquiry remains directed to the nature of the goods supplied and not merely to the mode of their consumption, the place where they are supplied or the extent of the service element involved. 37. The above interpretation follows from the language employed by Parliament in paragraph 6(b) itself and, therefore, constitutes the primary basis of our understanding of the provision. However, since the Appellant has also relied upon the broader legislative framework governing tobacco products, the applicable GST rate notifications, tariff classifications and various judicial authorities in support of its contentions, it would be appropriate to examine whether those statutory and judicial materials warrant a construction different from that emerging from the plain language of the enactment. We now proceed to examine those aspects. 38. The statutory interpretation emerging from paragraph 6(b) also merits examination in the context of the broader legislative framework governing restaurant services under the GST regime. Restaurant service is specifically dealt with by Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, issued under Section 9(1) of the CGST Act, which prescribes....
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....upply and Distribution) Act, 2003 (COTPA). COTPA is a special enactment regulating the production, supply, distribution, sale and advertisement of tobacco products and proceeds on the legislative recognition that such products constitute a distinct category requiring a specialised statutory framework. Although the provisions of COTPA have no direct bearing on the classification of supplies under the GST Acts, the enactment nevertheless reflects a consistent legislative policy of treating tobacco products separately from other goods in matters of regulation and control. 43. We are conscious that neither the tariff structure, the applicable rate notifications nor the provisions of COTPA can determine the true scope of paragraph 6(b) of Schedule II, which must necessarily be construed according to its own language. Nevertheless, where the interpretation emerging from the statutory provision is found to be in harmony with the broader legislative framework governing the same class of products, such legislative context legitimately reinforces that interpretation. The aforesaid statutory scheme, therefore, lends contextual support to the interpretation emerging from paragraph 6(b), wit....
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....egulatory framework enacted under the Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 (COTPA). It was in that context that the Hon'ble High Court observed that, even if tobacco products were assumed to fall within the wide definition of "food" contained in the Food Safety and Standards Act, it would be impermissible for two Central enactments to occupy the same legislative field and regulate the same products. 47. We are of the considered view that the ratio of the aforesaid decision does not govern the controversy before us. The Hon'ble High Court has neither interpreted paragraph 6(b) of Schedule II to the GST Acts nor determined the scope of the expression "food or any other article for human consumption or any drink" occurring therein. The observations relied upon by the Appellant were rendered in an entirely different statutory context. On the contrary, the judgment recognises the existence of a distinct legislative regime governing tobacco products under COTPA, which is broadly consistent with the separate fiscal treatment accorded to tobacco products under the GST fram....
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.... examine one further aspect arising from the additional submissions advanced by the Appellant during the course of the personal hearing. Besides reiterating the submissions contained in the Memorandum of Appeal, the Appellant placed reliance upon several additional judicial pronouncements in support of the contention that tobacco-based as well as non-tobacco-based hookah flavours constitute "food" or "any other article for human consumption" within the meaning of paragraph 6(b) of Schedule II to the GST Acts. Although the principal judicial authorities relied upon by the Appellant have already been discussed hereinbefore, the additional judicial pronouncements cited during the personal hearing also merit consideration. We, therefore, consider it appropriate to examine the legal principles emerging from those decisions, together with the concept of "food" under the GST enactments, the common parlance test and the settled principles governing the interpretation of taxing statutes, before recording our final conclusions. The aforesaid aspects are accordingly examined hereinafter. 52. In this context, we hereby draw reference to the case Uppara Veerendra, vs State Of Andhra Pradesh,....
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....observed that the citations regarding the inclusive definitions of 'food' pertain to the Food Safety and Standards Act and the Prevention of Food Adulteration Act. The expression "food" has not been assigned an exhaustive or universal definition under the GST enactments. Consequently, while determining whether a particular commodity falls within the ambit of the expression "food", the settled principle of interpretation consistently adopted by the constitutional courts and tax adjudicatory forums is the common parlance test (also referred to as the popular meaning test). 55. It is a well-established principle that, in the absence of a statutory definition, words employed in a taxing statute are ordinarily to be construed in the sense in which they are understood in common trade and by persons dealing with or consuming the goods, and not in their scientific, technical or dictionary sense. Accordingly, the expression "food" must receive the meaning which an ordinary person of average intelligence would attribute to it in common usage. 56. The Courts have consistently observed that the true character of an article is to be determined by considering its primary identity, its comm....
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....ries are found to be as follows: • Oxford English Dictionary: Any nutritious substance that people or animals eat or drink in order to maintain life and growth; nourishment, provisions. [https://www.oed.com/dictionary/food_n?tl=true]; • Merriam-Webster Dictionary: material consisting essentially of protein, carbohydrate, and fat used in the body of an organism to sustain growth, repair, and vital processes and to furnish energy.[https://www.merriam-webster.com/dictionary/food?]; • Cambridge Dictionary: something that people and animals eat, or plants absorb, to keep them alive. [https://dictionary.cambridge.org/dictionary/english/food] ; 61. World Health Organization (WHO) evaluates food strictly through the lens of nutrition, food safety, and physiological function, whereas The World Bank (adopting the 1996 World Food Summit definition) defines food primarily through the lens of food security. It views food as any safe, nutritious substance that meets dietary needs and preferences for an active, healthy life. 62. Thus, the essential aspect to define food is its 'nutritional' value in the form of protein, carbohydrate, lipid, vitamin ....
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....umed by inhalation through a hookah apparatus. 65. The above conclusion also finds support from the allied principle of noscitur a sociis, which postulates that the meaning of a word or expression is to be understood from the words with which it is associated. In paragraph 6(b) of Schedule II, the expression "any other article for human consumption" occurs in the company of the expressions "food" and "drink" and, therefore, cannot be interpreted in isolation or assigned an unrestricted meaning. The associated words indicate the legislative context in which the general expression has been employed and confine its scope to articles of the same nature and character as food and drink ordinarily supplied in the course of restaurant service. To construe the expression so as to include hookah merely because it is supplied in a restaurant would be to detach it from its statutory context and enlarge the scope of the provision beyond what the legislature has intended. 66. Having carefully examined the rival submissions, the statutory provisions, the legislative framework governing restaurant services and tobacco products, and the judicial authorities relied upon by the Appellant, we fi....
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....statutory concept of restaurant service. 69. The discussion in relation to COTPA is confined to tobacco-based hookah flavours and is relied upon only as contextual legislative support for that category. The conclusions reached in respect of herbal (non-tobacco-based) hookah flavours do not rest upon COTPA or the statutory framework governing tobacco products, but upon the independent interpretation of paragraph 6(b) of Schedule II discussed earlier. 70. In view of the foregoing discussion, we find that the supply of tobacco-based hookah flavours or herbal (non-tobacco-based) hookah flavours through a hookah apparatus does not fall within the ambit of paragraph 6(b) of Schedule II to the GST Acts merely because such supplies are made in a restaurant or along with food, beverages and other restaurant facilities. The taxability of such supplies is required to be determined in accordance with the applicable provisions of the GST Acts and the relevant rate notifications governing such supplies. 71. The controversy in the present appeal, in essence, stems from the Appellant's assumption that once a supply is made within a restaurant and is accompanied by substantial service elem....