Service tax is not payable on packed food sold as take away and not served in the restaurant

CESTAT Ahmedabad has ruled that food in packed form is sold either on the counter or through delivery boys to the customer’s place, therefore, the activity is clearly of sale of food and no service is involved and hence the same is not liable to service tax.

The appellant M/s Hotel Utsav are engaged in providing service as catering service at restaurant for which they are holding service tax registration.

On the scrutiny of records of the appellant by CERA Audit for the period from 2013-14 to 2017-18 (up to June 2017) it was noticed that the appellant having a hotel cum restaurant in which they provide catering service at restaurant. At the orders of the customers, they also supply the cooked food after packing the same to the customers for which they invoice as parcel of food. Though the appellant have been paying service on food supply in the restaurant but they were not paying service tax on food cooked and supplied in package to the customers as per their direction.

A show cause notice was issued which stated that as per clause (i) of Section 66E of the Finance Act, 1994, service portion in any activity wherein goods, being food or any other articles of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of activity is a declared service.

It was further stated in the show cause notice that the activity of cooking and supplying the food as parcel to the customers as per the customer’s direction is also an activity in which the food is supplied to the customers, so it is declared as service.

Ms. Pratika Chawla, Learned Chartered Accountant, appearing on ehalf of the appellant submits that the food is sold in the packed form as take away and not served in the restaurant, therefore, it is a sale of food and no service is involved. She submits that issue has been settled by the Hon’ble High Court of Madras in the case of Anjappar Chettinad A/C Restaurant reported at 2021 (51) GSTL 125 (MADRAS).

From the above judgement, it is observed that the fact of the above case is absolutely identical to the facts of the present case inasmuch as the food in packed form is sold either on the counter or through delivery boys to the customers’ place. Therefore, the activity is clearly of sale of food and no service is involved. In view of above judgment, the issue is no longer res-integra, accordingly, following the ratio of the above judgement we are of the view that the appellant’s activity of sale of food does not fall under the category of service. Hence the same is not liable for service tax. Accordingly, the impugned order is set aside. Appeal is allowed with consequential relief.