The Madras high court has held that service tax under the Finance Act 1994 would not be applicable on take-away orders in restaurants and hotels
By: Sunayna Jain, Jagran Lakecity University, Bhopal
In the case of Anjappar Chettinad A/C Restaurant V. Joint Commissioner, the Madras High Court has ruled that the Takeaway orders or food parcels picked up from restaurants would not be applicable for service tax under the Finance Act of 1994.
The Single-judge bench of Justice Anitha Sumanth ordered that such provision of food and drink to be taken away in parcels by restaurants amounts to sale of food and drink and not consumption at the restaurant attracting service tax , as in any case the consumption of the food and drinks is not in the premises of the restaurant.
Further the court said, “In most restaurants, there is a separate counter for collection of the take-away food parcels. Orders are received either over telephone, by e-mail, online booking or through a food delivery service,”
As once the parcel is ready for delivery they are brought to a separate counter and which are either picked up by the customer or a delivery service, and most often these counters are positioned away from the main dining area that may or may not be air-conditioned.
Further, the Court has observed that numerous elements that constitute for service tax are absent in take-away orders such as seating, decor, music and services of a host etc.
The court passed the order after a batch of pleas were filed by popular restaurants involving Anjappar, Thalappakatti and Sangeetha Hotels to challenge the notices issued by the commissioner of GST and central excise demanding service tax for ‘take-away’ orders.
The dispute occurred when the Department of Revenue found that service tax was not being charged for take-away services by the petitioner’s restaurants, to which the latter argued that service tax is not aimed to cover sale of food that is picked up for consumption elsewhere other than restaurant premises.
The petitioners contended “There is no liability for sale of food at the take-away counter or by parcel. They would state that the sale of packaged food constitutes pure trading activity and there is no component of service involved therein.”
The petitioners were represented by Advocates Joseph Prabakar, Hari Radhakrishnan and P. Jayalakshmi and placed reliance on a number of judgments which sought to distinguish between service components in the restaurant from other aspects.
The Respondents were represented by Senior Standing Counsel Advocates, A.P. Srinivas Rajnish Pathiyil and Advocate V. Sundareswaran and have placed their reliance on Section 66E(1) of the Finance Act, 1994 which declares the activity of ‘supply of food or any other article of human consumption or any drink’ as a taxable service.
Therefore, the court observed that not all services rendered by restaurants in the sale of food and drink are taxable and only specific situations would attract tax.