By Vinay Jain and Jay Chheda, Advocates
1. Whether Service Tax can be levied on the activity of take-away food as well as on the Rental cost shared with Associated Enterprise?
Facts and Pleadings:
The Appellant is engaged in running food outlets where customers can either purchase packaged foods like sweets or namkeen or avail restaurant dining facilities. The Appellant also provides take-away facility on food items. The department contended that the Appellant has failed to pay Service Tax on the activity of take-away of food items. The Appellant was also undertaking sale of certain products to its associated enterprise and had granted access to space within its premises and collected rent from its associate enterprise. The Appellant did not discharge service tax on such rent received from its associated enterprise. The department contended that service tax is payable under the category Renting of Immovable Property service.
The department alleged that the services provided by way of take-away should be subject to Service Tax at the same rate as dine-in service since the services of preparing and packing of food was done for the convenience of the customer. The Appellant submitted that the activities of take-away are that of pure sale and do not involve any element of service being rendered to the customer. Further, reliance was placed on various clarificatory circulars issued by the Government of India through the Ministry of Finance (F.No. 334/3/2011-TRU dated 28.02.2011, Clarification dated 13.08.2015 issued by Deputy Commissioner, CE & ST, Chandigarh, etc) wherein it was laid down that availing take-away service would amount to a mere sale and would fall outside the purview of Service Tax.
With regards to sharing of rent, the department alleged that the rental amount received from the associated enterprise was in lieu of sub-letting of immovable property. The Appellant contended that along with selling its own goods, they also sell goods of the associated enterprise purchased by it in the leased premises. Thus, to that extent, the transaction between the appellant and the associated enterprise is a sale transaction. Therefore, the rent received by the Appellant from the associated enterprise is in lieu of the economic benefit granted to the associated enterprise. Owing to this, the amount paid by the associated enterprise is not for any service but rental cost sharing between the associated enterprise and the Appellant.
Judgement:
Taking into account the circulars, case laws and contentions submitted by both the parties, the CESTAT held that no service tax can be levied on the activity of take-away food as it would amount to pure sale and does not involve additional service elements such as dining facility, washing, cleaning of tables after the food that has been eaten, etc. Reliance was also placed on the case of Anjappar Chettinand A/C Restaurant and Ors v. Joint Commissioner and Ors. (W.P No. 13469 of 2020 decided by Madras High Court) wherein it was held that the intention of the customer while availing take-away is to merely buy such packaged food and not avail any restaurant services and thus, no service tax will be attracted.
On the second issue, the CESTAT held that since the goods of the associated enterprise are also being sold from the same premises and certain portion of the rent is received from the associated enterprise, the associated enterprise is also benefiting from such arrangement. Therefore, such arrangement would qualify as ‘sharing of expenses’ and not ‘Renting of immovable property’. Reliance was placed on Gujarat State Fertilizers & Chemicals Ltd. V. Commissioner of C.Ex (2014 (45) S.T.R 489 (S.C)) wherein it was held that sharing of expenditure cannot be treated as service rendered by one to another.
Accordingly, the impugned order was set aside on both counts.
Haldiram Marketing Pvt. Ltd. Vs Commissioner New Delhi – 2023 (2) TMI 783 – CESTAT NEW DELHI
2. Whether services provided by a Non-Profit Society towards the furtherance of its objectives can fall within the category of ‘Business Support Services’ and be subject to service tax?
Facts and Pleadings:
The Appellant is Tamil Nadu Cricket Association, a non-profit society which is affiliated to the Board of Control for Cricket in India (“BCCI”). In the ongoing efforts of BCCI to promote the game of cricket, they devised the Indian Premier League (“IPL”) whereby various franchisees are given the right to form their own IPL cricket team and would compete amongst themselves. In furtherance to this, the Appellant herein had provided a stadium and other services for the conduct of IPL cricket matches at Chennai. In lieu of such services, an amount of Rs. 10,00,00,000/- was received by the Appellant from the BCCI.
According to the department, such services would fall under ‘Business Support Services’ as the Appellant is providing a service to the BCCI for a consideration. Thus, such amount shall be subject to Service Tax.
The Appellant argued that Appellant is a non-profit society which is affiliated to BCCI, which is also a non-profit society intended to promote and control the game of cricket in India. In its efforts to promote the game, the BCCI has devised the Indian Premier League. The surplus income generated by the BCCI from the conduct of the IPL are distributed by it to its various member associations (State Associations of Cricket, like the appellant herein) as the IPL subvention money. The quantum of such IPL subvention money payable to various State Associations are decided by the BCCI in its Annual General Body Meetings. The amounts are given by the BCCI as grant / assistance, to promote the object of developing the game of cricket.
Judgement:
The CESTAT held that the department has failed to provide any evidence to show that there was an understanding between the Appellant and the BCCI for providing any such services for a consideration. The Court further held that unless there is a service provided and a consideration is received for that service that is provided, there cannot be levy of Service Tax. Further, it was held that non-profit organisations such as the Appellant and BCCI, that are providing services in lieu of the objectives laid down in their memorandum of association, cannot be considered as providing services similar to that of a “commercial organisation” as conducting of sports or sporting events are not commercial or business transactions. It was further observed that the assessee had provided the Stadium to Chennai Super Kings and had received Rs.50,00,000/- per match, for which they have discharged Service Tax. It was therefore held that transaction in dispute cannot be subject to Service Tax.