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File NO.APPL-COMMOST/37/2019-GST- APL-CHD

CENTRAL GOODS & SERVICES TAX

COMMISSIONERA TE, CHANDIGARH,

C. R. BUILDING PLOT NO. 19 SECTOR 17-

CHANDIGARH, PH. 0172-2720240.

Dated: .131 s /1 j C No.App-COMMOST/37/2019-GST-APPL-CHD Appeal No. 67/A/ST/CHD/18-19 & »-: 1-~ ()

66/A/ST/CHD/18-19 ~1- '3) /' .1 ORDER-IN-APPEAL

'.1_~ ~ IJ) Order- in- Appeal No. : CHD-EXCUS-OOI-APP- -18-19

1. Mis Industrial Facilitator Enterprises (HUF with Sh. Rajiv Gupta as Karta), Nichla Malpur, opposite Baddi University, Baddi, District

Appellants Solan (H.P) 2. Sh. Rajiv Gupta (Karta of HUF), Nichla

Ma1pur, opposite Baddi University, Baddi, ". District Solan (H.P)

Order-in-Original 16-17/CE/JC/SML/2018-19 dated 27.08.2018 & date

Adjudicating Joint Commissioner, Central Goods and Services Tax Authority Cornmissionerate, Shimla

Service tax Rs.1,01,55,814/-

Amount of Penalty Rs.I0,000/- under Section 77 & Rs. 1,01,55,814/- under Section 78 of the Finance Act, 1994.

q~ Rs.1,00,0001- under Section 78A of the Finance Act, sc ) G)~?;0- ", 1994. ,,~,< l/ c.lI• q-~~ \" h. "U ( ~\ (' '''' '", j' 1 "" \l fA

ef /j-»

~'?,i;' :. ~ (~1 . ", ~~these two appeals have been filed by (i) Mis Industrial Facilitator ~~,"()_'lr~1<l'''''-10 ser

: Ch""P.nterpt'ses (HUF with Sh. Rajiv Gupta as Karta) , Nichla Malpur, opposite t]lr'Ja~ >1 University, Baddi, District Solan (H.P) (hereinafter referred to as the "appellant No. I") and (ii) Sh. Rajiv Gupta (Karta of HUF), Nichla Ma1pur, opposite Baddi University, Baddi, District Solan (H.P) (hereinafter referred to

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as the "appellant No.2") against the Order-in-Original No: 16- 17/CE/JC/SML/2018-19 dated 27.08.2018 (hereinafter referred to as the "impugned order") passed by Joint Commissioner, Central Goods and Services Tax Commissionerate, Shimla (hereinafter referred to as the "adjudicating authority"). As both these appeals are against the impugned order, therefore these are being taken up together for disposal through this common order.

1.1 Briefly stated, that investigation was initiated against the appellant No.1 by the Preventive branch of the Hqrs. Office. Accordingly, appellant was

'. asked to supply details of various agreements/contracts entered by them along with copies of relevant balance sheets, Income tax returns, form 26AS etc. On perusal of the documents as supplied by the appellant No.1, it was observed that they are engaged in the activity of preparing food at their place and then delivering/supplying the same at the premises of the client/service receiver, as per the requirements in the time schedule prescribed by the client/service receiver.

1.2 It was alleged that the activity undertaken by the appellant No.lfalls under the preview of "Outdoor Catering Service" as defined under Section 65(105)(zzt) of the Finance Act, 1994 (hereinafter referred to as 'the Act') before 01.07.2012 and under Section 66E of the Act with effect from 01.07.2012 after enactment of the Finance Act, 2012. It was further alleged that appellant No.1 had provided the taxable services (i.e. Outdoor Catering Service)

'. without payment of Service Tax and without getting registered with the department.

1.3 Accordingly, show cause notice (SCN) dated 30.03.2016 for the period from March 2011 to March 2015, was issued to the appellant No.1 for demand of service tax of Rs 46,08,323/- under Section 73(1) of the Act alongwith interest under Section 75 of the Act. For the subsequent period from April 2015 to June 2017, Statement dated 27.09.2017 under Section 73(1 A) of the Act was issued to the appellant No.1, for the demand of service tax of Rs.55,47,491/­ alongwith interest. Both the demand amounting to Rs. 1,01 ,55,814/-(Rs 46,08,323/- + Rs.55,47,49 11-) were confirmed by the adjudicating authority vide the impugned order, along-with interest under Section 73 & 75 of the Act respectively and penalties under Section 77 & 78 of the Act were also imposed ~--------

~\'\c\) \<): appellant No.I. A personal penalty of Rs.l ,00,000/- was also imposed on ~,:,~~~.as Cen!. ~

'$.,i' (-:1:" 'wap llant No.2 under Section 78A of the Act. ttl ) . ~B~ ~_~ G i? ~~B,~ing aggrieved by the findings of the adjudicating authority, the ~~,... TI~<l' ~'-",f .• $I It ;.ch.nf1?}}~l'] t No.1 has filed the instant appeal on the following grounds:-

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2.1 That Supply of food is liable to sales tax under the local sales taxes laws as per the Article 366(29A) of the Constitution of India

2.2 That in the present case the appellant No.1 prepares food in their own premises and then packs the same and delivers to the customer at the place and time mentioned by the customer in the purchase order/agreement. The said activity is simply sale of food. The appellant No.1 is not providing any service to their clients. They merely sell the packed food to their customers and duly discharge sales tax on the same.

"2.3 That the activity of appellant No.1 was specifically excluded from the definition of service under Section 65B( 44) of the Act.

2.4 That Chandigarh Commissionerate vide its letter dated C.No. ST- 20/STD/Misc./Sevottam/62/12/4693 dated 13.08.2015, had clarified that free home delivery/pickups of the foods not liable to service tax. The dominant nature of the transaction is sale not service as the food is not served at the restaurant and further no other element of service is offered in this case. Copy of the circular is enclosed.

2.5 That the appellant No.1 is registered with Sales Tax Department holding TIN No. 02030202237 and regularly paying VAT and filing VAT returns. Copy of VAT returns attached.

'. 2.6 That the food which is supplied by appellant No.1, is served by another firm known as M/s Industrial Facilitator Services, which is registered with service tax vide registration no. AHDPG3418MSD002 under the head "Outdoor Catering Service" and also paying service tax on full amount i.e. without availing abatement. In this regard, reference could also be made to the decision in the case of Indian Railways Catering & Tourism Corporation Ltd. Vs Govt. of NCT of Delhi & Ors. reported at 2010-TMI-77928 (HC- Delhi), wherein court has decided that the transaction between the petitioner-company and Indian Railways for providing food and beverages to the passengers, on board the trains, is a transaction of sale of goods by the petitioner-company to Indian Railways. It is neither a contract for providing services nor a composite contract for supply of goods and providing of services. We also hold that sale in respect

~)0 ~ ,Qds loaded on board the trains in Delhi, takes place, when the goods are ;, ':i' )(~~tg~tl. cL in the trains. Similarly, in the instant case, the contract/agreement 71$- " ", -, \ tp;; '. between appellant No.1 and its clients is neither for providing services nor a ~\ "_c,om,Posife contract for supply of goods and providing services. The agreements

~; Ch.~~e\ f~r-;' ale of goods only. Sample copy of agreement/contract attached. t;Sl'.'":~ ... ~-__.....::::;::

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2.7 That parties of the appellant No.1 issued certificate declaring that they only procured food from the appellant No.1 and that no service was provided by the appellant No.1 to them. Copy of Certificates issued by the parties are enclosed.

2.8 On combined reading of the section 65(105)(zzt), section 65(76)(a), 65(24) of the Act, it is clear that the for an activity is to be construed as outdoor catering service, the caterer must be engaged in providing services in connection with catering. In the instant case, appellant No.1 is preparing meals in their own premises and not at the customers place and they are not involved in serving of the meals in any manner. Therefore the activity carried on by the

'. appellant No.1 is not covered by the definition of "outdoor caterer" and accordingly, the service tax demand against the appellant No.1 is not sustainable and liable to be dropped. Reliance in this regard is placed on the decision of Hon'ble Delhi Tribunal in the case of Ambedkar Institute of Hotel Mgmt. Vs. C.C.E., Chandigarh 2015 (40) S.T.R. 823(Tri. - Del.).

2.9 The adjudicating authority has not properly appreciated the contention of the appellant no.1 on limitation. The demand is hit by the bar of limitation.

3. The appellant No.2 has filed the appeal against the imposition of penalty on him by the adjudicating authority on the ground that penalty under Section 78A of the Act can only be imposed on the directors of the company and is not applicable in the case of kart a ofHUF.

'. 4. Personal hearing in the case was held on 21.05.2019. Sh. Pawan Kumar Pahwa, Advocate and Sh. Pankaj Arora, Advocate attended the hearing on behalf of the appellants and reiterated the submissions made in their appeals. They also submitted ITR's, Balance Sheet and VAT returns for the relevant period evidencing that VAT has been paid on the entire amount.

5. I have carefully gone through the facts of the case, impugned order, appeals, the grounds of appeal and the submissions made at the time of personal hearing. The issue before me to be decided in this case is whether or not the activities undertaken by the appellant No.1 falls under the category of "Outdoor Catering Services" and liable to Service Tax

~-'i.~ It was alleged that appellant No.1 had provided "Outdoor Catering /'t~~"7~r~{~rVices" to their clients, as define~ under Section 65(105)(.zzt) of the Act rt~., .. before 01.07.2012 and under Section 66E of the Act with effect from ~§ ( 01.07.2012 after enactment of the Finance Act, 2012, without payment of W;'~(}'{I <l S6Iyivce Tax and without getting registered with the department. Accordingly,

* ·Ch.n;ia p ant No.1 was issued SCN/ Statement for the demand of service tax of Rs. :, .

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File No.APPL-COMMOST/37/2019-GST- APL-CHD

1,01,55,814/- for the period from March 2011 to June 2017, which was confirmed vide the impugned order by the adjudicating authority.

5.2 The appellant No.1 on the other hand contended that they had not provided any services but only supplied/sold packed food(after preparation in their own premises) to their customers at the place and time mentioned in the purchase orders/agreements; that their activity is not covered by the definition of "outdoor caterer"; that supply of food is leviable to sales tax/VAT as per the Article 366(29A) of the Constitution of India; that sale of goods leviable to sales tax/V AT was specifically excluded from the definition of service under Section 65B( 44) of the Act; that they are registered with Sales Tax Department holding TIN No. 02030202237 and regularly paying VAT on sale/supply of

'. packed food and filing VAT returns; that department vide letter dated l3.08.2015 has also clarified that free home delivery/pickups of the foods are not liable to service tax; that the food which is supplied by them is served by another firm known as M/s Industrial Facilitator Services, which is registered with service tax vide registration no. AHDPG3418MSD002 under the head "Outdoor Catering Service" and also paying service tax on full amount i.e. without availing abatement.

5.3 I observe that the definition of 'Service' excludes any transfer, delivery or supply of goods which is deemed to be a sale in terms of clause (29A) of Article 366 of Constitution of India. The relevant extract of Article 366 (29A) is reproduced as under:-

"(29A) tax on the sale or purchase of goods includes

(j) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration,

and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made; "

- The following shall constitute

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File No.APPL-COMMOST/37/2019-GST- APL-CHD

(i) service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity. "

5.5 However, as per Section 65B(44) of the Act, certain activities are specifically excluded from the definition of service including a declared service. Relevant extract of Section 65B( 44) of the Act is reproduced as under:

"Service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include- (a) an activity which constitutes merely- (i) (ii) such transfer, delivery or supply of goods which is deemed to be a sale

'. within the meaning of clause (29A) of article 366 of the constitution; "

5.6 The above provision specifically excludes transfer, delivery or supply of goods which is deemed to be a sale (leviable to V AT) from the definition of "Service". I find that the issue of "Outdoor Catering Services" involved in the sale and supply of food to the clients (in their premises) came for consideration before the Hon'ble CESTAT New Delhi in the case of Ambedkar Institute of Hotel Mgmt. Vs. C.C.E., Chandigarh 2015 (40) S.T.R. 823(Tri. - Del.). The relevant portion of the said order is reproduced as under:-

"6. We have considered the submissions of both the sides and perused the record. From the facts stated in the show-cause notice as well as in the order-in-original, it is seen that the appellant are preparing the meals as per the .fixed menu which are to be served in various schools of Chandigarh Administration under the midday Meal Scheme of the Government. Neither there is any allegation nor there is any evidence to show that the appellant had prepared the meaLs at the schools where the same were to be served or were in any manner involved in serving the meals. Meals prepared by them are simply supplied at the predetermined rates to Education Department. The service which is covered under Section 65(105)(zzt) is the service provided or to be provided to any

~C\~ erson by an 'outdoor caterer' and not by any caterer. The outdoor ~\\.'I-~~.~Cer.lr,'1:'{ terer as defined in Section 65(76a) means a caterer engaged in

$;l ~. R o"p. (; iding services in connection with catering at a place other than his r--€ ) , c,,) ", \

Cli.h:ll- ":O.~ g.W but including a place provided by way of tenancy or otherwise by ~v%>~ ••• 't. person receiving such services. Since the appellant are preparing

• Ch,n6\'.?o (I< (I< Q1T~ idday meals in their Institute and not in the schools where the meals

are served and are not involved in serving of the meals in any manner, in our view they are not covered by the definition of 'outdoor caterer' and hence their activity of preparing and supplying meals for midday scheme

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File No.APPL-COMMOST/37/2019-GST- APL-CHD

would not be covered by the definition of taxable service under Section 65(106(zzt). Accordingly the duty demand on this count would not be sustainable. "

5.7 Further, T find that the appellant has also relied upon the decision of the Hon'ble High Court in the case of Indian Railways Catering & Tourism Corporation Ltd. Vs Govt. of NCT of Delhi & Ors. reported at 2010-TMT- 77928 (HC- Delhi), wherein it was held that 'the transaction between the petitioner-company and Indian Railways for providing food and beverages to the passengers, on board the trains, is a transaction of sale of goods by the petitioner-company to Indian Railways. It is neither a contract for providing services nor a composite contract for supply of goods and providing of services. We also hold that sale in respect of goods loaded on board the trains in Delhi, takes place, when the goods are loaded in the trains '.

5.8 In the present case, it is admitted fact that appellant No.1 is preparing meals in their own premises and then delivering/supplying the same at the premises of the client/service receiver. The appellant No.1 in their support has submitted the copy of agreements entered into with their clients. The perusal of the agreements provides that appellant No.1 shall supply food at the specified premises of the client/service receiver; that food supply shall be in the time schedule prescribed by the service receiver and that client/service receiver shall also pay VAT charges to the appellant No.1. This clearly implies that activity of the appellant No.1 is restricted only to preparation of food and door delivery of the food items i.e. simply sale of food. The appellant No.1 has also submitted certificates issued by their client/service receiver, wherein it was certified that they only procure food from the appellant No.1 and that no service is provided by the appellant No.1 to them. Further, appellant No.1 also submitted ITR's,

'. Balance Sheet and VAT retums for the relevant period evidencing that V AT has been paid on the entire sale amount. On perusal of the VAT retums, I find that appellant No.1 is registered with Sales Tax Department holding TIN No. 02030202237 and had discharged VAT on the entire value of food supply. The appellant No.1 has also submitted ST-3 returns of Mis Industrial Facilitator Services for the relevant period in support of their contention that the food which is supplied by them, is served to their clients by M/s Industrial facilitator Services, which is registered with service tax vide registration no. AHDPG3419MSD002 under the head "Outdoor Catering Service" and also

~) - [ng service tax on full amount of services i.e. without availing abatement. ''!i ~~i.1!'1 C'nr.. .."-. ~

'h-- '" ,V!' --. ''In, ~')." IS'~} "- ....,..\ •.. C'~ \ fPt ('" ~.9 v ':'I1rom above, it is apparently clear that the activity of the appellant No.1 is .~\ Fc-~ , ~~rely' sal.e/supply of food to their clients .. Since transfer, .delivery or supply of ~~ 9h' goo'd which IS deemed to be a sale (leviable to VAT) IS excluded from the

.;. Ci; ~~ ~ fition of "Service" in terms of Section 65B( 44) of the Act, therefore I find

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that ratio of the Judgements cited in paras 5.6 & 5.7 above is squarely '. applicable in the instant case of the appellant No.I. As such, I find that the activity carried out by the appellant No.1 being merely sale/supply of food, the same is not covered by the definition of "outdoor caterer" and accordingly, the service tax demand against the appellant No.1 is not sustainable and liable to be dropped.

5.10 Consequently, penalty is also not imposable on the appellant No.1 and appellant No.2.

Order

6. In view of the above, I set aside the impugned order and thus allow the appeals filed by the appellants. The appeals filed by the appellants are disposed

'. of, accordingly. D;g;tally s;gned by :,l;!M~~ SALA Date:Tue Aug 20 12: 0:43 1ST 2019 Reason :Approved ?;:..fl'l

(Dr. Sum~ It) COMMISSIONER (APPEALS)

REGD.A.D. 1. M/s Industrial Facilitator Enterprises

(HUF with Sh. Rajiv Gupta as Karta), Nichla Malpur, opposite Baddi University, Baddi, District Solan (H.P)

2. Sh. Rajiv Gupta (Karta of HUF), Nichla Malpur, opposite Baddi University, Baddi, District Solan (H.P)

Copy to:-

1.

3.

The Principal Chief Commissioner (CZ), Central Goods & Service Tax, Chandigarh. The Commissioner, Central Goods & Service Tax Commissionerate, Shimla. The Asstt.lDeputy Commissioner, Central Goods & Service Tax Division-Baddi.

01 'l-«: ( {uperintend~ppeals)

2.

8