WHETHER SERVICE TAX CAN BE LEVIED ON FOOD ITEMS

UNDER PICK UP/FREE HOME DELIVERY SYSTEM

This is an ongoing problem faced by the consumers that they are burdened with number of taxes even when not enjoyed the ambiance of restaurant or hotel etc. This had been an issue raised several times about selling water at premium rates at places such as restaurants, hotels, airports and cinema halls. Public at large is often confused with the rules and regulations formulated by the Government authorities for adhering to MRP system on packed commodities and actual practice of selling .Weight and Measurement Department is to observe and check the compliance of MRP  system . Food Safety and Standard Authority has also made rules and regulations in the year 2011 and also revised the same in 2013 for the packaged goods making it compulsory to print MRP and ingredients / the contents of the packed item.

The issue of charging more than MRP by the hotels and restaurants was resolved by the Apex court by pronouncing a judgment that hotels and restaurants may charge more because consumer enjoys all ambiances and services also apart from getting food. In the light of the above proposition of law ,I may refer to the landmark judgements delivered by the Hono’ble High court of Delhi in the year 2007on the point of charging more than MRP by the hotels and restaurants in the matter of the Federation Of Hotels and Restaurants Association  Of India & Ors Versus  Union Of India & Ors. and also again in the year 2009 in the matter of  Delhi Gymkhana Club Ltd V Union Of India again elaborating the scheme and law in detail.The question raised in the year 2007 in the case of  Federation Of Hotels & Restaurants Association  Of India & Ors V/S Union Of India  was as to whether it is permissible for the hotel to charge their customers any price above the maximum retail price mentioned on the mineral water bottle .The court held in clear terms that charging price for mineral water in excess of the MRP printed on the packaging ,in the provision of service to the customers does not violate any of the provisions of the standards of weights and measurement act as it does not constitutes a sale or transfer of the commodity to them .Billing by hotelier/restaurant for service and goods is one and indivisible.It is further elaborated that a customer when enters a hotel or restaurant ,it is not simply to make a purchase of these commodities .His direct purpose of going therein is more than this-it is to enjoy its ambience ,hence held  NO for courts to interdict the sale of bottled mineral water.

Again in the year 2009,the same issue came up before the Hon’ble H.C. of Delhi in the case of Delhi Gymkhana Club Ltd V/S  Union Of India.Here the issue was about the price printed on the cold drink and objection on charging more than the price printed thereon.It was held that food items and beverages ,packaged or in any other form for the consumption in a comfortable atmosphere of the club not to be treated as sale  to the members .Price at which they are to be provided is clearly mentioned on the menu

 The above observations  made by the courts in their various judgements makes it ample clear a few things-

1.      Eatables consumed under a comfortable atmosphere ,enjoying the ambience and other facilities in the hotel ,restaurant or in the club cannot be separated for billing for their price ,services and other taxes leveled by the Govt.

2.       A restaurant  provides many services, in addition to the supply of food. He provides furniture and furnishings, linen, crockery and cutlery, and in the eating places of today he may add music and a specially provided area for floor dancing and in some cases a floor show. Once a person enters the hotel/restaurant /club,he orders for the desired item,waiter comes,takes order,serve him on the table.Charges taken for any order include all these facilities whether it is  water or a pinch of salt.

Consumer forums have been given plenty of discretionary power with the object to protect the interest of consumers.Its true that every interpretation is to be made keeping in view the intention of the Act .Hence wherever two interpretations are available ,the one which favours the consumers must be chosen

.But what should be the system when neither consumer is served in the hotel/restaurant nor has enjoyed the ambiance. Can he be levied with service tax or service charges for merely placing order for packed food/pick up food under promise of free home delivery? 

Office of Deputy Commissioner ,Central Excise and Service Tax Department got a query dated 22.7.2015 from Apex Restaurant Pvt. Ltd Chandigarh on this issue when consumers resisted to give service tax on free home delivery system .There was a reply/ clarification on the subject on 13.8 2015 as hereunder-

Food items given under free home delivery system is a sale of food and  no service is provided, may it be serving food, ambiance of enjoying air cooling, live entertainment, personalized hospitality etc.Hence no service tax is to be imposed on such transaction .

There are further two more things clarified-

·         Even while enjoying all air cooling and central heating facility available in the restaurant /hotels, service tax can be charged on food at the rate of 5.6% on the food bill.

·          Further, tax can be imposed on 40% of the total food bill and not on the total bill.    

But we see day in and day out that restaurants and hotels are charging service tax on all home deliveries. This is an issue must be brought to the knowledge of department concerned to circulate the policy so as to help the consumers for raising their voice against unfair trade practices being followed by the owners of hotels /restaurants and food caterers . 

 

---------------------------------------------------------------------------------------------------DR PREM LATA

  

 

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