JANUARY 06, 2009

By Vijay K Kumar, Editor-in-Chief

LAW is not without its share of humour. Can you imagine the word, “food” being defined by law? But we live by definitions. Notification No. 1/2006-Service Tax, Dated: March, 1, 2006 and its predecessor notifications, 21/1997, 12/2001, 20/2004 and 22/2004, defined food as a substantial and satisfying meal. Mandap Keepers get an abatement from the Service tax payable if they supply food also - that is a substantial and satisfying meal.

In all the seminars conducted by us, it has been a permanent joke for me; While announcing lunch break, I would say, “food is defined as a substantial and satisfying meal and this hotel would get the abatement only if the food is a meal that is substantial and satisfying; so let’s put Service Tax to test – after lunch let us decide whether the hotel is eligible for abatement – and that depends on your certificate that it was a meal; that it was substantial and that it was satisfying”.

Thank God, the condition of this notification is not proving to the satisfaction of the proper officer that the food was a substantial and satisfying meal.

Now could this be an issue for a case? When we joked about this, we were sending warning signals that this is not really a joke and you could actually have Central Excise sleuths descending on a party you have in a hotel to ascertain from the guests whether the food is a meal, whether it was substantial and whether it was satisfying.

More than four years ago we carried a story, SERVICE TAX NOTIFICATION : WHEN PAN MASALA IS A 'FOOD', WHY NOT A SAMOSA? Our story visualised a hypothetical situation,

A doubt may arise, because of the definition given for food in the notifications, whether the exemption is applicable if the hotel or mandap keeper supplies only snacks like samosa, dosa, biscuits or any other light eatables - along with mandaps. This is because these snacks cannot be considered as meal in general understanding even if the quantities are served to the satisfaction of the guests or client.

This kind of situation normally happens in case of hotels, where the clients would prefer to have only snacks, if any meetings or conferences timing do not fall during lunch or dinner hours and in cases where the budget for such meeting is minimal.

If the wordings of the notification are strictly interpreted, then the abatement or exemption under Notification No. 12/2001 (which existed in case of hotels during the period 20.12.2001 to 8.07.2004) is not applicable, if snacks are supplied along with mandap, inasmuch as snacks are not ‘food’ as per the notification! If you say this to any hotelwala, he may laugh at you, …..

Around the time our article was published, action was initiated in Vadodara Commissionerate where a hotel was stuck with a demand of over Rs. 2 lakhs of Service Tax short paid for claiming exemption/abatement on food that was not a substantial and satisfying meal.

The question reached the Tribunal with an interesting question whether breakfast and high tea are substantial and satisfying meals satisfying the conditions of the notification. And the Tribunal a fortnight ago passed an interesting order. Even here there was no unanimity. The Member (T) took the view that they were not food within the meaning of the notification, while the Member (J) took the view that they were indeed food. So convincing were her reasons that after reading her order, the Member (T) reversed his view and agreed with her that ‘high tea’ was a ‘substantial meal’.

According to the Member (T),

A heavy breakfast without any restrictions on the intake can be considered as a meal in view of the definition of food even though in the Indian context, breakfast has never been considered as a meal. But the times are changing and in convention and such formal functions, a view can be taken that breakfast is nothing but a substantial meal. But as regards high tea in Indian context it is not taken as a substantive and satisfying meal. Therefore, where unlimited breakfast as contended by the appellants consist of several items of food and several types of beverages, it is provided can be said to fulfil the condition of the notification, but this is to be verified on the basis of actual facts since the findings of the Commissioner is that this was not the case. Therefore, the matter has to go back to the Original Adjudicating Authority for ascertaining whether this type of breakfast amounting to food as per the Notification was provided and appellants are eligible for exemption under the Notification No.21/97-ST dt. 26/6/1997 and 12/2001-ST dt. 20/12/2001.

What is high tea?

In the Hindu dated 12.11.2002, a reader asked a question, “What is the meaning of ¶high tea¶?”

The reply given was,

In India, having tea around 5:30 in the evening along with a couple of samosas and biscuits is considered to be ¶high tea¶. High tea is generally much heavier than that. In England, for example, it is a heavy meal usually taken during the early evening hours. People invariably skipped their dinner after high tea. In the late 19th century ¶high tea¶ was an elaborate affair. What did it contain? Well, here's a British newspaper telling us what a high tea should include. ¶High tea should have cold roast beef at the head of the table, a cold Yorkshire pie at the bottom, a mighty ham in the middle. The side dishes will comprise soused mackerel, prickled salmon, sausages and potatoes, etc. Rivers of tea, coffee, and ale, with dry and buttered toast, scones, muffins and crumpets, jams and marmalade.¶ It's not surprising that most people refused to have dinner after such a heavy meal!

In the silver jubilee function of CESTAT at Bangalore, they had provided high tea from the famous MTR hotel which was more sumptuous and substantive than an elaborate dinner. Of course at that time the question whether it was food or not was in nobody’s mind.

Coming back to our case, the Member (J) observed,

Commissioner has recorded that high tea cannot be considered as 'substantial and satisfying meal'. The said expression 'substantial and satisfying meals' does not stand defined anywhere. Apart from the fact that the said interpretation is based upon the adjudicating authority's own opinion, I find that high tea is a concept associated with the early evening meal, as contended by the appellant. It is not providing of simple tea or coffee, but the adjective 'high' is used, when the same indicates that high tea is in the social context, replacement of dinner. Each and every invoice disclosing as to whether the supplied item was only tea or coffee or the same was inclusive of how many number of snacks etc. so as to fulfil the meaning of 'substantial and satisfying meal' is not required to be gone through. It is sufficient if, as a mandap keeper, the assessee is providing catering services and the invoices so raised by him show that the same were inclusive of charges for catering services. Even if such high tea is as per the fixed menu agreed upon between service provider and their client and is not unlimited like break-fast, the same, in my view, has to be held as 'substantial and satisfying meal'. It is not that menu so agreed upon is required to be scrutinized in each and every case and wherever it is found to be on the lesser side, the same has to be held as not satisfying meal. This exercise would not only be impracticable, but would be impossible also. It cannot, be held to be the intention of the notification in question. As such, I am of the view that the benefit of the exemption Notification stand rightly availed by the appellant and has to be allowed.

So there was a difference of opinion and the issue was supposed to be referred to a Third Member.

But then, the Member (T) was convinced with the reasoning of the Member (J) and agreed with her that “high Tea” was indeed food as defined in the notification.

Positively not THE END!

(See 2009-TIOL-35-CESTAT-AHM in 'Service Tax')