2013 (6) TMI 51 - HC - Service Tax

Service Tax dispute - territorial jurisdiction of high court - Import of services - levy of service tax u/s 66A - reverse charge - held that - What can be culled out from various pronouncements of the Supreme Court is that one of the most important considerations so far as the aspect of territorial jurisdiction is concerned, is to ascertain, as to whether the facts pleaded have any bearing with the lis or the dispute involved in the case. In the present case, what we find is that the registered office of the petitioner is at Mumbai, and the show-cause notice was also received at the Mumbai office. All queries were answered before the Commissioner of Service Tax at Mumbai. Levy of Service Tax under Section 66A of the Finance Act, 1994 has also been challenged in the High Court of Bombay. Thus, according to us, no part of cause of action can be said to have arisen within the territorial jurisdiction of this High Court. In our view, whether the diamonds imported were received at Mumbai or Surat by itself would not be conclusive factor for determining territorial jurisdiction of the High Court. Because by merely receiving consignment at a particular place by itself will not confer jurisdiction to the Court of that place where the consignment is received. This is not such a factor or circumstance which by itself will confer jurisdiction to the Court. Each and every fact pleaded in the Writ Petition does not ipso facto lead to the conclusion that those facts give rise to a cause of action which the Court s territorial jurisdiction unless those facts pleaded are such which have a nexus or relevance with the lis or dispute involved in the case. The facts which have no bearing with the lis or the dispute involved in the case, do not give rise to a cause of action so as to confer territorial jurisdiction on the Court concerned. The territorial jurisdiction must be decided on the facts pleaded in the petition, the truth or otherwise of the averment made in the petition being immaterial. To confer jurisdiction on a Court even if a part of the cause of action arises within its jurisdiction, it is sufficient. It is purely a question of fact. The preliminary objection as raised by the respondents as regard territorial jurisdiction of this High Court deserves to be sustained. - Decided against the assessee.

Summary

Issues Involved:
1. Territorial jurisdiction of the Gujarat High Court.
2. Legality, validity, and propriety of the show-cause notice issued under the Finance Act, 1994.
3. Alleged contraventions of the Finance Act, 1994 by the petitioner.

Issue-Wise Detailed Analysis:

1. Territorial Jurisdiction of the Gujarat High Court:
The primary issue addressed was whether the Gujarat High Court had the territorial jurisdiction to entertain the petition challenging the show-cause notice issued by the Commissioner of Service Tax-I, Mumbai.

Contentions of the Petitioner:
- The petitioner argued that the cause of action arose within the territorial limits of the Gujarat High Court as the rough diamonds were imported and processed in Surat.
- The petitioner relied on Article 226(2) of the Constitution of India, which allows High Courts to exercise jurisdiction where the cause of action arises, wholly or in part.
- The petitioner contended that the Surat branch was liable for service tax, and thus, the Commissioner at Surat had the jurisdiction, not the Commissioner at Mumbai.

Contentions of the Respondent:
- The respondent argued that the registered corporate office of the petitioner was in Mumbai, and all interactions and responses to queries were made from Mumbai.
- The payments for services received from foreign entities were made from Mumbai.
- The respondent cited precedents, including Union of India v. Adani Exports Ltd., to argue that the Gujarat High Court lacked territorial jurisdiction.

Court's Analysis:
- The Court examined the principles of territorial jurisdiction under Article 226(2) and relevant case laws.
- It was noted that the registered office and the primary business activities related to the show-cause notice were based in Mumbai.
- The Court concluded that merely receiving the diamonds in Surat did not constitute a significant part of the cause of action to confer jurisdiction to the Gujarat High Court.
- The Court emphasized that the facts pleaded must have a direct nexus with the dispute to establish jurisdiction.

Conclusion:
- The Court held that no part of the cause of action arose within the territorial jurisdiction of the Gujarat High Court.
- The petition was rejected on the ground of lack of territorial jurisdiction.

2. Legality, Validity, and Propriety of the Show-Cause Notice:
The petitioner challenged the legality, validity, and propriety of the show-cause notice issued by the Commissioner of Service Tax-I, Mumbai.

Contentions of the Petitioner:
- The petitioner argued that the notice was invalid as it was issued by the Commissioner at Mumbai, who allegedly lacked jurisdiction.
- The petitioner sought relief under Article 226 to quash the show-cause notice.

Court's Analysis:
- The Court did not delve into the merits of the legality and validity of the show-cause notice due to the preliminary objection of territorial jurisdiction.
- It was clarified that the petitioner could challenge the notice before a competent court with appropriate jurisdiction.

Conclusion:
- The Court did not adjudicate on the legality and validity of the show-cause notice due to the lack of territorial jurisdiction.

3. Alleged Contraventions of the Finance Act, 1994:
The petitioner was accused of various contraventions under the Finance Act, 1994, including failure to register for service tax, failure to file returns, and suppression of taxable services.

Department's Findings:
- The petitioner received 'Business Auxiliary Services' and 'Business Support Services' from foreign entities without registering for service tax.
- The petitioner failed to declare and pay service tax on these services, amounting to a significant tax liability.
- The department concluded that the petitioner suppressed the nature of services to evade tax.

Court's Analysis:
- The Court did not examine the detailed allegations and findings of the department due to the preliminary jurisdictional issue.
- It was noted that these issues could be addressed by the competent authority or court with proper jurisdiction.

Conclusion:
- The Court did not address the detailed contraventions under the Finance Act, 1994, due to the lack of territorial jurisdiction.

Final Judgment:
The petition was rejected solely on the ground of lack of territorial jurisdiction. The petitioner was advised to challenge the show-cause notice before the appropriate court. The Court did not impose any costs on the petitioner.