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TMI Blog2013 (6) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 68 and Section 66A of the Finance Act, 1994 read with Rule 3(iii) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 along with interest under Section 75 of the Act and penalty under Sections 76, 77 and 78 of the Act. 2. Facts shortly stated be thus : 2.1 The petitioner is a partnership concern engaged in the business of manufacturing and sale of cut and polished diamonds. As per the case set up by the petitioner the rough diamonds are imported at Surat and are thereafter processed to produce polished diamonds in the production unit at Surat. 2.2 The department received information through their intelligence that the petitioner was remitting foreign currency to companies based outside India, for the service rendered by such foreign companies in the course of purchase of rough diamonds. Information also revealed that the petitioner was not paying service tax on such services received by them from outside India as is necessary under the provisions of Section 66A of the Finance Act, 1994. 2.3 On being called for, the petitioner submitted details of commission paid to M/s. Goldie International Ltd., London, U.K. i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules made thereunder for the reasons enumerated below : (I) failed to make an application to the jurisdictional officer for registration within the period prescribed as required under Section 69 of the Act and Rule 4 of the Rules; (II) failed to file proper periodical returns on the due dates as prescribed under Section 70 of the Act and Rule 7 of the Rules, ibid; (III) failed to pay Service Tax within the prescribed time in contravention of Section 68 of the Act and Rule 6 of the Rules, ibid; (IV) deliberately suppressed the correct nature and value of services received from overseas commission agent with intent to evade Service Tax and the extended period of five years as provided under proviso to sub-section (1) of the section 73 of the Act appears to be invokable for demanding the Service Tax not paid by them. 2.6 Accordingly, department thought fit to issue show-cause notice at the head office of the petitioner concerned situated at 901-902, Panchratna, Opera House, Mumbai and called upon the petitioner concerned to show cause to the Commissioner, Service Tax-I, Mumbai at New Central Excise Building, 5th Floor, 115, Maharshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s petition by filing affidavit-in-reply. 5. Mr. Varun K. Patel, learned advocate appearing for the respondents has raised a preliminary contention as regards the territorial jurisdiction of this High Court to adjudicate this petition. According to Mr. Varun Patel, learned advocate for the respondents, show-cause notice which is the subject matter of challenge has been issued by Commissioner, Service Tax-I, Mumbai and the same was received by the petitioner at his office situated at 901-902, Panchratna, Opera House, Mumbai. According to Mr. Patel, therefore, this Court would have no jurisdiction to entertain this petition due to lack of territorial jurisdiction. This is the first contention which has been taken in the affidavit filed by the Commissioner, Service Tax-I, Mumbai. 6. As preliminary contention has been raised by the respondents as regards lack of territorial jurisdiction of this High Court to entertain the present petition is concerned, we called upon learned counsel Mr. J.P. Shah to address us on this issue before going into the merits of the main issue raised by the petitioner in this petition. (I) Contentions of the petitioner on the preliminary obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner at Surat possess requisite jurisdiction to issue such notice and not the Commissioner at Mumbai. According to Mr. Shah the Commissioner, Mumbai has issued notice to all importers irrespective of the fact whether the importer is importing rough diamonds at Mumbai or Surat, possibly under the misconception or on the assumption that all importers are stationed at Mumbai and goods are received by them at Mumbai. According to Mr. Shah, in view of the above fact, the territorial charge of petitioner for service tax would be in Surat and the Commissioner of Service Tax at Surat is also made a party to this petition as Respondent No. 2. 10. Mr. Shah in support of his contention has relied on the decisions of the Supreme Court in the Case of Rajendran Chingaravelu v. R.K. Mishra, Additional Commissioner of Income Tax and others, reported in (2010) 1 SCC 457 and in the case of Navinchandra N. Majithia v. State of Maharashtra, reported in AIR 2000 SC 2966. (II) Contentions of Respondent No. 1 on the issue of lack of territorial jurisdiction : 11. Mr. Varun K. Patel, learned advocate appearing for Respondent No. 1 vehemently submitted that the petition chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erate which has jurisdiction to issue the impugned show-cause notice. Lastly, Mr. Patel on the point of territorial jurisdiction submitted that the issue whether the petitioner had received the rough diamonds directly at Surat or not is a question of fact. Similarly, the issue whether any part of cause of action has arisen at Mumbai or not is also a question of fact. Therefore, the said issue can be decided only after the evidence is led and the entire controversy is adjudicated by the Competent Authority. According to Mr. Patel, even if it is assumed without admitting that the petitioner has received rough diamonds directly at Surat then also the said fact is not the conclusive factor for deciding a question of jurisdiction. 16. In support of his contention, Mr. Patel relied upon the following judgments of the Supreme Court : 1. Union of India v. Adani Exports Ltd. reported in 2001 (134) E.L.T. 596 (S.C.) 2. Kusum Ingots & Alloys Ltd. v. Union of India reported in (2004) 6 SCC 254 = 2004 (168) E.L.T. 3 (S.C.) 3. National Textile Corporation Ltd. and Others. v. Haribox Swalram and Others reported in (2004) 9 SCC 786 4. Mosaraf Hossain Khan v. Bhagheera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdiction with respect to the Central Government is the Punjab High Court. This involves considerable hardship to litigants from distant places. It is, therefore, proposed to amend Article 226. So that when any relief is sought against any Government, authority or person for any action taken, the High Court within whose jurisdiction the cause of action arises may also have jurisdiction to issue appropriate directions, orders or writs." Effect of Amendment : The effect of amendment is that it made the accrual of cause of action an additional ground to confer jurisdiction to a High Court under Article 226. As joint Committee observed : "This clause would enable the High Court within whose jurisdiction the cause of action arises to issue directions, orders or writs to any Government, authority or person, notwithstanding that the seat of such Government or authority or the residence of such person is outside the territorial jurisdiction of the High Court. The Committee feel that the High Court within whose jurisdiction the cause of action arises in part only should also be vested with such jurisdiction." Thus after the insertion of clause (1A), the legal position is that a writ can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the substance of the matter rather than the form of action. Again, it must be antecedent to the institution of the petition and the basis on which the petition must have been filed. Finally, before a petition can be entertained by the High Court, the petitioner has to show that one of the essential facts has arisen within the territorial jurisdiction of the High Court. Wholly or in part arises : Clause (2) of Article 226 enables a High Court to issue appropriate writs, orders or directions within the local limits of whose jurisdiction the cause of action, "wholly or in part" arises. It is, therefore, incumbent on the court to examine whether the cause of action wholly or partly has arisen within the local limits of its jurisdiction. If it has arisen, the High Court has jurisdiction to entertain a petition. But if it has not, the High Court cannot entertain such petition. The expression "in part" is comprehensive and takes within its sweep even an infinitesimal fraction of cause of action. Basis : Averments in petition : The expression "wholly or in part" in Article 226(2) refers entirely to the facts stated and grounds set forth in the petition as the cause of action and has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on a High Court to entertain a writ petition or a special civil application as in this case, the High Court must be satisfied from the entire facts pleaded in support of the cause of action that those facts do constitute a cause so as to empower the Court to decide a dispute which has, at least in part, arisen within its jurisdiction. It is clear from the above judgment that each and every fact pleaded by the respondents in their application does not ipso facto lead to the conclusion that those facts give rise to a cause of action within the Court's territorial jurisdiction unless those facts pleaded are such which have nexus or relevance with the lis or the dispute involved in the case. 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. If we apply this principal then we see that none of the facts pleaded in Para 16 of the petition, in our opinion, fall into the category of bundle of facts which would constitute a cause of action giving rise to a dispute which could confer territorial jurisdiction on the courts at Ahmedabad." 23. The Court furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernative prayers in the writ petition to which we have made reference hereinabove, which prayers according to this Court, gave rise to a cause of action to move the High Court at Bombay for relief. Therefore, in our opinion, this judgment does not help the writ petitioner to justify its action in filing a writ petition before the Gujarat High Court. That apart, we must notice that the said judgment is delivered in a matter involving criminal dispute and consequences of such dispute have a direct bearing on the personal freedom of a citizen guaranteed under Article 21 of the Constitution. Therefore, the consideration that arises in deciding the question of territorial jurisdiction in cases involving criminal offences may not always apply to cases involving civil disputes like the special civil applications with which we are concerned. Mr. Desai then urged that since the High Court has elaborately dealt with the merits of the case and given a finding in favour of the respondents in the interest of justice, we should not interfere with the said finding and uphold the same. We are not inclined to accept this argument of the learned counsel because the appellants herein had taken object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, therefore, concluded at Jabalpur and the major portion of the cause of action arose at Jabalpur. The material, essential or integral part of the cause of action arose in the State of Madhya Pradesh and not in Stale of Gujarat. This legal position is well settled. Reference may be made to the decision of the Apex Court in Navinchandra N. Majithia v. State of Maharashtra, 2000 SC 2966, Kusum Ingots & Alloys Ltd. v. Union of India, (2004) 6 SCC 254 and Alchemist Limited v. State Bank of Sikkim, AIR 2007 SC 1812. Apex Court has examined the scope of clause (2) of Article 226 of the Constitution of India and held that even if a small fraction of cause of action accrues within the jurisdiction of the Court, the Court may have jurisdiction in the matter, but the question one has to consider is whether such fact constitutes the material, essential or integral part of the cause of action. In Kusum Ingnots' case (supra), Apex Court held that even if a small portion of the cause of action arises within the territorial jurisdiction of the Court, the same by itself be not considered to be determinative factor compelling the High Court to decide the matter on merit. In appropriate cases, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them, gives the plaintiff a right to relief against the defendant. In Union of India v. Adani Exports Ltd. - AIR 2002 SC 126 in the context of clause (2) of Article 226 of the Constitution, it has been explained that 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 within the Court's territorial jurisdiction unless those facts pleaded are such which have a nexus or relevance with the lis that is involved in the case. Facts which have no bearing with the lis or dispute involved in the case, do not give rise to a cause of action so as to confer territorial jurisdiction on the Court concerned" 26. In the case of Kusum Ingots & Alloys Ltd. (supra) Supreme Court has very succinctly explained as to what is 'cause of action' and the term 'wholly or in part'. The following observations are relevant for our purpose : "Cause of Action implies a right to sue. The material facts which are imperative for the suitor to allege and prove constitute the cause of action. Cause of action is not defined in any statute. It has, however, been judicially interpreted inter alia to mean every fact which would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led 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. It is difficult for us to accept the submission of Mr. Shah that diamonds were received at Surat after being imported for which the petitioner is being proceeded, and therefore, a part of cause of action can be said to have been arisen within the territorial jurisdiction of this High Court. We are of the view that the fact that diamonds were received at Surat, even if believed to be true is not such a fact which by itself w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h praying that action be taken against the Income Tax Officers and the newspapers. He also sought compensation for the illegal acts, and quashing of the proceedings initiated against him under the Income Tax Act, 1961. The said writ petition was dismissed by the High Court of Andhra Pradesh on 17-6-2008 on the ground that no part of the cause of action arose within Andhra Pradesh. Aggrieved by the judgment of the Andhra Pradesh High Court Rajendran preferred SLP before the Supreme Court. Supreme Court took up the first question for consideration as to whether the Andhra Pradesh High Court was justified in holding that as the seizure took place at Chennai (Tamil Nadu), Rajendran could maintain the writ petition before the High Court at Chennai and not at the High Court of Andhra Pradesh. In the factual background Supreme Court held that considering the genesis for the entire episode of search, seizure and detention was the action of the security/intelligence official at Hyderabad Airport (in Andhra Pradesh) who having inspected the cash carried by Rajendran, alerted their counterparts at Chennai Airport that Rejendran was carrying a huge sum of money and required to be intercepted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sufficient. It is purely a question of fact. 32. In so far as the application of Clause (2) of Article 226 is concerned, the petitioner has to establish that cause of action wholly or in part arises within the jurisdiction of this Court. In order to find out the cause of action it is necessary to have a look at the entire averments in the Writ Petition. As already said it is not every averment in the Writ Petition which give rise to a cause of action. Averments in the Writ Petition must have a nexus with the act complied of and it is only those facts which give rise to a cause of action and which have a nexus or relevance to the lis or the dispute involved in the case which has been taken note of. 33. For the reasons stated aforesaid, we have no hesitation in coming to the conclusion that the preliminary objection as raised by the respondents as regard territorial jurisdiction of this High Court deserves to be sustained. This petition must fail solely on the ground that this Court lacks territorial jurisdiction to adjudicate the legality, validity and propriety of the show-cause notice issued by Commissioner, Service Tax-I, Mumbai. It will be open for the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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