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of <h1>High Court upholds jurisdiction and grants stay on service tax demand pending resolution</h1> The High Court found the petition maintainable due to the cause of action in Delhi, upheld its jurisdiction based on legal principles, and granted a stay ... Maintainability - Territorial jurisdiction - Petitioner contended that since the demand for service tax is in relation to transactions in Delhi as well, a part of the cause of action arises within the territorial jurisdiction of this Court - Held that:- the Court notes that prayer (a) of the petition is for a declaration that the transactions sought to be subject to service tax are not in fact amenable to service tax as they are “deemed sales” in terms of Section 65(105) of the Finance Act, 1994 (upto 30th June, 2012) and Section 65B (44) of the Finance Act, 1994 (with effect from 1st July, 2012). This declaration will cover the Petitioner’s transactions throughout India and would not be limited to any particular jurisdiction. Prayer (b) seeks the quashing of the Order-in-Original passed by Respondent No.3, the Commissioner of Service Tax in Mumbai. An appeal against the said order is maintainable before the CESTAT, Mumbai Bench. However, the fact of the matter is that the four Show Cause Notices (SCNs) which preceded the said order covered transactions relating to the lease of vehicles in Delhi as well. In other words, the transactions covered by the SCNs were not limited to the territory of Mumbai. Therefore, in the light of law explained by the decisions of the Supreme Court in various cases and the principles crystallized in the judgment of the Five-Judge Bench of this Court in Sterling Agro Industries v. UOI [2012 (6) TMI 76 - DELHI HIGH COURT - LB], the Court is of the view that it would not be justified in declining to exercise jurisdiction on the doctrine of forum conveniens. Consequently, the Court is satisfied that the present petition is maintainable in this Court. - Application disposed of Issues:1. Maintainability of the petition regarding service tax demand.2. Jurisdiction of the High Court to entertain the petition.3. Stay of enforcement of the demand of duty, interest, and penalty.Issue 1: Maintainability of the petition regarding service tax demandThe petitioner, engaged in operating vehicle leases, challenged a service tax demand confirmed by the respondent. The petitioner paid Value Added Tax (VAT) under the Delhi Value Added Tax Act, 2004 (DVAT Act) for transactions in Delhi. The petitioner argued that since a part of the cause of action arose in Delhi, the High Court should entertain the petition. The court considered various legal precedents and the petitioner's centralized registration in Mumbai for service tax but found that the cause of action in Delhi justified the court's jurisdiction.Issue 2: Jurisdiction of the High Court to entertain the petitionThe court analyzed the legal position based on previous judgments, particularly the Sterling Agro Industries case, which clarified the concept of forum conveniens regarding the High Court's jurisdiction. The court noted that the petition sought a declaration on transactions throughout India and the quashing of the order from Mumbai. As the transactions covered by the order-in-original included those in Delhi and considering the legal principles, the court held that it was justified in not declining jurisdiction based on forum conveniens.Issue 3: Stay of enforcement of the demand of duty, interest, and penaltyRegarding the enforcement of the service tax demand, the court directed the petitioner to furnish a bank guarantee for 10% of the demand within two weeks to stay enforcement during the petition's pendency. The court disposed of the application with this directive.In conclusion, the High Court found the petition maintainable due to the cause of action in Delhi, upheld its jurisdiction based on legal principles, and granted a stay on the enforcement of the service tax demand pending the petition's resolution. The respondents were directed to file replies, and the matter was listed for further hearing.
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