ST - Leasing of Vehicles - Deemed Sale - VAT paid - Is Service Tax payable? Delhi High Court stays Adjudication Order of Mumbai ST Commissioner
By TIOL News Service:
NEW DELHI, MAY 12, 2016: THE Petitioner is engaged in the business of operating leases of vehicles across India for which purpose it has entered into Master Lease Agreements (MLAs) with customers. Most of the MLAs were executed in Delhi. The stamp duty thereon was also paid to the Government of the National Capital Territory of Delhi. While there may be vehicles which are registered pursuant to the said MLAs in different states, there are vehicles that have also been registered in Delhi and are operating in Delhi.
The service tax sought to be collected from the Petitioner, in respect of which a demand has been confirmed by the impugned order dated 4th November, 2015 passed by Commissioner, Service Tax at Mumbai, includes transactions that were conducted in Delhi and in respect of which the Petitioner has paid Value Added Tax (VAT) in terms of the Delhi Value Added Tax Act, 2004 (DVAT Act).
The Petitioner has, for the purposes of service tax, a centralized registration at Mumbai, in respect of all its transactions throughout India.
Maintainability of the Petition: A full Bench of the High Court had in Sterling Agro Industries Ltd. v. UOI - 2011-TIOL-457-HC-DEL-CUS-LB had summarised the legal position as:
1. Even if a miniscule part of cause of action arises within the jurisdiction of this court, a writ petition would be maintainable before this Court.
2. An order of the appellate authority constitutes a part of cause of action to make the writ petition maintainable in the High Court within whose jurisdiction the appellate authority is situated. Yet, the same may not be the singular factor to compel the High Court to decide the matter on merits. The High Court may refuse to exercise its discretionary jurisdiction by invoking the doctrine of forum conveniens.
3. The conclusion that where the appellate or revisional authority is located constitutes the place of forum conveniens is not correct as it will vary from case to case and depend upon the lis in question.
4. The finding that the court may refuse to exercise jurisdiction under Article 226 if only the jurisdiction is invoked in a mala fide manner is too restricted/constricted as the exercise of power under Article 226 being discretionary cannot be limited or restricted to the ground of mala fide alone.
5. While entertaining a writ petition, the doctrine of forum conveniens and the nature of cause of action are required to be scrutinized by the High Court depending upon the factual matrix of each case.
In this particular case, the High Court noted that the prayer of the petitioner 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.
Another Prayer seeks the quashing of the Order-in-Original dated 4th November, 2015 passed by 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.
The High Court took 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. The Respondents were directed to file their respective replies to the petition on merits within four weeks.
It is further directed that subject to the Petitioner furnishing a bank guarantee to the extent of 10% of the impugned demand of service tax (excluding penalty and interest) in terms of the impugned order dated 4th November 2015 passed by the Commissioner of Service Tax - VII, Mumbai, to the satisfaction of the latter, within a period of two weeks from, there shall be a stay of the enforcement of the above demand of duty, interest and penalty during the pendency of the present petition.
(See 2016-TIOL-924-HC-DEL-ST)
