I don't think it's necessary to use semi-quotes around the variables, try:
curl -XPOST 'http://localhost/Service' -d "path=%2fxyz%2fpqr%2ftest%2f&fileName=1.doc"
%2f
is the escape code for a /
.
http://www.december.com/html/spec/esccodes.html
Also, do you need to specify a port? ( just checking :) )