Union of India vs Union of India?
CESTAT questions basic flaw - Proceedings against State actors instead of the State not valid - Demands against Government Departments cannot be enforced
THE CESTAT recently delivered a landmark judgement by which all demands by the Customs, Excise and Service Tax Department against Central Government and State Government Departments have become a NULLITY - which cannot be enforced.
The basic question revolves around who should be the appellant/respondent in a case filed by/against a Government Department.
Article 300 of the Constitution states: "The Government of India may sue or be sued by the name of the Union of India and the Government of a State may use or be sued by the name of the State………"
As per Section 79 of the CPC,
"Suits by or against Government.-- In a suit by or against the Government, the authority to be named as plaintiff or defendant, as the case may be, shall be--
(a) in the case of a suit by or against the Central Government, the Union of India; and
(b) in the case of a suit by or against a State Government, the State."
So if you are filing a case against the Government, the respondent should be "Union of India" and if a Department is filing a case, the petitioner/appellant should be "Union of India", but in practice, we find that all appeals before the Tribunal are either filed against a Commissioner of Customs, Excise and Service Tax or filed by a Commissioner. Union of India is never a party. This seems to be against the above provisions.
The CESTAT recently had to consider such an issue.
The appeal was filed by the Divisional Railway Manager, North Western Railway, Ajmer against a Service Tax demand. The Tribunal observed,
Suits or proceedings against the State can be pursued only in the name of the Union of India or the concerned State, as the case may be. It is axiomatic that neither the Secretary to the Government; the Railway Board nor as has been done in the present case, the Divisional Railway Manager, Ajmer Division may in law and per se represent the Indian Railways or the Union of India, in the absence of the Central Government being arrayed as a party.
A decree passed against the Divisional Railway Manager cannot be executed against the Union of India nor can a decree or award passed against the Divisional Railway Manager be satisfied by drawals from the Consolidated Fund of India. The provisions of Chapter II, in particular, the elaborate provisions relating to procedure in financial matters set out in Articles 112 to Article 114 in the Constitution clearly indicate that a charge upon or an appropriation from the Consolidated Fund of India could only be in respect of expenditure of the Government of India.
It is noticed in several cases, clearly oblivious of this fundamental constitutional mandate, proceedings are initiated against state actors instead of the State as duly designated under the Constitutional mandate.
The Tribunal noted a Supreme Court decision wherein it was observed,
Every post in the hierarchy of the posts in the Government set-up from the lowest to the highest, is not recognized as a juristic person nor can the State be treated as represented when a suit/proceeding is in the name of such offices/posts or the officers holding such posts, therefore, in the absence of the State in the array of parties, the cause will be defeated for non-joinder of a necessary party to the lis, in any court or Tribunal.
The Tribunal held:
The adjudicated liability, in the circumstances cannot be charged on the Indian Railways. Since the very initiation of assessment proceedings, in respect of the alleged liability to service tax of the India Railways is patently misconceived, the entire proceedings are a nullity. The appeal before us preferred by the Divisional Railway Manager is also, for reasons alike, mis-conceived and so are the Misc. applications.
And so the appeal by the Divisional Railway Manager was dismissed.
Now, what are the consequences?
1. Are all the demands against Government Departments (where Union of India is not made a party) nullity and the demands simply evaporate into thin air?
2. Are all the appeals filed by Commissioners invalid, as Union of India is not made an appellant?
3. Are all the appeals in which Commissioner is the only respondent invalid, as Union of India is not made a respondent?
4. If a Railway officer has to file an appeal against a Central Excise Commissioner's order, should it be Union of India vs Union of India - can you file an appeal against yourself?
Incidentally, Rule 12 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 reads as:
RULE 12. Who may be joined as respondents - (1) In an appeal or an application by a person other than the Commissioner or the Administrator, the Commissioner concerned or the Administrator shall be made the respondent to the appeal or, as the case may be, the application.
(2) In an appeal or an application by the Commissioner or the Administrator, the other party shall be made the respondent to the appeal or as the case may be, application.
As per this, the Commissioner is to be the respondent/appellant, but what is the status of these Rules before the Constitution and the Supreme Court?
I can share a personal experience: I filed a writ in a High Court against an order of attachmentby a Deputy Commissioner and the attachment was stayed, but when the case came up for final hearing, I was told that my writ is not correct as I had not made the Union of India as a respondent. I prayed for allowing me to file a Miscellaneous Petition for inclusion of Union of India as a respondent, which was allowed by His Lordship. It is a with a sense of déjà vu that I report that it is the same judge of the High Court who, now as President of CESTAT delivered this judgement.
Now, what happens? The Tribunal has sent a copy of this judgement to the CBEC for information and issuance of appropriate guidelines to the field formation.
Let us wait and see what guidelines the CBEC is going to give.
We bring you this judgement today. Please see Breaking News.