Who can be respondent in an appeal before Tribunal?
IN a recent case before the CESTAT, the issue was whether when the Service Tax is paid on the total consideration by the Principal contractor, the sub contractor need not pay the tax. The appeal was filed by the sub-contractor and the respondent was the Commissioner of Customs, Central Excise & Service Tax.
The Tribunal wanted the Principal contractor also to be impleaded as a respondent.
The short order of the CESTAT can be reproduced here:
1. The crux of the case of the appellant-assessee is that the principal contractor M/s. B. Girijapathy Reddy & Co (M/s. BGR) had remitted the service tax on total consideration received from the employer to Revenue and deducted that amount from the amounts due to the petitioner herein, while retaining a small amount as commission (for having procured the contract from the employer). The remittances were by M/s. BGR on its own account whether could be treated as remittances by the petitioner which had provided the taxable service of “Site Formation and Clearance, Excavation and Earthmoving and Demolishing” defined under Section 65(97a) of the Finance Act, 1994, is the matter to be considered eventually.
2. In the circumstances of the case it is considered appropriate that M/s. BGR and Co which is a party to this tax triangle, is impleaded as a Respondent in this appeal. The petitioner may file an appropriate application for such impleadment, within three weeks. List the appeal after three weeks.
Here the question was whether the sub contractor is required to pay Service Tax even if the Principal Contractor has paid the tax on the total consideration. Obviously the Commissioner wanted Service Tax from the sub contractor too and he has appealed to the Tribunal making the Commissioner the respondent. Now, how can the Principal contractor be made a respondent and what is the guarantee that he would respond to the Tribunal?
Suppose the principal contractor is a Mega PSU. The only fact to be verified is whether the principal contractor has paid the Service Tax on the total consideration. This can be verified by the Commissioner or even proof can be produced before the Tribunal. What is the need to make the Principal Contractor a respondent before the Tribunal? And what order can the Tribunal pass against the Principal contractor? Can it give any directions to the Principal Contractor? Can the Tribunal dismiss the appeal of the sub contractor because the principal contractor has chosen not to respond?
Are we not complicating things by bringing in an unrelated third respondent in a dispute between the assessee and the Commissioner?.
In fact the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 has an answer to this tricky question.
Rule 12 of the Rules 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.
There is no choice - in an appeal by an assessee, the Commissioner and only the Commissioner shall be made the respondent. There is no provision for making a third party as a respondent.
Even in the Form for Appeal S.T-5, there is no provision for more than one respondent. The Appeal Form mentions only ‘respondent' and not ‘respondents'. SO, THERE IS NO PROVISION TO FILE AN APPEAL AGAINST ANY PERSON OTHER THAN THE COMMISSIONER.
Then how can the Tribunal direct a third party to be impleaded as a respondent? The President of the Tribunal has been a distinguished judge of a High Court and is an authority on the Constitution of India. He is perhaps trying to bring the High Court procedures into the Tribunal. But this Tribunal is only a creature of the Customs Act and not a High Court and so has to function within the Customs Act and the Rules framed by the Tribunal itself. The President had in an earlier order held that the proceedings by the Department against a Railway Divisional Manager without arraying the Union of India as a respondent were not valid ().
Are we complicating matters and reinventing the Tribunal thirty years after its formation?