By TIOL News Service

NEW DELHI, DEC 20, 2013: THE appellant is the Divisional Railway Manager who had received a Show Cause Notice from the Service Tax Department, which was adjudicated by a Superintendent. The Senior Divisional Manager filed an appeal with the Commissioner (Appeals), which was rejected. The aggrieved Senior Divisional Manager is in appeal before the CESTAT.

The entire process till the CESTAT proceeded on the assumption that the assessee is the Divisional Railway Manager, North Western Railway, Ajmer. At no stage of the process, was the Union of India, Department/Ministry of Railways represented by either the Secretary/Chairman, Railway Board arrayed as a party to the adjudication proceedings. The material on record including the Show Cause Notice, the adjudication order and the order passed by the Commissioner (Appeals) clearly reveal that the taxable service of renting of immovable property is in respect of immovable property belonging to the Railways, a department of the Central Government.

The Tribunal found that proceedings against the Divisional Manager without arraying the Union of India as a respondent were not valid.

The Tribunal observed,

++ Qua provisions of the Constitution (Article 300) and settled and binding precedential authority, it is clear and beyond disputation that 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 drew strength from the decision of the Supreme Court in Chief Conservator of Forests, Govt. of A.P. vs. Collector and others in which the Supreme Court had clearly held that, “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.”

So, the Tribunal held: The adjudication order as confirmed by the order of the Commissioner (Appeals) in this case, (in circumstances where the Union of India, Ministry of Railways represented by the authorised designated authority was not arrayed as a party to the assessment proceedings) are incompetent and consequently the adjudicated liability cannot be recovered by lawful process of law, from the Indian Railways, a department of the Union of India or from any division thereof. 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.

Tribunal directed that a copy of this order be sent to the CBEC for information and issuance of appropriate guidelines to the field formation.

(See 2013-TIOL-1891-CESTAT-DEL)