CESTAT Third Member: Can It Exceed Reference Points?

In the intricate world of tax litigation, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) plays a pivotal role in resolving disputes. But what happens when a Division Bench reaches a deadlock due to differing opinions? The President refers the matter to a Third Member—but does this Third Member have unlimited power? A critical question arises: Whether the Third Member of CESTAT can go beyond the point of reference in case of difference of opinion?

This blog delves into the jurisdictional boundaries of the Third Member, drawing from statutory provisions, judicial precedents, and related case insights. Understanding these limits is essential for litigants, practitioners, and businesses navigating customs, excise, and service tax appeals.

The Legal Framework: Section 129C of the Customs Act, 1962

The authority of the Third Member is governed primarily by Section 129C(5) of the Customs Act, 1962. This provision stipulates that when members of a Bench differ on any point, the President shall refer the matter to a Third Member specifically on the point or points on which they differ. The Third Member's role is narrowly tailored: to provide an opinion solely on those referred points. Once delivered, the matter returns to the original Bench for final disposal by majority. 2005 0 Supreme(Guj) 702 2006 0 Supreme(Guj) 11

Going beyond this scope would typically constitute a jurisdictional overreach, as the Third Member derives power only from the President's precise reference. Courts have consistently upheld this principle to maintain procedural integrity and prevent scope creep in tribunal proceedings.

Jurisdiction Limitation: Strict Adherence to Referred Points

The Third Member cannot address issues outside the formulated points of disagreement. This limitation ensures fairness and confines the resolution process to the actual controversy.

• Explicit Statutory Restriction: Section 129C(5) mandates that the President can only refer such point or points of difference. The Third Member hears arguments limited to these, preventing any expansion. 2005 0 Supreme(Guj) 702
• Consequence of Overstepping: If the Third Member opines on extraneous matters, it risks invalidation. For instance, an opinion diverging from both original views without sticking to the reference has been deemed a violation of authority. 2006 0 Supreme(Bom) 583

A landmark observation reinforces this: The Third Member can decide only such point or points because the President can make reference only on such point or points of difference of opinion. The Third Member cannot derive any further jurisdiction because the matter has thereafter to be placed before the Bench which originally heard the appeal. 2010 0 Supreme(Guj) 185

Judicial Precedents Reinforcing the Principle

Courts and tribunals have repeatedly quashed decisions where the Third Member exceeded bounds, emphasizing procedural discipline.

• High Court Intervention: In a case challenging a Third Member's order, the court held the entire exercise—including the President's reference and the Third Member's order—bad in law being contrary to statutory provisions. It directed fresh hearings by the original Division Bench per Section 129C(2). 2010 0 Supreme(Guj) 185
• CESTAT Internal Consistency: Coordinate Benches have noted differences referred precisely, such as Whether CESTAT is right in law in... not extending to unrelated issues.

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• Resolution by Reference: In split verdicts, the Third Member resolved disputes by referencing larger Bench decisions strictly within the framed points, like the second point of difference in a technical dispute. 2023 Supreme(Online)(CESTAT) 1332

These precedents illustrate that deviations invite judicial scrutiny, often leading to remands or quashing.

Related Insights from CESTAT Proceedings

Beyond direct authorities, other CESTAT matters highlight practical applications of this rule, ensuring consistency across appeals.

• Split Verdicts in Excise Appeals: In a CENVAT credit dispute involving a steel plant's captive power plant, a split led to Third Member reference on specific terms post a 05.11.2012 CESTAT order. The focus remained on whether capital goods qualified within factory premises, without broadening. 2020 0 Supreme(Mad) 39
• Penalty Imposition Cases: Where differences arose on penalty quantum under Section 112, the Third Member aligned with one view, modifying penalties from Rs. 5 lakhs to Rs. 2.20 lakhs, but stayed within smuggling knowledge points under Section 112(b). 2015 0 Supreme(Del) 459
• Classification Disputes: In goods classification (e.g., Base Oil vs. HSD), tribunals reversed lower findings but respected reference limits, applying the 'most akin' test without extraneous considerations. 2025 0 Supreme(SC) 553

These examples underscore that even in complex technical or factual disagreements—like delay calculations (323 vs. 412 days) or refund entitlements—references are tightly scoped. 2025 0 Supreme(Mad) 3652

Potential Pitfalls and Judicial Challenges

Litigants must vigilantly monitor references to avoid overreach:

• Formulation Precision: Points must be clearly defined by the President; vague references invite disputes.
• Post-Opinion Process: The original Bench decides by majority, incorporating the Third Member's view only on referred points. Any broader opinion is non-binding and challengeable.
• Rectification Applications: Attempts to rectify beyond scope have failed, as seen in appeals under Sections 128-129. 2024 0 Supreme(Guj) 1368

In insurance-related consumer disputes before NCDRC (analogous to tribunal splits), differences on policy conclusion were referred precisely, with majority views prevailing without expansion.

SBI Life Insurance Co. Ltd. VS D. Srinivas

SBI Life Insurance Co. Ltd. VS D. Srinivas

Recommendations for Practitioners and Litigants

To safeguard appeals:- Scrutinize References: Ensure the President's order mirrors exact differences; object if broader.- Track Proceedings: Challenge any Third Member deviation via review or writ, citing Section 129C(5).- Prepare for Remand: Anticipate return to original Bench for majority decision.

Conclusion and Key Takeaways

Generally, the Third Member of CESTAT cannot go beyond the points of reference in resolving differences of opinion. Their role is strictly confined under Section 129C(5), as affirmed in precedents like 2006 0 Supreme(Guj) 11, where courts stress: the matter must be placed back before the original Bench for majority disposal. 2006 0 Supreme(Guj) 11

Key Takeaways:- Jurisdiction is limited to referred points only. 2005 0 Supreme(Guj) 702- Overreach leads to quashing and fresh hearings. 2010 0 Supreme(Guj) 185- Precision in formulation prevents errors.

This analysis provides general insights into CESTAT procedures and is not specific legal advice. Consult a qualified professional for case-specific guidance. Stay informed on evolving tax tribunal jurisprudence to strengthen your appeals.

References:- 2005 0 Supreme(Guj) 702 2006 0 Supreme(Guj) 11 2006 0 Supreme(Bom) 583 2010 0 Supreme(Guj) 185

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