Constitution of the Goods and Services Tax Appellate Tribunal held as unconstitutional by Hon'ble Madras High Court

[Ganeshan Kalyani]

The Hon'ble Madras HIgh Court in the case of Revenue Bar Association versus Union of India, The Goods and Services Tax Council, The State of Tamil Nadu has :

1. struck down Section 110(1)(b)(iii) of the CGST Act which states that a Member of the Indian Legal Services, who has held a post not less than Additional Secretary for three years, can be appointed as a Judicial Member in Goods and Services Tax Appellate Tribunal (GSTAT).

2. struck down Section 109(3) and 109(9) of the CGST Act, 2017, which prescribes that GSTAT shall consists of one Judicial Member, one Technical Member (Centre) and one Technical Member (State).

3. rejected the argument that Sections 109 & 110 of the CGST Act, 2017 and TNGST Act, 2017 are ultra vires, in so far as exclusion of lawyers from the scope and view for consideration as members of the tribunal.

1. struck down Section 110(1)(b)(iii) of the CGST Act, 2017 which states that a Member of the Indian Legal Services, who has held a post not less than Additional Secretary for three years, can be appointed as a Judicial Member in Goods and Services Tax Appellate Tribunal (GSTAT).

Petitioners challenge the consideration of a Member of the Indian Legal Services who is eligible for being appointed as a member of the Appellate Tribunal. It is the submitted that Members of the Indian Legal Services have been held not to be eligible for being appointed as members of NCLT and other tribunals in Union of India Vs. R.Gandhi reported in 2010 (5) TMI 393 - SUPREME COURT, wherein the Hon'ble Supreme Court at para 120 (i) has observed as under.

"Only Judges and advocates can be considered for appointment as judicial members of the Tribunal. Only High Court Judges, or Judges who have served in the rank of a District Judge for at least five years or a person who has practised as a lawyer for ten years can be considered for appointment as a judicial members. Persons who have held a Group A post or equivalent post under the Central or State Government with experience in the Indian Company Law Service (Legal Branch) and the Indian Legal Service (Grade I) cannot be considered for appointment as judicial members as provided in sub-sections (2) (c) and (d) of Section 10-FD. The expertise in Company Law Service or the Indian Legal Service will at best enable them to be considered for appointment as technical members."

Thus, the High Court struck down Section 110(1)(b)(iii) of the CGST Act which states that a Member of the Indian Legal Services, who has held a post not less than Additional Secretary for three years, can be appointed as a Judicial Member in Goods and Services Tax Appellate Tribunal (GSTAT).

2. The Hon'ble Madras High Court has struck down Section 109(3) and 109(9) of the CGST Act, 2017, which prescribes that GSTAT shall consists of one Judicial Member, one Technical Member (Centre) and one Technical Member (State).

The composition of the Appellate Tribunal of CGST or TNGST, as the case may be, under Section 109(3) and 109(9) of the CGST Act, 2017 prescribes that the tribunal will consists of one Judicial Member, one Technical Member (Centre) and one Technical Member (State). Thus, there are two Technical Members as against one Judicial Member. The two Technical Members therefore can overrule the Judicial Member who will be in minority.

The submission of the petitioner is that any tribunal where the Judicial Member is in the minority in a Bench, is violative of Articles 14 and 50 of the Constitution of India. It is the plea that for independence, impartiality and to ensure public confidence in the justice delivery system, it is essentially incumbent that the administrative members should not be in majority in a Bench.

According to the petitioners, administrative members would only be the mouth piece of the Government and this will not instil confidence in the minds of the litigant. It is therefore contended that any tribunal in which the Government is always the party against whom the relief is sought for, the number of administrative members cannot be more than the judicial member in the Bench. Simply put, bureaucrats cannot overrule a Judicial Member, who is or has been a Judge. It is stated that the proceedings in the tribunal are judicial proceedings and the administrative members cannot overrule a Judge.

The appellate tribunal is constituted also to see whether the legal principles and the decision making process are correct and fair. The expert members who are not well trained in law, cannot be permitted to overrule the judicial member on these aspects.

A Hon'ble Division Bench judgment of this Court in S. MANOHARAN VERSUS THE DEPUTY REGISTRAR, CENTRAL ADMINISTRATIVE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI AND THE REGISTRAR, CENTRAL ADMINISTRATIVE TRIBUNAL, CHENNAI, UNION OF INDIA, REP. BY THE COMMANDING OFFICER, INS KATTABOMMAN, NAVAL BASE, VIJAYANARAYANAM, TIRUNELVELI, J. SOOSAIRAJ [2015 (2) TMI 1273 - MADRAS HIGH COURT], while considering an issue as to whether the number of administrative members can be more than the judicial members in the Central Administrative Tribunal, compared the composition of the National Green Tribunal constituted under the National Green Tribunal Act, 2010. Proviso to Section 4 (4)(c) of the National Green Tribunal Act provides that number of expert members shall be equal to number of judicial members.

Mr.Arvind Datar, learned Senior Counsel appearing for the petitioners would state that the composition of the Benches in which the Technical Members would be majority is unconstitutional and he would state that Section 109 of the CGST Act, 2017, which prescribes that the tribunal shall consist of One Judicial Member, one Technical Member (Centre) and one Technical Member (State) i.e., two administrative members as against one judicial member is contrary to mandate of Article 50 of the Constitution of India and such a composition would seriously affect the independence of judiciary.

Thus, the Court struck down Section 109(3) and 109(9) of the CGST Act, 2017, which prescribes that GSTAT shall consists of one Judicial Member, one Technical Member (Centre) and one Technical Member (State).

3. rejected the argument that Sections 109 & 110 of the CGST Act, 2017 and TNGST Act, 2017 are ultra vires, in so far as exclusion of lawyers from the scope and view for consideration as members of the tribunal.

The challenge is to the vires of Section 110 (1)(b) of the CGST Act, on the ground of exclusion of lawyers from being eligible to be appointed as a Judicial Member of the tribunal. According to the petitioners, exclusion of lawyers from zone of consideration as a Judicial Member, is violative of Article 14 of the Constitution of India. It is the contention of the petitioners that the exclusion of lawyers from being considered to hold the post of Judicial Member of the tribunal is a departure from the existing practice. It is the case of the petitioners that Advocates are eligible to be considered as members of various tribunals and there is no justification or reason as to why they should be excluded from the zone of consideration of being appointed as Judicial Members under the CGST and TNGST Act, 2017. The petitioners state that in the Income Tax Appellate Tribunal, which is the oldest tribunal of India, CESTAT, the Sales Tax /VAT Tribunals, Advocates having more than ten years of experience were being considered for selection as Judicial Members. It is therefore stated that there is no valid explanation as to why the CGST Act, 2017 and the TNGST Act, 2017 excludes Advocates having more than 10 years of experience, from being considered as Judicial Members of the tribunal.

It is the case of the petitioner that the Hon'ble Supreme Court in R.K.Jain Vs. Union of India, reported in 1993 (5) TMI 23 - SUPREME COURT and some other cases has held that the tribunal members must have a judicial approach and expertise in that particular branch of Constitution, administrative and tax laws. It is therefore submitted that lawyers having more than ten years of experience in that branch of law should be considered for appointment as judicial members, as they have the legal expertise and judicial experience and are legally trained to understand, examine and adjudicate upon complex question of law, which would arise for consideration.

it is contended that the Hon'ble Supreme Court in Madras Bar Association Vs. Union of India, reported in 2014 (9) TMI 821 - SUPREME COURT, also emphasises the need for the advocates to be eligible to be considered as Judicial Members.

The petitioners state that lawyers having more than ten years experience, practising in the tax bar in the various tribunals are more competent to adjudicate the issues arising under the CGST Act. In fact it is submitted that they are more experienced than a District Judge, who might not have dealt with any tax case during his entire tenure.

Thus, the argument that Sections 109 & 110 of the CGST Act, 2017 and TNGST Act, 2017 are ultra vires, in so far as exclusion of lawyers from the scope and view for consideration as members of the tribunal, is rejected. However, we recommend that the Parliament must consider to amend section for including lawyers to be eligible to be appointed as Judicial Members to the Appellate Tribunal in view of the issues which are likely to arise for adjudication under the CGST Act and in order to maintain uniformity in various statutes.