Fourteen years after the National Tax Tribunal was constituted to hear “substantial questions of law” in relation to Income Tax, Sales Tax, Service Tax and Excise laws, the Supreme Court on Thursday held the tribunal to be unconstitutional.
A five-judge Constitution bench declared that the National Tax Tribunal Act 2005 was bad in law as it did not possess characteristics of a court even though the legislature bestowed it with adjudicatory functions.
Dealing with a bunch of petitions which questioned the validity of the Act by finding fault with its individual
provisions, the bench comprising Chief Justice RM lodha, Justices JS Khehar,
J Chelameswar, AK Sikri and Rohington Nariman agreed that the Act in its present form had to be struck down.
“In the absence of the aforesaid provisions which have been held to be unconstitutional, the remaining provisions have been rendered otiose and worthless, and as such, the provisions of the NTT Act, as a whole, are hereby set aside,” the bench said.
While ruling that the legislature can create tribunals and even assign it adjudicatory functions, the bench said, “in effecting such transfer (of jurisdiction), the court to which the power of adjudication is transferred, must be endured with salient characteristics, which were possessed by the court from which the adjudicatory power has been transferred.”
In the present case, the Court held that NTT was created to replace High Courts but its Chairperson and members were not judicial members and not equipped with knowledge of law to deal with disputes arising out of laws relating to Income Tax, Sales Tax, Excise Tax and Service Tax.
“Since the Chairperson /Members of the NTT will be required to determineIJ substantial questions of law arising out of decisions of the Appellate Tribunals, it is difficult to appreciate how an individual, well-versed only in accounts, would be able to discharge such functions.
In Section 15, the Act provided for Chartered Accountants and Company Secretaries to present a case before the tribunal. “We find it difficult to accept the prayer made by the Company Secretaries to allow them, to represent a party to an appeal before the NTT.”
The Court also faulted the law on the ground that the tribunal would sit in Delhi alone with the Centre getting full power to appoint Chairman and members and their place of sitting. “An unsuitable/disadvantageous Chairperson or Member could be easily moved to an insignificant jurisdiction, or to an inconvenient posting. This could be done to chastise him, to accept a position he would not voluntarily accede to,” the bench said.