• Notification Date: 12-04-2023
• Notification No: N/A

Constitution of GST Tribunal goes against Supreme Court Rulings

The historic introduction of a unified, one-nation, one Goods and Services Tax at a midnight session of Parliament was through a complex web of central and state laws. The Central Goods and Services Tax Act, 2017 also created a GST Tribunal. It was unfortunate that the composition and structure of this tribunal were contrary to settled principles laid down by several Supreme Court decisions. 

Consequently, this tribunal was held to be unconstitutional by the Madras High Court in Revenue Bar Association v Union of India (2019). No appeal was filed by the Union of India for a considerable time, presumably because the statutory provisions were patently unconstitutional. The result was that there has been no GST Tribunal for the last five years. 

Tribunals are part of the justice delivery system and are created as specialised fora to reduce the workload of courts. Sadly, the new provisions creating a GST Tribunal were inserted on the last day and the amended Finance Bill, 2023 was passed without any discussion or debate as the proceedings were disrupted. The new tribunal is equally unconstitutional, and several provisions are in the teeth of binding precedents laid down by the Supreme Court in no less than seven cases: Sampath Kumar (1987), L Chandrakumar (1997) and Madras Bar Association (2010, 2014, 2015, 2020, 2021). It is regrettable that laws continue to be drafted and enacted in deliberate contravention of Supreme Court judgments. 

The new GST Tribunal disqualifies lawyers from becoming judicial members when such exclusion was even recently held to be impermissible in the context of the Consumer Forum. Every other tribunal permits advocates to become judicial members and there is no reason to exclude them from this important all-India tribunal. It is illogical to select a district judge who has never dealt with any tax case but refuse to consider an advocate who has practised tax law. 

The search-cum-selection committee must recommend two names for each post and the central government will choose one of them. A similar provision in the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 was struck down by the Supreme Court. When the search committee is headed by a Supreme Court judge and senior secretaries are on the committee, why should not the selection by the committee be binding on the central government? 

From 1985, the Supreme Court has held that tribunal members should have a minimum tenure of five years with an automatic renewal for another term unless there are compelling reasons to discontinue their services. Despite this salutary rule, the 2017 amendment introduced a term of three years! When this was again held illegal, the term was increased to four years with an option for renewal for another two years, stubbornly refusing to accept the five-year norm. 

The provision of housing was a problem that was resolved by the Supreme Court fixing a house rent allowance of Rs 1,50,000 for the President and Rs 1,25,000 for members. This is now reduced to the house rent allowance of central government employees carrying the same pay, which will be woefully inadequate in major cities. 

The GST Tribunal will have one Principal Bench at New Delhi which consists of the president, a judicial member, a technical member (Centre) and a technical member (State). Similarly, the state benches will also have four-member tribunals consisting of two judicial members and two technical members. There is no logic in having one technical member for the states and another for the Centre when the Centre and state GST laws are identical. It would have been far better if each bench had just two members — one judicial and one technical. This could have doubled the number of benches available for the disposal of cases. One must also not forget from experience the extreme difficulty in selecting good candidates. With the principal bench of four members and state benches of four members each, the tribunals will easily need more than 75 members. 

The formation of the GST Tribunal should have been done by a proper bill and referred to a Parliamentary Committee. The present provisions are liable to be challenged, triggering a fresh round of litigation. The country is unlikely to see a functioning GST Tribunal for several more months to come. 

There is a serious need to change the way our tribunals are created. They are a part of the justice delivery system and must be independent. The present practice of treating them as part of the respective ministries has seriously undermined their functioning. Many tribunals have very poor infrastructure, and it is extremely difficult to recruit competent persons as no professional will leave his practice at the age of 45 for a period of four years. This results in tribunals being manned mainly by retired officials who get a few extra years of service. It is also worthwhile to consider whether it is time to have an Indian Tribunal Service that will attract professional talent and domain expertise.