Fate of GSTAT in the light of recent SC’s judgment on Tribunal Reforms Act, 2021

The Hon’ble Supreme Court in the case of Madras Bar Association Versus Union of India And Another - 2025 (11) TMI 1330 - Supreme Court held that the provisions of the Tribunals Reforms Act, 2021 that reintroduced clauses previously struck down by the Court are unconstitutional. The Court reaffirmed the binding nature of its earlier directions in MADRAS BAR ASSOCIATION Versus UNION OF INDIA - 2021 (10) TMI 885 - Supreme Courton appointments, qualifications, tenure, and service conditions for tribunal members and chairpersons, directing the government to establish a National Tribunals Commission within four months.

Facts:

The Madras Bar Association (“the Petitioner”) challenged the constitutionality of several provisions of the Tribunals Reforms Act, 2021, particularly those relating to appointments, qualifications, tenure, and service conditions of tribunal members.

The Union of India and Others, (“the Respondents”) enacted the 2021 Act which reintroduced provisions akin to those in the earlier Tribunals Reforms Ordinance, previously struck down, allegedly undermining judicial independence and violating separation of powers.

The Petitioner contended that these provisions nullified binding Supreme Court judgments dating back to SP. SAMPATH KUMAR AND OTHERS Versus UNION OF INDIA AND OTHERS - 1986 (12) TMI 136 - Supreme Court and violated constitutional principles including Articles 14 and 21.

The Respondent contended that Parliament has plenary legislative power and can override judicial directions in law-making, asserting the 2021 Act represented a policy choice within constitutional limits.

The Petitioner approached the Supreme Court by a writ petition contending the statutory provisions violated constitutional safeguards on tribunal independence.

Issue:

Whether the reintroduced provisions of the Tribunals Reforms Act, 2021 infringe the constitutional principles of judicial independence, separation of powers, and violate the basic structure of the Constitution?

Held:

The Hon’ble Supreme Court held as under:

• Observed that, Parliament cannot nullify or circumvent binding judgments of this Court as constitutional supremacy is part of basic structure and the Constitution is what the Court declares it to be.
• Noted that, re-enacting previously declared unconstitutional provisions amounts to legislative override in the strictest sense and violates constitutional supremacy.
• Held that, the principles and directions in Madras Bar Association IV and V judgments continue to govern tribunal appointments, qualifications, and tenure.
• Clarified that. all tribunal appointments and selections made prior to the 2021 Act but recognized afterward must comply with earlier parent statutes and Supreme Court directions.
• Directed the Government to establish a National Tribunals Commission within four months to bring systemic reforms and ensure judicial independence from executive control and rejected Union’s plea for a larger bench reference for constitutionality, citing no cogent reasons and emphasizing urgency to end uncertainty and vacancies plaguing tribunals.
• Noted that “what the 2021 Ordinance did through amendments to Section 184 of the Finance Act, 2017, the Impugned Act now does through Sections 3, 5, and 7.” It held that replicating provisions that have been declared unconstitutional does not cure the law but “consciously defies it.” Accordingly declared Sections 3, 4, 5, 6 and 7 of the 2021 Act unconstitutional and struck them down accordingly.

Our Comments:

This judgment emphatically upholds the supremacy of the Constitution and the constitutional limits on parliamentary law-making when it conflicts with binding judicial precedents. It reiterates the foundational principles set out in S.P. Sampath Kumar (supra) and successive Madras Bar Association judgments, which collectively shape the standards of judicial independence and qualifications for tribunals. The judgment sharply distinguishes legislative policy from permissible legislative reform, holding that no legislative sleight of hand can revive provisions already declared unconstitutional, emphasizing that “merely shifting the same content does not cure constitutional defects.” The Court also continues the trend in RK. JAIN Versus UNION OF INDIA - 1993 (5) TMI 23 - Supreme Court, L. Chandra Kumar Versus Union Of India And Others - 1997 (3) TMI 90 - Supreme Court, and Union of India Versus R. Gandhi President Madras Bar Association - 2010 (5) TMI 393 - Supreme Court, reinforcing the necessity for tribunal members to have judicial temperament and independence comparable to courts.

The judgment also stresses the practical necessity of institutional reform, mandating the creation of an independent National Tribunals Commission to resolve systemic deficiencies and protect tribunal autonomy comprehensively.

This judgment will directly impact the current architecture of the GST Appellate Tribunal, since several features of the GSTAT framework under Sections 109, and Section 110 of the CGST Act and related amendments mirror the very tenure, age and executive‑heavy selection models repeatedly invalidated in the Madras Bar Association line of cases and reaffirmed in this decision. Any attempt to constitute or run GSTAT on the basis of short fixed terms, eligibility floors such as a mandatory minimum age of fifty years, or search‑cum‑selection committees dominated by executive nominees will now be constitutionally vulnerable and liable to challenge.

For GST litigation, this is likely to mean that functional GSTAT must be designed with clear judicial primacy, longer and secure tenure and transparent selection standards comparable to the higher judiciary, which in turn can restore confidence in the tribunal as the true second appellate forum and gradually reduce over‑reliance on High Courts for routine GST disputes.

Relevant Provisions:

Sections 3, 4, 5, 6, and 7 of the Tribunals Reforms Act, 2021 struck down.

Section 3. Qualifications, appointment, etc., of Chairperson and Members of Tribunal.-

“(1) Notwithstanding anything contained in any judgment, order or decree of any court, or in any law for the time being in force, the Central Government may, by notification in the Official Gazette, make rules to provide for the qualifications, appointment, salaries and allowances, resignation, removal and other conditions of service of the Chairperson and Member of a Tribunal after taking into consideration the experience, specialisation in the relevant field and the provisions of this Act:

Provided that a person who has not completed the age of fifty years shall not be eligible for appointment as a Chairperson or Member.

(2) The Chairperson and the Member of a Tribunal shall be appointed by the Central Government on the recommendation of a Search-cum-Selection Committee constituted under sub-section (3), in such manner as the Central Government may, by rules, provide.

…”

Section 4. Removal of Chairperson or Member of Tribunal-

“The Central Government shall, on the recommendation of the Committee, remove from office, in such manner as may be provided by rules, any Chairperson or a Member, who---

1. has been adjudged as an insolvent; or
2. has been convicted of an offence which involves moral turpitude; or
3. has become physically or mentally incapable of acting as such Chairperson or Member; or
4. has acquired such financial or other interest as is likely to affect prejudicially his functions as such Chairperson or Member; or
5. has so abused his position as to render his continuance in office prejudicial to the public interest:

Provided that where the Chairperson or Member is proposed to be removed on any ground specified in clauses (c) to (e), he shall be informed of the charges against him and given an opportunity of being heard in respect of those charges.”

Section 5. Term of office of Chairperson and Member of Tribunal-

“Notwithstanding anything contained in any judgment, order or decree of any court, or in any law for the time being in force,---

(i) the Chairperson of a Tribunal shall hold office for a term of four years or till he attains the age of seventy years, whichever is earlier;

(ii) the Member of a Tribunal shall hold office for a term of four years or till he attains the age of sixty-seven years, whichever is earlier:

Provided that where a Chairperson or Member is appointed between the 26th day of May, 2017 and the notified date, and the term of his office or the age of retirement specified in the order of appointment issued by the Central Government is greater than that which is specified in this section, then, notwithstanding anything contained in this section, the term of office or age of retirement or both, as the case may be, of the Chairperson or Member shall be as specified in his order of appointment, subject to a maximum term of office of five years.”

Section 6. Eligibility for re-appointment.-

1. The Chairperson and Member of a Tribunal shall be eligible for re-appointment in accordance with the provisions of this Act:

Provided that, in making such re-appointment, preference shall be given to the service rendered by such person.

2. All re-appointments shall be made in the same manner as provided in sub-section (2) of section 3.”

Section 7. Salary and allowances.-

“(1) Notwithstanding anything contained in any judgment, order or decree of any court, or in any law for the time being in force, and without prejudice to the generality of the foregoing power, the Central Government may make rules to provide for the salary of the Chairperson and Member of a Tribunal and they shall be paid allowances and benefits to the extent as are admissible to a Central Government officer holding the post carrying the same pay:

Provided that, if the Chairperson or Member takes a house on rent, he may be reimbursed a house rent higher than the house rent allowance as are admissible to a Central Government officer holding the post carrying the same pay, subject to such limitations and conditions as may be provided by rules.

(2) Neither the salary and allowances nor the other terms and conditions of service of the Chairperson or Member of the Tribunal may be varied to his disadvantage after his appointment.”

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