2019 (9) TMI 983 - HC - GST

Indian Legal Service Members Exclusion from GST Tribunal Roles Ruled Unconstitutional

Revenue Bar Association Versus Union of India, The Goods and Services Tax Council, The State of Tamil Nadu

The court struck down provisions allowing Indian Legal Service members to be appointed as Judicial Members and administrative members to outnumber ... Constitution of the Goods and Services Tax Appellate Tribunal and the qualification and appointment of members - Vires/Validity of Sections 109 and 110 of CGST Act, 2017 and Tamil Nadu Goods and Services Tax Act, 2017 - exclusion of advocates from being considered for appointment as a Judicial Member in GST Appellate Tribunal - eligibility of Indian Legal Service, to be appointed as a Judicial Member of the appellate tribunal - composition of the National Bench, Regional Benches, State Bench and Area Benches of the GST Appellate Tribunal. HELD THAT:- An appeal from the adjudicating authority lies to an appellate authority under Section 107 of the CGST Act. Section 107 (16) states that the order of the appellate authority, subject to the provisions of Section 108 or Section 113 or Section 117 or Section 118, is final. The revisional authority subject to the provisions of Section 121 and any rules made thereunder, may, on his own motion or upon information received by him or on request from the Commissioner of State tax, or the Commissioner of Union Territory Tax, shall call for and examine the record of any proceedings, and if he considers that any decision or order passed under this Act or under the State Goods and Service tax Act or the Union Territory Goods and Services Tax Act, by any officer subordinate to him is erroneous and is prejudicial to the interest of revenue or it is illegal or improper or has not taken into account certain material facts, shall stay the operation of the order for such period as he deems fit and after giving the person concerned, an opportunity of being heard, can pass order as he thinks just and proper, including enhancing or modifying or annulling the said decision or order. The order of the appellate authority and the order of the revisional authority, are taken to the appellate tribunal. The appellate tribunal is constituted under Section 109 of the CGST Act - A perusal of Section 109 shows that it consists of a National Bench or the Regional Benches and State bench or the Area Benches. Section 109(5) provides that the National Bench and the Regional Benches, shall hear the appeals against the orders passed by the Appellate Authority or the Revisional Authority in cases where one of the issues involved relates to the place of supply and order of the National Bench or the Regional Benches can be challenged only in the Hon'ble Supreme Court. The orders of the National Bench or the Regional Benches are not subjected to any appellate jurisdiction of High Court. It is therefore similar to an order passed by a Central Administrative Tribunal. It is a different question as to whether such an order would be subjected to Article 227 of the Constitution of India or not and we are not going into the controversy. This Court is aware of the fact that the National Tribunal cannot adjudicate the vires of the notifications issued under the Act or the constitutional validity of the notifications / regulations and the very consequences of the Act, but nevertheless, it cannot be said that the National Bench is only an extension of the mechanism to determine only the quantum of tax, which is only a subject matter of experts. The quantum of tax is determined on the interpretation of various sections and notifications - It also involves adjudication upon the orders of the appellate authority. It has to be borne in mind that the decision making process has to be scrutinised by the tribunal. In doing so, judicial principles have to be kept in mind. 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. The principle which emerges is that while deciding issues as to whether the decision making process by the adjudicating authority or the appellate authority was just, fair and reasonable and to decide issues regarding interpretation of notifications and sections under the CGST Act a properly trained judicially mind is necessary which the experts will not have. The number of expert members therefore cannot exceed the number of judicial members on the bench. Thus, 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 GSTAT, is struck down - Section 109(3) and 109(9) of the CGST Act, 2017, which prescribes that the tribunal shall consists of one Judicial Member, one Technical Member (Centre) and one Technical Member (State), is struck down. 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. Petition disposed off. Issues Involved:1. Exclusion of advocates from being considered for appointment as Judicial Members in the GST Appellate Tribunal.2. Eligibility of members of the Indian Legal Service for appointment as Judicial Members.3. Composition of the GST Appellate Tribunal where administrative members outnumber judicial members.Issue-wise Detailed Analysis:1. Exclusion of Advocates:The petitioners challenged Section 110(1)(b) of the CGST Act, arguing that excluding advocates from being eligible for appointment as Judicial Members violates Article 14 of the Constitution. They contended that advocates with over ten years of experience are eligible for similar positions in other tribunals like the Income Tax Appellate Tribunal and CESTAT, and there is no justification for their exclusion. The court held that there is no vested right for advocates to be considered for such appointments unless explicitly provided by law. However, it recommended that the Parliament reconsider the exclusion of advocates, given their expertise and the existing practice in other tribunals.2. Eligibility of Indian Legal Service Members:The petitioners argued that Section 110(1)(b)(iii), which allows members of the Indian Legal Service with at least three years of experience as Additional Secretary to be appointed as Judicial Members, is contrary to the Supreme Court's ruling in Union of India vs. R. Gandhi. The court agreed, referencing the Supreme Court's decision that only judges and advocates should be considered for judicial appointments in tribunals, and struck down the provision allowing Indian Legal Service members to be appointed as Judicial Members.3. Composition of the GST Appellate Tribunal:The petitioners challenged the composition of the tribunal under Sections 109(3) and 109(9) of the CGST Act, which prescribes one Judicial Member and two Technical Members (one from the Centre and one from the State). They argued that this composition violates Articles 14 and 50 of the Constitution, as it allows administrative members to outnumber judicial members, potentially compromising the tribunal's independence and impartiality. The court agreed, emphasizing the need for judicial independence and the principle of separation of powers. It struck down the provisions allowing administrative members to outnumber judicial members in the tribunal.Conclusion:The court struck down Section 110(1)(b)(iii) of the CGST Act, which allowed Indian Legal Service members to be appointed as Judicial Members, and Sections 109(3) and 109(9) of the CGST Act, which allowed administrative members to outnumber judicial members in the tribunal. It rejected the argument that excluding advocates from being considered for appointment as Judicial Members is unconstitutional but recommended that the Parliament reconsider this exclusion. The writ petitions were allowed to the extent mentioned, with no costs.