Is it Fair to have a Lopsided Tribunal Under GST?

Background

Section 112 of the Central
Goods and Services Tax Act, 2017 (“CGST Act”) provides for an appeal to
the GST Appellate Tribunal. This Tribunal sits as the second Appellate
authority in the appellate mechanism, the first appeal being to the
Commissioner (Appeals).

Problem

Much water has flown under the bridge since
the first constitutional challenges were mounted against the rampant
tribunalisation in the country. The Supreme Court has dealt with such
tribunalisation on many occasions and cautioned against legislative devices to
tinker with the independence of the judiciary. However, the CGST Act not only
ignores these warnings, but goes on to push the envelope further than any
Government has attempted till date.

Unfairness

(1) Section 109(3), (4) and (9) of the CGST
Act mandates that the National Bench, Regional Bench, State Bench and the Area
Bench of the Appellate Tribunal be manned by one Judicial Member and two
Technical Members.

Now, the qualifications for the technical
members in section 110(1)(c) and (d) show that they will be invariably drawn
from the Departmental cadre. A 2:1 ratio of Judicial and Technical Members on
each bench will irredeemably tilt the Tribunal in the Government’s favour and
compromise independence of the Tribunal. In Union of India vs. R. Gandhi
(2010) 11 SCC 1, the Supreme Court has categorically held that the
number of Technical Members on a bench cannot exceed the Judicial Members. The
Madras High Court has denounced a similar provision in the Administrative
Tribunals Act as an attempt to reduce the sole judicial member to a “decorative
piece” [S. Manoharan vs. Dy. Registrar (2015) 2 LW 343 (DB)]. It
is surprising that the Government wishes to foist the same injustice all over
again despite the position in law being well settled in this regard.

(2) The term of office of Judicial Members
u/s. 110(9) and (10) is 3 years, whereas the term of office of Technical
Members u/s. 110(11) is 5 years. Apart from such discrimination being outright
unconstitutional, it sends out a discouraging message to the public at large
that the Government will remain blessed with a compliant Tribunal for a long
time. Furthermore, coupled with clauses like those relating to reappointment
(which is also a subject completely within the control of Government), such
provisions are potent enough to create apprehensions in minds of the Judicial
Members about the manner in which these Judicial Members are to set about their
judicial functions.

It is submitted, in any case, the Judicial
Members would be projected as an inferior class to the outside world at large.
Furthermore, experience has shown that it is difficult to find Judicial Members
than Technical Members and that both Central and State Governments sit over
Tribunal vacancies for a very long time. Giving shorter tenures to Judicial Members
will only bring about frequent vacancies of Judicial Members in comparison with
Technical Members.

This may bring about repeated scenarios where
there is no option but to allow two Technical Members or even one Technical
Member to constitute a Bench for lack of adequate Judicial Members as provided
for in section 110(10). Litigants will have no option but to put up with such a
Bench since section 110(14) protects proceedings of the Tribunal from being
assailed on the ground of existence of any vacancy or defect in the
constitution of the Tribunal. 

(3) Section 110(1)(b)(iii) allows a member
from the Indian Legal Services to be appointed as a Judicial Member, which is
impermissible under our Constitution [Union of India vs. R. Gandhi (2010)
11 SCC 1]. A similar clause in the RERA legislation was struck down
recently by the Bombay High Court in Neelkamal Realtors vs. Union of
India [(2018) 1 AIR Bom R 558] relying on R. Gandhi’s case.
It is against surprising that such a settled position of law is being ignored
to somehow create a compliant Tribunal.

(4) The qualifications for Technical Members
in section 110(1)(c) and (d) do not require the Technical Members to have any
experience in dealing with appellate work. In fact, even investigation officers
who have never handled any appeal will qualify to be appointed as Technical
Members under such a clause, as has been the unhappy experience of Sales Tax
Tribunals in some States like Maharashtra. Namit Sharma vs. Union of
India [(2013) 1 SCC 745] has clearly laid down that Technical Members
must not only possess legal qualifications, but also have a judicial bend of
mind. The Bombay High Court has recently, in case of the Maharashtra Sales Tax
Tribunal, held that a “judicially trained mind”, as required in Namit
Sharma, means long experience with quasi-judicial disputes and that the
mere status as a Deputy Commissioner for three years cannot suffice [Sales
Tax Tribunal Bar Association vs. State of Maharashtra – Judgment dated 28/29
September, 2017 in WP 2069/2015].

(5) Section 110(d) allows the State Government
to notify any rank of State Commissioners for appointment as Technical Member
(State). The criteria of qualifications pertains to the Constitutional
requirement of independence of the Members and must be dealt with by Parliament
itself. By allowing the Government control over deciding of qualifications, the
Legislature is allowing the Government to exert unholy influence over the
composition of the Tribunal. 

(6) While sections 110(2) and (4) recognise
the primacy of the Chief Justice of India and the Chief Justices of the High
Court in appointment of Judicial Members, however the selection of the
Technical Members has been left to a Selection Committee whose composition is
undefined in the Act. Firstly, the Selection Committee deals with the sensitive
aspect of selection of Technical Members. The composition of this committee
should not have been left to the good senses of the rule-making authority, the
Legislature must deal with such aspects, being an essential legislative
function. Secondly, there is no guarantee that the members of the Selection
Committee themselves will be judicially trained. Why should bureaucrats have
control of the Selection Committee?  

(7) The clause for reappointment of Members
creates a conflict of interest. A similar clause was struck down by the Supreme
Court in the National Tax Tribunal case for its mischievous potential to tinker
with the independence of the members [Madras Bar Association vs. Union of
India (2014) 10 SCC 1]. Yet we see the same clause in GST law all over
again. Reappointment clauses are notorious in nature and create a sense of
insecurity in minds of Tribunal members.

(8) Similarly, salary, allowances and terms
and conditions of service cannot be left to the rule-making authority. These
are substantial mattes which affect independence of judiciary and should have
been dealt with by Parliament itself. Furthermore, the rule-making authority,
that is the State and Central Governments, will be the litigants in every case
before the Tribunal. They cannot be allowed to hold any power over Members’
salaries and allowances. 

Solution

Each of the concerns raised above arise
ultimately from settled jurisprudence and past experience. There is no solution
except curing the faults in the statutory mechanism. In time, the Courts will
reiterate their earlier judgments and strike down these offending clauses. But
given the pace at which justice comes in India, the people will suffer in the
interim. 

Conclusion