Constitution Of GST Appellate Tribunal Is Unconstitutional, Holds Madras HC [Read Judgment]

The Madras High Court has set aside some provisions of Central Goods and Services Tax Act which provides for the constitution of the Goods and Services Tax Appellate Tribunal and the qualification and appointment of members, as unconstitutional.

The struck down provisions are: 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 and 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).

The bench comprising of Justice S. Manikumar and Justice Subramonium Prasad rejected the contention that exclusion of lawyers from the scope and view for consideration as members of the tribunal, is unconstitutional. But it suggested an amendment 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.

The High Court was disposing of a batch of petitions challenging the constitution of GSAT. Senior Advocate Arvind Datar, assisted by Advocates Rahul Unnikrishnan and Karthik Sundaram argued the lead matter.

A properly trained judicially mind is necessary which the experts will not have

The Court found favour with the contention that any tribunal where the Judicial Member is in the minority in a Bench, would affect independence, impartiality and to ensure public confidence in the justice delivery system, and thus it is essential that the administrative members should not be in majority in a Bench. The court said that a properly trained judicially mind is necessary which the experts will not have. Holding that the number of expert members therefore cannot exceed the number of judicial members on the bench, the court said:

"The tribunal consists of three members. Out of the three members, only one is a judicial member. The other two members are technical members, who would ordinarily possess little experience in law, though they might be otherwise adept in the understanding of the taxing statute. In these circumstances in a bench of 3 members, two of which would be technical members, there exists the possibility of the two technical members, arriving at a view, different from that of the Judicial member. Undoubtedly, mere possibility of the malafide exercise of power is no ground to strike down an enactment, (Refer D.K. Trivedi & Sons, v State of Gujarat (1986) Supp SCC 20.), but in the instant case, the appropriateness of the tribunal discharging judicial function was in question. Naturally, in all GST related issues, the litigation shall be between an Assessee and the Govt. and this is yet another reason, that the presence of two members from the Govt. would create a further apprehension of bias, and lead an Assessee to believe, that perhaps the remedy itself is non-existent. This is of greater importance in view of the fact, that the Tribunal is discharging Judical Functio"

It also observed that the Members of Indian Legal Service cannot be considered for appointment as Judicial Members following the dictum laid down in Union of India Vs. R.Gandhi.

Lawyer with sufficient experience and particularly with experience in Taxation Laws will be ideal to be appointed as a Judicial Member

The qualification of the Judicial Member has been prescribed as a Judge of the High Court or a sitting or retired District Judge, qualified to be appointed as a Judge of a High Court or a member of the Indian Legal Service and has held a post not less than Additional Secretary for not less than three years.

Exclusion of lawyers from zone of consideration as a Judicial Member, was challenged on the ground that it is violative of Article 14 of the Constitution of India and a departure from the existing practice. Though the bench observed that this exclusion would not render the provisions unconstitutional, it observed:

The Union of India must evaluate as to why it is making a departure from the existing practice. Advocates are eligible to be appointed as Judicial Members in the ITAT which is the oldest Tribunal in the country. Lawyers are eligible for appointment as Judicial Member in the Customs Excise Service Tax Appellate Tribunals. Mr.Arvind Datar is justified in contending that when the constitution provides that lawyers are eligible to be appointed as Judges of the High Court, then there is no reason to exclude them from being considered for appointment as Judicial Members. The Hon'ble Supreme Court in R.K. Jain vs. Union of India's case supra in paragraph 67 has held that the Members of the Tribunal must have a judicial approach and also knowledge and expertise in the particular branch of Law. A lawyer practising for 10 years in Taxation would definitely be well-equipped to grapple with the legal issues arising under the Act. It is to be noted that there is no reason given by the Union of India in their counter as to why lawyers have been excluded from the zone of consideration. For deciding the issues arising under the CGST Act and more particularly under Chapter III, it is necessary that the Judicial Member must have knowledge of various legal topics for which purpose a lawyer with sufficient experience and particularly with experience in Taxation Laws will be ideal to be appointed as a Judicial Member. Keeping in mind the existing practice in appointing lawyers to various Tribunals as Judicial Members and the various issues that are likely to arise while adjudicating disputes under the CGST Act, we recommend that the Parliament should reconsider the issue regarding the eligibility of lawyers to be appointed as Judicial Members in the Appellate Tribunal. 

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