SUPREME COURT DECLARES THE NATIONAL TAX TRIBUNAL AS UNCONSTITUTIONAL

By K P C Rao, LLB, FCMA, FCS.,

CMA (USA)., FIPA (Australia)

Practicing Company Secretary

kpcrao.india@gmail.com

On September 25, 2014, the Supreme Court held that the National Tax Tribunal Act, 2005 was unconstitutional and struck it down. The National Tax Tribunal Act, 2005 constituted the National Tax Tribunal (NTT), a quasi-judicial appellate tribunal.  The National Tax Tribunal (NTT) was an appellate Tribunal and was authorised to hear appeals against orders of the Income Tax Appellate Tribunal (ITAT) and Customs, Excise Service Tax Appellate Tribunal (CESTAT). The NTT was setup to expedite the appeals and ensure speedy recovery of arrears for the Government.

The Court held that:

(a)     Transfer of judicial power permissible: Transfer of judicial power vested in superior courts to coordinate courts/ tribunals is permissible. But whenever there is such transfer, all conventions and practices of the court to be replaced must be incorporated in the tribunal created.

(b)     Sections 5,6,7,8 and 13 of the NTT Act unconstitutional: These provisions demonstrated that the NTT differs from the High Courts on issues related to:

(i)          Efficacy and convenience of remedy available, as the tribunal bench was mandated to be located in the NCT of Delhi;

(ii)       The central government has a role in the constitution and functioning of the tribunal, i.e. determining where the benches would be set up, its jurisdiction, composition and constitution of the benches. This could affect independence and fairness of its members;

(iii)     Appointment and qualification of its members, which includes Accountant and Technical members. The composition of the tribunal including appointment and qualification of its members would have to be on the same parameters as that of the HC judges.

In light of the fact that Sections 5,6,7,8 and 13 of the NTT Act were held to be unconstitutional, the Court held that the remaining provisions were rendered worthless. Thus, the Act as a whole was set aside.

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