Tracking backwards, the idea of a national tax court or tribunal was first mooted by the first Law Commission constituted in 1955. Later in 1970, the Wanchoo and N Palkhivala Committee recommended the creation of separate tax benches in the high courts, and gradual transition to Central Tax Court forum to accelerate tax dispute resolution. Significant efforts had been made in the decades ever since to usher in judicial reforms.
The National Tax Tribunal Act, 2005, legislated by Parliament was an outcome of prolonged Executive deliberations on not just facilitating speedy dispute resolution but also on bringing in uniformity in the interpretation of statutes. The NTT Act provided transfer of appellate jurisdiction, vested in the high courts involving substantial question of law; on its constitution, the orders of Income Tax Appellant Tribunal (ITAT) and Customs Excise and Service Tax Appellate Tribunal (CESTAT) were to lie before the NTT, thus ousting the jurisdiction of the high courts.
The NTT Act was largely predicated on Parliaments quasi-judicial powers under Article 323B, which empowers legislature to constitute administrative tribunals to exclude jurisdiction of higher courts except for the Supreme Court. Post economic reforms, Parliament has exercised its powers to set up several such tribunals to deal with disputes in the area of capital markets (Sebi), telecom (TDSAT), etc whose orders can be appealed directly with the SC. Whilst the constitutionality of Article 323B has been upheld by the apex court (in the case of S P Sampath Kumar vs Union of India), the Court cautioned that the power of judicial review under the Constitution could rest only with the Supreme Court or the high courts under Article 32 and 226, respectively.
The unanimous ruling by the five-member bench recognises the Constitutional convention, which does not prevent legislative action, to vest adjudicatory functions of the superior court with an alternative institutional mechanism; however, the Supreme Court has held that such abrogation of powers shall not stand the test of constitutionality if the legislature fails to ensure that the delegated tribunal has all trapping and standards of a Court.
It is a well-settled principle that when the jurisdiction of the high court is vested in an alternative court/tribunal, the redress should be with same convenience and expediency. The key provisions of the NTT Act, which serve the fundamental edifice of the entire legislation, didnt pass this muster!
The constitutional part of the NTT Act was struck down on the ground that provisions for appointment and functioning of the chairman and the members of NTT lacked administrative autonomy. The SCs observation on NTTs jurisdiction, to adjudicate only substantial question of law, shorn of factual disputes, assailed the provision for appointment of non-judicial members.
Further, the court proscribing experts outside the legal profession (chartered accountants and company secretaries) from representing before NTT reinforces the judicial independence of courts.
There could be a wider repercussion of the judgment though, especially as far as other quasi-judicial administrative tribunals such as National Company Law Tribunal, etc, are concerned. However, the judgment does bring in focus certain areas of legislative actions which could require improvisation, while enacting the legislation to vest adjudicating powers to an alternative court /tribunal.
A larger question which will need to be debated is whether or not India requires a national tax court/tribunal to bypass the forum of judicial review under Article 226. If the answer is yes, the courts verdict shall afford the government a second chance to come up with a robust legislative and administrative framework for tax tribunal.
It is also a learning which will lead to the development of a framework for enacting such intricate legislation, wherein the Executive works in consultation with the Judiciary, respecting the basic structure of Constitution and rule of judicial review which is edifice of our Constitution.
Assisted by Sumit Singhania.
The author is Managing Partner, BMR Legal. Views are personal