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Last week, a five-judge Bench of the Supreme Court delivered a landmark judgment, holding that the National Tax Tribunal Act of 2005 (NTT Act) is ultra vires the Constitution.
The judgment is considered to be a huge victory for the Madras Bar Association, the petitioners in the case, as well as the lead counsel Senior Advocate Arvind Datar. The senior counsel has been arguing in the matter since 2006.
On his initial reaction to the judgment, Datar says that,
“It was indeed unfortunate that the NTT was formed. The Wanchoo Committee and then the Choksi Committee both suggested that there should be a National Tax Court within the judiciary. They were both against the creation of a Tribunal. Shockingly, even after the Parliamentary Committee studying the National Tax Tribunal Bill and recommending that it be scrapped, the Parliament went ahead with the creation of the Tribunal.”
In the majority judgment, the Court has held that although Constitutional conventions do not debar Parliament from vesting judicial powers in tribunals, it should have the trappings of a court; else it would be violative of the basic structure of the Constitution. In his concurring judgment, Justice Rohinton Nariman further mentioned that tribunals cannot decide ‘questions of law’ and such questions ought to be decided by superior Constitutional Courts alone.
Bar & Bench speaks with Arvind Datar to get his reactions on the judgment.
On the impact of the judgment
It is now made clear that substantial questions of law is part of the core or essential judicial functions and if any Tribunal is created, it should be virtually equivalent to the High Court. Both the judgments are detailed and have considered all the arguments. For the first time, the boundary limits are now drawn on what kind of cases can be shifted out of the High Court to Tribunals.
The Court has not struck down Article 323 (B) – a lesser victory especially since 323B (3) still remains.
We had argued that Article 323B was itself violative of the basic structure and it ought to be struck down in its entirety. The Supreme Court has not accepted this proposition. To this extent, our submissions did not find favour of the Supreme Court.
Justice Nariman called the NTT Act the “ultimate encroachment” on the domain of the Courts of Record.
Justice Nariman has used the expression in the light of Lord Atkin’s observations – we have seen Tribunals systematically taking away the jurisdiction of the civil courts and the High Courts. We have the DRT, NCLT and IPAB and now the NTT. For the first time, the powers of the High Courts were completely taken away in all tax disputes. It is, perhaps, in this background that the expression “ultimate encroachment” was used.
The Court has also rejected the right of chartered accountants/company secretaries to represent a party before NTT.
Since the NTT was to deal with only substantial questions of law, the Supreme Court felt such cases should be argued by the members of the Bar. It is always open to CA’s and CS’ to enroll with the Bar Council after completing a law degree. Just as the tax audit is the exclusive domain of CA’s, arguing on substantial questions of law is the function of an advocate.
Will the NCLT meet a similar fate?
No. The issues involved in the Constitutionality of the NCLT are very different. That case will proceed on similar lines as the R. Gandhi case. There is also a PIL pending in the Supreme Court on the question of bringing all the Tribunals under one nodal agency, or at least the Law Ministry.
One of the most common reasons given for setting up tribunals is to reduce pendency.
It is now clear that tribunals have not reduced the pendency of cases. As far as tax cases are concerned, the only way to reduce backlog is to avoid frequent amendments to the statutes, indiscriminate reopening of assessments, absurd views on transfer pricing, etc. Half of the litigation in tax disputes can be avoided if the Department adopts a reasonable or fair approach in deciding cases.