Madras HC issues notice in challenge to constitution of Authorities for Advanced Ruling under GST Act

Madras HC issues notice in challenge to constitution of Authorities for Advanced Ruling under GST Act

Meera Emmanuel

The Revenue Bar Association (RBA) has challenged the constitution of the Authority for Advanced Ruling (AAR) and the Appellate AAR under the new Goods and Services Tax (GST) regime in the Madras High Court.

The Bench of Justices S Manikumar and Subramonium Prasad today issued notice to the Central and state authorities, following preliminary arguments by Senior Advocate Arvind Datar on behalf of the RBA, briefed by Advocates Rahul Unnikrishnan and Karthik Sundaram.

The RBA has challenged the constitutionality of Sections 96 and 99 of Chapter XVII of the Central and Tamil Nadu GST Acts of 2017, which provide for the constitution of authorities for Advanced Ruling.

An Advanced Ruling is meant to aid applicants in planning activities liable for payment of GST in advance.

The grievance raised by the RBA is that the challenged provisions do not contemplate the appointment of any judicial members in the AAR or the Appellate AAR.

As per the present scheme, only officials from the executive branch are appointed as members of these authorities in Tamil Nadu as follows:

  • Authority for Advanced Ruling: A member each from the Central and State tax authorities
  • Appellate Authority for Advanced Ruling: Chief Commissioner of Central Tax and the Commissioner of State Tax

Two notifications were also issued to this effect by the Tamil Nadu government last year.

This scheme of constitution, the RBA contends, is violative of Articles 14, 21, and 50 of the Constitution of India, as well as the doctrines of separation of powers and independence of judiciary.

The RBA’s case rests on the contention that AARs and Appellate AARs are in the nature of tribunals, particularly since the decisions rendered by such bodies are binding on the applicant/assessee as well as the jurisdictional officer under Section 103 of the CGST Act.

Moreover, the Supreme Court has also indicated that an AAR exercises powers akin to a tribunal. As noted in RBA’s petition,

In Columbia Sportswear Company v. Director of Income Tax (2012) 11 SCC 224,233, a Full-Bench of the Supreme Court, while discussing the nature of function of AAR under the Income-tax Act, 1961, held that it is a body exercising judicial power and is thus a tribunal.”

This being the case, the petitioner association points out that the present scheme of constitution for Advanced Ruling authorities is contrary to the law laid down in cases such as R GandhiUnion of India, SP Sampath Kumar v. Union of India and  Madras Bar Association v. Union of India.

Notably, in R Gandhi’s case, the Supreme Court laid down that the technical members cannot in any case exceed the number of judicial members in the constitution of tribunals under the Companies Act.

The underlying principle is that when court jurisdiction is transferred to a tribunal, it should have as members, persons of a rank, capacity and status as nearly as possible equal to the rank, status and capacity of the court.

Among other principles, the R Gandhi case also emphasised that a person appointed to a tribunal should be prepared to totally disassociate himself from the Executive.

It was further laid down that neither the tribunals nor its members should seek or be provided with facilities from the respective sponsoring or parent ministries or concerned department. Rather, it was held that all administrative support for tribunals should come from the Ministry of Law and Justice.

The RBA has argued that these principles are applicable to all tribunals in India, including the AAR and Appellate AAR. Given this position, the coram of AARs and Appellate AARs has been challenged by the petitioners as being a “coram non judice.”

Therefore, the RBA has prayed that the above provisions of the Central and Tamil Nadu GST Acts, as well as the 2017 notifications concerning the constitution of AARs and Appellate AARs in Tamil Nadu, be declared as defective, void and unconstitutional.

The case will be taken up next on October 3.

Two petitions challenging the constitution of tribunals and appellate tribunals under the GST Act on similar grounds are also pending before the Madras High Court.

Read the Petition:

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