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A.S. Sundar Rajan

THE LONGSTANDING demand for setting up a Tax Tribunal for Direct and Indirect Taxes under Article 323B of the Constitution has at last been recognised by the Government, though in haste. However, the National Tax Tribunal (NTT) Ordinance 2003 (3 of 2003) promulgated on October 16 appears to have aroused mixed feelings among both the litigating public and the tax department.

The Ordinance does not spell out the urgency to invoke the powers conferred under Article 123 on the President when Parliament is slated to meet in early December. For purposes of this article, reference is made only to indirect taxes.

Clause 1(1) (3) specifies that the Ordinance "will come into force at once". The object appears to be to let the Government take steps to set up the NTT expeditiously by choosing the place of its functioning, select the chairperson and other members, as also the staff. However, some High Courts have already expressed the view that hereafter the litigants should approach the NTT rather than the High Court.

Clause 4 of the Ordinance specifies that the NTT shall consist of a chairperson and such judicial and technical members as the Centre may deem fit. However, the number of Benches or the Members has not been specified. Further, Clause 5(4) specifies that the NTT shall ordinarily sit in the national capital or such other places as the Centre in consultation with the chairperson may notify. As the NTT takes away the jurisdiction of the High Courts, its location at Delhi is likely to cause serious hardship to litigants in far-flung areas of a vast country. The Supreme Court, in the context of Central Administrative Tribunal (CAT) constituted under Article 323A of the Constitution, has held that Benches of such Tribunal should be set up at various seats of the High Courts so as to avoid hardship to the litigants.

The most controversial provision of the NTT appears to be Clause 6 which provides for the qualification for the appointment of chairperson and members. Whereas sub-Clauses (2) and (3) of Clause 5 refer to member (direct taxes) and (indirect taxes) respectively, there is no definition as to who qualifies for the post. However, Clauses (3) and (4) lay down the qualification for a technical member for direct and indirect taxes.

Sub-Clause (4) of Clause 6 appears to be loaded in favour of a bureaucrat rather than a person discharging quasi-judicial functions. Whereas the Technical Members of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) should have rendered two years of service as vice-president or seven years as member (technical), a member of the Settlement Commission need not possess such experience. Similar is the provision regarding a Chairman or a Member of the Central Board of Excise and Customs (CBEC) who need not have any experience in quasi-judicial capacity. As for the other members, a mere one-year service as Chief Commissioner is sufficient to qualify for appointment. There is no stipulation regarding experience in discharging quasi-judicial functions. In other words, weightage has been given for executive officers rather than an officer discharging quasi-judicial functions.

Clause 7 of the Ordinance provides for appointment of Chairperson and members on the recommendation of a Selection Committee consisting of the Chief Justice of India or his nominee, the Secretary, Ministry of Law and Justice, and Secretary, Ministry of Finance, Department of Revenue, apart from the chairperson of the NTT. The NTT chairperson shall be a person who has been a Supreme Court judge or the Chief Justice of a High Court. It is submitted that these posts are far above the post of Secretary, Ministry of Law or Finance, as the case may be. It is, therefore, anomalous to have a Selection Committee consisting of junior persons to select senior judicial officers. The better course would be to appoint the Cabinet Secretary to be a Member.

Clause 8 of the Ordinance provides for a Chairperson or a member shall be appointed for five years and eligible for reappointment. This clause appears to be retrograde and would keep the members of the Tribunal under the Damocles Sword of the Executive to deny extension where the "performance is not satisfactory". No yardstick has been prescribed for measuring the performance of such judicial officers. In fact, none should be prescribed. This will deprive the NTT of its independence.

Clause 10 of the Ordinance provides for the salary and allowances of the Chairperson and other members of the NTT. The Clause provides that a Supreme Court judge who is appointed as the NTT chairperson shall be deprived of the right to go on vacation which is part of the terms and conditions of appointment as a Supreme Court Judge or Chief Justice of the High Court. This will discourage many aspirants for the post.

Sub-Clause (2) of Clause 11 provides for removal and suspension of a chairperson and other members. It specifies that the Centre, on the ground of proven misbehaviour or incapacity, after an enquiry made by a Supreme Court judge can remove the chairperson or a member. This is against the Constitutional provisions as a judge of a Supreme Court or a High Court cannot be removed from service except in accordance with the provisions of Article 124 (4) of the Constitution. Can the provisions of Clause 11 overide the Constitution? Sub-Clause (4) of Clause 11 also provides that the Centre may, by Rules, regulate the procedure for investigation or misbehaviour of the chairperson or the member of the NTT. This is also likely to interfere with the judiciary's independence as the power of removal or suspension or cause enquiry is not vested with the Centre, and as for pay and allowances the same are governed by the Second Schedule to the Constitution.

Clause 14 provides that in the event of any vacancy in the office of the chairperson due to his death, resignation or otherwise, the Centre may designate the "senior-most" to act as chairperson. The Ordinance does not provide the basis on which the seniority of the Members will be determined. The Ordinance also does not provide the basis on which the inter se seniority will be determined for discharging the functions of a Bench by the two members constituting it. This has been a bone of contention in the CESTAT which has led to lot of ill will and bad feelings amongst the members. Further, though there is provision for the "senior-most" member required to discharge the functions of the chairperson, the Ordinance specifies that he shall not be entitled to draw the salary of the Chairperson. It hardly needs to be stressed that if a person is required to discharge the duties and functions of higher post he is also entitled to the salary and allowances of that post.

Clause 15 of the Ordinance specifies the jurisdiction, powers and functions of the NTT. It is regretted that even though the NTT has been set up under Article 323B of the Constitution, it appears to be another "Appellate Tribunal" rather than a Tribunal under Article 323B. In other words, the NTT is old wine in new bottle. The major grievance of the litigating public is that the CESTAT does not enjoy original powers and is a mere spectator to abuse of process of law by the executive.

In other words, there is remedy against "action" by the Executive but no remedy against "inaction" which is the real malady of the Executive. No doubt, the provisions of Article 226 of the Constitution are available to the litigant to seek issue of the appropriate writ. The fact remains that such remedy will not be available, more particularly, considering that the NTT has been constituted under Article 323B and is a substitute for the High Courts. Further, the second proviso to sub-Clause 2(c) of Clause 15 restricts the period within which an appeal should be preferred to the NTT. Under the existing scheme, an aggrieved person can file an appeal to the CESTAT within three months and thereafter he/she can prefer the appeal subject to condonation of delay at the discretion of the CESTAT, without limit. However, the second proviso to sub-Clause 2(c) of Clause 15 restricts the time limit to within 60 days after the expiry of 120 days at the discretion of the NTT. This appears to be a restriction on the powers of the NTT to condone delay in deserving cases where the delay is satisfactorily explained. Such fetters on the NTT will only provoke courts to intervene. Sub-Clause (3) of Clause 15 states that the NTT shall formulate the questions of law for hearing of appeal and also any question which has not been so determined or which has been wrongly determined by the CESTAT. The CESTAT, as constituted now, is the final fact-finding authority. It is only on a substantial question of law that an appeal would lie to the Supreme Court or the High Court as the case may be.

The major change introduced appears to be to award costs. This is a specific provision which will work against the revenue and in favour of the appellant. What was the provocation for introducing this Clause? The high-handedness of the Executive or the agony of the public. This power could also be conferred on the CESTAT.

Sub-clause (4) of the Clause 15 specifies that in any appeal under this Section which involves payment of tax or duties, the assessee or the aggrieved person shall deposit at least 25 per cent of such tax on the basis of the order appealed against. The proviso empowers the NTT to dispense with even this deposit on sufficient cause being shown subject to such conditions as deemed fit. What is relevant to note is the reference to penalty and interest in Section 129E of the Customs Act, 1962 and corresponding Section 35F of the Central Excise Act are excluded. One of the grievances of the assessees was the indiscretion of the adjudicating authority to levy reasonable penalty. With the result it appears that there is no requirement for depositing any part of the penalty or interest demanded by an adjudicating authority or confirmed by an appellate authority. This is a liberal provision with far reaching consequences. The discretion vested in the appellate authority to waive the requirement of pre-deposit has been curtailed. There will be more certainty and less scope for misgivings.

Clause 16 specifies the procedure of the Tribunal. The emphasis is on principles of natural justice. Is it that the CESTAT has not been following these principles? Or the NTT requires to be taught this basic rule of law?

Clause 17 provides that any order passed by the NTT shall be final. This appears to be contrary to the decision of the Supreme Court which has held that though the CAT has been constituted under Article 323A, the jurisdictional High Courts shall have powers to entertain appeals, if the aggrieved person so chooses. In addition, the original jurisdiction of the Supreme Court under Article 32 of the Constitution will continue to be available to the aggrieved person.

Clause 19 of the Ordinance provides for the constitution of a Special Bench on a question of law consisting of three judicial members and two technical members. Though, the Ordinance provides for specific number of members from either source to sit on the Special Bench, it does not provide whether the senior-most or any member will suffice. The discretion exercised by the President of the CESTAT in constituting Benches with certain Members alone has been questioned. No member of Regional Benches at Mumbai, Chennai and Kolkata has been co-opted on the Bench. This gives a monopoly to the Members who are posted at Delhi. It also appears to give an impression that the Bench of CESTAT sitting at Delhi can dictate the law to be followed by others.

Clause 23 of the Ordinance provides for transfer of pending cases from High Court. It is not clear whether original petitions pending in the various High Courts will get transferred. If the object is to transfer only certain Reference Applications and Appeals arising out of the orders of the CESTAT, it appears that the NTT will not help in achieving revenue collections or reducing pendency as there is no stay of the orders of the Tribunal which are referred to the High Court. It is for the department to recover the amounts on the basis of the orders of the Tribunal. It is not understood how this provision would result in higher revenue collection.

Clause 25 of the Ordinance provides that the Chairperson and members shall be deemed to be public servants within the meaning of the Section 21 of the Indian Penal Code.

The NTT appears to be an attempt by the Government to provide a birth to retired and retiring bureaucrats. The qualifications and experience prescribed for the various members (other than the Chairperson) appears to have been tailor-made to accommodate certain bureaucrats or it appears to be a means to ease out inconvenient members of the CESTAT and CBEC. If so, the remedy does not lie in setting up a new Tribunal. It would be a case of adopting an ostrich-like policy. The remedy appears to devise a mechanism by which the undesirable elements could be removed by a legal process rather than by such costly adventures.

sThe Ordinance does not contemplate the NTT to exercise original jurisdiction at the stage when the matter is before the executive at the lower rung. If the Executive acts arbitrarily or sits on the case there appears to be no remedy. Otherwise, only the Supreme Court alone can give relief. The inaction on the part of the Executive causes delay and financial hardship. There is no remedy against these injustices and inaction. These are the areas where the NTT should be empowered and should exercise powers. No doubt, the power to award costs and dispensation of the requirement of pre-deposit of the entire amount of duty is welcome. But even the requirement of pre-deposit of 25 per cent is highly arbitrary and will cause hardship to the litigating public. A Tribunal constituted under Article 323B will be an exercise in futility, ff it is not clothed with original jurisdiction.

When the country is facing serious unemployment problems and no new posts are being created, providing a cushy birth to retiring and retired persons is arbitrary and likely to cause more ill will in the society.

This Ordinance is not likely to result in collection of revenue or achieving uniformity in the assessment, collection and enforcement of law. Uniformity was the avowed object of CESTAT. Today, we have more references to third Members and larger Benches.

In view of the various ambiguities in the Ordinance there is likely to be a plethora of writ petitions in various High Courts and the Supreme Court. As of date the Madras High Court has already admitted a writ petition from the advocates engaged in the profession. There is talk of further petitions being filed at various other courts.

In the result, there would be more uncertainty in the administration of law rather than uniformity or certainty in these matters. It is hoped that Parliament will consider these aspects when the Ordinance is placed for its consideration/confirmation. The courts before which petitions are filed (or would be filed) will also certainly look into various aspects.

(The author, who with was the Department of Revenue, is a Chennai-based advocate.)

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