A taxing decision

The Supreme Court’s decision to strike down sections of the National Tax Tribunal Act, 2005 as unconstitutional, thereby effectively killing the proposed National Tax Tribunal (NTT), is a setback for the Government’s bid to reform the tax dispute resolution process. The verdict also raises a question mark about the future of several other tribunals set up under similar enabling legislations. The core issue was whether tribunals could replace high courts in their appellate jurisdiction when it comes to addressing substantial issues of law. While the Court reiterated that Parliament has the power to enact legislation vesting adjudicatory functions — thereby maintaining that the passing of the NTT Act or any such similar legislation — is not per se violative of the Constitution, it took exception to the manner in which the Tribunal was proposed to be constituted.

The judgment held that “substantial” questions of law can only be addressed by the judiciary and had reservations about who could appear before the NTT and the constitution of the Bench. In doing so, the Court perhaps failed to give adequate consideration to the need for technical expertise in setting issues related to specialised fields such as taxation. There is little doubt that the justice delivery system, as it exists today, suffers because of the lack of the required expertise to resolve complex disputes.

While there can be no disputing the need to preserve the judiciary's independence, this should not be at the cost of dispensing with tribunals. The NTT was proposed to reduce the huge backlog of arrears in tax cases, ensure uniformity in interpretation of the law and basically speed up the settlement process, which is a win-win for both the Government and the assesses. In fact, ironically, the case challenging the NTT Act itself has taken nearly nine years to reach a conclusion, a period during which the backlog has only increased. The decision also puts a question mark over several other tribunals — around 30 are already in existence — which have been set up under Acts which have similar provisions to the ones in the NTT Act which have been struck down. Interestingly, the appellant in the NTT case — the Madras Bar Association — has also similarly challenged the National Competition Law Tribunal Act, which is pending in the Supreme Court. This is not good news for reforms or the Government’s bid to deliver better and speedier governance. The verdict underscores the need to ensure better drafting of legislation and framing of rules on the part of the Government so that such conflict is avoided and the intent behind the legislation — of reforming governance — is actualised.

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