Madras Tax Bar Challenges Constitutionality of CGST Appellate Tribunal Provisions, Supreme Court issues Notice [Read Petition]

On Friday, the Supreme Court, comprising Chief Justice of India DY Chandrachud, Justice JB Pardiwala, and Justice Manoj Misra, issued notice to the Writ Petition filed by the Madras Tax Bar. The petition raises concerns about the constitutional validity of Sections 149 and 150 of the Finance Act, 2023, which aim to replace Sections 109 and 110 of the Central Goods and Services Tax Act, 2017 (CGST Act).

Senior Advocate Arvind Datar, representing the petitioner, argued that the recent amendment disqualifies Advocates from seeking appointment as judicial members of the GST Appellate Tribunal. He contended that this amendment directly contradicts four rulings by the Constitution Bench of the Supreme Court.

The Petitioner, Madras Tax Bar submitted that these provisions are contrary to the law laid down in Union of India v R Gandhi (2010) , Madras Bar Association v Union of India (2014), Madras Bar Association v Union of India (2015), Rojer Mathew v South Indian Bank Ltd, (2020), Madras Bar Association v Union of India (2021) Madras Bar Association v Union of India (2022) and Ministry of Consumer Affairs v Dr. Mahindra Bhaskar Limaye (2023).

The petition also pointed the direct violations which includes:

1. Exclusion of advocates from being appointed as judicial members [Section 110(1)(b) of the CGST Act].
2. Officers below the rank of Secretaries and Additional Secretaries with vague and non-adjudicatory experience made eligible for appointment of technical members [Sections 110(1)(c) and 110(1)(d) of the CGST Act].
3. Provision requiring Search-cum-Selection Committee to recommend a panel of two names for each appointment [Section 110(6) of the CGST Act].
4. A term of 4 years for the members of the Appellate Tribunal with a possible reappointment for 2 further years, with a retirement age of 67 years for the President and 65 years for the other members [Sections 110(9) and 110(10) of the CGST Act].

The Writ petition has been filed to challenge the validity of Finance Act 2023's Sections 149 and 150, designed to replace CGST Act 2017's Sections 109 and 110. The focus is on CGST Act sections 109(9), 110(1)(b), 110(1)(c), 110(1)(d), 110(4)(b)(ii), 110(4)(b)(iv), 110(6), 110(8), 110(9), and 110(10).

By challenging the validity of these sections, the petitioners are essentially questioning the legality and constitutionality of the amendments made by the Finance Act, 2023. These amendments, if upheld, would alter the rules governing the appointment process and the terms and conditions of service for members of the Appellate Tribunal.

In relation to the contestation of Section 109(9) of the CGST Act, the petitioner drew upon the precedent set in the case Union of India v R Gandhi, (2010) 11 SCC 1 (paragraph 120(xiii)). In this case, it was established that whenever a tribunal bench is formed, the quantity of technical members should not surpass that of judicial members.

Further stated that “However, the substituted Section 109(9) will provide that, in case of a difference of opinion in a bench, the matter may be referred to any third member, and does not provide for any restriction on whether such third member would be a technical or judicial member. Thus, the provision indirectly allows a bench consisting of two technical members and one judicial member to decide a matter. Hence, to this extent, Section 109(9) is unconstitutional and ought to be read down.”

Regarding the challenge to Section 110(1)(b) of the CGST Act, the petitioner cited recent cases like Madras Bar Association v Union of India in 2021, 2022, and Ministry of Consumer Affairs v Dr. Mahindra Bhaskar Limaye in 2023. They argued that advocates with at least ten years of experience should be eligible as judicial members. However, Section 110(1)(b) excludes such advocates from eligibility, which the petitioner deems unacceptable and seeks its annulment.

The petition states that “the substituted Sections 109 and 110 will have various provisions that are directly and ex facie in violation of various judgments of this Hon’ble Court wherein similar provisions have been held to be unconstitutional since they affect independence of the judiciary, rule of law and separation of powers, which are part of the basic structure of the Constitution and are sourced in Articles 14, 19 and 21, amongst others.”

The Madras Tax Bar submitted their prayer before the Supreme Court of India to “Issue any appropriate writ, order or direction declaring Sections 149 and 150 of the Finance Act, 2023 that seek to substitute Sections 109 and 110 of the Central Goods and Services Tax Act, 2017, specifically Sections 109(9), 110(1)(b), 110(1)(c), 110(1)(d), 110(4)(b)(ii), 110(4)(b)(iv), 110(6), 110(8), 110(9) and 110(10) of the Central Goods and Services Tax Act, 2017, as unconstitutional for being ultra vires the Constitution of India and against the principles laid down in earlier judgments passed by this Hon’ble Court.”

To Read the full text of the Order CLICK HERE

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