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Sales Tax Tribunal - When Rule itself makes it clear that only JCs are eligible for posts of Member, Explanation to Rule calling for giving weightage to experience as DC does not stand test of legality: HC

BY TIOL NEWS SERVICE

MUMBAI, JAN 13, 2018: THE issue is - Whether when the Rule itself makes it clear that only Joint Commissioners are eligible for the posts of Member in the Tribunal, the Explanation to the Rule calling for giving weightage to experience as DC does not stand the test of legality. YES is the answer.

Facts of the case

The assessee herein is an association of persons engaged in practicing before the Maharashtra Sales Tax Tribunal. The assessee challenged the constitutional validity of Section 11 of the MVAT Act and Rule 6 of the related Rules. The assessee alleged that these provisions were contrary to the basic structure of the Constitution. The assessee also challenged the Government Resolution dated 2nd June 1973 issued by the Finance Department of the Government of Maharashtra. Such Resolution pertains to the appointment of Deputy Commissioners of Sales Tax as Members of the Tribunal. It further provides that retired Deputy Commissioner of Sales Tax should not be considered for appointment on the Tribunal. Moreover, the selection of the Members of the Tribunal should be entrusted to a High Power Selection Board, with the Chief Secretary as chairperson, and the Secretary of Law and Judiciary Department and the Secretary of Finance Department as its members. Thus, the present writ by the assessee contesting such Resolution of the Government.

On hearing the writ, the High Court held that,

++ considered provisions of Section 11 of the MVAT Act, and also of Rule 6 of the connected Rules. Section 11 of the VAT Act provides that the power to appoint all the Members of the Tribunal is vested in the State Government. Subsection (2) of Section 11 provides that the State Government shall appoint one of the Members of the Tribunal to be the President thereof on the basis of seniority in judicial service. Though Section 11 does not specifically provide for appointment of Judicial or Administrative/Technical Members, the very fact that subsection (2) refers to seniority of Members in judicial service shows that appointment of judicial officers is contemplated as Members of the said Tribunal. Subsection (3) of Section 11 provides that the qualifications and terms of office of the Members of the Tribunal shall be as prescribed. In view of the definition in subsection (19) of Section 2, the word “prescribed” means prescribed by the rules or by any notification. Though subsection (5) of Section 11 of the VAT Act provides that the functions of the Tribunal may be discharged by any of the Members sitting either singly, or in Benches of two or more Members as may be determined by the President of the Tribunal, there is no provision which says that only the Judicial Members should head Benches of two or more Members and in no circumstances, the Administrative or Technical Member can become the head of the Tribunal.

++ in view of subsection (6) of Section 11, if the Members of a Bench of more than two Members are divided, the decision shall be the decision of the majority, if there is a majority. If the Bench consists of two Members, the Administrative or Technical Member can differ and in such case, the matter will be referred by the President to another Member. We have already quoted Rule 6 of the VAT Rules. There is an apparent inconsistency between clause (d) of subrule (1) of Rule 6 and the explanation to subrule (1) of Rule 6. One of the qualifications for appointment as a Member of the Tribunal is of a continuous period of service of not less than two years holding an office not below the rank of Joint Commissioner of Sales Tax in the Sales Tax Department of the State. Thus, a person belonging to the rank of Joint Commissioner of Sales Tax can be appointed as a Member provided he has held the said office for at least two years. Initially, the period of three years was provided in clause (d). Explanation to subsection (1) of Section 6 explains that for the purposes of clause (d), the service as a Deputy Commissioner of Sales Tax before the appointed day shall be considered for determining the period of three years. Firstly, clause (d) of subsection (1) provides that the person who is to be appointed as a Member of the Tribunal should hold the office as a Joint Commissioner of Sale Tax for a continuous period not less than two years. In the explanation, it is strangely provided that for considering the period provided in clause (d), the service as a Deputy Commissioner before the appointed day shall be considered for determining the period of three years.

++ clause (d) requires an officer not below the rank of Joint Commissioner of Sales Tax to hold the office for not less than two years. Explanation provides that service of a candidate as Deputy Commissioner before the appointed day shall be considered for determining the period of three years. On plain reading of clause (d) of subrule (1) of Rule 6, a Deputy Commissioner is not at all qualified to hold the post of a Member. Apart from this discrepancy, when clause (d) of subrule (1) of Rule 6 does not recognize the service as a Deputy Commissioner as the qualifying service, the explanation purports to override clause (d) and makes a provision to that effect.

++ it is well settled that violation of Article 14 is also one of the grounds on which there can be a challenge to the constitutional validity of a statute. According to us, the explanation is completely arbitrary. If the explanation is allowed to remain, a person who has been appointed as Joint Commissioner of Sales Tax, who does not have experience of two years in the said office will be appointed on the basis of his service as a Deputy Commissioner. Therefore, it is very difficult for us to save the explanation from unconstitutionality. Therefore, we hold that notwithstanding the explanation, a Joint Commissioner who is appointed as a Member should have experience of working in the said post for minimum two years.

++ considered Apex Court's decision in Union of India v. R.Gandhi, President, Madras Bar Association. What is material is clauses (c) and (d) of the above paragraph. Clause (c) holds that whenever there is a need for Tribunals, there is no presumption that there should be Technical Members of the Tribunals. It was held that only where exercise of jurisdiction involves inquiry and decisions on technical or special aspects, the presence of Technical Members will be useful. Thus, the law laid down by the Supreme Court is that it is permissible in law to appoint Technical/ Administrative Members. In the present case, considering the nature of the jurisdiction exercised by the Tribunal, for dealing with the taxing statutes imposing Sales Tax and Value Added Tax, experience of Joint Commissioners of Sales Tax is very useful. In fact, in the case of Tribunals dealing with matters of Excise, Customs, Service Tax and Income Tax, there is a provision for appointment of technical/administrative members who are having experience of making adjudication in Tax matters. Such members usually have a long experience in making adjudication on the the tax disputes. There is no illegality associated with it, especially in the light of the statement made in the affidavit of Shri Rajendra D. Bhagat, Deputy Secretary, Finance Department, Government of Maharashtra.

(See 2018-TIOL-80-HC-MUM-CT)


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