SEPTEMBER 24, 2019

By G Natarajan, Advocate, Swamy Associates

1.0 THE Madras High Court 2019-TIOL-2188-HC-MAD-GST, in its path breaking judgement has brought forth the systemic flaws in the constitution of the GST Appellate Tribunal in loudest terms, its rhetoric ranging from a polite advice to the Parliament and striking down certain provisions of the GST Acts. It is earnestly appealed to the Government that instead of challenging the judgement before the Supreme Court, the Government should graciously accept the judgement of the Madras High Court and use this opportunity to iron out not only the anomalies pointed by the Madras High Court but also address various other flaws in the set up of GSTAT.

1.1 The Madras High Court has held as below.

(i)  There is no valid reason to exclude advocates with 10 years practice for being considered for the post of Member Judicial. Though the High Court did not go to the extent of striking down the qualification criteria, which kept Advocates out of its ambit, the High Court gave a sane advice to the Parliament to include Advocates also in the list of eligible candidates for the post of Member Judicial. The advantages of doing so has already been articulated by the High Court and there is no need to repeat the same here.

(ii)  The Madras High Court has held that Indian Legal Service officers cannot be considered for appointment as Judicial Members, by following the precedent decision of the Supreme Court in the context of NCLT and strike down that portion of the law.

(iii)  The Madras High Court has also held that the structure of the GSTAT, with Two Technical Members and one Judicial Member, thereby paving way of two Technical Members (who were revenue bureaucrats) overriding the decision of the Judicial Member, is flawed and struck down the relevant provisions.

1.2 Thus, the entire provisions relating to GSTAT in the GST law has to be re-drafted. A strong and vibrant Tribunal is very much required in GST domain, considering the fact that the law is naïve and prone to various interpretations. The following suggestions, if duly considered would go a long way in establishing a robust GSTAT.

2.0 As per the present dispensation, GSTAT shall have a National Tribunal with its regional benches and State Tribunal with its area benches. The jurisdiction of National bench and its regional benches is limited to issues involving place of supply. It may be noted that disputes on place of supply does not have any monetary impact in most of the cases. If an inter-state supply is wrongly considered as an intra-state supply or vice versa, the nature of tax paid (IGST or CGST and SGST) alone would undergo a change. The law provides that the wrongly paid tax has to be claimed as refund and the correct tax has to be paid and there would be no interest liability. Hence, it is not at all prudent for any taxpayer to litigate on place of supply. As it is only the State Benches and its area benches, where most of the litigations in GST would be dealt with, the need for two tier structure of the GSTAT itself is doubtful. With 21 State benches and its area benches, how uniformity in decision making and precedential value of such decisions among all State benches is going to be ensured is a big doubt. When each State Bench is going to take a different view on a same issue, taxpayers having presence in various States are bound to suffer a lot.

2.1 Hence, the two tier structure of Tribunals, viz., and National Tribunal with regional benches and State Tribunal with area benches should be scrapped. There should only be one tier of Tribunal, with headquarters at New Delhi and benches in all major State Capitals and important tier 2 cities in some States. This will ensure judicial discipline among all benches of the Tribunal in following other benches' decisions.

3.0 A bench of the Tribunal shall have only two members, viz., Member Judicial and Member Technical (Centre) or Member Technical (State). For this purpose, the total number of posts of Member Technical in respect of all benches of the Tribunal, shall be shared between the Central officers and State Officers on a rational basis. For this purpose, the post of Member Technical shall be based on an All India cadre, where Member Technical (State) are also transferable among all benches. As the structure of GST law is common in all States, this shall not face any problem.

4.0 We are aware that Integrated GST (IGST) is payable on all imports and for this purpose the GST law would also have to be dealt with by the CESTAT. Customs and GST follow the same HSN based classification. The various exemptions under GST, concept of supply, valuation, etc. would be relevant for CESTAT also in dealing with the Customs matters involving IGST levy. So, there will be overlap of jurisdiction between CESTAT and GSTAT on various issues, which will lead to disputes on precedential value of the decisions of these two bodies, among themselves. Hence, the present CESTAT shall be merged with GSTAT and Customs matters shall also be heard by the same Tribunal. It shall be ensured that whenever Customs matters are considered, the bench shall consist of Member Judicial and Member Technical (Centre). Similarly when matters pertaining to Central Excise and Service Tax are heard by the Tribunal, it shall have the same composition as above.

5.0 In the same breath, there is no need to continue with the VAT Tribunals in all States, which shall also be merged with the GSTAT. When VAT matters are heard it shall consist of Member Judicial and Member Technical (State).

6.0 As a consequence to the above suggestions, the current Members Judicial, Members Technical at both CESTAT and State VAT Tribunals should automatically become members of the newly constituted GSTAT.

7.0 The above measures would go a long way in not only ensuring a safe birth for the baby GSTAT without any judicial abortions, but also ensure healthy growth and maturity of the Institution. Needless to say that it requires a lot of political and administrative will to undertake the above reforms.

[The views expressed are strictly personal.]