Judgement Update | Composition of GSTAT is unconstitutional

The recent decision of Madras High Court in the case of Revenue Bar Association v. UOI, 2019-VIL-466-MAD has held that the constitution of GST Appellate Tribunal (GSTAT) is invalid.

In this case, the petitioner contended that Section 109 and 110 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) does not permit appointment of lawyers as members of GSTAT and is thus violative of Article 14 of Constitution of India. The petitioner relied on the judgment in the case of R.K. Jain v. UOI, 1993 (4) SCC 119, wherein the Supreme Court held that the Tribunal need to have a judicial approach and expertise in the particular branch of constitution, administrative and tax laws. The Court held that lawyers possessing more than 10 years of experience in required branch of law must be considered for appointment for the said post.

Additionally, the petitioner contended that Section 109(3) and 109(9) of the CGST Act contravene Article 50 of the Constitution of India. Notably, Section 109(3) and 109(9) of the CGST Act prescribes one judicial member and two technical members in National and State bench of GSTAT. According to Section 109(11) of the CGST Act, decision shall be taken based on majority. Hence, two technical members can overrule the decision of the judicial member.

Article 50 of Constitution of India provides for separation of Judiciary from Executive. It is important to refer to the case of UOI v. R. Gandhi, 2010-VIL-38-SC where the Supreme Court held that technical members should never be in majority to judicial members in any circumstance. In this case, the Supreme Court held composition of the National Company Law Tribunal to be unconstitutional.

Basis the above, the Madras High Court struck down Section 110(1)(b)(iii) of the CGST Act (not allowing lawyers to be members of GSTAT) and Section 109(3) and 109(9) of the CGST Act (dealing with composition of GSTAT). The Madras High Court recommended amendment in various provisions of the CGST Act.

NITYA Comments:

It is surprising that even after two years of advent of GST, issues like constitution of GSTAT are not put in order. All through the Government was aware of the challenge of constitution of GSTAT in various Courts, it did not made any amendment in the CGST Act to address the issue.

 The Government has recently proposed extension of last date of filing appeal to GSTAT. With this decision, the formation of GSTAT looks far away.