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Opinion - Taxation


National Tax Tribunal — Supplementing, or substituting, High Courts?

T. C. A. Ramanujam

With the establishment of the National Tax Tribunal, all matters pending in appeals under the direct and indirect tax laws before the High Courts will stand transferred to the Tribunal. While many of the objects of the proposed body mark a welcome departure from present practice, some of the provisions that may cause hardship to the appellants need fine-tuning.

THE UPA Government has introduced in Parliament the National Tax Tribunal Bill, 2004. The statement of objects and reasons points out that huge revenue is blocked in litigation before the High Courts, affecting the economy. To speed up taxation matters pending before the High Courts, the National Tax Tribunal (NTT) is to be established to hear cases on substantial questions of law from the Income-Tax Appellate Tribunal and the Customs, Excise and Service Tax Appellate Tribunal.

The NTT is being set up under Article 323-B of the Constitution. A person who has been a judge of the Supreme Court or the Chief Justice of a High Court shall be chairperson of the NTT. With the establishment of the NTT, all matters and proceedings pending in appeals and references under the direct and indirect tax laws before the High Court shall stand transferred to the NTT.

The Bill provides for the establishment of the NTT for adjudication of disputes with reference to levy, assessment, collections, and enforcement of direct taxes and the determination of the rates of duties of Customs and Central Excise on goods as well as the valuation of goods for the assessment of such duties and also levy of the tax on service. There will be 15 Benches of the NTT to deal with direct tax matters, and 10 for indirect tax matters.

Eligibility

The BJP Government had also introduced a Bill for the establishment of the NTT. It was embroiled in controversy and writ petitions were filed in many high courts challenging the Bill and the ordinance. The bone of contention was the provision in the earlier Bill that there would be a judicial member and a technical member, the latter being generally drawn from the Indian Revenue Service.

Litigant public and tax professionals feared that IRS officers on the Bench of the NTT may exhibit a bias born out of long years of working in the Revenue Department. With the dissolution of the then Parliament, the ordinance and the Bill lapsed.

The present Bill is different with regard to the composition of the NTT. To be appointed as a Member of the NTT, a person should be eligible to be judge of the High Court or should have been a member of the Appellate Tribunal for at least seven years. The IRS officers need not have any grievance about this provision.

Even as it is, they are eligible to be appointed as Accounted Members of the Appellate Tribunal if they have held the post of Additional Commissioner of Income-Tax, or any equivalent or higher post, for at least three years. This provision in income-tax law has proved a disincentive for members of the IRS to apply for the post of Tribunal members. Hereafter, with the prospect of being elevated as Member of the NTT, IRS officers may choose to apply for the post of members of the Appellate Tribunal. The appointment will be on the recommendations of a Selection Committee consisting of:

(a) the Chief Justice of India or a Judge of the Supreme Court nominated by him;

(b) the Secretary, Ministry of Law and Justice (Department or Legal Affairs)

(c) the Secretary, Ministry of Finance (Department of Revenue)

The Chairman and every other member shall hold office for a term of five years but shall be eligible for re-appointment up to the age of 68 years, for the Chairman, and 65 years for the other members. But here is the catch. By stipulating a period of five years, the Central Government is dangling the Damocles' Sword. There is no provision in the Bill that expressly permits a member to revert to the Appellate Tribunal if he is not re-appointed after five years. Professionals entering the NTT will find it difficult to accept a position just for five years since this may mean dislocation of their professional careers.

The appeal before the NTT may be argued either by the party in person or through his chartered accountant or advocate. This provision will make chartered accountants smile. At present, the CA is not eligible to appear before the High Court.

It is a fact that many CAs have shown themselves competent in interpreting the complicated provisions of tax laws. The Government side, however, will always be represented before the NTT either by a lawyer or a government officer.

Appeals to the NTT should involve substantial questions of law. The appeal has to be filed within 120 days. The NTT may entertain an appeal after the expiry of the period of 120 days, within 60 days if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal in time. This provision in the statute marks a departure from the present practice.

Even though Section 260A of the Income-Tax Act 1961 prescribed a period of 120 days for preferring appeals before the high courts, the latter have generally exercised the power to admit an appeal even beyond 1,000 days if suitable cause is shown for the delay. The high court being a constitutional authority, it can condone delays by the exercise of its inherent powers. This may not be possible hereafter in the light of the provision in the NTT Bill.

Different from High Court

There is a provision in the Bill that may cause hardship to tax-payers. The Bill stipulates that an appeal before the NTT can be preferred only if the appellant deposits at least 25 per cent of the tax or duty payable on the basis of the order appealed against. The NTT is also given the discretion to condone this requirement. There is no such stipulation in cases that go before the high court.

Yet another distinction is that no interim order can be passed by the NTT without hearing the other party.

No Tribunal constituted under 323A or 323B of the Constitution can ever oust the jurisdiction of the high court under Articles 226/227 of the Constitution. The writ jurisdiction of the high court will continue, despite the provision that appeals from the NTT will go to the Supreme Court (228 ITR 725 SC). The NTT will, therefore, be one more forum working along with the high court.

The Government makes it appear that there is huge pendency before the various high courts involving fiscal disputes. The truth seems to be that the overall pendency does not exceed 30,000 cases, the maximum being around 10,000 in Mumbai and an equal number in Delhi. Probably, constitution of permanent tax benches in these two High Courts will solve the problem for revenue.

The NTT will not be governed by the Civil Procedure Code, though rules of natural justice will apply. Is the NTT a substitute for the high court or will it supplement the latter? Time will tell.

(The author is a former Chief Commissioner of Income-Tax.)

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