SC Questions NTT: Quashes Sections of the National Tax Tribunal Act

SC Questions NTT: Quashes Sections of the National Tax Tribunal Act

An SC bench headed by CJI R. M. Lodha and justices Rohinton Nariman, A. K. Sikri, J. Chelameswar and J. S. Khehar have just rendered the proposed National Tax Tribunal unconstitutional. The SC bench has quashed sections 5,6,7,8 as well as 13 of the Act. The law has now been rendered virtually useless, according to experts and media reports.

Justice Nariman held that the entire act was unconstitutional citing the separation of the powers and judicial superintendence as a basis for this contention. The lead petition along with several other cases were brought to challenge the legality of the NTT, the former having been placed by the Madras Bar Association. The National Tax Tribunal has been established by an Act of the Parliament passed in 2005. The NTT has been given the power to judge appeals from numerous tax appellate tribunals which were previously under the HC.

The NTT Act was held unconstitutional by the bench as a result of which sections 5 to 8 and 13 were declared null and void by the SC bench. Nariman, while concurring that the NTT was unconstitutional, also gave a separate judgment stating that “the National Tax Tribunals Act is unconstitutional, being the ultimate encroachment on the exclusive domain of the superior Courts of Record in India.” The judgement could now pave the way for other tribunals to also face a similar fate. It is the National Company Law Appellate Tribunal which is facing the heat next.

The SC bench headed by the CJI faulted the NTT Act on the basis that a substantial question of law can only be debated by the HC or the SC. It also held that the Parliament could not capture the court's power and pass it into the hands of a body which is not a court by nature.

The judgement was authored by Justice Khehar and the majority of this judgement has challenged the provisions of the Act and made them illegal. These provisions were the fundamental basis of the constitution of the tribunal. The SC bench declared that tribunalisation can only be permitted at what is the original state. Taking away the HC's power and giving it to the NTT curbs judicial independence, according to the judgement.

“If the jurisdiction of the High Courts is being transferred to the NTT, the stature of the members of the tribunal had to be akin to that of the judges of High Courts,” the bench mandated.

The main petitioner in this case, the Madras Bar Association had challenged the power of the NTT to decide and mandate on a “substantial question of law.” The main petition had also held that the legislation violated the basic structure of the Constitution and imposed on the powers of judicial review of the HC. The SC ruling has given this contention a legal authority through its judgement. The next big question is whether NCLAT will be able to survive in the face of a judicial challenge.