Appearance of CA before NTT as representative is unconstitutional; SC quashes law for setting up NTT

CA Sandeep Kanoi

Constitutional Bench of Hon’ble Supreme Court comprising Chief Justice RM Lodha, Justices JS Kehar, Jasti Chelameswar, AK Sikri and RF Nariman has struck down National Tax Tribunal set up vide NTT Act, 2005. It held the same as unconstitutional as the National Tax Tribunal (NTT) encroaches upon the power of higher judiciary, which can only decide issuesinvolving substantial laws and not a tribunal.

One more Blow to Chartered Accountants

Honorable Supreme Court held that the provisions regarding appearance of CAs before NTT, is unconstitutional and not acceptable in law. It held as follows :-

78. Keeping in mind the fact, that in terms of Section 15 of the NTT Act, the NTT would hear appeals from the Income Tax Appellate Tribunal and the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) only on “substantial questions of law”, it is difficult for us to appreciate the propriety of representation, on behalf of a party to an appeal, through either Chartered Accountants or Company Secretaries, before the NTT. The determination at the hands of the NTT is shorn of factual disputes. It has to decide only “substantial questions of law”. In our understanding, Chartered Accountants and  Company Secretaries would at best be specialists in understanding and explaining issues pertaining to accounts. These issues would, fall purely within the realm of facts. We find it difficult to accept the prayer made by the Company Secretaries to  allow them, to represent a party to an appeal before the NTT. Even insofar as the Chartered Accountants are concerned, we are constrained to hold that allowing them to appear on behalf of a party before the NTT, would be unacceptable in law. We accordingly reject the claim of Company Secretaries, to represent a party before the NTT. Accordingly the prayer made by  Company Secretaries in Writ Petition (Civil) no. 621 of 2007 is hereby declined. While recording the above conclusion, we simultaneously hold Section 13(1), insofar as it allows Chartered Accountants to represent a party to an appeal before the NTT, as unconstitutional and unsustainable in law.

For the sake of convenience, the said verdict has been enclosed herewith for reference.

The Bench quashed Sections 5, 6, 7, 8 and 13 of the National Tax Tribunal Act, 2005 rendering the law ineffective for all practical purposes.

Text of the above sections is as follows :-

5. Constitution and jurisdiction of Benches-

(1) the jurisdiction of the National Tax Tribunal may be exercised by the Benches thereof to be constituted by the Chairperson.

(2) The Benches of the National Tax Tribunal shall ordinarily sit at any place in the National Capital Territory of Delhi or such other places as the Central Government may, in consultation with the Chairperson, notify:

Provided that the Chairperson may for adequate reasons permit a Bench to hold its temporary sitting for a period not exceeding fifteen days at a place other than its ordinary place of seat.

(3) The Central Government shall notify the areas in relation to which each bench of the National Tax Tribunal may exercise its jurisdiction.

(4) The Central Government shall determine the number of Benches and each Bench shall consist of two members.

(5) The Central Government may transfer a Member from headquarters of one Bench in one State to the headquarters of another Bench in another State or to the headquarters of any other Bench within a State:

Provided that no member shall be transferred without the concurrence of the Chairperson.

6. Qualifications for appointment of Chairperson and other Members –

(1) The Chairperson of the National Tax Tribunal shall be a person who has been a Judge of the Supreme Court or the Chief Justice of a High Court.

(2) A person shall not be qualified for appointment as Member unless he

(a) is, or has been, or is eligible to be, a Judge of a High Court; or

(b) is, or has been, a Member of the Income-tax Appellate Tribunal or of the Customs, Excise and Service Tax Appellate
Tribunal for at least five years.

7. Appointment of Chairperson and other Members

(1) Subject to the provisions of sub-section (2), the Chairperson and every other Member shall be appointed by the Central Government.

(2) The Chairperson and the other Members shall be appointed by the  Central Government 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 in the Ministry of Law and Justice (Department  of Legal Affairs);

(c) the Secretary in the Ministry of Finance (Department of Revenue).

(3) No appointment of the Chairperson or of any other Member shall be invalidated merely by reason of any vacancy or any defect in the constitution of the Selection Committee.

8. Terms of office of Chairperson and other Members 

The Chairperson and every other Member shall hold office as such for a term of five years from the date on which he enters upon his office but shall be eligible for re-appointment:

Provided that no Chairperson or other Member shall hold office as such after he has attained, –

(a) in the case of Chairperson, the age of sixty-eight years; and

(b) in the case of any other Member, the age of sixty-five years.

13. Appearance before National Tax Tribunal

(1) A party to an appeal other than Government may either appear in person or authorize one or more chartered accountants or legal practitioners to present his or its case before the National Tax Tribunal.

(2) The Government may authorize one or more legal practitioners or any of its officers to present its case before the National Tax Tribunal.

Explanation – For the purposes of this Section,-

(a) “chartered accountant” means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;

(b) “legal practitioner” means an advocate, a vakil or any attorney of any High Court, and includes a pleader in practice.