Tribunals are judicial institutions established by law, to provide a platform for expedited and specialized expertise in the process of adjudication.
The GST Appellate Tribunal (“the GSTAT”) is envisaged to streamline the adjudication of GST related matters and the resolution of disputes in GST. The GSTAT is the second forum of appeal, where orders of the first Appellate Authority and Revisional Authority will be challenged.
Since the GSTAT is not in function till date, the assessee needs to follow the route of filing Writ Petitions in the respective High Courts or paying their GST demands under protest.
Recently, Section 109 of the CGST Act has been substituted vide the Finance Act, 2023 w.e.f. the date yet to be notified, so as to provide that, the jurisdiction, powers and authority conferred on the GSTAT, shall be exercised by the Principal Bench and the State Benches instead of ‘National Bench or Regional Benches’, which would be set up in every state, while there will be a Principal Bench in New Delhi, consisting of the President, a Judicial Member, a Technical Member (Centre) and a Technical Member (State). Further, the State Benches will consist of two Judicial Members, a Technical Member (Centre) and a Technical Member (State).
Additionally, only the Principal Bench would hear the case involving the place of supply.
Furthermore, relevant amendments have been made in Section 110 (Appointment, qualification, conditions of GSTAT members), Section 114 (Administrative and Financial powers of the President of GSTAT), Section 117 (Appeal to the High Court), Section 118 (Appeal to the Supreme Court), and Section 119 (Sums due to be paid notwithstanding appeal, etc.) of the CGST Act.
The above cited amendments have not been made effective till date. However, it is expected that the GST Council may, in its next 50th GST Council meeting to be held on July 11, 2023, lay down detailed rules for setting up the GSTAT.
Though the Finance Act 2023 has tried to cater to all the intricacies of the existing provisions pertaining to the GSTAT, there are still certain challenges that need to be addressed, which is a matter of debate and subjectivity.
These challenges are discussed in detail in the ensuing paragraphs.
Section 110 of the CGST Act states that only a Judge of the High Court or someone who has served for 10 years as a District Judge or Additional District Judge are eligible to be appointed as a judicial member of the GST Tribunal.
In comparison to the erstwhile tax Tribunals, a clear distinction can be observed since previously, lawyers who have practiced for 10 years before the CESTAT/ the High Court/ the Supreme Court in Central Excise/ Service Tax / Customs matters were eligible to be appointed as judicial members of the CESTAT, but unfortunately, the same is not the case with the GST Tribunal, as the GST law does not allow the lawyers to be judicial members of the tribunal.
It becomes important for the GST tribunal to have a judicial member who is highly experienced in taxation since, the tribunal is the highest authority dealing with the question of facts (and question of law). The Hon’ble Supreme Court made a similar observation in the case of RK Jain v. UOI [(1993) 4 SCC 119]. The government must evaluate why it is departing from the existing practice of appointing lawyers as judicial members.
Many thanks to the Hon’ble Madras High Court for holding Sections 109(3) and 109(9) of the CGST Act, as unconstitutional being violative of the Hon’ble Supreme Court judgment UOI v. R. Gandhi [(2010) 11 SCC 1] by holding that any 3 or more-member bench will not have more technical members than judicial members.
Resultantly, the government vide the Finance Act, 2023 substituted Section 109, whereby the Principal and the State bench will be a four-member bench (2 + 2), where the Principal bench will comprise a President, a judicial member and 2 technical members (one from State and one from Centre), on the other hand, the State bench will have 2 judicial members and 2 technical members (one from State and one from Centre).
The cases will be heard by a divisional bench comprising a judicial and a technical member, except for the cases specified in Section 109(8) of the CGST Act. In the event of any difference of opinion, the President will refer the case to either a judicial or technical member. If the technical member hears the case, then it will result in a three-member bench with a majority of technical members, thereby shaping the tribunal to function akin to an Advance Ruling Authority with a pro-revenue focus, which would potentially contravene Article 50 of the Constitution and run counter to the holding of Apex Court in the case of R. Gandhi (supra). Certainly, the provision requires a revisit by lawmakers before the Courts declare the said provision unconstitutional.
Undoubtedly, the operation of the GST tribunal will reduce litigation and ultimately bring relief to taxpayers.
But it appears that Section 109(5) of the CGST Act, will overburden the Principal Bench because only the Principal Bench will hear cases where an issue of the place of supply is involved. In such cases, a minor question of place of supply also reaches with other broader issues that can otherwise be heard by the State Bench(s). This issue also needs redressal beforehand.
Better late than never, it is anticipated that the GST tribunal will commence its operations before the end of the calendar year 2023, after 6 years of enactment of the GST law. Undoubtedly, the GST tribunal will reduce the burden on higher Courts. However, it is imperative for the government to revisit the aforementioned issues to start on a smooth slate.
It is also important that the GSTAT must be equipped with digitisation and be technology-driven, wherein it allows e-filing of appeals, e-hearing, and e-orders/ judgments so as to provide the “Ease of Doing Business” and boost the “Digital India” initiative. It is expected that the GSTAT web portal will also depict the full trail of cases in a timely and effective manner on a real-time basis.
Lastly, we hope the different State Benches will keep their rulings consistent and ensure fair judgments rather than a pro-revenue approach.
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