Gujarat HC issues notice in challenge to constitution of AAR under GST regime

The Gujarat High Court has issued notice in a petition questioning the sanctity of the Authority for Advance Ruling (AAR) and the Appellate Authority for Advance Ruling (AAAR), under both the Central and State Goods and Services Tax (GST) Acts..The Centre has the power to set up AARs and AAARs to determine an applicant’s Central Goods and Services Tax (CGST) liability. A similar power is conferred upon state governments with respect to State Goods and Services Tax (SGST)..In the petition filed by advocate Nipun Singhvi, it is contended that the said adjudicating authorities are Tribunals for all practical purposes. Reliance has been placed on a judgment of the Supreme Court in Columbia Sportswear Company v. Director of Income Tax (Bangalore), in which it was laid down,.“Thus, the test for determining whether a body is a tribunal or not is to find out whether it is vested with the judicial power of the State by any law to pronounce upon rights or liabilities arising out of some special law…”.The petitioner goes on to rely on another judgment by a Constitution Bench of the Supreme Court in Union of India v. R Gandhi, which contemplated and ruled on the appointment of members to the National Company Law Tribunal (NCLT) and the National Company Law Appelate Tribunal (NCLAT)..The Court in that case held that Tribunals performed functions very similar to the High Court, and therefore members must be of similar quality to High Court judges. It was also emphasized that these tribunals could not function without a judicial member..“Two-Member Benches of the Tribunal should always have a judicial member. Whenever any larger or special benches are constituted, the number of Technical Members shall not exceed the Judicial Members.”.The guidelines laid out in the judgment also specified that technical members must be of the rank of Secretary or Additional Secretary..It is argued in the instant PIL that though these guidelines were set out with respect to NCLT and NCLAT, they apply to all Tribunals across India..In view of the above two judgments, it is the petitioner’s argument that having a Joint Commissioner as the AAR and AAAR for both SGST and CGST applications, is a violation of the doctrine of separation of powers and an infringement on the powers and independence of the judiciary..The petitioner points out that previously, the advance ruling authority was headed by a Judicial Member who was a retired Supreme Court judge, and that after the imposition of the GST regime, such a requirement was done away with. It is further claimed that it is not possible for AAR/AAAR to function judiciously and independently in the absence of a Judicial Member..“In absence of judicial member in AAR and AAAR, it will lead to executive taking power of judiciary and executive who enjoys the office to the pleasure of government. There has been significant number of decisions against the tax department constituting Technical and Judicial Member under pre GST regime, it will now be apprehensive to pass orders against the relevant ministry.”.Thus, the petition states that the provision for these authorities is an excessive delegation of legislative functions without placing any guidelines and is violative of Articles 14 and 50 of the Constitution of India..Therefore it is prayed that the Court strike down Sections 96 and 99 of the CGST Act, as well as related provisions in the CGST Rules, and in the Gujarat Goods and Service Tax Act and Rules as ultra vires the Constitution, and to stay these provisions pending the disposal of the petition..“Similarly, while constituting Tribunals, the Legislature can prescribe the qualifications/eligibility criteria. The same is however subject to Judicial Review. If the court in exercise of judicial review is of the view that such tribunalisation would adversely affect the independence of judiciary or the standards of judiciary, the court may interfere to preserve the independence and standards of judiciary.”.On Friday, a Bench of Justices Akil Kureshi and BN Karia issued notice in the petition, returnable by April 13 this year. Advocate Vishal Dave appeared for the petitioner.Read the petition.Read the order