IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL/APPELLATE JURISDICTION
TRANSFERRED CASE (C) NO. 150 OF 2006
Madras Bar Association …Petitioner(s) versus
Union of India and another …Respondents WITH
CIVIL APPEAL NO. 3850 OF 2006
CIVIL APPEAL NO. 3862 OF 2006
CIVIL APPEAL NO. 3881 OF 2006
CIVIL APPEAL NO. 3882 OF 2006
CIVIL APPEAL NO. 4051 OF 2006
CIVIL APPEAL NO. 4052 OF 2006
WRIT PETITION (C) NO.621 OF 2007
TRANSFERRED CASE (C) NO.116 OF 2006
TRANSFERRED CASE (C) NO.117 OF 2006
TRANSFERRED CASE (C) NO.118 OF 2006
WRIT PETITION (C) NO.697 OF 2007
J U D G M E N T
Jagdish Singh Khehar, J.
- All the above cases are being disposed of by this common judgment. The issue which arises for consideration before us, in the present bunch of cases,
pertains to the constitutional validity of the National Tax Tribunal Act, 2005 (hereinafter referred to as, the NTT Act). Simultaneously, the constitutional validity of the Constitution (Forty-second Amendment) Act, 1976 has been assailed, by asserting, that the same violates the basic structure of the Constitution of India (hereinafter referred to as, the Constitution), by impinging on the power of “judicial review” vested in the High Court. In the event of this Court not acceding to the aforementioned prayers, a challenge in the alternative, has been raised to various provisions of the NTT Act, which has led to the constitution of the National Tax Tribunal (hereinafter referred to as, the NTT). The NTT, according to the learned counsel for the petitioners, is styled as a quasi-judicial appellate tribunal. It has been vested with the power of adjudicating appeals arising from orders passed by Appellate Tribunals (constituted under the Income Tax Act, the Customs Act, 1962, and the Central Excise Act, 1944). Hitherto before, the instant jurisdiction was vested with High Courts. The pointed issue canvassed in this behalf is, that High Courts which discharge judicial functions, cannot be substituted by an extra-judicial body. Additionally, it is maintained that the NTT in the manner of its constitution undermines a process of independence and fairness, which are sine qua non of an adjudicatory authority.
The Historical Perspective:
The Income Tax Legislation, in India:
2(i). Law relating to income tax dates back to 1860, when legislation pertaining to levy of tax on income, was introduced in India for the first time. The original
enactment was replaced by subsequent legislations, enacted in 1865, 1886, 1918 and 1922. The Indian Income Tax Act, 1922 (hereinafter referred to as, the 1922 Act) was brought about, as a result of the recommendations of the All India Tax Committee. The 1922 Act can be described as a milestone in the evolution of direct tax laws in India. Detailed reference needs to be made to the provisions of the 1922 Act.
(ii) After the procedure provided for assessment of tax had run its course, and tax had been assessed, an executive-appellate remedy was provided for, before the Appellate Assistant Commissioner of Income Tax (under Section 30 of the 1922 Act). A further quasi-judicial appellate remedy, from decisions rendered by the first appellate authority, lay before an appellate tribunal (hereinafter referred to as the Appellate Tribunal). Section 33A was inserted by the Indian Income Tax (Amendment) Act, 1941. It provided for a remedy by way of revision before a Commissioner of Income Tax.
(iii) The remedy before the Appellate Tribunal (provided under Section 5A of the 1922 Act, by Section 85 of the Indian Income Tax (Amendment) Act, 1939), was required to be exercised by a bench comprising of one Judicial Member and one Accountant Member. It was permissible for the President of the Appellate Tribunal or any other Member thereof, to dispose of appeals, sitting singly (subject to the condition, that the total income of the assessee, as computed by the assessing officer, did not exceed Rs.15,000/-). It was also open to the President of the Appellate Tribunal to constitute larger benches of three
Members (subject to the condition, that the larger bench would comprise of at least one Judicial Member and one Accountant Member).
(iv) Section 5A of the 1922 Act, laid down the conditions of eligibility for appointment as a Judicial Member – a person who had served on a civil judicial post for 10 years was eligible, additionally an Advocate who had been practicing before a High Court for a period of 10 years, was also eligible. Under the 1922 Act, a person who had practiced in accountancy as a Chartered Accountant (under the Chartered Accountants Act, 1949) for a period of 10 years, or was a Registered Accountant (or partly a Registered Accountant, and partly a Chartered Accountant) for a period of 10 years (under any law formerly enforced), was eligible for appointment as an Accountant Member. Only a Judicial Member could be appointed as the President of the Appellate Tribunal.
(v) Section 67 of the 1922 Act, barred suits in civil courts pertaining to income tax related issues. Additionally, any prosecution suit or other proceedings could not be filed, against an officer of the Government, for an act or omission, in furtherance of anything done in good faith or intended to be done under the 1922 Act.
(vi) The 1922 Act, did not provide for an appellate remedy, before the jurisdictional High Court. The only involvement of the jurisdictional High Court, was under Section 66 of the 1922 Act. Under Section 66, either the assessee or the Commissioner of Income Tax, could move an application to the Appellate Tribunal, requiring it to refer a question of law (arising out of an assessment order) to the jurisdictional High Court. In case of refusal to make such a
reference, the aggrieved assessee or the Commissioner of Income Tax, could assail the refusal by the Appellate Tribunal, before the jurisdictional High Court. A case referred to the High Court under Section 66, was to be heard by a bench of not less than two judges of the High Court (Section 66A of the 1922 Act – inserted by the Indian Income Tax (Amendment) Act, 1926). Section 66 of the 1922 Act, was amended by the Indian Income Tax (Amendment) Act, 1939, whereby the power to make a reference became determinable by the Commissioner of Income Tax (in place of the Appellate Tribunal).
(vii) In exercise of the reference jurisdiction, a question of law, which had arisen in an appeal pending before the Appellate Tribunal, had to be determined by the High Court. After the jurisdictional High Court had answered the reference, the Appellate Tribunal would dispose of the pending appeal in consonance with the legal position declared by the High Court.
3(i) The 1922 Act was repealed by the Income Tax Act, 1961 (hereinafter referred to as, the Income Tax Act). As in the repealed enactment, so also under the Income Tax Act, an order passed by an assessing officer, was assailable through an executive-appellate remedy. The instant appellate remedy, was vested with the Deputy Commissioner (Appeals)/Commissioner (Appeals). The orders appealable before the Deputy Commissioner (Appeals) were distinctly mentioned (in Section 246 of the Income Tax Act). Likewise, the orders appealable before the Commissioner (Appeals) were expressly enumerated (in Section 246A of the Income Tax Act).
(ii) As against the order passed by the executive-appellate authority, a further appellate remedy was provided before a quasi-judicial appellate tribunal (hereinafter referred to as, the Appellate Tribunal, under Section 252 of the Income Tax Act). Section 255(6) of the Income Tax Act provides as under:-
“6. The Appellate Tribunal shall, for the purpose of discharging its functions, have all the powers which are vested in the income-tax authorities referred to in section 131, and any proceeding before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purpose of section 196 of the Indian Penal Code (45 of 1860), and the Appellate Tribunal shall be deemed to be a civil court for all the purposes of section 195 and Chapter XXXV of the Code of Criminal Procedure, 1898 (5 of 1898).”
By a deeming fiction of law, therefore, the Appellate Tribunal was considered as a civil court , dealing with “judicial proceedings”.
(iii) To be eligible for appointment as the President of the ITAT, the incumbent had to be a sitting or retired judge of a High Court, with not less than 7 years of service as a judge. Alternatively, the Central Government could appoint a Senior Vice President or a Vice President of the Appellate Tribunal, as its President. It is, therefore apparent, that the Appellate Tribunal was to be comprised of a President, Senior Vice President(s), Vice President(s) and Members.
(iv) The benches of the Appellate Tribunal, under the Income Tax Act (was similar to the one under the 1922 Act), were to be comprised of at least one Judicial Member and one Accountant Member. The authority to constitute benches of the Appellate Tribunal was vested with the President. The composition of the benches under the Income Tax Act, was similar to that postulated under the 1922 Act. When authorized by the Central Government, it
was open to the Appellate Tribunal, to dispose of appeals sitting singly (subject to the condition, that the appeal pertained to a dispute, wherein the concerned assessee’s total income was assessed as not exceeding Rs.5 lakhs). The President of the Appellate Tribunal, had the authority to constitute special benches, comprising of three or more Members (one of whom had to be a Judicial Member, and one, an Accountant Member). In case of difference of opinion, the matter was deemed to have been decided in terms of the opinion expressed by the majority.
(v) An assessee or the Commissioner, could move an application before the Appellate Tribunal, under Section 256 of the Income Tax Act, requiring it to make a reference to the High Court on a question of law (arising in an appeal pending before the Appellate Tribunal). In case the prayer made in the application was declined by the Appellate Tribunal, the order (declining the prayer) was assailable before the High Court.
(vi) Section 257 of the Income Tax Act provided for a reference directly to the Supreme Court. The instant reference could be made by the Appellate Tribunal, if it was of the opinion, that the question of law which had arisen before it, had been interpreted differently, by two or more jurisdictional High Courts.
(vii) Section 260A was inserted in the Income Tax Act by the Finance (No. 2) Act, 1998, with effect from 1.10.1998. Under Section 260A, an appellate remedy was provided for, to raise a challenge to orders passed by the Appellate Tribunal. The instant appellate remedy, would lie before the jurisdictional High Court. In terms of the mandate contained in Section 260B of the Income Tax Act, an
appeal before the High Court was to be heard by a bench of not less than two judges. The opinion of the majority, would constitute the decision of the High Court. Where there was no majority, on the point(s) of difference, the opinion of one or more judges of the High Court, was to be sought. Thereupon, the majority opinion of the judges (including the judges who had originally heard the case) would constitute the decision of the High Court.
(viii) A further appellate remedy was available as against a decision rendered by the jurisdictional High Court. The instant appellate remedy was vested with the Supreme Court under Section 261 of the Income Tax Act.
The Customs Legislation, in India:
4(i). The Customs Act, 1962 (hereinafter referred to as, the Customs Act) was enacted to consolidate and amend the law relating to customs. The Customs Act vested the power of assessment of customs duty, with the Deputy Collector of Customs or the Collector of Customs. An executive-appellate remedy was provided under Section 128 of the Customs Act, before a Collector of Customs (where the impugned order had been passed by an officer, lower in rank to the Collector of Customs), and before the Central Board of Excise and Customs (constituted under the Central Boards of Revenue Act, 1963), where the impugned order had been passed by a Collector of Customs. The Board had also been conferred with executive revisional powers (under Section 130 of the Customs Act), to suo moto, or on an application of an aggrieved person, examine the record of any proceeding, pertaining to a decision or order under the provisions of the Customs Act. Revisional powers, besides those expressly
vested in the Board (under Section 130 of the Customs Act), were also vested with the Central Government (under Section 131 of the Customs Act). (ii) By the Finance (No. 2) Act, 1980, Sections 128 to 131 of the original Act were substituted. The power to entertain the first executive-appellate remedy, was now vested with the Collector (Appeals), under Sections 128 and 128A of the Customs Act. On exhaustion of the above remedy, a further quasi-judicial appellate remedy was provided for, under Sections 129 and 129A before the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as, the CEGAT/Appellate Tribunal). CEGAT was also the appellate authority, against orders passed by the Board. With introduction of Service Tax, under Chapter V of the Finance Act, 1994, CEGAT was conferred the jurisdiction to hear appeals in cases pertaining to service tax disputes as well. The Appellate Tribunal is now known as the Customs, Excise and Service Tax Appellate Tribunal – the CESTAT. By Act 22 of 2003, the expression “Gold (Control)” was substituted with “Service Tax” in the definition of the “Appellate Tribunal” (w.e.f. 14.5.2003).
(iii) Section 129 of the Customs Act delineated the constitution of the CEGAT. It was to comprise of as many Judicial and Technical Members, as the Central Government thought fit. The instant provision, also laid down the conditions of eligibility for appointment of Judicial/Technical Members. A Judicial Member could be chosen out of persons, who had held a civil judicial post for at least 10 years, or out of persons who had been in practice as an Advocate for at least 10 years, as also, from out of Members of the Central Legal Service (not below
Grade-I), who had held such post for at least 3 years. A Technical Member could be appointed out of persons, who had been members of the Indian Customs and Central Excise Service (Group A), subject to the condition, that such persons had held the post of Collector of Customs or Central Excise (Level I), or equivalent or higher post, for at least 3 years. The Finance (No.2) Act, 1996 amended Section 129(3) of the Customs Act, whereby it enabled the Central Government to appoint a person to be the President of the Appellate Tribunal. The Central Government could make such appointment, subject to the condition, that the person concerned had been a judge of the High Court, or was one of the Members of the Appellate Tribunal. Likewise, it was open to the Central Government to appoint one or more Members of the Appellate Tribunal to be its Vice President(s).
(iv) Powers and functions of the Appellate Tribunal were to be exercised through benches constituted by its President, from amongst Members of the Appellate Tribunal (in terms of Section 129C of the Customs Act). Each bench was required to be comprised of at least one Judicial Member and one Technical Member. It was open to the President to constitute a special bench of not less than three Members (comprising of at least one Judicial and one Technical Member). The composition of the bench, was modified by an amendment which provided, that a special bench of the Appellate Tribunal was to consist of not less than two Members (instead of three). It was also open to the President and/or Members (as authorized by the President of the Appellate Tribunal) to dispose of appeals, sitting singly, subject to the condition, that the value of goods
confiscated, or the difference in duty involved, or duty involved, or the amount of fine or penalty involved, did not exceed Rs.10,000/- — the limit was first revised to Rs.50,000/-, then to Rs.1 lakh, later to Rs.10 lakhs, and at present, the same is Rs.50 lakhs. A case involving a dispute where the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment is the sole or one of the points in issue, must however be heard by a bench comprising of a Judicial and a Technical Member [Section 129C(4)(b)]. In case of difference of opinion on any point(s), the opinion of the majority was to constitute the decision of the Appellate Tribunal. If Members were equally divided, the appeal was to be referred by the President, for hearing on such point(s), by one or more other Members of the Appellate Tribunal. Whereupon, the majority opinion was to be considered as the decision of the Appellate Tribunal. Sub-sections (7) and (8) of Section 129C provided as under:-
“(7) The Appellate Tribunal shall, for the purposes of discharging its functions, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the following matters, namely:-
(a) discovery and inspection;
(b) enforcing the attendance of any person and examining him on oath;
(c) compelling the production of books of account and other documents; and
(d) issuing commissions.
(8) Any proceeding before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 and for the purpose of Section 196 of the Indian Penal Code 945 of 1860) and the Appellate Tribunal shall be deemed to be a Civil Court for all the purposes of Section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).”
It is apparent from the above provision, that by a fiction of law, proceedings before the Appellate Tribunal are treated as judicial proceedings. (v) The Customs and Excise Revenues Appellate Tribunal Act, 1986 came into force with effect from 23.12.1986. Section 26 of the instant enactment, excluded the jurisdiction of courts except the Supreme Court. Section 28 thereof provided as under:-
“28. Proceedings before the Appellate Tribunal to be judicial proceedings – All proceedings before the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of Sections 193, 219 and 228 of the Indian Penal Code (45 of 1860).”
A perusal of the above amendment reveals, that by a fiction of law, the Appellate Tribunal was deemed to be discharging “judicial proceedings”. Therefore, the position prevailing prior to the amendment, was maintained, so far as the instant aspect was concerned.
(vi) Just as in the case of the 1922 Act, which did not provide for an appellate remedy, but allowed a reference to be made to a jurisdictional High Court, under Section 66, likewise, Section 130 of the Customs Act provided for a reference on a question of law, to the High Court. A reference could be made, on an application by the Collector of Customs or the person on whom customs duty has been levied, to the Appellate Tribunal. If the Appellate Tribunal refused to make a reference, the aggrieved party could assail the determination of the Appellate Tribunal, before the jurisdictional High Court. Where a reference on a question of law was entertained, it had to be heard by a bench of not less than two judges of the High Court. In case of difference of opinion on any point(s), the opinion
expressed by the majority, was to be treated as the decision of the High Court. Where the opinion was equally divided, on the point(s) of difference, the matter was to be heard by one or more other judges of the High Court. Thereupon, the majority opinion of the judges (including the judges who had originally heard the case) would constitute the decision of the High Court. A decision of the High Court, would then be applied by the Appellate Tribunal, for the disposal of the appeal wherefrom the reference had arisen.
(vii) The Appellate Tribunal was also authorized to make a reference directly to the Supreme Court (under Section 130A of the Customs Act). This could be done, in case the Appellate Tribunal was of the view, that there was a conflict of decisions of High Courts in respect of a question of law pending before it for decision. The decision of the Supreme Court, would then be applied by the Appellate Tribunal, for the disposal of the appeal out of which the reference had arisen.
(viii) The Finance (No. 32) Act, 2003 introduced a new Section 130. The remedy of a reference to the jurisdictional High Court, was substituted by a remedy of an appeal to the High Court. The amended Section 130 of the Customs Act provided, that an appeal would lie to the High Court from every order passed by the Appellate Tribunal (on or after 1.7.2003), subject to the condition, that the High Court was satisfied, that the case involved a substantial question of law. In such an eventuality, the High Court would formulate the substantial question(s) of law. It was open to the High Court in exercise of its instant appellate jurisdiction, also to determine any issue which had not been
decided by the Appellate Tribunal, or had been wrongly decided by the Appellate Tribunal. The appeal preferred before the High Court, could be heard by a bench of not less than two judges.
(ix) After amendment to Section 130, Section 130E was also amended. The latter amended provision, provided for an appeal to the Supreme Court, from a judgment of the High Court, delivered on an appeal filed under Section 130, or on a reference made under Section 130 by the Appellate Tribunal (before 1.7.2003), or on a reference made under Section 130A.
(x) The NTT Act omitted Sections 130, 130A, 130B, 130C and 130D of the Customs Act. The instant enactment provided for an appeal from every order passed by the Appellate Tribunal to the NTT, subject to the condition, that the NTT arrived at the satisfaction, that the case involved a substantial question of law. On admission of an appeal, the NTT would formulate the substantial question of law for hearing the appeal. Section 23 of the NTT Act provided, that on and from the date, to be notified by the Central Government, all matters and proceedings including appeals and references, pertaining to direct/indirect taxes, pending before the High Court, would stand transferred to the NTT. Section 24 of the NTT Act provides for an appeal from an order passed by the NTT, directly to the Supreme Court.
The Central Excise Legislation, in India:
5(i). The Central Excise and Salt Act, 1944 (hereinafter referred to as, the Excise Act) was enacted to consolidate and amend, the law related to central duties on excise, and goods manufactured and produced in India, and to salt.
Under the said enactment, the power to assess the duty, was vested with the Assistant Collectors of Central Excise, and Collectors of Central Excise. An executive-appellate remedy was provided for under Section 35 before the Commissioner (Appeals).
(ii) The Board was vested with revisional jurisdiction. Revisional jurisdiction was additionally vested with the Central Government. In 1972, the Board was empowered under Section 35A of the Excise Act, to exercise the power of revision, from a decision/order/rule made/passed, under the Excise Act, subject to the condition, that no revision would lie under the instant provision, as against an appellate order passed under Section 35 of the Excise Act, by the Commissioner (Appeals). The Central Government was vested with revisional jurisdiction against appellate orders passed by the Commissioner (Appeals) under Section 35. In 1978, the revisional jurisdiction which hitherto before lay with the Board, was vested with the Collector of Central Excise.
(iii) On the exhaustion of the first executive-appellate remedy, a further quasi judicial appellate remedy was provided for, under Section 35B of the Excise Act, to an Appellate Tribunal. The remedy of appeal before the Appellate Tribunal, could be availed of (a) against a decision or order passed by the Collector of Central Excise as an adjudicating authority, (b) against an order passed by the Collector (Appeals) under Section 35A of the Excise Act (as substituted by the Finance (No. 2) Act, 1980), (c) against an order passed by the Board or the Appellate Collector of Central Excise under Section 35 (as it stood before
21.8.1980), and (d) against an order passed by the Board or the Collector of Central Excise under Section 35A (as it stood before 21.8.1980). (iv) The Appellate Tribunal was to be comprised of such number of Judicial/Technical Members as the Central Government would think fit. Appointment of Judicial Members could only be made from amongst persons who had held a judicial office in India for at least 10 years, or who had been practicing as an Advocate for at least 10 years, or who had been a member of the Indian Legal Service (having held a post in Grade I of the said service, or any equivalent or higher post) for at least 3 years. Only such persons could be appointed as Technical Members who had been, members of the Indian Customs and Central Excise Service, Group A, and had held the post of Collector of Customs or Central Excise (or any equivalent or higher post) for at least 3 years. The Central Government had the power to appoint a person, who was or had been a judge of a High Court, or who was one of the Members of the Appellate Tribunal, as the President of the Appellate Tribunal. The functions of the Appellate Tribunal were to be discharged through benches constituted by its President. The Central Government also had the authority to appoint one or more Members of the Appellate Tribunal as Vice-President(s). Each bench was to consist of at least one Judicial Member and one Technical Member. In case of difference of opinion on any point(s), the opinion of the majority would constitute the decision of the Appellate Tribunal. If the Members of the bench were equally divided, the President was required to refer the disputed opinion for hearing, on the point(s) of difference, by one or more other Members of the Appellate
Tribunal. The majority opinion after such reference, would be the decision of the Appellate Tribunal. It was also permissible for the President, and the Members (authorized by the President) of the Appellate Tribunal, to hear and dispose of appeals, sitting singly (subject to the condition, that the difference in duty or the duty involved, or the amount of fine or penalty involved, did not exceed Rs.10,000/- — the limit was first revised to Rs.50,000/-, then to Rs.1 lakh, later to Rs.10 lakhs, and at present, the same is Rs.50 lakhs). Similar provision (as in respect of appeals to the Appellate Tribunal under Customs Act) with regard to matters to be heard by a division bench, is enjoined in Section 35D(3)(a) of the Excise Act.
(v) The Customs and Excise Revenues Appellate Tribunals Act, 1986, came into force on 23.12.1986. Section 26 of the instant enactment excluded the jurisdiction of courts except the Supreme Court. Section 14, provided for jurisdiction, powers and authority of the Appellate Tribunal. Section 28 provided as under:-
“28. Proceedings before the Appellate Tribunal to be judicial proceedings – All proceedings before the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of Sections 193, 219 and 228 of the Indian Penal Code (45 of 1860).”
A perusal of the above amendment reveals, that by a fiction of law, the Appellate Tribunal was deemed to be discharging “judicial proceedings”. (vi) Section 35G provided for a reference on any question of law, by the Appellate Tribunal, to the High Court. The aforesaid remedy could be availed of by filing an application before the Appellate Tribunal. Such an application could be filed by either the Collector of Central Excise, or the person on whom the
excise duty was levied. A reference, on a question of law, made by the Appellate Tribunal, to the High Court, would be heard by a bench of not less than two judges. On the Appellate Tribunal’s refusal to refer a question of law, the aggrieved party could assail the decision of the Appellate Tribunal (declining to make a reference), before the High Court. The jurisdictional High Court, on the acceptance of a reference, would render its decision, on the question of law. In case of difference of opinion, the opinion expressed by the majority would constitute the decision of the High Court. If the opinion by the bench was equally divided, the point(s) of difference were to be heard by one or more other judges of the High Court, whereafter, the opinion expressed by the majority would be treated as the decision of the High Court. The Appellate Tribunal would thereupon, decide the pending appeal, in consonance with the decision rendered by the High Court.
(vii) Section 35H of the Excise Act provided for a reference, by the Appellate Tribunal, directly to the Supreme Court. The instant reference by the Appellate Tribunal, could be made after the Appellate Tribunal had arrived at the conclusion, that the question of law arising for adjudication in an appeal pending before it, was differently interpreted by two or more jurisdictional High Courts. The decision of the Supreme Court, would then be applied by the Appellate Tribunal, to decide the pending appeal. Section 35L provided for appeal to the Supreme Court against the judgment rendered by the High Court (upon a reference made to the High Court by the Appellate Tribunal). The decision of the
Supreme Court would then be applied by the Appellate Tribunal, in the disposal of the appeal pending before it.
(viii) The Finance (No. 32) Act, 2003 substituted Section 35G of the Excise Act and in place of the remedy of reference, the amended provision provided for a direct appeal to the jurisdictional High Court (after the cut-off date, i.e., 1.7.2003). The jurisdictional High Court was to entertain an appeal from an order passed by the Appellate Tribunal, on its being satisfied, that the appeal raised a substantial question of law. In such an eventuality, the High Court would formulate the substantial question(s) of law. It was open to the High Court in exercise of its instant appellate jurisdiction, also to determine any issue which had not been decided by the Appellate Tribunal, or had wrongly been decided by the Appellate Tribunal. The appeal preferred before the High Court, would be heard by a bench of not less than two judges. Section 35L of the Excise Act was also amended. The amended provision provided for an appeal from any judgment of the High Court (in exercise of its appellate jurisdiction under Section 35G of the Excise Act, or on a reference made under Section 35G by the Appellate Tribunal before 1.7.2003, or on a reference made under Section 35H), to the Supreme Court.
(ix) The NTT Act omitted Sections 35G, 35H, 35I and 35J of the Excise Act. The instant enactment provided for an appeal from every order passed by the Appellate Tribunal to the NTT, subject to the condition, that the NTT was satisfied, that the case involved a substantial question of law. On admission of an appeal, the NTT would formulate the substantial question of law, for hearing
the appeal. Section 23 of the NTT Act provided, that on and from the date to be notified by the Central Government, all matters and proceedings including appeals and references, pertaining to direct/indirect taxes, pending before the jurisdictional High Courts, would stand transferred to the NTT. Section 24 of the NTT Act provided for an appeal from an order passed by the NTT, to the Supreme Court.
Facts leading to the promulgation of the NTT Act:
- The first Law Commission of independent India was established in 1955 for a three year term under the chairmanship of Mr. M.C. Setalvad, who was also the first Attorney General for India. The idea of constituting a “National Tax Court” was mooted by the first Law Commission in its 12th Report, suggesting the abolition of the existing appellate tribunal, under the framework of the Income Tax Act. It recommended a direct appeal to the High Courts, from orders passed by appellate Commissioners. This recommendation was not accepted.
- A Direct Taxes Enquiry Committee was set up by the Government of India in 1970, with Mr. K.N. Wanchoo a retired Chief Justice of the Supreme Court of India, as its Chairman. The Enquiry Committee was assigned the following objectives: (1) to recommend ways to check avoidance of tax, through various legal lacunae; (2) to examine the exemptions allowed by tax laws, and evaluate scope of their reduction; and (3) to suggest methods for better tax assessment, and improvements in tax administration. The Wanchoo Committee recommended creation of a “National Court”, which would be comprised of
judges with special knowledge of tax laws. The recommendation made by the Wanchoo Committee, was for creation of permanent “Tax Benches” in High Courts, and appointment of retired judges to such benches, under Article 224A of the Constitution. The suggestion was aimed at clearing the backlog of tax cases. The Wanchoo Committee did not suggest the establishment of any separate tax courts as that, according to the Committee, would involve an amendment to the provisions of the Constitution, besides other statutory and procedural changes.
- Another Direct Tax Laws Committee was constituted in 1977, under the chairmanship of Mr. N.K. Palkhivala, an eminent jurist. The Committee was later headed by Mr. G.C. Choksi. The Committee was constituted, to examine and suggest legal and administrative measures, for simplification and rationalization of direct tax laws. The Choksi Committee recommended the establishment of a “Central Tax Court” with an all-India jurisdiction. It was suggested, that such a court be constituted under a separate statute. Just like the recommendations of the Wanchoo Committee, the recommendations of the Choksi Committee also necessitated amendments in the provisions of the Constitution. As an interim measure to the above recommendation, the Choksi Committee suggested, the desirability of constituting “Special Tax Benches” in High Courts, to deal with the large number of pending tax cases, by continuous sitting throughout the year. It was also suggested, that judges who sit on the “Special Tax Benches”, should be selected from those who had special knowledge, to deal with matters relating to direct tax laws. The Choksi Committee recommended, that the judges selected for the “Special Tax Benches” would be transferred to the “Central Tax Court”, as
and when the same was constituted. It is, therefore apparent, that according to the recommendations of the Choksi Committee, the “Central Tax Court” was to comprise of judges of High Courts, or persons qualified to be appointed as High Court Judges. The recommendations of the Choksi Committee reveal, that the suggested “Central Tax Court” would be a special kind of High Court, to deal with issues pertaining to direct tax laws. This was sought to be clarified in paragraph 6.22 of the Choksi Committee’s Report.
- None of the recommendations referred to hereinabove were implemented, till a similar recommendation was again mooted in the early 1990s. After deliberating on the issue for a few years, the Union of India promulgated the National Tax Tribunal Ordinance, 2003. The Ordinance inter alia provided, for the transfer of appellate jurisdiction (under direct tax laws) vested in High Courts, to the NTT. After the Ordinance lapsed, the National Tax Tribunal Bill, 2004 was introduced. The said Bill was referred to a Select Committee of the Parliament. The Select Committee granted a personal hearing to a variety of stakeholders, including the representatives of the Madras Bar Association (i.e., the petitioner before this Court in Transferred Case (C) no. 150 of 2006). The Committee presented its report on 2.8.2005. In its report, it suggested serious reservations on the setting up of the NTT. The above Bill was presented before the Lok Sabha in 2005. The Bill expressed four main reasons for setting up the NTT: (1) to reduce pendency of huge arrears, that had mounted in High Courts all over the country, (2) huge tax recovery was statedly held up, in tax litigation before various High Courts, which directly impacted implementation of national
projects/welfare schemes of the Government of India, (3) to have a uniformity in the interpretation of tax laws. In this behalf it was suggested, that different opinions were expressed by different High Courts on identical tax issues, resulting in the litigation process being tied up in higher Courts, and (4) the existing judges dealing with tax cases, were from civil courts, and therefore, were not well-versed to decide complicated tax issues.
The issues canvassed on behalf of the petitioners:
- The submissions advanced on behalf of the petitioners, for purposes of convenience, deserve to be examined from a series of distinct and separate perspectives. Each perspective is truly an independent submission. It is, therefore necessary, in the first instance, to clearly describe the different submissions, advanced at the hands of the learned counsel for the petitioners. The same are accordingly being delineated hereunder:-
The first contention: That the reasons for setting up the NTT, were fallacious and non-existent. Since the foundational basis is untrue, the structure erected thereupon, cannot be accepted as valid and justified. And therefore, the same is liable to be struck down.
The second contention: It is impermissible for the legislature to abrogate/divest the core judicial appellate functions, specially the functions traditionally vested with the High Court. Furthermore, the transfer of such functions to a quasi judicial authority, devoid of essential ingredients of the superior court, sought to be replaced was constitutionally impermissible, and was liable to be set aside. Besides the appellate jurisdiction, the power of judicial review vested in High
Courts under Articles 226 and 227 of the Constitution, has also been negated by the NTT Act. And therefore, the same be set aside.
The third contention: Separation of powers, the rule of law, and judicial review, constitute amongst others, the basic structure of the Constitution. Article 323B inserted by the Constitution (Forty-second Amendment) Act, 1976, to the extent it is violative of the above mentioned components of the basic structure of the Constitution, is liable to be declared ultra vires the Constitution.
The fourth contention: A number of provisions including Sections 5, 6, 7, 8 and 13 of the NTT Act, undermine the independence of the adjudicatory process vested in the NTT, and as such, are liable to be set aside in their present format. 11. We shall now narrate each of the above contentions advanced by the learned counsel for the petitioners, in the manner submissions were advanced before us.
The first contention:
- As regards arrears of tax related cases before High Courts is concerned, it was submitted, that the figures indicated by the Department were incorrect. In this behalf it was asserted, that the stance adopted at the behest of the Revenue, that there were about 80,000 cases pending in different courts, was untrue. It was the emphatic contention of the learned counsel for the petitioners, that as of October, 2003 (when the National Tax Tribunal Ordinance, was promulgated), the arrears were approximately 29,000. Of the total pendency, a substantial number was only before a few High Courts, including the High Court of Bombay and the High Court of Delhi. In the petition filed by the Madras Bar Association, it
was asserted, that in the Madras High Court, the pending appeals under Section 260A of the Income Tax Act, were less than 2,000. It was also sought to be asserted, that the pendency of similar appeals in most southern States was even lesser. It was pointed out, that the pendency of such appeals in the High Court of Karnataka and the High Court of Kerala, was even lesser than 2,000.
- In respect of the Revenue’s assertion, that huge tax recovery was held up, in tax litigation, before High Courts, it was submitted, that the figures projected at the behest of the Department were incorrect. It was pointed out, that according to the Revenue, the pending cases in the High Courts involved an amount of approximately Rs.80,000 crores (relatable to direct tax cases). It was submitted, that the figures projected by the Department, included not only the basic tax, but interest and penalty imposed thereon, as well. It was pointed out, that interest could be as high as 40% per annum, under tax statutes, besides penal interest. It was accordingly sought to be canvassed, that if the main appeals were set aside by the High Court, there would hardly be any dues payable to the Government at all. Additionally, it was sought to be asserted, that many tax appeals pending before the High Courts, were filed by assessees, and accordingly, in the event of the assessees succeeding, the amount could not be considered as having been held up, but may have to be refunded. It was further asserted, that in most cases, the Revenue was able to recover a substantial amount from the assessees, by the time the matter reached the High Court (on account of pre-deposits). It was, therefore sought to be submitted, that the
figures indicated by the Revenue, with reference to the amount of tax held up in pending cases, before High Courts was wholly flawed and deceptive. 14. It was also the contention of the learned counsel for the petitioners, that the mere establishment and creation of the NTT, would not result in uniformity of decisions pertaining to tax laws. In this behalf it was sought to be asserted, that just as in the manner two High Courts could differ with one another, so also, could two tax benches, of the NTT. On the factual front, it was pointed out, that divergence of opinion in High Courts was very rare. It was, as a matter of approximation, suggested, that in most cases (approximately 99%), one High Court would follow the view taken by another High Court. Learned counsel, however pointed out, that in High Courts an age-old mechanism, to resolve conflicts of views, by either placing such matters before larger benches, or before a higher court, was in place. Pointing out illustratively to the ITAT and the CESTAT, it was asserted, that there had been many cases of divergence of opinion, which were resolved by larger benches. It was, therefore sought to be canvassed, that the instant basis for constituting the NTT, was also not based on a prudent or sensible rationale.
- On the subject of High Court Judges being not well-versed to determine complicated interpretation of tax-law related issues, it was submitted, that the very mention of the above as a basis, for creating the NTT, was extremely unfortunate. It was submitted, that well before the independence of this country, and even thereafter, High Courts have been interpreting and construing tax related disputes, in a legitimate, tenable and lawful manner. The fairness and
rationale of tax related issues, according to learned counsel, was apparent from the faith reposed in High Courts both by the Revenue, as well as, by the assessees. Furthermore, the veracity and truthfulness, of the instant assertion, according to the learned counsel, could be gauged from the fact, that interference by the Supreme Court, in the orders passed by the High Courts on tax matters, has been minimal.
- During the course of hearing, our attention was also invited to the fact, that the legislations of the instant nature would have a lopsided effect. In this behalf it was sought to be pointed out, that while jurisdiction vested in High Courts was being excluded, the burden was being transferred to the Supreme Court of India. This assertion was sought to be substantiated by the learned counsel for the petitioners, by inviting our attention to the legislations, wherein the power of judicial review traditionally vested in the High Courts, has been excluded, and a remedy of appeal has been provided from the tribunals constituted directly to the Supreme Court. In this behalf, reference may illustratively be made to the following provisions:-
(i) The Electricity Act, 2003
- Appeal to Supreme Court – Any person aggrieved by any decision or order of the Appellate Tribunal, may, file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him, on any one or more of the grounds specified in Section 100 of the Code of Civil Procedure, 1908 (5 of 1908):
Provided that the Supreme Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.
(ii) The National Green Tribunal Act, 2010
Section 22. Appeal to Supreme Court – Any person aggrieved by any award, decision or order of the tribunal, may, file an appeal to the Supreme Court, within ninety days from the date of communication of the award, decision or order of Tribunal, to him, on any one or more of the grounds specified in Section 100 of the Code of Civil Procedure, 1908 (5 of 1908)
Provided that the Supreme Court may, entertain any appeal after the expiry of ninety days, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal.
(iii) The Telecom Regulatory Authority of India Act, 1997 Section 18. Appeal to Supreme Court – (1) Notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908) or in any other law, an appeal shall lie against any order, not being an interlocutory order, of the Appellate Tribunal to the Supreme Court on one or more of the grounds specified in section 100 of that code.
(2) No appeal shall lie against any decision or order made by the Appellate Tribunal with the consent of the parties.
(3) Every appeal under this section shall be preferred within a period of ninety days from the date of the decision or order appealed against:
Provided that the Supreme Court may entertain the appeal after the expiry of the said period of ninety days, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal in time.
(iv) The Securities and Exchange Board of India Act, 1992 Section 15Z. Appeal to Supreme Court. – Any person aggrieved by any decision or order of the Securities Appellate Tribunal may file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order of the Securities Appellate Tribunal to him on any question of law arising out to such order: Provided that the Supreme Court may, if it is satisfied that the applicant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.
(v) Companies Act, 1956
Section 10GF. Appeal to Supreme Court. – Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law arising out of such decision or order:
Provided that the Supreme Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.
- It was also pointed out, that the enactment of the NTT Act per se lacks bonafides. In this behalf the contention of the learned counsel for the petitioner was, that there is a Parliamentary convention that if a Select Committee rejects a Bill, it is normally not passed by the Parliament. At the very least, the reservations expressed by the Select Committee are taken into account, and the Bill in question is appropriately modified. It was submitted, that the bill under reference was presented before the Lok Sabha on 29.11.2005, and the same was passed without making a single amendment.
- It was, therefore, the vehement contention of the learned counsel for the petitioners, that the foundational facts being incorrect, and the manner in which the bill was passed, being devoid of bonafides, the legislation itself i.e., the NTT Act, deserved to be set aside.
The second contention:
- It was the emphatic contention of the learned counsel for the petitioners, that it was impermissible for the legislature to abrogate/divest the core judicial appellate functions traditionally vested with the High Court, and to confer/vest the same, with an independent quasi-judicial authority, which did not even have the basic ingredients of a superior Court, like the High Court (whose jurisdiction is sought to be transferred). In conjunction with the instant contention, it was also the submission of the learned counsel, that the jurisdiction vested in the High Courts under Articles 226 and 227 of the Constitution, is not only in respect of the rightful implementation of statutory provisions, but also of supervisory jurisdiction, over courts and tribunals, cannot be curtailed under any circumstances.
- In order to supplement the instant contention, learned counsel also placed reliance on Article 225 of the Constitution which is being extracted hereunder:-
“225. Jurisdiction of existing High Courts – Subject to the provisions of this Constitution and to the provisions of any law of the appropriate Legislature made by virtue of powers conferred on that Legislature by this Constitution, the jurisdiction of, and the law administered in, any existing High Court, and the respective powers of the Judges thereof in relation to the administration of justice in the Court, including any power to make rules of Court and to regulate the sittings of the court and of members thereof sitting alone or in Division Courts, shall be the same as immediately before the commencement of this Constitution:
Provided that any restriction to which the exercise of original jurisdiction by any of the High Courts with respect to any matter concerning the revenue or concerning any act ordered or done in the collection thereof was subject immediately before the commencement of this Constitution shall no longer apply to the exercise of such jurisdiction.”
Inviting the Court’s attention to the proviso to Article 225 of the Constitution it was submitted, that the original jurisdiction of High Courts on matters pertaining to revenue or the collection thereof, even if considered as barred, the said bar was ordered to be expressly done away with, by the proviso to Article 225 of the Constitution. In the present context, learned counsel for the petitioners invited our attention to Section 226(1) of the Government of India Act, 1935. The said Section is reproduced hereunder:-
“226(1) Until otherwise provided by Act of the appropriate Legislature, no High Court shall have any original Jurisdiction in any matter concerning the revenue, or concerning any act ordered or done in the collection thereof according to the usage and practice of the country or the law for the time being in force.”
It was submitted, that under the above statutory provision, a High Court could not issue a writ in the nature of mandamus, to call upon a Revenue authority to discharge its statutory obligations, in respect of the assessment of tax. Likewise,
it was not open to the High Court, to issue a writ in the nature of certiorari or certiorarified mandamus, in order to set aside or modify an order of assessment, passed in violation of or in contravention of any statutory provision(s). It was submitted, that the proviso to Article 225 of the Constitution, as has been extracted hereinabove, was omitted by the Constitution (Forty-second Amendment) Act, 1976 (with effect from 1.2.1977). It was, however pointed out, that the Parliament having realized its mistake, restored the proviso to Article 225 of the Constitution, as was originally enacted by the Constitution (Forty-fourth Amendment) Act, 1978 (with effect from 20.6.1979). Thus viewed, according to the learned counsel for the petitioners, under the provisions of the Constitution, prevailing at the present juncture, the original jurisdiction of the High Court (i.e., the jurisdiction under Articles 226 and 227 of the Constitution), as also, the law administered by a High Court at the time of enactment of the Constitution, cannot be restricted. Accordingly, it was asserted, that on matters pertaining to revenue or the collection thereof, the adjudication authority of High Courts, could not be curtailed.
- Articles 226 and 227 of the Constitution, on which emphatic reliance has been placed by the learned counsel, are being reproduced hereunder:-
“226. Power of High Courts to issue certain writs –
(1) Notwithstanding anything in article 32, every High Court shall have power, throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate cases, any Government, within those territories directions, orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by Part III and for any other purpose.
(2) The power conferred by clause (1) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories.
(3) Where any party against whom an interim order, whether by way of injunction or stay or in any other manner, is made on, or in any proceedings relating to, a petition under clause (1), without –
( a) furnishing to such party copies of such petition and all documents in support of the plea for such interim order; and (b) giving such party an opportunity of being heard, makes an application to the High Court for the vacation of such order and furnishes a copy of such application to the party in whose favour such order has been made or the counsel of such party, the High Court shall dispose of the application within a period of two weeks from the date on which it is received or from the date on which the copy of such application is so furnished, whichever is later, or where the High Court is closed on the last day of that period, before the expiry of the next day afterwards on which the High Court is open; and if the application is not so disposed of, the interim order shall, on the expiry of that period, or, as the case may be, the expiry of the aid next day, stand vacated.
(4) The power conferred on a High Court by this article shall not be in derogation of the power conferred on the Supreme Court by clause (2) of Article 32.
- Power of superintendence over all courts by the High Court – (1) Every High Court shall have superintendence over all courts and tribunals throughout the territories in relation to which it exercises jurisdiction.
(2) Without prejudice to the generality of the foregoing provisions, the High Court may –
(a) call for returns from such courts;
(b) make and issue general rules and prescribe forms for regulating the practice and proceedings of such courts; and (c) prescribe forms in which books, entries and accounts shall be kept by the officers of any such courts.
(3) The High Court may also settle tables of fees to be allowed to the sheriff and all clerks and officers of such courts and to attorneys, advocates and pleaders practising therein:
Provided that any rules made, forms prescribed or tables settled under clause (2) or clause (3) shall not be inconsistent with the provision of any law for the time being in force, and shall require the previous approval of the Governor.
(4) Nothing in this article shall be deemed to confer on a High Court powers of superintendence over any court or tribunal constituted by or under any law relating to the Armed Forces.”
It was submitted, that the above original jurisdiction vested in the High Court to issue prerogative writs, has been shown to have been consciously preserved, for matters pertaining to levy and collection of tax. It was also submitted, that the enactment of the NTT Act has the clear and explicit effect, of excluding the jurisdiction of the High Courts. This was sought to be explained by indicating, that the jurisdiction to adjudicate appeals, traditionally determined by jurisdictional High Courts, from orders passed by Appellate Tribunals under the Income Tax Act, the Customs Act and the Excise Act (all taxing legislations) have been taken out of the purview of the High Courts, and have been vested with the NTT, by the NTT Act. It was further submitted, that even the jurisdiction vested in High Courts under Articles 226 and 227 of the Constitution, has been practically done away with. In this behalf the explanation was, that by providing for an appellate remedy against an order passed by the NTT, directly to the Supreme Court, the above original jurisdiction of the High Courts, had practically been frustrated and effectively neutralized. It is pointed out, that the curtailment of the jurisdiction of the High Courts under Articles 226 and 227 of the Constitution, must be viewed as submission, distinct and separate from the one emerging out of the substitution of, the jurisdiction of the High Courts under Section 260A of the Income Tax Act, 1961, Section 130 of the Customs Act, and Section 35G of the Excise Act. Whilst the former contention is based on a clear constitutional right, the submission based on the provisions of the taxing statutes,
emerges from a well accepted constitutional convention, coupled with the clear intent expressed in the proviso to Article 225 of the Constitution. 22. In order to support the second contention advanced by the petitioners, the following decisions were relied upon:
(i) Reliance was first of all, placed on the decision of the Privy Council in Hinds v. The Queen Director of Public Prosecutions v. Jackson Attorney General of Jamaica (Intervener), 1976 All ER Vol. (1) 353. The factual/legal position which arose for determination in the cited case pertained to the Gun Court Act, 1974, enacted by the Parliament of Jamaica. The aforesaid enactment was made, without following the special procedure prescribed by Section 49 of the Constitution of Jamaica (to alter the provisions of the Constitution of Jamaica). The Gun Court Act, 1974, had the effect of creating a new Court – “the Gun Court”, to sit in three different kinds of divisions: A Resident Magistrate’s Division, a Full Court Division and a Circuit Court Division. One or the other of these divisions, was conferred with the jurisdiction to try, different categories of offenders of criminal offences. Prior to the passing of the Act, and at the date of coming into force of the Constitution, these offences were cognizable only before a Resident Magistrate’s Court, or before the Circuit Court of the Supreme Court of Jamaica. The Gun Court Act, 1974, also laid down the procedure to be followed (in each of the divisions). For certain specified offences relating to unauthorized possession, acquisition or disposal of firearms and ammunition, “the Gun Court” was required to mandatorily impose a sentence of detention on hard labour. A detenue could only be discharged, at the direction of the
Governor-General, acting in accordance with the advice of the Review Board. The Review Board was a non-judicial body under the Gun Court Act, 1974. Lord Diplock while recording the majority view in Hinds case (supra), observed as under:-
“…..In seeking to apply to the interpretation of the Constitution of Jamaica what has been said in particular cases about other constitutions, care must be taken to distinguish between judicial reasoning which depended on the express words used in the particular constitution under consideration and reasoning which depended on what, though not expressed, is nonetheless a necessary implication from the subject-matter and structure of the constitution and the circumstances in which it had been made. Such caution is particularly necessary in cases dealing with a federal constitution in which the question immediately in issue may have depended in part on the separation of the judicial power from the legislative or executive power of the federation or of one of its component states and in part upon the division of judicial power between the federation and a component state.
Nevertheless all these constitutions have two things in common which have an important bearing on their interpretation. They differ fundamentally in their nature from ordinary legislation passed by the parliament of a sovereign state. They embody what is in substance an agreement reached between representatives of the various shades of political opinion in the state as to the structure of the organs of government through which the plenitude of the sovereign power of the state is to be exercised in future. All of them were negotiated as well as drafted by persons nurtured in the tradition of that branch of the common law of England that is concerned with public law and familiar in particular with the basic concept of separation of legislative, executive and judicial power as it had been developed in the unwritten constitution of the United Kingdom. As to their subject-matter, the peoples for whom new constitutions were being provided were already living under a system of public law in which the local institutions through which government was carried on, the legislature, the executive and the courts, reflected the same basic concept. The new constitutions, particularly in the case of unitary states, were evolutionary not revolutionary. They provided for continuity of government through successor institutions, legislative, executive and judicial, of which the members were to be selected in a different way, but each institution was to exercise powers which, although enlarged, remained of a similar character to those that had been exercised by the corresponding institution that it had replaced.
Because of this a great deal can be, and in drafting practice often is, left to necessary implication from the adoption in the new constitution of a governmental structure which makes provision for a legislature, an executive and a judicature. It is taken for granted that the basic principle of separation of powers will apply to the exercise of their respective functions by these three organs of government. Thus the constitution does not normally contain any express prohibition on the exercise of legislative powers by the executive or of judicial powers by either the executive or the legislature. As respects the judicature, particularly if it is intended that the previously existing courts shall continue to function, the constitution itself may even omit any express provision conferring judicial power upon the judicature. Nevertheless it is well established as a rule of construction applicable to constitutional instruments under which this governmental structure is adopted that the absence of express words to that effect does not prevent the legislative, the executive and the judicial powers of the new state being exercisable exclusively by the legislature, by the executive and by the judicature respectively. To seek to apply to constitutional instruments the canons of construction applicable to ordinary legislation in the fields of substantive criminal or civil law would, in their Lordships’ view, be misleading – particularly those applicable to taxing statutes as to which it is a well-established principle that express words are needed to impose a charge on the subject.
In the result there can be discerned in all those constitutions which have their origin in an Act of the Imperial Parliament at Westminster or in an Order in Council, a common pattern and style of draftsmanship which may conveniently be described as ‘the Westminster model.’
Before turning to those express provisions of the Constitution of Jamaica upon which the appellants rely in these appeals, their Lordships will make some general observations about the interpretation of constitutions which follow the Westminster model.
All Constitutions on the Westminster model deal under separate Chapter headings with the legislature, the executive and the judicature. The Chapter dealing with the judicature invariably contains provisions dealing with the method of appointment and security of tenure of the members of the judiciary which are designed to assure to them a degree of independence from the other two branches of government. It may, as in the case of the Constitution of Ceylon, contain nothing more. To the extent to which the Constitution itself is silent as to the distribution of the plenitude of judicial power between various courts it is implicit that it shall continue to be distributed between and exercised by the courts that were already in existence when the new Constitution came into force; but the legislature, in the exercise of its power to make laws for the ‘peace, order and good government’ of the state, may provide for the establishment of new courts and for the transfer to them of the whole or part of the jurisdiction previously exercisable by an existing court. What, however, is implicit in
the very structure of a Constitution on the Westminster model is that judicial power, however it be distributed from time to time between various courts, is to continue to be vested in persons appointed to hold judicial office in the manner and on the terms laid down in the Chapter dealing with the judicature, even though this is not expressly stated in the Constitution (Liyanage v. R.  1 All ER 650 at 658,  A.C. 259 at 287, 288).
The more recent constitutions on the Westminster model, unlike their earlier prototypes, include a Chapter dealing with fundamental rights and freedoms. The provisions of this Chapter form part of the substantive law of the state and until amended by whatever special procedure is laid down in the Constitution for this purpose, impose a fetter upon the exercise by the legislature, the executive and the judiciary of the plenitude of their respective powers. The remaining Chapters of the Constitutions are primarily concerned not with the legislature, the executive and the judicature as abstractions, but with the persons who shall be entitled collectively or individually to exercise the plenitude of legislative, executive or judicial powers – their qualifications for legislative, executive or judicial office, the methods of selecting them, their tenure of office, the procedure to be followed where powers are conferred on a class of persons acting collectively and the majorities required for the exercise of those powers. Thus, where a constitution on the Westminster model speaks of a particular ‘court’ already in existence when the Constitution comes into force it uses this expression as a collective description of all those individual judges who, whether sitting alone or with other judges or with a jury, are entitled to exercise the jurisdiction exercised by that court before the Constitution came into force. Any express provision in the constitution for the appointment or security of tenure of judges of that court will apply to all individual judges subsequently appointed to exercise an analogous jurisdiction, whatever other name may be given to the ‘court’ in which they sit ( Attorney-General for Ontario v. Attorney-General for Canada)  A.C. 750.
Where, under a constitution on the Westminster model, a law is made by the Parliament which purports to confer jurisdiction on a court described by a new name, the question whether the law conflicts with the provisions of the constitution dealing with the exercise of the judicial power does not depend upon the label (in the instant case ‘The Gun Court’) which the Parliament attaches to the judges when exercising the jurisdiction conferred on them by the law whose constitutionality is impugned. It is the substance of the law that must be regarded, not the form. What is the nature of the jurisdiction to be exercised by the judges who are to compose the court to which the new label is attached? Does the method of their appointment and the security of their tenure conform to the requirements of the constitution applicable to judges who, at the time the constitution came into force, exercised jurisdiction of that nature? (Attorney-General for
Australia v. R. and Boilermakers’ Society of Australia,  A.C. 288, 309-310).
xxx xxx xxx
…..So in deciding whether any provisions of a law passed by the Parliament of Jamaica as an ordinary law are inconsistent with the Constitution of Jamaica, neither the courts of Jamaica nor their Lordships’ Board are concerned with the propriety or expediency of the law impugned. They are concerned solely with whether those provisions, however reasonable and expedient, are of such a character that they conflict with an entrenched provision of the Constitution and so can be validly passed only after the Constitution has been amended by the method laid down by it for altering that entrenched provision.”
The question examined by the Privy Council in the background of the factual/legal position expressed above, was recorded in the following words:-
“The attack on the constitutionality of the Full Court Division of the Gun Court may be based on two grounds. The first is that the Gun Court Act 1974 purports to confer on a court consisting of persons qualified and appointed as resident magistrates a jurisdiction which under the provisions of Chapter VII of the Constitution is exercisable only by a person qualified and appointed as a judge of the Supreme Court. The second ground is much less fundamental. It need only be mentioned briefly, for it arises only if the first ground fails. It is that even if the conferment of jurisdiction on a Full Court Division consisting of three resident magistrates is valid, section 112 of the Constitution requires that any assignment of a resident magistrate to sit in that division should be made by the Governor-General acting on the recommendation of the Judicial Service Commission and not by the Chief Justice as the 1974 Act provides.”
The question was dealt with, by opining as under:-
“Chapter VII of the Constitution, ‘The Judicature,’ was in their Lordships’ view intended to deal with the appointment and security of tenure of all persons holding any salaried office by virtue of which they are entitled to exercise civil or criminal jurisdiction in Jamaica. For this purpose they are divided into two categories: (i) a higher judiciary, consisting of judges of the Supreme Court and judges of the Court of Appeal, and (ii) a lower judiciary, consisting of those described in section 112 (2) , viz.:
‘… Resident magistrate, judge of the Traffic Court, Registrar of the Supreme Court, Registrar of the Court of Appeal and such other offices connected with the courts of Jamaica as, subject to the provisions of this Constitution, may be prescribed by Parliament.’
Apart from the offices of judge and registrar of the Court of Appeal which were new, these two categories embraced all salaried members of
the judiciary who exercised civil or criminal jurisdiction in Jamaica at the date when the Constitution came into force. A minor jurisdiction, particularly in relation to juveniles, was exercised by justices of the peace but, as in England, they sat part-time only, were unpaid and were not required to possess any professional qualification.
Common to both categories, with the exception of the Chief Justice of the Supreme Court and the President of the Court of Appeal, is the requirement under the Constitution that they should be appointed by the Governor-General on the recommendation of the Judicial Service Commission – a body established under section 111 whose composition is different from that of the Public Service Commission and consists of persons likely to be qualified to assess the fitness of a candidate for judicial office.
The distinction between the higher judiciary and the lower judiciary is that the former are given a greater degree of security of tenure than the latter. There is nothing in the Constitution to protect the lower judiciary against Parliament passing ordinary laws (a) abolishing their office (b) reducing their salaries while they are in office or (c) providing that their appointments to judicial office shall be only for a short fixed term of years. Their independence of the good-will of the political party which commands a bare majority in the Parliament is thus not fully assured. The only protection that is assured to them by section 112 is that they cannot be removed or disciplined except on the recommendation of the Judicial Service Commission with a right of appeal to the Privy Council. This last is a local body established under section 82 of the Constitution whose members are appointed by the Governor-General after consultation with the Prime Minister and hold office for a period not exceeding three years.
In contrast to this, judges of the Supreme Court and of the Court of Appeal are given a more firmly rooted security of tenure. They are protected by entrenched provisions of the Constitution against Parliament passing ordinary laws (a) abolishing their office (b) reducing their salaries while in office or (c) providing that their tenure of office shall end before they attain the age of 65 years. They are not subject to any disciplinary control while in office. They can only be removed from office on the advice of the Judicial Committee of Her Majesty’s Privy Council in the United Kingdom given on a reference made on the recommendation of a tribunal of inquiry consisting of persons who hold or have held high judicial office in some part of the Commonwealth.
The manifest intention of these provisions is that all those who hold any salaried judicial office in Jamaica shall be appointed on the recommendation of the Judicial Service Commission and that their independence from political pressure by Parliament or by the Executive in the exercise of their judicial functions shall be assured by granting to them such degree of security of tenure in their office as is justified by the importance of the jurisdiction that they exercise. A clear distinction is
drawn between the security of tenure appropriate to those judges who exercise the jurisdiction of the higher judiciary and that appropriate to those judges who exercise the jurisdiction of the lower judiciary.
Their Lordships accept that there is nothing in the Constitution to prohibit Parliament from establishing by an ordinary law a court under a new name, such as the “Revenue Court,” to exercise part of the jurisdiction that was being exercised by members of the higher judiciary or by members of the lower judiciary at the time when the Constitution came into force. To do so is merely to change the label to be attached to the capacity in which the persons appointed to be members of the new court exercise a jurisdiction previously exercised by the holders of one or other of the judicial offices named in Chapter VII of the Constitution. In their Lordships’ view, however, it is the manifest intention of the Constitution that any person appointed to be a member of such a court should be appointed in the same manner and entitled to the same security of tenure as the holder of the judicial office named in Chapter VII of the Constitution which entitled him to exercise the corresponding jurisdiction at the time when the Constitution came into force.
Their Lordships understand the Attorney-General to concede that salaried judges of any new court that Parliament may establish by an ordinary law must be appointed in the manner and entitled to the security of tenure provided for members of the lower judiciary by section 112 of the Constitution. In their Lordships’ view this concession was rightly made. To adopt the familiar words used by Viscount Simonds in Attorney-General of Australia v. R. and Boilermakers’ Society of Australia  A.C. 288 , 309- 310, it would make a mockery of the Constitution if Parliament could transfer the jurisdiction previously exercisable by holders of the judicial offices named in Chapter VII of the Constitution to holders of new judicial offices to which some different name was attached and to provide that persons holding the new judicial offices should not be appointed in the manner and on the terms prescribed in Chapter VII for the appointment of members of the judicature. If this were the case there would be nothing to prevent Parliament from transferring the whole of the judicial power of Jamaica (with two minor exceptions referred to below) to bodies composed of persons who, not being members of ‘the Judicature,’ would not be entitled to the protection of Chapter VII at all.
What the Attorney-General does not concede is that Parliament is prohibited by Chapter VII from transferring to a court composed of duly appointed members of the lower judiciary jurisdiction which, at the time the Constitution came into force, was exercisable only by a court composed of duly appointed members of the higher judiciary.
In their Lordships’ view section 110 of the Constitution makes it apparent that in providing in section 103 (1) that: ‘There shall be a Court of Appeal for Jamaica …’ the draftsman treated this form of words as carrying with it by necessary implication that the judges of the court required to be
established under section 103 should exercise an appellate jurisdiction in all substantial civil cases and in all serious criminal cases; and that the words that follow, viz. ‘which shall have such jurisdiction and powers as may be conferred upon it by this Constitution or any other law,’ do not entitle Parliament by an ordinary law to deprive the Court of Appeal of a significant part of such appellate jurisdiction or to confer it on judges who do not enjoy the security of tenure which the Constitution guarantees to judges of the Court of Appeal. Section 110 (1) of the Constitution which grants to litigants wide rights of appeal to Her Majesty in Council but only from ‘decisions of the Court of Appeal,’ clearly proceeds on this assumption as to the effect of section 103, Section 110 would be rendered nugatory if its wide appellate jurisdiction could be removed from the Court of Appeal by an ordinary law without amendment of the Constitution.
Their Lordships see no reason why a similar implication should not be drawn from the corresponding words of section 97. The Court of Appeal of Jamaica was a new court established under the Judicature (Appellate Jurisdiction) Law 1962 , which came into force one day before the Constitution, viz. on 5 August, 1962. The Supreme Court of Jamaica had existed under that title since 1880. In the judges of that court there had been vested all that jurisdiction in Jamaica which in their Lordships’ view was characteristic of a court to which in 1962 the description ‘a Supreme Court’ was appropriate in a hierarchy of courts which was to include a separate ‘Court of Appeal.’ The three kinds of jurisdiction that are characteristic of a Supreme Court where appellate jurisdiction is vested in a separate court are: (1) unlimited original jurisdiction in all substantial civil cases; (2) unlimited original jurisdiction in all serious criminal offences; (3) supervisory jurisdiction over the proceedings of inferior courts (viz. of the kind which owes its origin to the prerogative writs of certiorari, mandamus and prohibition).
That section 97 (1) of the Constitution was intended to preserve in Jamaica a Supreme Court exercising this characteristic jurisdiction is, in their Lordships’ view, supported by the provision in section 13 (1) of the Jamaica (Constitution) Order in Council 1962, that ‘the Supreme Court in existence immediately before the commencement of this Order shall be the Supreme Court for the purposes of the Constitution.’ This is made an entrenched provision of the Constitution itself by section 21 (1) of the Order in Council, and confirms that the kind of court referred to in the words ‘There shall be a Supreme Court for Jamaica’ was a court which would exercise in Jamaica the three kinds of jurisdiction characteristic of a Supreme Court that have been indicated above.
If, as contended by the Attorney-General, the words italicised above in section 97 (1) entitled Parliament by an ordinary law to strip the Supreme Court of all jurisdiction in civil and criminal cases other than that expressly conferred upon it by section 25 and section 44, what would be left would be a court of such limited jurisdiction that the label ‘Supreme
Court’ would be a false description; so too if all its jurisdiction (with those two exceptions) were exercisable concurrently by other courts composed of members of the lower judiciary. But more important, for this is the substance of the matter, the individual citizen could be deprived of the safeguard, which the makers of the Constitution regarded as necessary, of having important questions affecting his civil or criminal responsibilities determined by a court, however named, composed of judges whose independence from all local pressure by Parliament or by the executive was guaranteed by a security of tenure more absolute than that provided by the Constitution for judges of inferior courts.
Their Lordships therefore are unable to accept that the words in section 97 (1), upon which the Attorney-General relies, entitle Parliament by an ordinary law to vest in a new court composed of members of the lower judiciary a jurisdiction that forms a significant part of the unlimited civil, criminal or supervisory jurisdiction that is characteristic of a ‘Supreme Court’ and was exercised by the Supreme Court of Jamaica at the time when the Constitution came into force, at any rate where such vesting is accompanied by ancillary provisions, such as those contained in section 6 (1) of the Gun Court Act 1974 , which would have the consequence that all cases falling within the jurisdiction of the new court would in practice be heard and determined by it instead of by a court composed of judges of the Supreme Court.
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In their Lordships’ view the provisions of the 1974 Act, in so far as they provide for the establishment of a Full Court Division of the Gun Court consisting of three resident magistrates, conflict with Chapter VII of the Constitution and are accordingly void by virtue of section 2.
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Thus Parliament, in the exercise of its legislative power, may make a law imposing limits upon the discretion of the judges who preside over the courts by whom offences against that law are tried to inflict on an individual offender a custodial sentence the length of which reflects the judge’s own assessment of the gravity of the offender’s conduct in the particular circumstance of his case. What Parliament cannot do, consistently with the separation of powers, is to transfer from the judiciary to any executive body whose members are not appointed under Chapter VII of the Constitution, a discretion to determine the severity of the punishment to be inflicted upon an individual member of a class of offenders. Whilst none would suggest that a Review Board composed as is provided in section 22 of the Gun Court Act 1974 would not perform its duties responsibly and impartially, the fact remains that the majority of its members are not persons qualified by the Constitution to exercise judicial powers. A breach of a constitutional restriction is not excused by the good intentions with which the legislative power has been exceeded by the particular law. If, consistently with the Constitution, it is permissible for the Parliament to confer the discretion to
determine the length of custodial sentences for criminal offences on a body composed as the Review Board is, it would be equally permissible to a less well-intentioned Parliament to confer the same discretion on any other person or body of persons not qualified to exercise judicial powers, and in this way, without any amendment of the Constitution, to open the door to the exercise of arbitrary power by the executive in the whole field of criminal law.
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Their Lordships would hold that the provisions of section 8 of the Act relating to the mandatory sentence of detention during the Governor General’s pleasure and the provisions of section 22 relating to the Review Board are a law made after the coming into force of the Constitution which is inconsistent with the provisions of the Constitution relating to the separation of powers. They are accordingly void by virtue of section 2 of the Constitution.”
(ii) In the same sequence, learned counsel for the petitioners invited our attention to Liyanage v. Reginam, (1966) 1 All ER 650. It is first necessary to record the factual/legal matrix, in the cited judgment. All the 11 appellants in the matter before the Privy Council, were charged with offences arising out of an abortive coup d’e’tat on 27.1.1962. The factum of the said coup d’e’tat, was set out in a White Paper issued by the Government of Ceylon on 13.2.1962. The White Paper gave the names of 13 alleged conspirators including the appellants. The White Paper concluded by observing, that a deterrent punishment of a severe character ought to be imposed, on all those who were guilty. On 16.3.1962, the Criminal Law (Special Provisions) Act, No. 1 of 1962 was passed. It was given retrospective effect from 1.1.1962. It was limited in operation to those who were accused of offences against the State, on or around 27.1.1962. The above Act legalized imprisonment of the appellants, while they were awaiting trial. It modified a section of the Penal Code, so as to enact ex post facto, a new offence, to meet the circumstance of the abortive coup. It altered ex post facto,
the law of evidence, regarding settlements made by an accused, while in custody. It enacted a minimum punishment, accompanied by forfeiture of property, for the offences for which the appellants were tried. Under Section 440A of the Criminal Procedure Code, trial in case of sedition, could be directed to be before three judges without a jury. The instant provision was amended by the above Act, so as to extend the same, to the offences for which the appellants were charged. Under Section 9 of the above Act, the Minister of Justice was empowered to nominate the three judges. In exercise of his powers under Section 9, the Minister of Justice had nominated three judges, to try the appellants without a jury. The Supreme Court upheld the objection raised by the appellants, that Section 9 was ultra vires the Constitution of Ceylon, and that, the nomination was invalid. Thereafter, the Criminal Law Act, No. 31 of 1962 was passed. It repealed Section 9 of the earlier Act. It amended the power of nomination, in that, the power was conferred on the Chief Justice. On appeal by the appellants, against the conviction and sentence from their trial before a Court of three judges nominated under the Act, it was held, that the Criminal Law (Special Provisions) Act, No. 1 of 1962, as well as, the Criminal Law Act, No. 31 of 1962, were invalid for the two reasons. Firstly, under the Constitution of Ceylon, there was a separation of powers. The power of the judicature, while the Constitution stood, could not be usurped or infringed by the executive or the legislature. Secondly, the Criminal Law (Special Provisions) Act, No. 1 of 1962, as well as, the Criminal Law Act, No. 31 of 1962 were aimed at individuals concerned in an abortive coup, and were not legislation effecting criminal law of
general application. Although not every enactment ad hominem, and ex post facto, necessarily infringed the judicial power, yet there was such infringement in the present case, by the above two Acts. In addition to the above conclusions, it was also held, that the joint effect of the Ceylon Constitution Order in Council 1946, and the Ceylon Independence Act, 1947, was intended to, and resulted in, giving the Ceylon Parliament, full legislative powers of an independent sovereign State. Consequently, the legislative power of the Ceylon Parliament, was not limited by inability to pass laws, which offended fundamental principles of justice. The Privy Council while examining the above controversy, rendered the following opinion:-
“In Ceylon, however, the position was different. The change of sovereignty did not in itself produce any apparent change in the constituents or the functioning of the Judicature. So far as the courts were concerned their work continued unaffected by the new Constitution, and the Ordinances under which they functioned remained in force. The judicial system had been established in Ceylon by the Charter of Justice in 1833. Clause 4 of the Charter read:
“And to provide for the administration of justice hereafter in Our said Island Our will and pleasure is, and We do hereby direct that the entire administration of justice, civil and criminal therein, shall be vested exclusively in the courts erected and constituted by this Our Charter … and it is Our pleasure and We hereby declare, that it is not, and shall not be competent to the Governor of Our said Island by any Law or Ordinance to be by him made, with the advice of the Legislative Council thereof or otherwise howsoever, to constitute or establish any court for the administration of justice in any case civil or criminal, save as hereinafter is expressly saved and provided.”
Clause 5 established the Supreme Court and clause 6 a Chief Justice and two puisne judges. Clause 7 gave the Governor powers of appointing their successors. There follow many clauses with regard to administrative, procedural and jurisdictional matters. Some half a century later Ordinances (in particular the Courts Ordinance) continued the jurisdiction and procedure of the courts. Thereunder the courts have functioned continuously up to the present day.
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The Constitution is significantly divided into parts – “Part 2 The Governor-General,” “Part 3 The Legislature,” “Part 4 Delimitation of Electoral Districts,” “Part 5 The Executive,” “Part 6 The Judicature,” “Part 7 The Public Service,” “Part 8 Finance.” And although no express mention is made of vesting in the judicature the judicial power which it already had and was wielding in its daily process under the Courts Ordinance, there is provision under Part 6 for the appointment of judges by a Judicial Service Commission which shall not contain a member of either House, but shall be composed of the Chief Justice and a judge and another person who is or shall have been a judge. Any attempt to influence any decision of the Commission is made a criminal offence. There is also provision that judges shall not be removable except by the Governor-General on an address of both Houses.
These provisions manifest an intention to secure in the judiciary a freedom from political, legislative and executive control. They are wholly appropriate in a Constitution which intends that judicial power shall be vested only in the judicature. They would be inappropriate in a Constitution by which it was intended that judicial power should be shared by the executive or the legislature. The Constitution’s silence as to the vesting of judicial power is consistent with its remaining, where it had lain for more than a century, in the hands of the judicature. It is not consistent with any intention that henceforth it should pass to or be shared by, the executive or the legislature.
Counsel for the appellants succinctly summarises his attack on the Acts in question as follows. The first Act was wholly bad in that it was a special direction to the judiciary as to the trial of particular prisoners who were identifiable (in view of the White Paper) and charged with particular offences on a particular occasion. The pith and substance of both Acts was a legislative plan ex post facto to secure the conviction and enhance the punishment of those particular individuals. It legalised their imprisonment while they were awaiting trial. It made admissible their statements inadmissibly obtained during that period. It altered the fundamental law of evidence so as to facilitate their conviction. and finally it altered ex post facto the punishment to be imposed on them.
In their Lordships’ view that cogent summary fairly describes the effect of the Acts. As has been indicated already, legislation ad hominem which is thus directed to the course of particular proceedings may not always amount to an interference with the functions of the judiciary. But in the present case their Lordships have no doubt that there was such interference; that it was not only the likely but the intended effect of the impugned enactments; and that it is fatal to their validity. The true nature and purpose of these enactments are revealed by their conjoint impact on the specific proceedings in respect of which they were designed, and they take their colour, in particular, from the alterations they purported to make as to their ultimate objective, the punishment of those convicted. These
alterations constituted a grave and deliberate incursion into the judicial sphere. Quite bluntly, their aim was to ensure that the judges in dealing with these particular persons on these particular charges were deprived of their normal discretion as respects appropriate sentences. They were compelled to sentence each offender on conviction to not less than ten years’ imprisonment, and compelled to order confiscation of his possessions, even though his part in the conspiracy might have been trivial.
The trial court concluded its long and careful judgment with these words ((1965), 67 CNLR at p. 424):
“But we must draw attention to the fact that the Act of 1962 radically altered ex post facto the punishment to which the defendants are rendered liable. The Act removed the discretion of the court as to the period of the sentence to be imposed, and compels the court to impose a term of 10 years’ imprisonment, although we would have wished to differentiate in the matter of sentence between those who organised the conspiracy and those who were induced to join it. It also imposes a compulsory forfeiture of property. These amendments were not merely retroactive: they were also ad hoc, applicable only to the conspiracy which was the subject of the charges we have tried. We are unable to understand this discrimination. To the courts, which must be free of political bias, treasonable offences are equally heinous, whatever be the complexion of the Government in power or whoever be the offenders.”
Their Lordships sympathise with that protest and wholly agree with it.
One might fairly apply to these Acts the words of Chase J., in the Supreme Court of the United States in Calder v. Bull: “These acts were legislative judgments; and an exercise of judicial power.”
Blackstone in his Commentaries, Vol. I (4th Edition), p. 44, wrote: “Therefore a particular act of the legislature to confiscate the goods of Titius, or to attaint him of high treason does not enter into the idea of a municipal law: for the operation of this act is spent upon Titius only and has no relation to the community in General: it is rather a sentence than a law.”
If such Acts as these were valid the judicial power could be wholly absorbed by the legislature and taken out of the hands of the judges. It is appreciated that the legislature had no such general intention. It was beset by a grave situation and it took grave measures to deal with it, thinking, one must presume, that it had power to do so and was acting rightly; But that consideration is irrelevant, and gives no validity to acts which infringe the Constitution. What is done once, if it be allowed, may be done again and in a lesser crisis and less serious circumstances; and thus judicial power may be eroded. Such an erosion is contrary to the clear intention of
the Constitution. In their Lordships’ view the Acts were ultra vires and invalid.
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It was agreed between the parties that if the Acts were ultra vires and invalid, the convictions cannot stand. Their Lordships have therefore humbly advised Her Majesty that this appeal should be allowed and that the convictions should be quashed.”
(iii) Reference was then made to Director of Public Prosecutions of Jamaica v. Mollison, (2003) 2 AC 411. The factual controversy which led to the above cited decision of the Privy Council may be noticed. On 16.3.1994, when Kurt Mollison was merely 16 years old, he committed a murder in furtherance of a robbery. His offence was described as a “capital murder”, under the law of Jamaica. After his trial, he was convicted on 21.4.1997, when he was 19 years old. On 25.4.997, he was sentenced under Section 29(1) of the Juveniles Act, 1951, to be detained during the Governor-General’s pleasure. On 16.2.2000, although the Court of Appeal refused his prayer for leave to appeal against his conviction, it agreed to examine his contention, whether the sentence imposed on him was compatible with the provisions of the Constitution of Jamaica. The Court of Appeal accepted his contention. The sentence of detention, during the Governor-General’s pleasure, was set aside. In its place, he was sentenced to life imprisonment, with the recommendation that, he be not considered for parole till he had served a term of 20 years’ imprisonment. In the controversy which came up for consideration before the Privy Council, there were two main issues. Firstly, whether the sentence of detention during the Governor-General’s pleasure authorized by Section 29(1), was a power exercised by him in his executive capacity. And secondly, whether the power to determine the measure for
punishment to be inflicted on an offender, is compatible with the Constitution. The Privy Council, while examining the controversy, opined as under:-
“Section 29 of the Juveniles Act 1951
 Section 3 of the Offences against the Person Act 1864, as amended, provides that every person convicted of capital murder shall be sentenced to death. But special provision has been made for those who commit this crime when aged under 18. Following a number of amendments made pursuant to section 4 of the Jamaica (Constitution) Order in Council 1962 (SI 1962/1500), section 29 of the Juveniles Act 1951 now provides, so far as material to the main issue in this appeal, as follows:
“(1) Sentence of death shall not be pronounced on or recorded against a person convicted of an offence if it appears to the court that at the time when the offence was committed he was under the age of 18 years, but in place thereof the court shall sentence him to be detained during Her Majesty’s pleasure, and, if so sentenced, he shall, notwithstanding anything in the other provisions of this Law, be liable to be detained in such place (including, save in the case of a child, an adult correctional centre) and under such conditions as the Minister may direct, and while so detained shall be deemed to be in legal custody.
(4) The Governor-General may release on licence any person detained under subsection (1) or (3) of this section. Such licence shall be in such form and contain such conditions as the Governor General may direct, and may at any time be revoked or varied by the Governor-General. Where such licence is revoked the person to whom it relates shall return forthwith to such place as the Governor General may direct, and if he fails to do so may be arrested by any constable without warrant and taken to such place.”
 Section 29 as originally enacted was amended in 1964 to substitute “Minister” for “Governor” in subsection (1) and “Governor General” for “Governor” in each of the four references originally made to the Governor in subsection (4). In 1975 subsection (1) was further amended to make plain, reversing the effect of Baker v The Queen,  AC 774,  3 All ER 55, that the statutory prohibition on pronouncement of the death sentence applied to those appearing to be aged under 18 at the time when they had committed the offence, not at the time of sentence. In 1985, the reference to “an adult correctional centre” was substituted for the previous reference to “a prison”. The enacted reference to “Her Majesty’s pleasure” has not, however, been amended, no doubt because section 68(2) of the Constitution of Jamaica provides that the executive authority of Jamaica may be exercised on behalf of Her Majesty by the Governor General. In recognition of this constitutional reality, it appears to be the practice where section 29(1) applies, as was done in this case, to call the
sentence one of detention during the Governor-General’s pleasure, and in this opinion that usage will be adopted.
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The first question: is section 29 compatible with the Constitution of Jamaica?
 Both the Director and the Solicitor-General, who appeared with him, accepted at the hearing that, subject to their argument based on section 26(8) of the Constitution, section 29 of the Juveniles Act 1951 infringes the rights guaranteed by, and so is inconsistent with, sections 15(1)(b) and 20(1) of the Constitution. Given this concession, rightly made, it is unnecessary to do more than note the reason for it. A person detained during the Governor-General’s pleasure is deprived of his personal liberty not in execution of the sentence or order of a court but at the discretion of the executive. Such a person is not afforded a fair hearing by an independent and impartial court, because the sentencing of a criminal defendant is part of the hearing and in cases such as the present sentence is effectively passed by the executive and not by a court independent of the executive.
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 …..It does indeed appear that the sentencing provisions under challenge in the Hinds case were held to be unconstitutional not because of their repugnancy to any of the rights guaranteed by sections in Chapter III of the Constitution but because of their incompatibility with a principle on which the Constitution itself was held to be founded. There appears to be no reason why (subject to the other arguments considered below) the reasoning in the Hindscase does not apply to the present case. It would no doubt be open to the Board to reject that reasoning, but it would be reluctant to depart from a decision which has stood unchallenged for 25 years, the more so since the decision gives effect to a very important and salutary principle. Whatever overlap there may be under constitutions on the Westminster model between the exercise of executive and legislative powers, the separation between the exercise of judicial powers on the one hand and legislative and executive powers on the other is total or effectively so. Such separation, based on the rule of law, was recently described by Lord Steyn as “a characteristic feature of democracies”: R (Anderson) v Secretary of State for the Home Department,  4 All ER 1089,  3 WLR 1800, at pp. 1821-1822, para 5 of the latter report. In the opinion of the Board, Mr Fitzgerald has made good his challenge to section 29 based on its incompatibility with the constitutional principle that judicial functions (such as sentencing) must be exercised by the judiciary and not by the executive.
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…..The nature and purpose of the sentence of detention during the Governor-General’s pleasure are clear, as explained above. The only question is who should decide on the measure of punishment the detainee should suffer. Since the vice of section 29 is to entrust this decision to the executive instead of the judiciary, the necessary modification to ensure conformity with the Constitution is (as in Browne v The Queen,  1 AC 45) to substitute “the court’s” for “Her Majesty’s” in subsection (1) and “the court” for each reference to “the Governor-General” in subsection (4).”
(iv) Our attention was also invited to Harry Brandy v. Human Rights and Equal Opportunity Commission, (1995) 183 CLR 245. The instant judgment was rendered by the High Court of Australia. The factual controversy which led to the above determination is being narrated first. The plaintiff Harry Brandy was engaged as an officer of the Aboriginal and Torres Strait Islander Commission. The third defendant John Bell was also an officer of the said Commission. The plaintiff and the third defendant continued to serve the Commission until the Commission itself ceased to exist. On 13.3.1990, John Bell lodged a complaint with the Human Rights and Equal Opportunity Commission, wherein he alleged, verbal abuse and threatening behaviour on the part of Harry Brandy, while both were in the employment of the Commission. Thereafter, John Bell issued a notice under Section 24 of the Racial Discrimination Act, 1975. And accordingly, the Commissioner referred the complaint to the Commission. The power of the Commission, to hold an enquiry under the Racial Discrimination Act, 1975 against Harry Brandy, was exercised by the second defendant. The second defendant had been appointed under Section 24 of the Racial Discrimination Act, 1975, which empowered the Minister, to appoint a person to perform and discharge the functions of the Commissioner. The second defendant returned
his findings under Section 25Z of the Racial Discrimination Act, 1975 on 22.12.1993. The defendant’s complaint was found to be substantiated. In disposing of the controversy, the second defendant required Harry Brandy, the plaintiff, to do the following acts/course of conduct:-
“(1) that the Plaintiff do apologise to the Third Defendant, the form of the apology being annexed to the determination;
(2) that the Plaintiff do pay the sum of $2 500 to the Third Defendant by way of damages for the pain, humiliation, distress and loss of personal dignity suffered by the Third Defendant;
(3) that ATSIC do take disciplinary action against the Plaintiff, in relation to the conduct which he perpetrated against the Third Defendant; (4) that ATSIC do apologise to the Third Defendant in relation to the handling of his complaint, the form of the apology being annexed to the determination;
(5) that ATSIC do pay the sum of $10 000 to the Third Defendant by way of damages for the pain, humiliation, distress and loss of personal dignity suffered by the Third Defendant.”
In order to contest the determination rendered by the second defendant, Harry Brandy raised a challenge to the provisions of the Racial Discrimination Act, 1975. The challenge raised by him came to be formulated in the following words:-
“In consequence of the amendments embodied in the Sex Discrimination and other Legislation Amendment Act 1992 and/or the Law and Justice Legislation Amendment Act 1993 as they affect the Racial Discrimination Act 1975 are any, and if so which, of the provisions of Part III of the Racial Discrimination Act invalid?”
While adjudicating upon the matter, the High Court of Australia held as under:-
“The plaintiff’s challenge to the Act
- The plaintiff’s challenge to particular provisions of the Act is based upon the proposition that they provide for an exercise of judicial power otherwise than in conformity with Ch.III of the Commonwealth Constitution in that the power is exercised by the Commission which is not a court established pursuant to s.71 and constituted in accordance with s.72 of the Constitution. The plaintiff further argues that the correctness of this
proposition is not affected by the provisions for review by the Federal Court.
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- Although many decision-making functions may take their character as an exercise of judicial, executive or legislative power from their legislative setting, the character of the decision-maker and the nature of the decision making process, some decision-making functions are exclusive and inalienable exercises of judicial power (34 Reg. v. Davison (1954) 90 CLR at 368-370 per Dixon CJ and McTiernan J). As Dixon CJ and McTiernan J observed in Reg. v. Davison (35 ibid. at 369) :
“The truth is that the ascertainment of existing rights by the judicial determination of issues of fact or law falls exclusively within judicial power so that the Parliament cannot confide the function to any person or body but a court constituted under ss.71 and 72 of the Constitution”.
In that statement, the expression “judicial determination” means an authoritative determination by means of the judicial method, that is, an enforceable decision reached by applying the relevant principles of law to the facts as found.
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- Turning to the case before the Court, whatever might be the enforceability of a declaration that the plaintiff “do apologise”, a declaration that the plaintiff “do pay the sum of $2 500” to the third defendant, once registered, attracts the operation of s.53 of the Federal Court of Australia Act 1976 (Cth). By that section, a person in whose favour a judgment is given is entitled to the same remedies for enforcement, by execution or otherwise, as are allowed by the laws of the State or Territory applicable. In the present case, this means New South Wales. Section 53 does not affect the operation of any provision made by or under any other Act or the Rules of Court for the execution and enforcement of judgments of the Court (40 s.53(2)) .
- But s.25ZAB goes beyond providing the machinery for the enforcement of a determination. It purports to give a registered determination effect “as if it were an order made by the Federal Court”. A judicial order made by the Federal Court takes effect as an exercise of Commonwealth judicial power, but a determination by the Commission is neither made nor registered in the exercise of judicial power. An exercise of executive power by the Commission and the performance of an administrative function by the Registrar of the Federal Court simply cannot create an order which takes effect as an exercise of judicial power; conversely, an order which takes effect as an exercise of judicial power cannot be made except after the making of a judicial determination. Thus, s.25ZAB purports to prescribe what the Constitution does not permit.”
(v) Our attention was then invited to Reference Re Residential Tenancies Act, 123 DLR (3d) 554. The factual matrix, in furtherance of which the above judgment was rendered by the Supreme Court of Canada, is as follows. The provisions of the Residential Tenancies Act, 1979 (Ontario), by which the Residential Tenancy Commission was empowered to order eviction of tenants, as also, could require landlords and tenants to comply with the obligations imposed under the said Act, were assailed, as offending against the limitation contained in Section 96 of the British North America Act, 1867, and therefore, ultra vires. In recording its conclusions on a similar analogy, as in the judgments noticed above, the Supreme Court of Canada observed as under:-
“Under s. 92(14) of the British North America Act, 1867, the provincial Legislatures have the legislative power in relation to the administration of justice in the Province. This is a wide power but subject to subtraction of ss. 96 to 100 in favour of the federal authority. Under s. 96 the Governor General has the sole power to appoint the judges of the Superior, District and County Courts in each Province. Under s. 97 the Judges who are to be appointed to the Superior, District and County Courts are to be selected from the respective bars of each Province. Under s. 100 the Parliament of Canada is obliged to fix and provide for their salaries. Section 92(14) and ss. 96 to 100 represent one of the important compromises of the Fathers of Confederation. It is plain that what was sought to be achieved through this compromise, and the intended effect of s. 96, would be destroyed if a Province could pass legislation creating a tribunal, appoint members thereto, and then confer on the tribunal the jurisdiction of the Superior Courts. What was conceived as a strong constitutional base for national unity, through a unitary judicial system, would be gravely undermined. Section 96 has thus come to be regarded as limiting provincial competence to make appointments to a tribunal exercising s. 96 judicial powers and therefore as implicitly limiting provincial competence to endow a provincial tribunal with such powers.
The belief that any function which in 1867 had been vested in a s. 96 Court must forever remain in that Court reached its apogee in the judgment of Lord Atkin in Toronto Corporation v. York Tp. Et. Al., (1938) 1 DLR 593, (1938) AC 415, (1938) 1 WWR 452. Describing s. 96 as one of
the “three principal pillars in the temple of justice… not to be undermined”, Lord Atkin held that the Ontario Municipal Board could not validly receive “judicial authority”. At the same time, he held that the Municipal Board was in ‘pith and substance’ an administrative body, and the impugned ‘judicial functions’ were severable from the administrative powers given to the Board under its enabling legislation. There was no analysis of the inter relationship between the judicial and administrative features of the legislative scheme; the assumption was that any attempt to confer a s. 96 function on a provincially-appointed tribunal was ultra vires the Legislature. This sweeping interpretation of s. 96, with its accompanying restrictive view of provincial legislative authority under s. 92, was limited almost immediately by the judgment of this Court in the Reference re Adoption Act and Other Act, etc., (1938) 3 DLR 497, 71 CCC 110, (1938) SCR 398. Chief Justice Duff held that the jurisdiction of inferior Courts was not “fixed forever as it stood at the date of Confederation”. On his view, it was quite possible to remove jurisdiction from a Superior Court and vest it in a Court of summary jurisdiction. The question which must be asked was whether “the jurisdiction conferred upon Magistrates under these statutes broadly conforms to a type of jurisdiction generally exercisable by Courts of summary jurisdiction rather than the jurisdiction of Courts within the purview of s. 96” (p. 514). In the Adoption Reference, Duff C.J. looked to the historical practice in England and concluded that the jurisdiction conferred on Magistrates under the legislation before the Court in the Reference was analogous to the jurisdiction under the English Poor Laws, a jurisdiction which had belonged to courts of summary nature rather than to Superior Courts. On this basis, the legislation was upheld. The Adoption Reference represented a liberalization of the view of s. 96 adopted by the Privy Council in Toronto v. York, at least in the context of a transfer of jurisdiction from a Superior Court to an inferior Court.
The same process of liberalization, this time in the context of a transfer of jurisdiction from a Superior Court to an administrative tribunal, was initiated by the Privy Council in Labour Relations Board of Saskatchewan v. John East Iron Works, Limited, (1948) 4 DLR 673, (1949) AC 134, (1948) 2 WWR 1055. Lord Simonds proposed a two-fold test. The first limb of the test is to ask whether the board or tribunal exercises “judicial power”. Lord Simonds did not propose a ‘final’ answer to the definition of “judicial power”, but he suggested at p. 680 DLR, p. 149 AC, that:
“…the conception of the judicial function is inseparably bound up with the idea of a suit between parties, whether between Crown and subject or between subject and subject, and that it is the duty of the Court to decide the issue between those parties, with whom alone it rests to initiate or defend or compromise the proceedings.”
If the answer to the initial question as to “judicial power” is in the negative, then that concludes the matter in favour of the provincial board.
If, however, the power is in fact a judicial power, then it becomes necessary to ask a second question: in the exercise of that power, is the tribunal analogous to a Superior, District or County Court?
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Step two involves consideration of the function within its institutional setting to determine whether the function itself is different when viewed in that setting. In particular, can the function still be considered to be a ‘judicial’ function? In addressing the issue, it is important to keep in mind the further statement by Rand J. in Dupont v. Inglis (at p. 424 DLR, p. 543 SCR) that “…it is the subject-matter rather than the apparatus of adjudication that is determinative”. Thus the question of whether any particular function is ‘judicial’ is not to be determined simply on the basis of procedural trappings. The primary issue is the nature of the question which the tribunal is called upon to decide. Where the tribunal is faced with a private dispute between parties, and is called upon to adjudicate through the application of a recognized body of rules in a manner consistent with fairness and impartiality, then, normally, it is acting in a ‘judicial capacity’. To borrow the terminology of Professor Ronald Dworkin, the judicial task involves questions of ‘principle’, that is, consideration of the competing rights of individuals or groups. This can be contrasted with questions of ‘policy’ involving competing views of the collective good of the community as a whole. (See Dworkin, Taking Rights Seriously (1977) at pp. 82-90 (Duckworth).”
A perusal of the conclusions recorded by the Supreme Court of Canada reveals, that the court evolved a three step test to determine the constitutional validity of a provision which vested adjudicatory functions in an administrative tribunal. The first step was determined in the light of the historical conditions existing in 1867, i.e. before the British North America Act, 1867 was enacted. The first step required a determination whether at the time of Confederation, the power or jurisdiction now vested in an administrative tribunal, was exercised through a judicial court process. If the answer to the first step was in the negative, the constitution of the administrative tribunal would be valid. If historical evidence indicated, that the power, now vested with an administrative tribunal, was identical or analogous to a power exercised under Section 96 Courts at
Confederation, then the matter needed to be examined further. The second step was to determine, whether the power to be exercised by the administrative tribunal, should be considered as a judicial function. Insofar as the instant aspect of the matter is concerned, it was illustratively concluded, that where power vested in the administrative tribunal was in respect of adjudication of disputes between the parties, which required to be settled through an application of a recognized body of rules, in a manner consistent with fairness and impartiality, then the said power could be classified as judicial power/function. If, however, while applying the second step, the answer was in the negative, it was not necessary to proceed with the matter further, and the vesting of the power with the administrative tribunal should be considered as valid. If the power or jurisdiction is exercised in a judicial manner, then it is imperative to proceed to the third and final step. The third step contemplates analysis and review of the administrative tribunal’s functions as a whole, and to examine the same in its entire institutional context. It contemplated an examination of the inter relationship between the administrative tribunal’s judicial powers, and the other powers and jurisdiction conferred by the legislative enactment. If a judicial hearing is a must, whereafter a judgment was required to be rendered, the administrative tribunal would be deemed to be exercising jurisdiction which is ordinarily vested in a Court . It is after recording a finding in the affirmative on all the three steps, that it will be possible to conclude, whether judicial functions have been required to be exercised by the concerned administrative tribunal. Having examined the controversy in Reference Re Residential Tenancies Act
(supra), the Supreme Court of Canada arrived at the conclusion, that the Residential Tenancy Commission could have been authorized to grant orders for possession to a landlord or to grant orders for specific performance of a tenancy. 23. Finally, learned counsel for the petitioners placed reliance on “Constitutional Law of Canada”, by Peter W. Hogg (third edition, 1992, by Carswell, Thomson Professional Publishing) in order to assert, that even under Constitutions where the separation of power rule has not been explicitly provided for, there would be limitations in delegation of Court functions to tribunals. Relevant text on the subject, from the above treatise is being reproduced hereunder:-
“7.3 Implications of Constitution’s judicature sections
(a) Separation of powers
There is no general “separation of powers” in the Constitution Act, 1867. The Act does not separate the legislative, executive and judicial functions and insist that each branch of government exercise only “its own” function. As between the legislative and executive branches, any separation of powers would make little sense in a system of responsible government; and it is clearly established that the Act does not call for any such separation. As between the judicial and the two political branches, there is likewise no general separation of powers. Either the Parliament or the Legislatures may by appropriate legislation confer non-judicial functions on the courts and (with one important exception, to be discussed) may confer judicial functions on bodies that are not courts.
Each Canadian jurisdiction has conferred non-judicial functions on its courts, by enacting a statute which enables the government to refer a question of law to the courts for an advisory opinion. The rendering of advisory opinions to government is traditionally an “executive” function, performed by the law officers of the government. For that reason, the supreme Court of the United States and the High Court of Australia have refused to render advisory opinions, reasoning that a separation of powers doctrine in their Constitutions confines the courts to the traditional judicial function of adjudicating upon genuine controversies. But in the Reference Appeal (1912), A-G Ont. V.A.-G. Can. (Reference Appeal) (1912) AC 571, the Privy Council refused to read any such limitation into Canada’s Constitution. Their lordships upheld the federal reference statute,
apparently as a law in relation to the supreme court of Canada (s.101). The provincial reference statutes are also valid as laws in relation to the administration of justice in the province (s.92(14)).
The conferral of judicial functions on bodies which are not courts is likewise subject to no general prohibition. However, here there is an important qualification to be made. The courts have held that the provincial Legislatures may not confer on a body other than a superior, district or county court judicial functions analogous to those performed by a superior, district or county court. This little separation of powers doctrine has been developed to preclude evasion of the stipulations of ss. 96 to 100 of the constitution Act, 1867.
If ss. 96 to 100 of the constitution Act, 1867 were read literally, they could easily be evaded by a province which wanted to assume control of its judicial appointments. The province could increase the jurisdiction of its inferior courts so that they assumed much of the jurisdiction of the higher courts; or the province could best higher-court jurisdiction in a newly established tribunal, and call that tribunal an inferior court or an administrative tribunal. It is therefore not surprising that the courts have added a gloss to s. 96 and the associated constitutional provisions. What they have said is this: if a province invests a tribunal with a jurisdiction of a kind that ought property to belong to a superior, district or county court, then that tribunal, whatever its official name, is for constitutional purposes a superior, district or county court and must satisfy the requirements of s. 96 and the associated provisions of the constitution Act, 1867. This means that such a tribunal will be invalidly constituted, unless its members (1) are appointed by the federal government in conformity with s. 96, (2) are drawn from the bar of the province in conformity with ss. 97 and 98, and (3) receive salaries that are fixed and provided by the federal parliament in conformity with s. 100.
So far the law is clear, and the policy underlying it is comprehensible. But the difficulty lies in the definition of those functions that ought properly to belong to a superior, district or county court. The courts have attempted to fashion a judicially enforceable rule which would separate “s. 96 functions” from other adjudicatory functions. The attempt has not been successful, and it is difficult to predict with confidence how the courts will characterize particular adjudicatory functions. The uncertainty of the law, with its risk of nullification, could be a serious deterrent to the conferral of new adjudicatory functions on inferior courts or administrative tribunals, and a consequent impediment to much new regulatory or social policy. For the most part, the courts have exercised restraint in reviewing the provincial statutes which create new adjudicatory jurisdictions, so that the difficulty has not been as serious as it could have been. However, in the last two decades, there has been a regrettable resurgence of s. 96 litigation: five challenges to the powers of inferior courts or tribunals based on s. 96 have succeeded in the Supreme Court
of Canada, A.G. Que. v. Farrah  2 S.C.R. 638; Re Residential Tenancies Act  1 S.C.R. 714; Crevier v. A.G. Que.  2 S.C.R. 220; Re B.C. Family Relations Act  1.S.C.R. 62; McEvoy v. A.G.N.B.  1 S.C.R. 704. Since the abolition of Privy Council appeals, two other challenges have also been successful, namely, A.G. Ont. v. Victoria medical building  S.C.R. 32; Seminary of Chicoutimi v. A.G. Que.  S.C.R. 681, and these decisions have spawned many more challenges. These developments are described in the text that follows.
- It was also the submission of the learned counsel for the petitioners, that the proposition of law highlighted hereinabove on the basis of the provisions of constitutions of different countries (Jamaica, Ceylon, Australia and Canada) decided either by the Privy Council or the highest courts of the concerned countries, is fully applicable to India as well. In order to demonstrate this, he placed reliance on State of Maharashtra v. Labour Law Practitioners’ Association, (1998) 2 SCC 688. The controversy in the cited case originated with the filing of a writ petition by the respondent Association challenging the appointment of Assistant Commissioners of Labour (i.e., Officers discharging executive functions under the Labour Department). The above appointments had been made, consequent upon amendments to the provisions of the Bombay Industrial Relations Act, and the Industrial Disputes (Maharashtra Amendment) Act. The submission advanced at the hands of the respondent Association was, that Labour Courts had been constituted in the State of Maharashtra, under the Industrial Disputes Act, the Bombay Industrial Relations Act, as also, the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices, Act. Qualifications of persons to be appointed as a judge of the Labour Court under the Industrial Disputes Act, was stipulated in Section 7, which provided as under:-
“(a) that he was or had been a Judge of a High Court; or
(b) that he had for a period of not less than three years been a District Judge or an Additional District Judge; or
(c) that he had held the office of the Chairman or any other Member of the Labour Appellate Tribunal or of any Tribunal for a period of not less than two years; or
(d) that he had held any judicial office in India for not less than seven years; or
(e) that he had been the Presiding Officer of a Labour Court constituted under any provincial Act for not less than five years.”
By the Industrial Disputes (Maharashtra Amendment) Act, 1974, Section 7 was amended, and three more sources of recruitment for the post of judge of the Labour Court were added. These were:-
“(d-1) he has practiced as an advocate or attorney for not less than seven years in the High Court, or any court, subordinate thereto, or any Industrial Court or Tribunal or Labour Court, constituted under any law for the time being in force; or
(d-2) he holds a degree in law of a University established by law in any part of India and is holding or has held an office not lower in rank than that of a Deputy Registrar of any such Industrial Court or Tribunal for not less than five years; or
(d-3) he holds a degree in law of University established by law in any part of India and is holding or has held an office not lower in rank than that of Assistant Commissioner of Labour under the State Government for not less than five years.”
Under the Bombay Industrial Relations Act, as it originally stood, Section 9 provided, that only such persons would be eligible for appointment as a judge of the Labour Court, who possessed the qualifications laid down under Article 234 of the Constitution, for being eligible to enter judicial service in the State of Maharashtra. By the Maharashtra Act 47 of 1977, Section 9 of the Bombay Industrial Relations Act was amended by substituting a new sub-section (2), which replaced the original sub-section (2) of Section 9. The amended sub section (2) was as follows:-
“9. (2) A person shall not be qualified for appointment as the presiding officer of a Labour Court, unless:
(a) he has held any judicial office in India for not less than five years; or
(b) he has practiced as an Advocate or Attorney for not less than seven years in the High Court or any court subordinate thereto, or in any Industrial Court, Tribunal or Labour Court constituted under any law for the time being in force; or
(c) he holds a degree in law of a University established by law in any part of India and is holding or has held an office not lower in rank than that of Deputy Registrar of any such Industrial Court or Tribunal, or of Assistant Commissioner of Labour under the State Government, in both cases for not less than five years.”
In the first instance, this Court for the first time declared the salient components of the functions exercised by a civil court , as under:-
“6. In the case of The Bharat Bank Ltd. v. Employees, AIR 1950 SC 188, this Court considered whether an Industrial Tribunal was a court. It said that one cannot go by mere nomenclature. One has to examine the functions of a Tribunal and how it proceeds to discharge those functions. It held that an Industrial Tribunal had all the trappings of a court and performed functions which cannot but be regarded as judicial. The Court referred to the Rules by which proceedings before the Tribunal were regulated. The Court dwelt on the fact that the powers vested in it are similar to those exercised by civil courts under the Code of Civil Procedure when trying a suit. It had the power of ordering discovery, inspection etc. and forcing the attendance of witnesses, compelling production of documents and so on. It gave its decision on the basis of evidence and in accordance with law. Applying the test laid down in the case of Cooper v. Wilson, (1937) 2 K.B. 309 at p.340, this Court said that “a true judicial decision presupposes an existence of dispute between two or more parties and then involves four requisites – (1) the presentation of their case by the parties; (2) ascertainment of facts by means of evidence adduced by the parties often with the assistance of argument; (3) if the dispute relates to a question of law, submission of legal arguments by the parties; and (4) by decision which disposes of the whole matter by findings on fact and application of law to facts so found. Judged by the same tests, a Labour Court would undoubtedly be a court in the true sense of the term. The question, however, is whether such a court and the presiding officer of such a court can be said to hold a post in the judicial service of the State as defined in Article 236 of the Constitution.”
The other relevant observations recorded in the above cited judgment are reproduced below:-
“13. Reliance has been placed upon this judgment as showing that judicial service is interpreted narrowly to cover only the hierarchy of civil courts headed by the District Judge. This Court, however, was not considering the position of other civil courts, in the context of the extensive definition given to the term “district judge”. This Court was concerned with preserving independence of the judiciary from the executive and making sure that persons from non-judicial services, such as, the police, excise or revenue were not considered as eligible for appointment as District Judges. That is why the emphasis is on the fact that the judicial service should consist exclusively of judicial officers. This judgment should not be interpreted narrowly to exclude from judicial service new hierarchies of civil courts being set up which are headed by a judge who can be considered as a District Judge bearing in mind the extensive definition of that term in Article 236.
- The High Court has, therefore, correctly interpreted the observations of this Court in Chandra Mohan vs. State of U.P., AIR 1966 SC 1987, as giving paramount importance to the enforcement of the constitutional scheme providing for independence of the judiciary. The concern of the court was to see that this independence was not destroyed by an indirect method.
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- In the case of Shri Kumar Padma Prasad v. Union of India & Ors., (1992) 2 SCC 428, this Court had to consider qualifications for the purpose of appointment as a Judge of the High Court under Article 217 of the Constitution. While interpreting the expression “judicial office” under Article 217(2)(a), this Court held that the expression “judicial office” must be interpreted in consonance with the scheme of Chapters V and VI of Part VI of the Constitution. So construed it means a judicial office which belongs to the judicial service as defined under Article 236(b). Therefore, in order to qualify for appointment as a judge of a High Court, a person must hold a judicial office which must be a part of the judicial service of the State. After referring to the cases of Chandra Mohan (supra) and Statesman (Private) Ltd. vs. H.R. Deb, AIR 1968 SC 1495, this Court said that the term “judicial office” in its generic sense may include a wide variety of offices which are connected with the administration of justice in one way or the other. Officers holding various posts under the executive are often vested with magisterial power to meet a particular situation. The Court said,
“Did the framers of the Constitution have this type of ‘offices’ in mind when they provided a source of appointment to the high office, of a judge of the High Court from amongst the holders of a ‘judicial office’? The answer, has to be in the negative. We are of the view
that holder of judicial office under Article 217(2)(a) means the person who exercises only judicial functions, determines causes inter parties and renders decisions in a judicial capacity. He must belong to the judicial service which as a class is free from executive control and is disciplined to uphold the dignity, integrity and independence of the judiciary.”
Going by these tests laid down as to what constitutes judicial service under Article 236 of the Constitution, the Labour Court judges and the judges of the Industrial Court can be held to belong to judicial service. The hierarchy contemplated in the case of Labour Court judges is the hierarchy of Labour Court judges and Industrial Court judges with the Industrial Court judges holding the superior position of District Judges. The Labour Courts have also been held as subject to the High Court’s power of superintendence under Article 227.
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- The constitutional scheme under Chapter V of Part VI dealing with the High Courts and Chapter VI of Part VI dealing with the subordinate courts shows a clear anxiety on the part of the framers of the Constitution to preserve and promote independence of the judiciary from the executive. Thus Article 233 which deals with appointment of District Judges requires that such appointments shall be made by the Governor of the State in consultation with the High Court. Article 233(2) has been interpreted as prescribing that “a person in the service of the Union or the State” can refer only to a person in the judicial service of the Union or the State. Article 234 which deals with recruitment of persons other than District Judges to the judicial service requires that their appointments can be made only in accordance with the Rules framed by the Governor of the State after consultation with the State Public Service Commission and with the High Court. Article 235 provides that the control over district courts and courts subordinate thereto shall be vested in the High Court; and Article 236 defines the expression “District Judge” extensively as covering judges of a City Civil Court etc. as earlier set out, and the expression “judicial service” as meaning a service consisting exclusively of persons intended to fill the post of the District Judge and other civil judicial posts inferior to the post of District Judge. Therefore, bearing in mind the principle of separation of powers and independence of the judiciary, judicial service contemplates a service exclusively of judicial posts in which there will be a hierarchy headed by a District Judge. The High Court has rightly come to the conclusion that the persons presiding over Industrial and Labour Courts would constitute a judicial service so defined. Therefore, the recruitment of Labour Court judges is required to be made in accordance with Article 234 of the Constitution.”
- According to the learned counsel for the petitioners, the judgments and text cited hereinabove, are fully applicable on the subject of administration of
justice through courts in India. Insofar as the instant aspect of the matter is concerned, learned counsel placed reliance on Article 50 of the Constitution, which is reproduced hereunder:-
“50. Separation of judiciary from executive – The State shall take steps to separate the judiciary from the executive in the public services of the State.”
Based on Article 50 aforementioned, it was the contention of the learned counsel for the petitioners, that the Constitution itself mandates a separate judicial hierarchy of courts distinct from the executive.
- Coupled with the above mandate, it was the contention of the learned counsel for the petitioners, that the provisions of the Income Tax Act, the Customs Act, and the Excise Act prior to independence of this country, and even thereafter, vested the High Courts with an exclusive jurisdiction to settle “questions of law” emerging out of tax disputes. It was further contended, that even after the enforcement of the Constitution, with effect from 26.11.1949, the adjudicatory power to decide substantial questions of law, continued to be vested in the High Courts, inasmuch as, the jurisdictional High Courts continued to exercise appellate jurisdiction. The position has remained unaltered till date. It is, therefore, the contention of the learned counsel for the petitioners, that historically, constitutionally and legally, the appellate jurisdiction in direct/indirect tax matters, has remained with the High Courts, and it is not permissible either by way of an amendment to the Constitution itself, or by enacting a legislation, to transfer the said appellate jurisdiction exercised by the High Courts to a quasi judicial tribunal.
The third contention:
- In the course of the submissions advanced by the learned counsel for the petitioners on the third contention, wherein it was sought to be submitted, that “separation of powers”, the “rule of law” and “judicial review” constitute amongst others, the “basic structure” of the Constitution, it was submitted, that Article 323B inserted by the Constitution (Forty-second Amendment) Act, 1976 was violative of the above mentioned components of the basic structure of the Constitution. Article 323B is being extracted hereunder:-
“323B. Tribunals for other matters – (1) The appropriate Legislature may, by law, provide for the adjudication or trial by tribunals of any disputes, complaints, or offences with respect to all or any of the matters specified in clause (2) with respect to which such Legislature has power to make laws.
(2) The matters referred to in clause (1) are the following, namely:- (a) levy, assessment, collection and enforcement of any tax;
(b) foreign exchange, import and export across customs frontiers; (c) industrial and labour disputes;
(d) land reforms by way of acquisition by the State of any estate as defined in article 31A or of any rights therein or the extinguishment or modification of any such rights or by way of ceiling on agricultural land or in any other way;
(e) ceiling on urban property;
(f) elections to either House of Parliament or the House or either House of the Legislature of a State, but excluding the matters referred to in article 329 and article 329A;
(g) production, procurement, supply and distribution of foodstuffs (including edible oilseeds and oils) and such other goods as the President may, by public notification, declare to be essential goods for the purpose of this article and control of prices of such goods;
(h) rent, its regulation and control and tenancy issues including the rights, title and interest of landlords and tenants;
(i) offences against laws with respect to any of the matters specified in sub-clauses (a) to (h) and fees in respect of any of those matters; (j) any matter incidental to any of the matters specified in sub clauses (a) to (i).
(3) A law made under clause (1) may-
(a) provide for the establishment of a hierarchy of tribunals;
(b) specify the jurisdiction, powers (including the power to punish for contempt) and authority which may be exercised by each of the said tribunals;
(c) provide for the procedure (including provisions as to limitation and rules of evidence) to be followed by the said tribunals;
(d) exclude the jurisdiction of all courts except the jurisdiction of the Supreme Court under article 136, with respect to all or any of the matters falling within the jurisdiction of the said tribunals;
(e) provide for the transfer to each such tribunal of any cases pending before any court or any other authority immediately before the establishment of such tribunal as would have been within the jurisdiction of such tribunal if the causes of action on which such suits or proceedings are based had arisen after such establishment;
(f) contain such supplemental, incidental and consequential provisions (including provisions as to fees) as the appropriate Legislature may deem necessary for the effective functioning of, and for the speedy disposal of cases by, and the enforcement of the orders of, such tribunals.
(4) The provisions of this article shall have effect notwithstanding anything in any other provision of this Constitution or in any other law for the time being in force.
Explanation.—In this article, “appropriate Legislature”, in relation to any matter, means Parliament or, as the case may be, a State Legislature competent to make laws with respect to such matter in accordance with the provisions of Part XI.”
Insofar as the aforesaid provision is concerned it was submitted, that Clause (3) of Article 323B clearly violated all the above mentioned ingredients of the “basic structure” theory. In this behalf it was sought to be asserted, that establishment of a hierarchy of tribunals implicitly led to the inference, that the existing judicial process, where adjudication was before a court of law, was to be substituted in its entirety. Thereby, even the existing appellate process which was vested in High Courts was sought to be substituted by tribunals. It was submitted, that creation of a parallel judicial system, was alien to the provisions of the Constitution, which recognized the judiciary as an independent component, separate from the executive and the legislature. It was accordingly vehemently
asserted, that the process of justice was being substituted, by tribunalization of justice, which was clearly unacceptable under the Constitution. Sub-clause (d) of Article 323B(3), according to the learned counsel for the petitioners, divested jurisdiction vested in all civil courts for the adjudication of the matters on the subjects referred to in Article 323B(2), including not only the appellate jurisdiction of High Courts, but also, the power of “judicial review” vested in High Courts under Articles 226 and 227, of the Constitution. It was also the contention of the learned counsel for the petitioners, that despite decisions rendered by this Court, the legislature has repeated and reiterated what had been found to be unsustainable in law.
- While canvassing the aforesaid contention learned counsel for the petitioners pointed out, that the above mentioned Article 323B was introduced by the Constitution (Forty-second Amendment) Act, 1976, which was part of an overall scheme, to drastically curtail the power of “judicial review” vested with the higher judiciary. It was pointed out, that all other objectionable provisions were deleted, and powers earlier vested in superior courts were restored. However, Part XIV A of the Constitution, inserting Articles 323A and 323B was allowed to remain. It was submitted that Articles 323A and 323B, enabled the creation of parallel judiciary under executive control. In order to support his aforestated contention, learned counsel invited the Court’s attention to the expressions “adjudication or trial”, “disputes, complaints or offences”, “transfer of suits or proceedings”, etc. which could be fashioned in a manner different from that which presently prevailed. It was pointed out, that the aforestated mandate contained
in Article 323B of the Constitution, was incompatible with the “basic structure” of the Constitution, which mandates “separation of powers”.
- In view of the aforementioned submissions, it was the vehement contention of the learned counsel for the petitioners, that Article 323B(4) should be struck down. It was submitted, that if the instant prayer of the petitioners does not find favour with this Court, the alternative prayer of the petitioners was, that Article 323B must be purposefully interpreted, so as to bestow equivalence commensurate to the Court sought to be substituted by the tribunal. It was submitted, that it was imperative to provide for measures to ensure independence in the functioning of tribunals substituting functions carried out by courts. This could be done, according to learned counsel for the petitioners, by extending the conditions of service applicable to judges of the court sought to be substituted. In order to support his aforestated contention, learned counsel for the petitioners placed reliance on judgments rendered by this Court, laying down the limits and parameters within which such tribunals could be created. Despite the declaration of law by this Court it was submitted, that the NTT Act, has been enacted, which suffers from the same vices, which had already been found to be unconstitutional. For reasons of brevity, it is considered inappropriate, to refer to all the judgments relied upon by the rival parties on the instant issue. Suffice it to state, that the same will be examined, only while recording conclusions.
The fourth contention:
- While advancing the fourth contention, learned counsel for the petitioners referred to various provisions of the NTT Act, which would have the effect of
compromising the independence of the NTT. We may briefly refer to the provisions of the said Act, highlighted by the learned counsel for the petitioners, during the course of hearing, as under:-
(i) First and foremost, reference was made to Section 5 of the NTT Act. The same is being extracted hereunder:-
“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.”
Referring to sub-section (2) of Section 5 it was sought to be asserted, that benches of the NTT are ordinarily to function in the National Capital Territory of Delhi. This, according to the learned counsel for the petitioners, would deprive the litigating assessee, the convenience of approaching the High Court of the State to which he belongs. In this behalf it was sought to be asserted, that in every tax related dispute, there is an asseessee on one side, and the Revenue on the other. Accordingly, if the NTT is mandated to sit ordinarily in the National Capital Territory of Delhi, assessees from far flung States would have to suffer extreme hardship for the redressal of their grievance, especially at the appellate
stage. Besides the hardships, it was pointed out, that each asseessee would be subjected to unfathomable financial expense. Referring to sub-section (5) of Section 5 of the NTT Act, it was the submission of the learned counsel for the petitioners, that the Central Government was vested with the power to transfer a Member from the headquarters of one bench in one State, to the headquarters of another bench in another State. It was also open to the Central Government to transfer a Member from one bench to another bench in the same State. It was submitted, that in case of High Courts, such power is exercised exclusively by the Chief Justice, in the best interest of the administration of justice. It was submitted, that the Central Government, which is a stakeholder, could exercise the above power of transfer for harassment and exploitation of sitting Members of the NTT. In other words, an inconvenient Member could be moved away, and replaced by one who would tow the desired line.
(ii) Likewise, learned counsel for the petitioners referred to Section 6 of the NTT Act to demonstrate, that the same would also have an undermining effect on the adjudicatory process. Section 6 of the NTT Act is reproduced hereunder:-
“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.”
Learned counsel for the petitioners pointed out, that sub-section (2), aforementioned, laid down the qualifications for appointment as Member of the
NTT. Referring to clause (a) of sub-section (2) of Section 6 of the NTT Act it was submitted, that a person who is eligible to be a judge of a High Court, is to be treated as eligible as a member of the NTT. Inviting our attention to Article 217 of the Constitution it was submitted, that a person who is a citizen of India and has, for at least 10 years, practiced as an Advocate before one or the other High Court, has been treated as eligible for being appointed as a Member of the NTT. Referring to Section 8 of the NTT Act it was pointed out, that a Member of the NTT is provided with a tenure of five years, from the date of his appointment as Member of the NTT. It was pointed out, that in terms of Article 217 of the Constitution, a person would easily become eligible for appointment as a judge at or around the age of 35-40 years, and as such, if he is assured a tenure of only five years, it would not be possible for him to discharge his duties without fear or favour, inasmuch as, he would always have a larking uncertainty in his mind about his future, after the expiry of the prescribed term of five years, in the event of not being granted an extension. Relying on clause (b) of Section 6(2) of the NTT Act, it was also the submission of the learned counsel for the petitioners, that Members of the Appellate Tribunals constituted under the Income Tax Act, the Customs Act, and the Excise Act, are also eligible for being appointed as Members of the NTT. In this behalf it was sought to be asserted, that there are Accountant Members of the Income Tax Appellate Tribunal, who too would become eligible for appointment as Members of the NTT. It was submitted, that judicial experience on the niceties of law, specially on the different aspects, which need to be dealt with while adjudicating tax matters, would be alien to
them, inasmuch as they can only be experts on the subject of accountancy. It was pointed out, that the jurisdiction vested in the NTT, is an alternative jurisdiction to that of the High Court, and as such, it is difficult to appreciate how an Accountant Member of the Income Tax Appellate Tribunal can be expected to discharge duties relating to settling substantial questions of law in the manner judges of the High Court dispense with the aforesaid responsibilities.
(iii) Learned counsel for the petitioners then invited our attention to Section 7 of the NTT Act. The said section is reproduced hereunder:-
“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.”
A perusal of sub-section (2) of Section 7 reveals the composition of the selection committee for selection of the Chairperson and Members of the NTT. It was sought to be pointed out, that there were two representatives of the executive, out of three member selection committee, and only one member in the selection committee was from the judiciary. Accordingly it was asserted, that the two representatives belonging to the executive would control the outcome of every selection process. Since the NTT was, an alternative to the jurisdiction earlier
vested with the High Court, it was submitted, that the same process of selection, as was prevalent for appointment of judges of the High Court, should be adopted for selection of Chairperson and Members of the NTT. All that is imperative and essential is, that the selection process should be the same, as is in place, for the court sought to be substituted. It was also the contention of the learned counsel for the petitioners, that a provision similar to Section 7(2) of the NTT Act, had been struck down by this Court, in State of Maharashtra v. Labour Law Practitioners’ Association (supra).
(iv) Learned counsel for the petitioners then invited our attention to Section 8 of the NTT Act. Section 8 is being reproduced hereunder:-
“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.”
According to learned counsel, a perusal of Section 8 reveals, that a Chairperson and a Member of the NTT would hold office for a term of five years, from the date of his/her appointment to the NTT. It was, however sought to be pointed out, that a person appointed as such, is clearly eligible for reappointment. It was sought to be asserted, that a provision for reappointment, would itself have the effect of undermining the independence of the Members of the NTT. It was sought to be asserted, that each one of the appointees to the NTT would be prompted to appease the Revenue, so as to solicit reappointment contemplated under Section 8 of the NTT Act. In this behalf it was submitted, that the tenure of
appointment to a tribunal, which is to substitute a High Court, should be akin to that of a judge of High Court.
(v) Our attention was then invited to Section 13 of the NTT Act, which is reproduced hereunder:-
“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.”
It was submitted, that besides allowing the assessee to represent himself before the NTT, Section 13 allows him to be represented through one or more Chartered Accountants or legal practitioners. Thus far, according to learned counsel for the petitioners, there seemed to be no difficulty in Section 13(1) of the NTT Act. However, allowing “any person duly authorized” by the assessee to represent him before the NTT, is clearly ununderstandable. It was submitted, that the main function of the NTT would be to settle substantial questions of law on tax issues, and as such, under Section 13(1), it would be open to an assessee to engage an individual to represent him, even though he is totally unqualified in the fields on which the adjudicatory process is to be conducted. Likewise, it is the contention of the learned counsel for the petitioners, besides legal practitioners, the Revenue is allowed to be represented through any of its
officers. It was sought to be asserted, that an understanding of the text of the provision is one thing, whereas interpreting it in the contemplated context, quite another. As such, it was submitted, that officers of the Revenue, who lack in interpretative skills, would be wholly unsuited for representing the Revenue before the NTT.
Submissions in opposition, by the respondents/interveners: The first contention:
- In response to the first contention, namely, that the reasons for setting up the NTT were fallacious and non-existent, and as such, the legislative enactment under reference creating the NTT as an independent appellate forum to decide appeals on “substantial questions” of law, from orders passed by the Appellate Tribunals constituted under the Income Tax Act, the Customs Act, and the Excise Act deserves to be set aside; it was the contention of the learned counsel for the respondents, that the submissions advanced at the hands of the petitioners, were premised on an improper understanding of the factual background. In this behalf, it is sought to be asserted, that the tax receipts are the primary source of revenue in India. The Government of India meets its budgetary requirements from revenue receipts. It is sought to be explained, that tax is collected by an established administrative and legal structure. On the one hand, while fastening of a tax liability would reduce the profits of an assessee, it would enhance the revenue receipts of the Government. On the other hand, exemption from a tax
liability would increase profits of an assessee, but would reduce the revenue receipts of the Government. In view of the above profit and loss scenario, administration of tax loss, has an inherent tendency to result in disputes and litigation. The process of litigation is primarily based on adoption of innovative means of interpretation of law, both by the revenue and by the tax payers. As a result, significant amount of time is spent, on long drawn litigation, wherein tax payers and the Government lock horns against one another. Naturally, this impacts revenue earnings as levy of tax of thousands of crores of rupees, remains embroiled in such litigation. It was sought to be pointed out, that as per the Centre for Monitoring Indian Economy Database, Indian companies have a vast amount locked in disputed taxes. As per the above report, during the Financial Year 2011-2012; 30 companies that make up the Bombay Stock Exchange sensex, had money locked in disputed taxes estimated at Rs.42,388 crores. The above disputed tax liability, according to the learned counsel for the respondents, was a 27% increase from the amount of the preceding year, which was estimated at Rs.33,339 crores.
- In respect of disputes on direct taxes, it was submitted, that in a written reply submitted by the Minster of State for Finance, the Lok Sabha was informed in April, 2012, that 5,943 tax cases were pending with the Supreme Court, and 30,213 direct tax cases were pending with High Courts. It was submitted that the Lok Sabha was additionally informed, that the disputed amount of tax, at various levels, was estimated at Rs.4,36,741 crores, as on 31.12.2011. It was further sought to be asserted, that in the preceding year, the estimate in respect of the
disputed amount at various levels, was to the tune of Rs.2,43,603 crores. Accordingly it was sought to be pointed out, that with each succeeding year, not only the tax related litigation was being progressively enhanced, there was also a significant increase in the finance blocked in such matters.
- It was likewise pointed out, that the number of cases involving levy of indirect taxes, projected a similar unfortunate reflection. In this behalf, it was sought to be pointed out, that as on 31.12.2012, the number of pending customs disputes were approximately 17,800, wherein an amount of approximately Rs.7,400 crores was involved. Insofar as the number of pending central excise cases as on 31.10.2012 is concerned, the figure was approximately 19,800 and the amount involved was approximately Rs.21,450 crores. By adding the figures reflected hereinabove, in respect of the disputes pertaining to indirect taxes, it was suggested that a total of about 37,600 cases were pending, involving an amount of approximately Rs.28,850 crores. Additionally it was submitted, that out of the 17,800 customs cases, approximately 6,300 cases had been pending for adjudication for periods ranging from one to three years, and approximately 2,800 customs cases had been pending adjudication for over three years. Likewise, out of the 19,800 central excise cases, 1,600 cases were pending for decision for a period between one to three years; and 240 cases had been pending for decision for over three years.
- It was pointed out at the behest of the respondents, that several reasons contributed to the prolonged continuation of tax disputes. The main reason however was, that there was a lack of clarity in law in tax litigation. It was
submitted, that the above lack of clarity resulted in multiple interpretations. Added to that, according to the learned counsel for the respondents, existence of multiple appellate levels, and independent jurisdictional High Courts, resulted in the existence of conflicting opinions at various appellate forums across the country, contributing in unfathomable delay and multiplicity of proceedings.
- Based on the factors narrated above, it was the submission of the learned counsel for the respondents, that the burden of high volume of disputes had had the effect of straining the adjudicatory, as well as, the judicial system. It was pointed out, that the judicial system was already heavily burdened by the weight of significant number of unresolved cases. It was submitted, that the addition of cases each year, added not only to the inconvenience of the taxpayer, but also to the revenue earned by the government. It was pointed out, that the instant state of affairs created an uncertain and destabilized business environment, with taxpayers not being able to budget, for tax costs. Importantly such uncertainty, according to the learned counsel, emerged out of the two factors. Firstly, the law itself was complex, and therefore, uncertain. And secondly, for an interpretation of the law to achieve a degree of certainty at the Supreme Court level, required several rounds of litigation. It was submitted, that in view of the above, the current scenario called for reforms in the dispute resolution mechanism, and the introduction of, conscious practices and procedures, aimed at limiting the initiation, as well as, the prolongation of tax disputes. It is, therefore, the submission of the learned counsel for the respondents, that the assertions made
at the hands of the petitioners, while projecting the first contention, were wholly misconceived, and as such, are liable to be rejected.
The second contention:
- In response to the second contention, namely, that it is impermissible for the legislature to abrogate the core judicial appellate functions, traditionally vested with the High Court, or that it is impermissible to vest the same with an independent, parallel quasi-judicial hierarchy of tribunals, it was submitted, that the petitioners had not been able to appreciate the matter in its correct perspective. It was pointed out, that the NTT Act is a legislation which creates an appellate forum, in a hierarchy of fora, as a remedy for ventilation of grievances emerging out of taxing statutes. To fully appreciate the purport of the special remedy created by the statute, the nature of the right and/or the liability created by the taxing statutes, and the enforcement for which these remedies have been provided, needed to be understood in the correct perspective. Accordingly, in order to debate the rightful cause, learned counsel drew our attention to the proposition, in the manner, as was understood by the respondents. The submissions advanced in this behalf are being summarized hereinafter.
- It was the contention of the learned counsel for the respondents, that the Income Tax Act, the Customs Act, and the Excise Act, as also, other taxing statutes create a statutory liability. The said statutory liability has no existence, de hors the statute itself. The said statutory liability, has no existence in common law. It was further submitted, that it had been long well settled, that where a right to plead liability had no existence in common law, but was the creation of a