Govt dropped initial plan on GSTAT set-up, proposal flagged, shows RTI

Madras High Court had LATER declared bench composition unconstitutional due to non-inclusion of even a single judicial member; No appeal filed yet

The initial proposal for setting up four benches for the Goods and Services Tax Appellate Tribunal (GSTAT), put forward by the Department of Revenue (DoR), was rolled back and only one national bench was ultimately established, according to information revealed in a set of previously unpublished documents. The composition of the bench, in fact, had also been flagged by the Department of Legal Affairs, due to non-inclusion of even a single judicial member.

The papers, which were reviewed by Business Standard, are in the form of draft cabinet notes (DCN), inter-ministerial correspondences, file notings and the final cabinet note. They were obtained as a reply to RTI queries filed by transparency activist Venkatesh Nayak.

The papers show that in 2018, the Department of Revenue (DoR) framed a proposal for setting up the GSTAT, under which the tribunal would have a National Bench in Delhi and three regional ones in Mumbai, Kolkata and Chennai. The tribunal was conceived to hear appeals against orders passed by the Appellate Authority or the Revisional Authority.

The proposal was in accordance to guidelines laid down in Section 109 of Chapter XVIII of the CGST Act, 2017.

After being approved by the finance minister, the DCN was forwarded to Department of Legal Affairs (DoLA), Department of Expenditure (DoE), Dept of Personnel and Training (DoPT), and the Ministry of Housing and Urban Affairs (MoHUA) for their consideration.

Composition of bench flagged

The DoLA in its response raised a key concern regarding the lack of judicial representation in the GSTAT Bench.

It noted, "It is mentioned that the GSTAT will be confronting legal issues concerning jurisdiction, resolution of conflicting views amongst the states inter-se and the Central Government. Hence, in order to equip the Appellate Tribunal with the ability to in-house competent legal advice, it is advisable to consider an officer as judicial member as proposed in the rules. Doing so will be in accordance with the settled principles of law."

The Department of Revenue (DoR) responded to this saying, "(The) Dept of Revenue is in accordance with section 109 of the CGST Act, which provides that the National Bench of the Appellate Tribunal shall be situated in Delhi and shall be presided over by the President and shall consist of one technical member (from the Centre) and one technical member (from the State)."

In effect, the DoR sidestepped DoLA's concern over the non-inclusion of even a single judicial member in the GSTAT bench.

The fact that DoLA raised concerns over GSTAT's composition becomes essential in light of the fact that nearly a year later, on September 20,

2019, a division bench of the Madras High Court held the structure of the GST appellate tribunal 'unconstitutiona'.

In its decision, the bench observed that there should be primacy for judicial members and that technical members cannot exceed judicial members.

No appeal has been filed against the High Court decision so far.

Proposal rollback

Section 109 of the law empowers the Centre to create a national bench, regional benches, and as many state and area benches as may be required via notification by the GST Council.

There was high demand for these benches, which is evident from the fact that in May 2018, the Gujarat High Court issued notices to the state government and the Centre over non-creation of benches. The Allahabad High Court, similarly, directed the Uttar Pradesh government to file a status report in July 2019.

In both these cases, problems faced by taxpayers were mentioned and the urgent need to create benches was stressed by petitioners.

However, by August 2018, the original proposal of one national bench and three regional benches was rolled back. The creation of four benches had been approved by the GST Council in its 21st meeting on July 21, 2018 and a copy had also been sent to the PMO. By October, the revised DCN said that approval for only the Delhi bench has been sought in the initial stage.

In the available documents, 72 pages of which have been held back by the Central Public Information Officer (CPIO) citing Section 8(1)e of the RTI Act, one can neither find a reason for the rollback, nor even a record of the decision.

A possible explanation for the rollback decision is the lack of space for a government accommodation in the metro cities, as noted in the comments made by MoHUA. It is after incorporating the concerns about accommodation that the first recorded decision regarding the rollback has been stated in a file noting.

Nearly a year later, on August 22, 2019, the government notified the creation of state and area Benches. No notification for regional benches

has come about yet.

Area benches differ from Regional Benches in one key aspect: they do not have jurisdiction over cases in which the place of supply is an issue. This means area benches do not have the power to adjudicate in disputes involving interstate transactions; only the national and regional benches enjoy such powers.

As of now, taxpayers from across the country have only the bench located in Delhi to approach for such cases.