This article is written by Sakshi Singh from the University of Petroleum and Energy Studies, Dehradun. This article deals with controversy aroused in the establishment of the GST Appellate Tribunal regarding the location of the establishment of the state bench of the GST tribunal in Uttar Pradesh.

Introduction 

In August 2018, the State Government recommended the GST Council to establish the state bench of the GST Tribunal in Lucknow, the capital of Uttar Pradesh. Thereafter, several conflicting orders were passed by the Allahabad High Court and Lucknow Bench.

Section 109(1) of the Central Goods and Services Tax Act, 2017 (hereafter CGST Act)  empowers the Central Government to constitute on the recommendation of the Council, by notification, from such date as may be specified therein, an appellate tribunal known as the Goods and Services Tax Appeal Tribunal to hear appeals against orders made by the appeal authority or the revisional authority.

The power of the Appellate Tribunal shall be exercised by-

• The National Bench;
• Regional Benches; and
• State and Area Benches.

Need for GST Appellate Tribunal

A person dissatisfied with a decision or order made against him under the GST by a ruling authority can appeal to the first appellate authority. If they are not satisfied with the decision of the first appellate authority, they can appeal to the National Appellate Tribunal, then to the High Court, and finally to the Supreme Court. Some salient features of the GST Appellate Tribunal are as follows-

1. Goods and Services Tax Appellate Tribunal is the forum of the second appeal in GST laws and it is the first common forum of dispute resolution between Centre and States.
2. The appeals against the orders in the first appeals issued by the Appellate Authorities under the Central and State GST Acts lie before the GST Appellate Tribunal, which is common under the Central as well as State GST Acts.
3. Being a common forum, GST Appellate Tribunal ensures that there is uniformity in the redressal of disputes arising under GST, and therefore, in the implementation of GST across the country.
4. The Constitution of the second level of appeal will put in place a mechanism for disposal of appeals arising out of the first-level appellate orders.
5. The government statement stated that a common forum, GST Appellate Tribunal will ensure that there is uniformity in the redressal of disputes arising under GST.

An overview of the case

The Awadh Bar Association has filed a writ petition before High Court, seeking a prayer of mandamus for the establishment of GST Appellate Tribunal state bench at Lucknow.

The controversy started when the State Government of Uttar Pradesh first recommended that the State Bench of GST Tribunal be constituted at Lucknow and other 20 Area benches, including Allahabad in different locations. This proposal has been revised and another proposal was pressed forward by the State government, which requested the Secretary of the GST Council, New Delhi for the creation of State Bench at Allahabad and 19 Area Benches at different Tribunals and it should be constituted quickly within three months.

In the 39th meeting of the GST Council, it was approved that the establishment of the State Bench of Uttar Pradesh GST Tribunal will be constituted in Prayagraj and the areas benches in Lucknow, Agra, Varanasi, and Ghaziabad.

At the 40th meeting of the GST Council, the Council was placed in the State of Uttar Pradesh. It was observed that the GST Council considered and approved the first proposal initiated by the UP state government to create the State and Area Benches of the GST Tribunal for the State of Uttar Pradesh, in Lucknow and four Area Benches in Varanasi, Ghaziabad, Agra, and Prayagraj.

Facts

• On February 21, 2019, the State Government of Uttar Pradesh (UP State Government) initially proposed to the Secretary of the Goods and Services Tax (GST) Council of New Delhi to create the State Bench of the GST in Lucknow and 20 Area Benches in different districts from the state of Uttar Pradesh. 
• It was also stated in the said proposal that the earlier tribunal was also operating with its headquarter at Lucknow and, therefore, taking into account all the relevant factors, the state government had asked the GST Council that the Tribunal of the state of Uttar Pradesh be constituted in Lucknow and further recommended the constitution of 20 Area Benches in 16 towns as mentioned therein.
• Subsequently, the earlier Proposal dated 21-2-2019 was revised, thus proposing the GST state bench in Allahabad instead of the state capital in Lucknow, with four area benches, one each in Ghaziabad, Lucknow, Varanasi, and Agra. This was done because of the Court’s observations in the Allahabad High Court Order taking the reference of the Madras Bar Association v. UOI (2020) case, in which the Supreme Court ruled that the Tribunal should only be constituted where the principal bench of the High Court is located and since the principal bench of the High Court is in Allahabad, the High Court directed the revised proposal of GST Appellate Tribunal is to be sent within two weeks for the constitution of state bench in Prayagraj (Allahabad).
• Hence, the Awadh Bar Association of Lucknow bench filed a writ petition to quash the order or proposal regarding the constitution of the state bench of GST Tribunal in Allahabad.

Contentions of both the parties in the case

Appearing for the Awadh Bar Association, the learned counsel argued that the GST Council had decided on February 21, 2019, that the GST Tribunal would be established in the state capital, but subsequently, the Council changed his decision without any rhyme or reason to establish the tribunal in Prayagraj arbitrarily and illegally.

Further, it was contended by the respondent that due to repetitive requirements of the personal appearance of the officials at Allahabad High Court it would be better to constitute the State Bench of GST Tribunal at Allahabad, and the principal seat is also in Allahabad.

The learned counsel further contended that in the case of Lalit Kumar v. Union of India (2020), wherein the Apex Court hearing an appeal from the judgment and order of the Uttarakhand High Court whereby the High Court had directed for establishment of a permanent Bench of the Armed Forces Tribunal in the State Uttarakhand, dismissed by the Supreme Court.

It was argued that under Section 109 of the CGST Act, the decision as to where the benches of the tribunal are to be constituted is a matter that falls solely within the competence of the government, and it is the government that makes a decision after taking into account all the relevant facts and elements, and unless there are extraordinary circumstances, the High the court is gaits power to intervene in such cases. It was further alleged that no such extraordinary circumstances existed in the present case.

It has been argued that in the present case, the letter dated 21.02.2019, would indicate that the state government made a very conscious decision taking into account all the relevant factors, including the fact that the previous bench of such tribunal was incorporated in Lucknow as the headquarter.

This decision was not even challenged in the writ petition when the order of 28.02.2019 was adopted. It was not challenged by any individual in a competent court and, therefore, the state government generally did not have an opportunity to review its earlier letter dated 21.02.2019 and publish a new proposal without stating any reasons and recommend Allahabad as Headquarters for the constitution of the GST Tribunal under the provision of Section 109 of the CGST Law, contrary to the previous proposal.

The Association stated that the fact that the principal seat of the High Court is in Allahabad is irrelevant for the purposes of deciding the location of the Tribunal.

The lawyers reiterated before the Bench that since Lucknow also happens to be the Capital of the State with good infrastructure, transport facilities and is also geographically accessible from various parts of the State, the litigants would not face any difficulty in pursuing their case and an Area Bench can be set up at Prayagraj to meet the needs of litigants around Prayagraj.

Observations by the court

All the counsels appearing before the Court was asked to point out any such observation in Madras Bar Association v. UOI or in S.P Sampath Kumar v. UOI (1987) that Tribunals should always be established at the ‘principal Seat’ of the jurisdictional High Court, the counsels found no such observations or finding in that order which can be used in this case. 

The Court further held that the observation was made after referring to Madras Bar of Association v. UOI. The case was misreading and misconstruing regarding the principal bench of the High Court.

The respondents have totally misconstrued the essence of the order, which was, in fact, the observation of the Court, and no direction was given by this Court to formulate a fresh recommendation for the constitution of the GST Tribunal at Allahabad instead of at Lucknow.

The state government’s proposal to create a GST Tribunal in Allahabad dated March 5, 2019, was neither overturned by any court nor withdrawn by the state government. Thus, the High Court overturned the proposal dated May 29, 2020, of the Commissioner of Trade Taxes of Uttar Pradesh, which was in contradiction with the proposal made in the letter of March 5, 2019. The recommendations made at the 40th meeting of the GST Council based on the said proposal of the commissioner were set aside.

Cases in the recent scenario oriented to GST heard by different courts in India

In Revenue Bar Association v. Union of India (2019), the constitution of the Goods and Services Tax Appeal Tribunal and the qualification and appointment of members were challenged in the High Court of Madras by the petitioners. Madras High Court ruled that:

Section 110(1)(b)(iii) of the CGST Act which states that a member of Indian Legal Services, who has served at least one additional secretary post for three years, may be appointed Judicial Member of GSTAT, is removed because it violates the provision of Article 14 of the Constitution of India.

Section 109(3) and 109(9) of the CGST Act, which provides that the tribunal shall consist of a judicial member, a technical member (Center), and a technical member (State), is removed because the administrative member outnumbers the judicial member which is violative of Article 14 and Article 50 of the Constitution of India.

Due to the above decision of the Madras High Court, the Center could not constitute appellate courts. Therefore, the appeal could not be brought against the order of the Appellate Authority before the Appeals Tribunal within the limitation period. To remove the difficulties associated with the application of the above-mentioned provision of the Act, the government, on the recommendations of the Council, promulgated the Central Goods and Services Tax (the ninth removal of difficulties order 2019), which says that the appeal to Tribunal can be made within 3 to 6 months in case of an appeal by the government.

Conclusion

The absence of a GST Tribunal under the CGST Act has been a long-standing problem, which has led to many pending disputes, with no opportunity to appeal and get satisfaction. The High Court’s decision not to proceed with recovery as long as the appeal period has not expired is a great relief to the taxpayers. Thus, according to the High Court’s direction, the State Bench of the GST Tribunal will be constituted at Prayagraj (Allahabad), and four Area Benches at Ghaziabad, Lucknow, Varanasi, and Agra, in the State of Uttar Pradesh.

References

• https://www.taxmann.com/preview-document?categoryName=null&fileId=101010000000188475&subCategory=caselaws&searchText=oudh%20Bar%20Association%20V%20Union%20of%20India
• https://taxguru.in/goods-and-service-tax/appeal-revision-part-ii-section-109-112-cgst-act-2017.html 

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