The Ministry of Communications and Information Technology released three draft policies on telecommunications, information technology and electronics. The Ministry has invited comments on the draft policies, which may be sent to epolicy2011@mit.gov.in. These policies have the common goal of increasing revenues and increasing global market share. However, the policies may be incompatible with the Direct Taxes Code Bill, 2010 (DTC) and India’s international obligations under the General Agreement on Tariff and Trade (GATT). Below we discuss these policies within the scope of the GATT and the DTC. The draft National Information Technology Policy, 2011 aims to formulate a fiscal structure to attract investment in the IT industry in tier II and III cities. It also seeks to prepare SMEs for a competitive environment by providing fiscal benefits. Similarly, the draft National Electronics Policy provides for fiscal incentives in manufacturing on account of infrastructure gaps relating to power, transportation etc. and to mitigate the relatively high cost of finance. The draft policy also provides preferential market access for domestically manufactured or designed electronic products including mobile devices and SIM cards. The draft National Telecom Policy seeks to provide fiscal incentives required by indigenous manufacturers of telecom products and R&D institutions. The theme of the DTC was to remove distortions arising from incentives. The detailed note annexed to the Bill states that “tax incentives are inefficient, distorting, iniquitous, impose greater compliance burden on the tax payer and on the administration, result in loss of revenue, create special interest groups, add to the complexity of the tax laws, and encourage tax avoidance and rent seeking behaviour.” It further notes that the Parliamentary Standing Committee on finance had recommended removal of exemptions other than in exceptional cases. As per the Department of Revenue, tax holidays should only be given in businesses with extremely high risks, lumpy investments and lengthy gestation periods. The DTC also removes location-based incentives as these “lead to diversion of resources to areas where there is no comparative advantage”. These also lead to tax evasion and avoidance, and huge administrative costs. The proposals to provide fiscal incentives in all three draft policies contradict the direction of the direct tax reforms. Article 3 of GATT provides that foreign products should be accorded the same treatment accorded to similar domestic products in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution and use. The provisions in the draft electronics policy to secure preferential market access to products manufactured in India may contravene this Article. In granting such fiscal and trade incentives, the policies may be contrary to the approach adopted in the DTC and India’s obligations under the GATT. These draft policies will have to be reconciled with tax reforms and trade obligations.
Tribunals function as a parallel mechanism to the traditional court system. Tribunals were established for two main reasons - allowing for specialised subject knowledge in disputes on technical matters and reducing the burden on the court system. In India, some tribunals are at the level of subordinate courts with appeals lying with the High Court, while some others are at the level of High Courts with appeals lying with the Supreme Court. In 1986, the Supreme Court ruled that Parliament may create an alternative to High Courts provided that they have the same efficacy as the High Courts. For an overview of the tribunal system in India, see our note here.
In April 2021, the central government promulgated an Ordinance, which specified provisions related to the composition of the search-cum-selection committees for the selection of members of 15 Tribunals, and the term of office for members. Further, it empowered the central government to notify qualifications and other terms and conditions of service (such as salaries) for the Chairperson and members of these tribunals. In July 2021, the Supreme Court struck down certain provisions of the Ordinance (such as the provision specifying a four-year term for members) stating that these impinged on the independence of the judiciary from the government. In several earlier judgements, the Supreme Court has laid out guidelines for the composition of Tribunals and service conditions to ensure that these Tribunals have the same level of independence from the Executive as the High Courts they replace.
However, Parliament passed the Tribunals Reforms Bill, 2021 in August 2021, which is almost identical to the April Ordinance and includes the provisions which had been struck down. This Act has been challenged in the Supreme Court. For a PRS analysis of the Bill, please see here.
On 16th September 2021, the central government notified The Tribunal (Conditions of Service) Rules, 2021 under the Tribunals Reforms Act, 2021. A couple of the provisions under these Rules may contravene principles laid out by the Supreme Court:
Appointment of the Administrative Member of the Central Administrative Tribunal as the Chairman
In case of the Central Administrative Tribunal (CAT), the Rules specify that a person with at least three years of experience as the Judicial Member or Administrative Member may be appointed as the Chairman. This may violate the principles laid down by the past Supreme Court judgements.
The CAT supplants High Courts. In 1986, the Supreme Court stated that if an administrative tribunal supplants the High Courts, the office of the Chairman of the tribunal should be equated with that of the Chief Justice of the High Court. Therefore, the Chairman of the tribunal must be a current or former High Court Judge. Further, in 2019, the Supreme Court stated – “the knowledge, training, and experience of members or presiding officers of a tribunal must mirror, as far as possible, that of the Court it seeks to substitute”.
The Administrative Member of the CAT may be a person who has been an Additional Secretary to the central government or a central government officer with pay at least that of the Additional Secretary. Hence, the Administrative Member may not have the required judicial experience for appointment as the Chairman of CAT.
Leave Sanctioning Authority
The Rules specify that the central government will be the leave sanctioning authority for the Chairperson of tribunals, and Members (in case of absence of the Chairperson). In 2014, the Supreme Court specified that the central government (Executive) should not have any administrative involvement with the members of the tribunal as it may influence the independence and fairness of the tribunal members. In addition, it had observed that the Executive may be a litigant party and its involvement in administrative matters of tribunals may influence the fairness of the adjudication process. In judgements in 1997 and 2014, the Supreme Court recommended that the administration of all Tribunals should be under a nodal ministry such as the Law Ministry, and not the respective administrative ministry. In 2020, it recommended setting up of a National Tribunals Commission to supervise appointments and administration of Tribunals. The Rules are not in consonance with these recommendations.
