In a jolt for the government, the Supreme Court on Thursday held as unconstitutional the law that sought to set up a National Tax Tribunal (NTT).

A Constitutional bench led by Chief Justice R M Lodha quashed the National Tax Act, saying it was bad in law and failed the test of constitutional validity.

The judgement also held that the government could not vested judicial powers with a tribunal without according to it the characteristics of a court and ensuring its autonomy.
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NTT was also held to be invalid as it sought to take away the jurisdiction of the High Court in deciding tax related matters.

The government had defended the NTT stating that the move was intended to reduce the pendency of cases in the High Courts.

The challenge to the NTT was made by Madras Bar Associations and others, contending the NTT could not have ousted jurisdiction of the High Courts and that it was against the basic structure of the Constitution.

It was pointed out that where parties before the NTT were always the Ministry of Finance, a quasi-judicial tribunal would not inspire confidence and it would shake the very foundation of the principles of independence of judiciary, rule of law and separation of powers.

It was argued that there was a grave danger that the judiciary would be substituted by a host of quasi-judicial tribunals which would function as departments of various ministries.

This judgement will have a direct bearing on a petition that has challenged the validity of the National Company Law Appellate Tribunal.