In this case the constitutional validity of the National Tax Tribunal Act, 2005 was challenged. In TC No.150/2006, additionally there was a challenge to section 46 of the Constitution (Fortysecond Amendment) Act, 1976 and Article 323B of Constitution of India. It was contended that section 46 of the Constitution (Forty-second Amendment) Act, was ultra vires the basic structure of the Constitution One of the contentions urged in support of the challenge to Article 323B related to the fact that Tribunals did not follow the normal rules of evidence contained in Evidence Act. In criminal trials, an accused is presumed to be innocent till proved guilty beyond reasonable doubt, and Evidence Act plays an important role, as appreciation of evidence and consequential findings of facts are crucial. The trial would require experience and expertise in criminal law, which means that the Judge or the adjudicator to be legally trained. Tribunals which follow their own summary procedure, are not bound by the strict rules of evidence and the members will not be legally trained. Therefore it may lead to convictions of persons on evidence which is not sufficient in probative value or on the basis of inadmissible evidence. It is submitted that it would thus be a retrograde step for separation of executive from the judiciary.
as it enabled proliferation of Tribunal system and made serious inroads into the independence of the judiciary by providing a parallel system of administration of justice, in which the executive has retained extensive control over matters such as appointment, jurisdiction, procedure etc. It was contended that Article 323B violates the basic structure of the Constitution as it completely took away the jurisdiction of the High Courts and vests them in the National Tax Tribunal, including trial of offences and adjudication of pure questions of law, which have always been in the exclusive domain of the judiciary.
Appeals on issues on law are traditionally heard by courts. Article 323B enable constitution of Tribunals which will be hearing appeals on pure questions of law which is the function of courts. In L. Chandra Kumar v. Union of India (1997) 3 SCC 261, the Supreme Court considered the validity of only Clause 3(d) of Article 323B but did not consider the validity of other provisions of Article 323B.
The appeals relating to constitutional validity of National Company Law Tribunals under the Companies Act, 1956 did not involve the consideration of Article 323B. The constitutional issues raised in TC (Civil) No. 150/2006 were not touched as the power to establish Company Tribunals was not traceable to Article 323B but to several entries of Lists I and III of Seventh Schedule and consequently there was no challenge to this Article.
The Court held that the basis of attack in regard to Part 1B and 1C of Companies Act and the provisions of NTT Act are completely different. The challenge to Part IB & IC of Companies Act, 1956 seeks to derive support from Article 323B by contending that Article 323B is a bar for constitution of any Tribunal in respect of matters not enumerated therein. On the other hand the challenge to NTT Act is based on the challenge to Article 323B itself.
The Supreme Court thus held that the petitions relating to the validity of the NTT Act and the challenge to Article 323B raised issues which did not arise in the two civil appeals. Therefore the cases could not be disposed of in terms of the decision in the civil appeals but required to be heard separately. It accordingly directed that the matters be delinked and listed separately for hearing.