ORATION

Judicial review of fiscal statutes

The Institute of Chartered Accountants of Sri Lanka held its 16th Annual Tax Oration delivered by Justice K Sripavan Judge of the Supreme Court.

Judicial Review is the name given to the procedure whereby the Court will supervise or review the actual or proposed conduct of a public body on the application of a person who has a complaint or grievance about the conduct and who has sufficient interest in the matter entitling him to be heard.

In general, judicial review is concerned with the consideration of the process by which a decision has been taken rather than with the merits of the decision itself.

Esmond Satarasinghe founder member of the ICASL Council garlanding the orator Justice K Sripavan. ICASL President Sujeewa Mudalige and ICASL Tax Faculty Past Chairman R N Asiriwathan look on.

That is why the Court's jurisdiction with regard to judicial review is called a supervisory jurisdiction, to be contrasted with its original and appellate jurisdiction.

There are at least three different grounds on which the conduct of a Tribunal may be subject to judicial review. The first ground, "illegality" is where the Tribunal has failed to understand the law correctly that regulates its decision making power and to give effect to it.

The second ground, "irrationality" is sometimes called Wednesbury unreasonableness, (Associated Provincial Picture House Ltd, vs, Wednesbury Corporation (1948 1 KB 223) and applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at, such a finding.

The third ground, " procedural impropriety" covers failure to observe basic rules of Natural Justice and the failure to follow statutory rules of procedure applicable to the exercise of the Tribunal's jurisdiction.

A further ground known as the principle of "proportionality" which is now gaining importance in the field of Administrative Law is also relevant to be considered.

Generally, Courts are reluctant to interfere with the decisions and the conduct of Tribunals by way of judicial review. There is a substantive and a procedural basis for this reluctance.

The substantive basis is the realization that Parliament has entrusted the hearing of disputes such as tax appeals to an independent and informed Tribunal with wide knowledge and experience of the relevant law and practice and has given the Courts an appellate jurisdiction only, often limited to questions of law rather than of fact.

The procedural basis for the Court's reluctance is to interfere by way of judicial review is the existence of a right of appeal from the Tribunal's decision to the Superior Courts.

It is also noted that judicial review will not normally be granted where an alternative remedy is available. Thus, the Courts will only be willing to review a Tribunal's decision in exceptional circumstances only.

A party dissatisfied with the decision of a Tribunal invokes the jurisdiction of the Court by way of judicial review, has to establish an excuse for his failure to invoke and pursue the appellate jurisdiction.

Such excuses should be pleaded in the petition seeking judicial review and be supported by affidavits and necessary documents. The same principle is applicable to instances where the law provides for a right to appeal from a decision or order of an institution or an officer towards a statutory Tribunal.

The reason is that such appellate procedure as established by law, should be availed of, before recourse has had to the extraordinary jurisdiction by way of judicial review as provided in Article 140 of the Constitution.

In England of course, the basis of review by prerogatory rules is common law while appeals are in terms of the statute. In Sri Lanka, however, both remedies are statute-based.

"In our context, it is appropriate to describe the appellate jurisdiction as the ordinary jurisdiction and review by way of certiorari, prohibition, mandamus etc. as the extra-ordinary jurisdiction." (Halwan and Others vs. Kaleelul Rahuman 2000 3 SLR page 50).

The new Act No. 23 of 2011 established the "Tax Appeals Commission" replacing the Boards of Review of the enactments specified in the said Act and came into operation with effect from 31st March 2011.

The members of the Commission shall consist of retired judges of the Appellate Courts. A panel of legal advisors comprising not more than 10 persons who have gained eminence in the field of law will assist the Commission in the exercise and discharge of its powers, duties and functions under the Act.

It may thus be seen that the "Tax Appeals Commission" is different from the Panel of Advisors. Once it is established who constitutes the "Tax Appeals Commission", it is clear that all members must participate in its decision making process. In R vs. Kensington and Chellsea Rent Tribunal (1974) 1 W.L.R. 1486, 1490 Lord Widgery C.J. recognized this principle when he said "Counsel has given us a timely reminder that under the Act, the Tribunal consists of a Chairman and two other Members; he submits quite rightly that no decision can be taken except by a Tribunal so constituted."

Accordingly, if one of the members of the Commission is absent during appeal proceedings, the Commission cannot proceed to hear and determine the appeal.

The Act is silent on the quorum of the Members of the Commission. If a quorum is spelt out in the Act, it will not, of course, necessary for every member of the Commission to be present at a hearing. Section 10 of the Act mandates that appeals shall be heard by the Commission and the Commission shall make its decision. (Emphasis added).

This provision makes it clear that no Member of the panel of legal advisors can participate in the decision making process of the Commission. "Defects in the composition of the Tribunals which are relevant here are of two kinds; the participation by non members on the one hand, and on the other, non participation of members in a Tribunal's decision" (Vide Natural Justice by Paul Jackson - 2nd Ed.)

However, it may well be successfully argued that the Commission which receives the assistance of the legal advisors of the panel to record evidence is not delegating its powers provided the evidence is laid before the Commission and the final determination is made by the Commission itself.

When Parliament has entrusted to the Commission to do a particular act, it is not a matter for the Courts to decide so long as the Commission acts fairly and in good faith. It is for the Commission and not the Courts to decide how much information each of the members should have when considering a particular case.

As long as the Commission has enough information to enable it to make a fair assessment of the case, the Courts will not interfere.

The Commission is empowered to hear all appeals in respect of matters relating to imposition of any tax, levy or duty by the Commissioner General. The manner and the time period within which such an appeal is to be preferred is not laid down in the Act.

However, it has to be "prescribed" in terms of Section 7(4). "Prescribed" means "prescribed by any rule, regulation, by-law, proclamation or order made thereunder" as provided in Section 2 of the Interpretation Ordinance.

It is noted that the Act is silent as to who could make these rules, regulations or orders. Another noticeable feature is that the word "Commissioner General of Inland Revenue" has not been given a wider interpretation in the Act.

Thus, all appeals to the Commission has to be necessarily made from the determination made by the Commissioner General himself.

A taxpayer who wishes to appeal to the Commission has to deposit into a special account 25 percent of the assessed amount by the Commissioner General or he must provide a bank guarantee for the same amount.

Failure to do so would render the rejection of his appeal on the basis that the taxpayer has failed to properly invoke the jurisdiction of the Commission to hear his appeal. However, this requirement does not apply to any appeal made in respect of matters relating to imposition of "levy or duty".

If the words of the Act lead to injustice, inconvenience, unreasonableness or absurdity, the democratic process must be used to bring about a change in the Act.

Thus, it could safely be concluded that any failure on the part of the Commission to make a determination within 180 days is directory only and might even be complied with after the prescribed time.

The Commission is duty bound to give a fair hearing in all appeals received by it prior to making its decision. As the authorities will show, the Courts took its stand several centuries ago, on the broad principle that bodies entrusted with legal power could not validly exercise it without first hearing the person who was going to suffer. The hypothesis on which the Courts built up their jurisdiction was that the duty to give every victim a fair hearing was as much a canon of good administration as of a good legal procedure. Even where an order or determination is unchallengeable as regards its substance, the Court can at least control the primary procedure so as to require fair consideration of both sides of the case.

To be continued