The (Il)legitimacy of Judicial Taxation
by Promod Nair
The Supreme Court of India has often played the role of a steward of the
environment. An era of judicial activism, often spurred on by public interest
litigation, has seen the Indian courts engage frequently and courageously
with environmental issues and fashion innovative remedies to prevent
degradation of the environment in the face of general apathy from the
executive.
Whilst such methods have not been without controversy, the latest
intervention by the court in imposing a green tax on the purchase of diesel
cars above 2000cc is unprecedented.
The imposition of a symbolic cess as a pre-condition for the registration of
new cars has been criticised in some quarters as an unjustified volte-face by
the Supreme Court. It signalled a hasty withdrawal from a decision which,
equally controversially and to the consternation of automobile
manufacturers, banned the registration of high-engine-capacity diesel cars in
December last year.
Irrespective of whether the tax will dissuade consumers from purchasing
diesel cars, the court’s imposition of a green cess has certainly struck at the
heart of the principle of separation of powers provided for under the Indian
Constitution- a principle considered so fundamental that it has been
described as part of the “basic structure” of the Indian Constitution by the
Supreme Court itself.
By appropriating for itself the power to impose a tax by judicial fiat, the
Supreme Court has embraced, in the words of Justice Kennedy of the US
Supreme Court, “an expansion of power in the judiciary beyond all
precedent”. It has failed to recognise the fundamental principle that taxation
is not a judicial, but an exclusively legislative, function under our
constitutional scheme.
Taxation is not a Judicial Function
Cooley, in his treatise Constitutional Limitations, defined taxes as a “burden
or charge imposed by the legislative power upon persons or property to raise
money for public purposes”.
The proper authority to determine what should and what should not
constitute an appropriate burden is therefore the legislative arm of the State.
The Indian Constitution adopts this principle and provides that a tax (which
inevitably deprives a person of property) must be supported by the
“authority of law”. This phrase has been interpreted, by a long and
venerable line of judicial precedents of the Supreme Court itself, to refer to
legislative action. No tax may, therefore, be imposed by either executive or
judicial action.
Confining the power to tax to the legislative branch reflects the intention of
the framers of the Constitution, and based upon the experience of colonial
rule, that the power of taxation must be under the control of those who are
taxed. Under our system of government, the legislative wing alone “has
access to the pockets of the people”. In the words of Cooley,
“in imposing a tax, the legislature acts upon its constituents. This is, in
general, a sufficient security against erroneous and oppressive taxation.”
Providing for the power of taxation to be exercised exclusively by the
legislature also tackles the “no taxation without representation” problem
since legislators represent the will of, and are also accountable to, the
electorate.
A tax imposed by judges who are not representative of, or responsible to,
the people in a political sense is wholly without “the authority of law” under
our Constitutional scheme.
Lacking in Legitimacy
It also lacks legitimacy. Will a 1% cess on diesel vehicles of 2000 cc and
above effectively tackle the serious issue of pollution in Delhi and the NCR
region? Why should the cess be limited to registration of vehicles in Delhi
and the NCR region and not extended nationally? What is the projected cost
of tackling air pollution in the Delhi and NCR region? What measures have
to be taken for this purpose? Will the court-imposed cess raise sufficient
revenue to meet this cost? Will a 1% cess deter prospective buyers from
opting for diesel vehicles?
Are diesel vehicles with an engine capacity less than 2000 cc pollution-free
so as to be exempt from the scope of the tax? In circumstances where a 4%
cess on diesel vehicles was mooted by the Finance Minister in his budget
speech earlier this year, what purpose would an additional 1% cess serve?
Would it have been more appropriate to levy a cess on the polluting fuel
(diesel) rather than on automobiles which use such fuel? Why should the
cess be limited to automobiles and not extended to diesel-run generators
which are equally, if not more, polluting? Sadly, the Supreme Court has not
even engaged with these issues or considered if the token cess imposed by it
will achieve its intended objectives.
No Safeguards Available Against Judicial Taxation
In addition to the unconstitutionality and illegitimacy of a judge-imposed
tax, judicial taxation also has other perils. A tax which falls outside the
scope of legislative competence of a legislature or one which is plainly
discriminatory or confiscatory can be invalidated by the courts. No
safeguards are however available against a court-imposed tax, especially in
circumstances where it is imposed by an institution whose orders are not
subject to challenge before a higher authority.
The Supreme Court is the highest judicial authority in our country and a tax
imposed by it is not amenable to challenge before any other forum. A citizen
who is adversely affected by such a tax simply has no recourse to challenge
the legality of such a measure.
In withdrawing its earlier ban and replacing it with a cess on the registration
of diesel vehicles, the Supreme Court seems to have been unduly influenced
by the fact that automobile manufacturers consented to the levy of such a
tax. It however overlooked the fact that the burden of the tax will, in reality,
be borne by consumers who were not even represented before the court.
Such consumers have also been deprived of the right to challenge the
legality of such a tax.
Conclusion
In confronting various constitutional challenges, from the enforcement of
civil rights to reviewing the conduct of government institutions and
authorities, it is permissible (and often necessary) for the judicial power to
fashion new tools to provide effective relief. However, whilst the remedies
devised by the courts must be adequate to the task, such powers are not
unlimited.
Fundamentally, judges are auditors of legality and not makers of policy.
However, the visual attractiveness of an activist court blowing away the
smog filled air of Delhi has resulted in judicial encroachment into the
legislative power of taxation. Such steps jeopardise the legitimacy that
justifies judicial independence and warrants a course correction by the court.
Promod Nair ([email protected]) is an advocate practising
at the High Court of Karnataka