the essay of 21 February 2024 · the untouched capture
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<p align="left"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">February 21, 2024</font></strong></p>
<p align="center"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Doctrine of Proportionality</strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><u>By Vijay Kumar</u></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> the recent <em>Electoral Bonds case - Association for Democratic Reforms vs Union of India - <strong><a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTgwMTc0" target="_blank">2024-TIOL-17-SC-IT-CB</a></strong></em>, an important principle applied was the <font color="#FF0000"><em>doctrine of proportionality</em></font>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In his concurring judgement, Justice Sanjiv Khanna observed, </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span">24. Hon'ble the Chief Justice has rejected the Union of India's submissions by applying the doctrine of proportionality. This is a principle applied by courts when they exercise their power of judicial review in cases involving a restriction on fundamental rights. It is applied to strike an appropriate balance between the fundamental right and the pursued purpose and objective of the restriction. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The test of proportionality comprises four steps: </font></p>
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<td valign="top" bgcolor="#006600"><p><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif">1</font></p>
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<td valign="top" bgcolor="#E9E9E9"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Legitimate aim/purpose: </font></td>
<td valign="top" bgcolor="#006600"><div align="justify"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif">The first step is to examine whether the act/measure restricting the fundamental right has a legitimate aim. </font> </div></td>
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<td valign="top" bgcolor="#006600"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif">2.</font></td>
<td valign="top" bgcolor="#E9E9E9"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Rational connection: </font></td>
<td valign="top" bgcolor="#006600"><div align="justify"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif">The second step is to examine whether the restriction has rational connection with the aim. </font> </div></td>
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<td valign="top" bgcolor="#006600"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif">3. </font></td>
<td valign="top" bgcolor="#E9E9E9"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Minimal impairment/necessity test: </font></td>
<td valign="top" bgcolor="#006600"><div align="justify"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif">The third step is to examine whether there should have been a less restrictive alternate measure that is equally effective. </font> </div></td>
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<td valign="top" bgcolor="#006600"><p><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif">4.</font></p> </td>
<td valign="top" bgcolor="#E9E9E9"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Balancing act: </font></td>
<td valign="top" bgcolor="#006600"><div align="justify"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif">The last stage is to strike an appropriate balance between the fundamental right and the pursued public purpose. </font></div></td>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Justice Khanna explained the doctrine: </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span">The first two prongs of proportionality resemble a means-ends review of the traditional reasonableness analysis, and they are applied relatively consistently across jurisdictions. Courts first determine if the ends of the restriction serve a legitimate purpose, and then assess whether the proposed restriction is a suitable means for furthering the same ends, meaning it has a rational connection with the purpose. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span">In the third prong, courts examine whether the restriction is necessary to achieve the desired end. When assessing the necessity of the measure, the courts consider whether a less intrusive alternative is available to achieve the same ends, aiming for minimal impairment. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span">The fourth prong, the balancing stage has been a matter of debate amongst jurists and courts. Some jurists believe that balancing is ambiguous and value based. This stems from the premise of rule-based legal adjudication, where courts determine entitlements rather than balancing interests. However, proportionality is a standard-based review rather than a rule-based one. Given the diversity of factual scenarios, the balancing stage enables judges to consider various factors by analysing them against the standards proposed by the four prongs of proportionality. This ensures that all aspects of a case are carefully weighed in decision-making. This perspective finds support in the work of jurists who believe that constitutional rights and restrictions/measures are both principles, and thus they should be optimised/balanced to their fullest extent. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is certainly not the first time that Courts in India have employed the <font color="#FF0000"><em>doctrine of proportionality</em></font>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <em>Commissioner of Customs & Central Excise, Hyderabad vs H B Cargo Services - <strong><a href="https://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=27&filename=legal/hc/2011/2011-TIOL-198-HC-AP-CUS.htm" target="_blank">2011-TIOL-198-HC-AP-CUS</a></strong></em>, the Andhra Pradesh High Court observed, </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span">While issuance of signed blank shipping bills would, by itself, amount to negligence on the part of the CHA, their doing so for a consideration of Rs.150/- per shipping bill is an act of corruption. It is in this context that the proportionality of punishment imposed on the respondent, and the scope and amplitude of this doctrine, is required to be examined. <em>"Proportionality" </em>is a principle where the court is concerned with the process, method or manner in which the decision-maker has ordered his priorities, reached a conclusion or arrived at a decision. The very essence of decision-making consists in the attribution of relative importance to the factors and considerations in the case. The <font color="#FF0000"><em>doctrine of proportionality</em></font> places in focus the true nature of the exercise - the elaboration of a rule of permissible priorities. <em>"Proportionality"</em> involves <em>"balancing test"</em> and <em>"necessity test".</em> While the former (balancing test) permits scrutiny of excessive onerous penalties or infringement of rights or interests, and a manifest imbalance of relevant considerations, the latter (necessity test) limits infringement of human rights to the least restrictive alternative. What is otherwise within the discretionary domain and sole power of the decision maker to quantify the punishment, once the charge of misconduct stands proved, is exposed to judicial intervention if exercised in a manner which is out of proportion to the fault. Award of punishment, which is grossly in excess of the allegations, cannot claim immunity and remains open for interference under limited scope of judicial review. One of the tests to be applied, while dealing with the question of quantum of punishment, would be: would any reasonable person have imposed such punishment in like circumstances? </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <font color="#FF6633"><strong><u>CC Vs SPEEDY MULTIMODES PVT LTD,</u></strong></font><strong> <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTMxMjkx" target="_blank">2017-TIOL-3807-CESTAT-MUM</a></strong> the CESTAT observed, </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span">Learned counsel submits that penalties imposed on others were very mild. Therefore, this respondent should not be imposed with a harsh penalty. It may be stated that<font color="#FF0000"><em> doctrine of proportionality</em></font> does not apply in penal proceedings when gravity of offence is different. Accordingly levy of suitable penalty is considered as proper measure to prevent recurrence of breach of law. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In<em> Coimbatore District Central Co-operative Bank Ltd. vs Employees</em>, the Supreme Court observed: </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span"><em>So far as the <font color="#FF0000">doctrine of proportionality</font> is concerned, there is no gainsaying that the said doctrine has not only arrived in our legal system but has come to stay. With the rapid growth of administrative law and the need and necessity to control possible abuse of discretionary powers by various administrative authorities, certain principles have been evolved by courts. If an action taken by any authority is contrary to law, improper, irrational or otherwise unreasonable, a court of law can interfere with such action by exercising power of judicial review. One of such modes of exercising power, known to law is the doctrine - of proportionality. </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span"><em>Proportionality is a principle where the court is concerned with the process, method or manner in which the decision-maker has ordered his priorities, reached a conclusion or arrived at a decision. The very essence of decision-making consists in the attribution of relative importance to the factors and considerations in the case. The <font color="#FF0000">doctrine of proportionality</font> thus steps in focus true nature of exercise - the elaboration of a rule of permissible priorities. </em></font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Even in our nascent simple GST, the Supreme Court applied the doctrine. In <strong><font color="#FF6633"><u>RADHA KRISHAN INDUSTRIES Vs STATE OF HP</u></font> - <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTY1NjYy" target="_blank">2021-TIOL-179-SC-GST</a></strong>, the Supreme Court observed, </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span">By utilizing the expression "it is necessary so to do" the legislature has evinced an intent that an attachment is authorized not merely because it is expedient to do so (<font color="#CC3333">or profitable or practicable for the revenue to do so</font>) but because it is necessary to do so in order to protect interest of the government revenue. Necessity postulates that the interest of the revenue can be protected only by a provisional attachment without which the interest of the revenue would stand defeated. Necessity in other words postulates a more stringent requirement than a mere expediency. A provisional attachment under Section 83 is contemplated during the pendency of certain proceedings, meaning thereby that a final demand or liability is yet to be crystallized. An anticipatory attachment of this nature must strictly conform to the requirements, both substantive and procedural, embodied in the statute and the rules. The exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power. Each of these ingredients must be strictly applied before a provisional attachment on the property of an assesses can be levied. The Commissioner must be alive to the fact that such provisions are not intended to authorize Commissioners to make pre-emptive strikes on the property of the assessee, merely because property is available for being attached. There must be a valid formation of the opinion that a provisional attachment is necessary for the purpose of protecting the interest of the government revenue. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span">These expressions in regard to both the purpose and necessity of provisional attachment implicate the <font color="#FF0000"><em>doctrine of proportionality</em></font>. Proportionality mandates the existence of a proximate or live link between the need for the attachment and the purpose which it is intended to secure. It also postulates the maintenance of a proportion between the nature and extent of the attachment and the purpose which is sought to be served by ordering it. Moreover, the words embodied in sub-Section (1) of Section 83, as interpreted above, would leave no manner of doubt that while ordering a provisional attachment the Commissioner must in the formation of the opinion act on the basis of tangible material on the basis of which the formation of opinion is based in regard to the existence of the statutory requirement. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <u><font color="#FF6633"><strong>RK MOTORS Vs STATE TAX OFFICER</strong></font></u><strong>, <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTQ1Mzk2" target="_blank">2019-TIOL-431-HC-MAD-GST</a></strong>, the Madras High Court observed, </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span">The specific stand taken by the writ petitioner is that the driver without knowing the correct route had taken a wrong turn and headed towards Sivakasi. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span">It is also not in dispute that the bill is addressed only to the writ petitioner's principal office at Sivakasi; delivery alone is to be made at Virudhunagar. I am of the view that even if by mistake, a wrong instruction had been given to the driver of the vehicle to head towards Sivakasi. Still, it would not really matter. The only question that the respondent ought to have posed is whether there is any attempt at evasion. It is not as if the goods had already been offloaded. The vehicle was intercepted when it was in transit. The respondent ought to have directed the driver of the vehicle to move back towards Virudhunagar. Instead adopting such a procedure, the respondent had chosen to be harsh and vindictive. When the writ petitioner is a registered dealer, when the tax in respect of the goods have already been remitted and when the transportation of goods is duly covered by proper documentation, the respondent ought to have taken a sympathetic and indulgent view of the lapse committed by the driver of the vehicle. The detention order dated 28.12.2018 and the order dated 11.01.2019 suffer from vice of gross unreasonableness and<font color="#FF0000"> disproportionality</font>. When a power is conferred on a statutory authority, it should be exercised in a reasonable manner. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">GST officers should always keep in mind the sagacious words of the Supreme Court, </font></p>
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<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">The Commissioner must be alive to the fact that such provisions are not intended to authorize Commissioners to make pre-emptive strikes on the property of the assessee, merely because property is available for being attached. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Doctrine of Proportionality in GST - It's like trying to fit an elephant into a mini-car - completely disproportionate! </font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until next week</font></p>
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