Thursday, May 04, 2017

Linking PAN with Aadhaar – Updates from the Supreme Court (Day V)

Moneylife: Krittcacgg: New Delhi: Thursday, May 4, 2017.
The arguments in the case challenging the constitutionality of s. 139AA of the Income Tax Act (IT Act) continued for the fifth day today. Summaries of arguments advanced on the first four days can be accessed here. Today, the Central Government concluded its submissions and the petitioners commenced their rejoinder arguments.
Due to the Attorney General’s unavailability, the Central Government as well as the Unique Identification Authority of India (UIDAI) were collectively represented by two counsels for today’s hearing.
The Government advanced arguments on two grounds raised by the petitioners during their submissions –
  • Violation of Article 14 of the Constitution
  • Informational self-determination
  • Violation Article 14 of the Constitution
On Article 14, two main arguments were advanced. The first was that proportionality was not a facet of Article 14, and should not be read into the Article in the instant case. The second argument advanced was that in any case, on facts, there was no Article 14 violation. An important facet of the second argument, subsequently advanced by the second counsel was that inclusion of Aadhaar into the tax regime actually helped secure Article 14 rights, or the right to equality. India had a progressive tax regime, which in itself was an important aspect of equality under Article 14. It was argued that weeding out duplicate PANs to end corrupt practices would eliminate the discrimination against honest tax payers as against those abusing the system.
The first argument advanced was that proportionality was not a facet of Article 14 under our constitutional scheme. To decide proportionality of a legislation would amount to the Court substituting its wisdom in place of the legislature. It was argued that the issue of proportionality only arose in a context where a restriction needed to be balanced with a right of if different rights were required to be balanced. Article 14 did not contemplate any such balance and therefore, the issue of proportionality did not arise.
No violation of Article 14 on merits
With respect to the second argument, it was argued that the penalty imposed by the legislature could not be struck down on proportionality. This was because s. 139AA did not impose any new penalty and the consequences would be the same as if an individual did not quote their PAN for tax returns. The counsel revisited the AG’s argument that the purpose of PAN was also to provide a unique identity. Further, it was also submitted that an enactment cannot be struck down on reasonableness or arbitrariness. Rajbala v. State of Haryana was again cited for this proposition. Citing the Mardia Chemicals judgement, Justice Sikri suggested that in certain circumstances, the ground of arbitrariness may be available.
On the argument that s. 139AA lacked a rational nexus with the object of controlling black money as it only affected individuals and not companies, the Union’s response was that the enactment never purported to solve the problem completely. The Government would probably devise other methods for tax evasion and money laundering done through companies or trusts. A sealed envelope, with details of ongoing investigations was handed over to the bench to impress upon it the extent of tax fraud perpetuated by individuals. However, the bench refused to take a look at it.
The bench appeared convinced regarding the intelligible differentia between individuals and legal persons but quizzed the counsel regarding the discrimination between willing enrollees of Aadhaar and those who objected to the scheme. To this, the Union’s response was that the object of the scheme was not to discriminate, as it only sought de-duplication of PAN and not seeding of Aadhaar numbers. The counsel further argued that ‘conscientious objectors’ should actually be considered as offenders of the law, notwithstanding any good or moral justifications for not wanting to comply. If being a conscientious objector was seen as a standard for discrimination, most laws would be considered discriminatory.
Informational Self-Determination
With respect to informational self-determination, three arguments were advanced – that the right was not absolute, that the right was an inherent facet of privacy (which could not be argued before this Court) and that the right could not be imported into Indian jurisprudence as is, due to peculiarities of the Indian context.
The counsel argued that even in Germany, where the right emerged, it was not absolute. In India, all fundamental rights envisaged restrictions. Quoting Daniel Solove’s seminal paper titled Conceptualizing Privacy, he further argued that informational self-determination was intrinsically linked to privacy. Lastly, he submitted that German conceptions of privacy were markedly different and warned against directly borrowing solutions from one jurisdiction to another, without context. The counsel cited R. Rajagopal v. State of Tamil Nadu to emphasise that the right to be let alone was a part of privacy rights, which prompted Justice Sikri to frame the issue as that of choice. He asked the petitioners if they had any right to pay taxes in the manner they desired.
In conclusion, the counsel argued that biometrics were the most sophisticated technology for de-duplication in this day and age. Under Section 70 of the Information Technology Act, the central repository which stored biometrics had been designated as a Critical Information Infrastructure, ensuring additional security for it.
At 2:30 pm, shortly after the court reassembled after the lunch break, the petitioners began their rejoinder arguments. On behalf of (Retd) Maj. Gen Vombatkere and Mr. Wilson, the following arguments were made –
The counsel emphasised on the petitioners’ background and their contribution to the state as well as civil society. He reiterated their grave concerns about the state’s efforts to constrain their freedom. He specifically pointed out Mr. Wilson’s work with manual scavengers and how biometrics have repeatedly failed for those engaged in manual labour. The exclusion due to biometric failure made this a real civil rights issue, rather than an elite concern as the AG had claimed.
He reiterated his argument that the scheme of the Aadhaar Act was in collision with s. 139AA as the former was voluntary and the latter was not. In response, the AG had tried to reconcile this contradiction by arguing that even under the Aadhaar Act, enrolment was mandatory. The petitioners’ counsel argued that this was wrong, and proceeded to attack the premise of this argument by showing how the entire scheme of Aadhaar was voluntary. He relied on –
Section 3 of the Aadhaar Act, which creates an entitlement in favour of a resident, but poses no obligation to obtain an Aadhaar.
Further, Section 7 of the Act only applied to subsidies or benefits. He argued that it was a narrow provision and could not be extended to situations such as tax collection.
Section 8 of the Aadhaar Act contemplates seeking consent, again pointing towards the voluntariness of the scheme.
He then referred to the enrolment form appended as a Schedule to the Aadhaar (Enrolment and Update) Regulations 2016. The form clearly stated that Aadhaar enrolment is ‘free and voluntary’.
Additionally, citing Regulation 6 of the Aadhaar (Authentication) Regulations 2016, he pointed out how consent was an inherent aspect of the enrolment process. There could be no consent to a mandatory scheme.
Further, Section 57 of the Act, on which the AG had relied to show that Aadhaar could be used for purposes other than subsidies or benefits, also contemplated informed consent by making a reference to Section 8. He contended that the nature and character of Aadhaar was essentially voluntary, and therefore, tax payers could not be compelled to enrol for it.
The lack of any coercive action or penalty under the Act for failing to enrol.
The petitioners’ counsel also relied on representations made on the UIDAI website and the advertisements put out by UIDAI reaffirming its voluntariness. He proceeded to argue that to claim otherwise would be to defraud the public. Since instrumentalities of the state could not defraud the citizenry, their representations as to the voluntary nature of Aadhaar must be taken to be true and s. 139AA should be struck down on this ground alone.
He went on to reference a report from today’s newspaper about new-borns being required to enrol for Aadhaar even before they were assigned a name. In his view, the insistence on tracking individuals from birth showed signs of a totalitarian state, capable of destroying any individual social or political choice.
He also assailed the Central Government’s argument that biometric authentication was secure and sophisticated. He explained how it was possible to forge fingerprints using a photograph or Fevicol.
On the contention that Aadhaar leaks by government portals were distinct from the main centralised database being compromised, he contended that from the citizen’s point of view, the lapses were made by the state. The citizens’ personal information was in public domain irrespective of where the lapse occured.
On compelled speech, he clarified that the issue was not limited to parting with biometrics or iris scans, but a compulsion to give information to a private third party, 34,000 of whom had been blacklisted. The architecture, he argued, was deeply flawed. Based on the Government’s contention that personal information was required to be supplied for purposes such as Census and registration of property, he responded that these were vastly different. These were localized, retained by one authority and for a narrowly tailored purpose. Under the Census Act, there were restrictions on sharing the information, including a prohibition on using the information in a court of law. (Author’s note – the Aadhaar Act allows information stored in the centralised database to be used for court proceedings pursuant to a judge’s orders)
He also debunked the Centre’s claim that Aadhaar was an identity for the identity-less, by citing RTI replies from UIDAI pointing out that less than 0.03% of the total number of people enrolled lacked any previous form of identification.
Finally, on legislative competence, he argued that despite wide residuary powers, there were implied limitations on the state’s power to legislate with respect to an individual’s body, barring narrowly tailored circumstances. Viewed this way, s. 139AA was not a fiscal statute, where the state enjoyed wide latitude to legislate.
The counsel for Mr. Binoy Viswam commenced arguments shortly before the court rose for the day. His arguments will continue tomorrow, after which the matter is likely to be reserved for judgment. A summary of his arguments made today and tomorrow will be collectively posted after tomorrow’s hearing.