Constitutional Case Brief: Between the Government of Bhutan and the

Opposition
IN THE SUPREME COURT OF KINGDOM OF BHUTAN

The Tax Revision Case

BETWEEN;

THE ROYAL GOVERNMENT OF BHUTAN

(Represented by the Office of Attorney General)…………Respondent/Appellant

AND

THE OPPOSITION PARTY

(Represented by Damchoe Dorji)…………………………..Petitioner/Respondent

Case Brief

The constitutional/Tax Revision case between the Government of Bhutan hereinafter referred to as the
respondent/appellant represented by the office of Attorney General and the Opposition party represented by
Damchoe Dorji, member of opposition, Hon’ble member of National Assembly, hereafter referred to as the
petitioner/ respondent.

The petitioner/respondent moved the High court challenging the constitutionality of the government’s
implementation of tax revision measures as ultra vires the constitution and the Public Finance Act 2007. The
respondent/appellant prayed for dismissal of the case for want of jurisdiction and locus standi, interalia
constitutionality of judicial consideration of a matter already under legislative process.

Facts of the case

The democratically elected government under the guise of “rationalization and broadening the existing
tax structure” revised tax measures citing Section 4.2, Chapter 3, Part I of the Sales Tax, Customs and
Excise Act 2000 (herein after referred to as the “Sales Tax Act”) which states that: “The fixation of the
rates of Sales Tax and any revision thereof, and the range of commodities and services under the Sales
Tax Schedule shall be approved by the Royal Government of Bhutan.” The executive revised the sales,
customs and import tax on light vehicles without introducing the same before the Parliament and voting on
it. The argument of the government was that the relevant provision of the impugned Act delegated
legislation to the government to revise indirect tax. The opposition citing several Sections of the Public
Finance Act, 2007 and Article 14, Section 1 of the Constitution challenging its constitutionality filed a
petition to the High Court.

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Opposition
Procedural history

The High Court as the court of first instance in all constitutional matters admitted the petition of the
opposition Party, subsequently at trial the High Court ruled against the Government and held the tax revision
unconstitutional. The government aggrieved by the High Court’s ruling has preferred appeal to the Hon’ble
Supreme Court of Bhutan.

Issues

The parties to this constitutional case have raised many important and relevant issues. However for
convenience I have selected only few major facts in issue and provided the relevant court decisions and
rationale on the issues. Some major issues raised by the parties before the Honorable Supreme Court
were;

(a) Whether the opposition leader has locus standi to file a petition against the government.
(b) Whether the case involves a concrete case of controversy as required under section 31.2 of the
Civil and Criminal Procedure Code.
(c) Whether the High Court erred in interpretation of the Jabmi Act and a retired drangpoen
could appear and practice before courts.
(d) Whether it is constitutional for the High Court to give judicial consideration of a matter under
legislative process.
(e) Whether the High Court has jurisdiction to hear a constitutional case?
(f) Whether the implementation of the tax measures by the Government without the approval of
Parliament violates Section 9 and 14(b) of the Public Finance Act and Article 13 and 14(1) of the
Constitution.
(g) Whether the constitution provides a distinction between direct tax and indirect tax.
(h) Whether all forms of taxes shall be regarded as money Bills and subjected to the same
Procedure of Bills as enunciated under Article 13 of the Constitution.

Holding decision, rationale and reasoning.

The constitutional bench of the Honorable High Court admitted the petition on the ground of Public Interest
Standing overriding the principle of locus standi as outdated technical hitches. The court affirmed the case
to be that of the opposition party involving concrete case of controversy as under section 31.2 of the civil
and criminal procedure code. The high court ruled the tax revision as unconstitutional. The government
appealed to the Supreme Court. The Supreme Court adjudicated that the issue raised by the Opposition Party

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does not relate to the authority of the Government to impose tax but pertains to the non-compliance of
procedure in raising and implementing the altered vehicle tax which is the main subject of litigation. Hence,
the locus standi of the Opposition Party to file constitutional cases is deemed justified under Section 1
Article 18 of the Constitution as held by the High Court. However, while filing constitutional cases the
Opposition Party henceforth, must comply with guidelines enumerated by the Apex Court.

On the issue of whether a retired drangpoen can practice and appear before courts; the Honorable Supreme
Court upheld the High Court decision affirming appearance of Damcho Dorji on behalf of his party and
observed that the relevant provision of the Jabmi Act may be in contravention to Section 1 Article 7 (right to
life – to earn a livelihood) and Section 10 Article 7 (right to practice any lawful trade, profession or
vocation) of the Constitution as raised by the respondent. However the High Court’s decision on this issue
based on the interpretation of the phrases retired drangpoen and resigned drangpoen of the Jabmi Act was
overruled by the apex court.

On the issue of constitutionality of judicial consideration of a matter under legislative process, the Supreme
Court held that judicial recourse of a constitutional matter must exhaust parliamentary process for the Court
to ensure its constitutionality. Judicial review is an example of the functioning of separation of powers in a
modern governmental system. Therefore, based on the principle of separation of powers enshrined under the
Constitution, once the Court has taken cognizance of any matter, Parliament must comply with rules of
procedure pertaining to abstaining from discussing matters that are sub-judice to avoid complications. The
court observed that the doctrine of constitutional avoidance dictates that a Constitutional Bench should
refuse to rule on a constitutional issue, if the matter can be resolved on a non-constitutional basis that is, if
there is also present some other ground upon which the case may be disposed off. However, Parliament has
failed to resolve the matter related to the procedure concerning the passing of the budget which includes the
contested raising of taxes under the “rationalization and broadening the existing tax structure” quoting the
provisions of Sales Tax, Customs and Excise Act 2000 during the winter session (Nov–Dec, 2010). The
imposition of taxes by the Government without the approval of Parliament is not in accordance with the
provisions of the Constitution, and so it has sabotaged the fundamental principle of constitutional law.
Therefore, this Court affirms the findings and the decision of the High Court with regard to constitutionality
of judicial consideration of a matter under legislative process.

On the issue whether the High Court has jurisdiction, the Supreme Court has held that unlike the
concentrated and diffused systems, our constitution has preferred a variation from the two systems and thus it
provides for judicial restraint and refrains from becoming an activist judiciary for safety. The High Court in
accordance with Section 23 Article 7, Section 5 Article 23 and Section 18 Article 21 read with Section 9

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Article 21 of the Constitution is the designated Court of first instance in all constitutional matters involving a
substantial question of law of general importance relating to the interpretation of this Constitution, which is
in compliance with the principles of appeal enshrined in the statutes and natural justice. Such an
interpretation provides for efficiency and at least one appeal to the Supreme Court for review of the
judgment rendered by the Constitutional Bench of the High Court in all constitutional matters. Therefore, the
High Court has the requisite jurisdiction to adjudicate constitutional matters involving a substantial question
of law of general importance relating to the interpretation of this Constitution.

On the issue whether the implementation of the tax measures by the Government without the approval of
Parliament violates Section 9 and 14(b) of the Public Finance Act and Article 13 and 14(1) of the
Constitution, the court held that the doctrine of eclipse enshrined in the constitution Article 1 section 10 “…
the provision of any law, whether made before or after the coming into force of this Constitution, which are
inconsistent with this Constitution, shall be null and void”. Therefore the provisions of the Sales Tax,
Custom and Excise Act 2000 authorizing the government instead of the parliament to revise tax rates must
be deemed to be eclipsed by Article 1 section 10 of the constitution. On the same line the court also ruled
that provision of the Public Finance Act 2007 section 9 which states; “Raising of revenues through taxes
shall be authorized by Parliament” and section 2 of the same Act provides; “the Act shall supersede all
laws, regulations, rules and notifications that are inconsistent with the provisions of this Act, except the
Constitution of the Kingdom of Bhutan, or as otherwise specified herein” takes precedence over the
provisions of the Sales Tax, Customs and Excise Act 2000 by virtue of principle of last in time rule and
strict interpretation applicable to tax statutes. Therefore repugnant provisions of the sales tax, customs and
excise Act 2000 must be deemed null and void as it is inconsistent with the provisions of the Constitution.

On the issue whether the constitution provides a distinction between direct tax and indirect tax the Honorable
Supreme Court held that the Constitution does not differentiate direct and indirect tax. Tax is tax. The
contention of the government regarding the delegated authority to impose ‘indirect tax’ is without legal
basis. The direct and simple meaning of Section 1 Article 14 of the Constitution, “taxes, fees and other forms
of levies…” leave no room for further interpretations and interpretation of the Constitution is within the
emphatic domain of the Supreme Court. It must be de lege lata and not de lege ferenda. Therefore, the
argument of the appellants that there exists a separate law related to direct and indirect tax is unfounded.

On the issue whether all forms of taxes shall be regarded as Money Bills and subjected to the same
Procedure of Bills as enunciated under Article 13 of the Constitution. The court held that Section 1 Article
14 of the Constitution pertains to the supremacy of Parliament to impose taxes as representatives of the
people. The relevant provision of the Constitution clearly mandates and embodies the important

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Opposition
constitutional principle that no tax shall be levied or collected except under the authority of law. The raising
of taxes by merely incorporating it in the budget report being presented to and deemed adopted by the
National Assembly alone without completing the normal legislative process is inconsistent with
constitutional requirements and the democratic system of governance. Imposing and altering of taxes must
be decided by the elected representatives of the people in its entirety and not only by a sub-group represented
by the executive. According to the constitutional provisions it must be approved and passed by Parliament.
This understanding is based on the principle that the government derives its powers from the consent of the
governed substantiated by the concept of parliamentary supremacy over the Executive enshrined under
Section 2 Article 10, Section 8 Article 20, and Section 13 Article 1 of the Constitution. Exercise of power
under the ultra vires provisions of sales tax, customs and excise Act 2000 would lead to usurpation of power
not granted by the parliament. The requirement of raising taxes or alteration except by law implies that it
must follow the normal bill passing process and hence, will become applicable as law only after grant of
Royal Assent. Bills can be introduced in Parliament in either the National Assembly or the National Council
except for "money bill”, those bills relating to “spending or taxation” which can originate only in the
National Assembly must be initiated by the government in accordance with Section 2 Article 13 of the
Constitution.

Court order

The Supreme Court observed that the constitution is the supreme law and the guide, which it shall uphold
forever. That our democracy is a majoritarian democracy within the tapestry of constitutionalism and the
court shall respect and recognize the roles of other institutions without abdicating its role as the guardian of
constitution. The principle of constitutionalism is entrenched in our constitution. The Supreme Court’s
interpretation of the constitution vis-a-vis legality of the Acts of legislature and actions of government
agencies is final not because it is infallible but because it is the guardian and final authority to interpret the
constitution. The court also held that our Constitution has different centers of power under vertical,
horizontal and intra check and balance ensured through separation of power. The Constitution has carefully
crafted the checks and balance inherent to constitutionalism. It prevents power from being concentrated in
too few hands, which could result in an autocratic and dictatorial government. Constitutionalism embodies
the philosophy of limited government and Bhutan has established a constitutional democratic system of
governance. Therefore, the Constitution prevents power from being fragmented in a manner that could lead
to an ineffectual and unstable government.

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The Court while enumerating relevant directives unanimously concurred with and modified the decision of
the Constitutional Bench of the High Court with supplemental reasoning and justifications under Section
111(b) of the Civil and Criminal Procedure 2011.

Respectfully submitted