CESTAT Cannot Constitute a Larger Bench to Question a Jurisdictional HC Ruling, Telangana HC Holds

The Telangana High Court has set aside a Customs, Excise and Service Tax Appellate Tribunal order that had directed the constitution of a Larger Bench to decide which of two conflicting High Court judgments should be followed on the question of cash refund of transitional CENVAT credit under Section 142(3) of the CGST Act. The ruling, by a bench of Justice P. Sam Koshy and Justice Narsing Rao Nandikonda in W.P. No. 23846 of 2026, is a clear statement on the binding character of jurisdictional High Court judgments on subordinate tribunals.

The dispute arose in service tax proceedings of M/s Autoform Engineering India Private Limited. The central question — whether Section 142(3) of the CGST Act permits a cash refund of CENVAT credit that could not be converted and carried forward under the transitional provisions — had been answered in favour of the taxpayer by the Telangana High Court in Granules India Ltd. v. Commissioner of Central Tax, Hyderabad (decided 20.02.2024). However, the Madhya Pradesh High Court had taken a contrary view in M/s Rungta Mines v. CCE, Bistupur. Faced with these conflicting judgments, the CESTAT Hyderabad Bench passed an order in September 2025 directing that a Larger Bench be constituted to determine which of the two High Court views should be followed.

The Telangana HC found this course impermissible. The principle is well-settled, drawing from the Supreme Court ruling in East India Commercial Co. Ltd. v. Collector of Customs, Calcutta: judgments of a High Court are binding on all tribunals and subordinate courts functioning within its territorial jurisdiction, and they cannot be ignored merely because another High Court has taken a different view. The CESTAT, sitting in Hyderabad within the jurisdiction of the Telangana High Court, was bound by the Granules India judgment. It had no authority to constitute a Larger Bench for the purpose of examining whether to follow the judgment of its own jurisdictional High Court — such an exercise would effectively amount to a tribunal sitting in judgment over a High Court ruling, which is constitutionally impermissible.

At the same time, the court recognised a practical difficulty: the Granules India judgment is itself under challenge before the Supreme Court in SLP(C) No. 17834 of 2025, where notice has been issued and an interim order passed. Directing the CESTAT to proceed purely on the basis of the Granules India judgment would risk creating further conflict if the Supreme Court ultimately takes a different view. The court therefore held that while the Larger Bench order must be set aside as legally unsound, the CESTAT appeal shall remain pending without further proceedings until the Supreme Court decides the Granules India SLP. This pragmatic outcome preserves the binding authority of jurisdictional High Court judgments while avoiding needless adjudication on a question that is shortly to be authoritatively settled.

-2026-juristway.com-2117-HC(Telangana)-GST  |  High Court of Telangana  |  30.07.2026