GST Appellate Tribunal Rules That ITC Transfer in Merger Cases Involves a 'Question of Law' — Appeal to Be Heard by Division Bench

The Chennai Bench held that whether credit reflected against one GSTIN can be directly availed by a transferee without following Section 18(3) read with Rule 41 is a question of law requiring adjudication by a Division Bench.

In one of the earliest substantive procedural orders of the GST Appellate Tribunal, the Chennai Bench has held that a departmental appeal involving the interplay of Section 16(2), Section 18(3), and Rule 41 of the CGST Rules in the context of a merger raises a 'Question of Law' within the meaning of Section 109(8) of the CGST Act, and must therefore be heard by a Division Bench of one Judicial Member and one Technical Member [Assistant Commissioner of GST & Central Excise, Villupuram Division v. Rockman Industries Limited].

The bench comprising Praveen Kumar Jain, Member (Judicial) and Shaik Khader Rahman, Member (Technical) was deciding a preliminary question: whether the appeal — involving disputed Input Tax Credit of Rs. 30,23,370 — involved a question of law so as to require hearing by a Division Bench rather than a Single Member.

Interestingly, the department itself had initially submitted that no question of law was involved and that the appeal was confined to factual issues. However, the respondent contended that two cumulative conditions under Section 109(8) must be satisfied for a Single Member hearing — the disputed amount must not exceed fifty lakh rupees, and the appeal must not involve a question of law. The respondent framed several questions concerning whether substantive ITC benefit can be denied for procedural lapses, whether credit can be denied solely for non-reflection in GSTR-2A for pre-January 2022 periods, and whether ITC could only be transferred through the mechanism under Section 18(3).

The Tribunal noted that the department's own submissions in its para-wise comments engaged with the interpretation of Sections 16 and 18 of the CGST Act, effectively contradicting its stand that no question of law was involved. Relying on the Karnataka High Court's decision in M/s. Atria Convergence Technologies Ltd. v. Deputy Commissioner of Commercial Tax, the Tribunal held that a question is one of law where its answer is to be found by reference to the statute, and directed that the appeal be listed for hearing on merits before a Division Bench.

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