The Goods and Services Tax Appellate Tribunal (GSTAT), Chennai Bench, has held that an appeal challenging the recovery of transitional credit involves questions of law and must be heard by a Division Bench comprising one Judicial Member and one Technical Member.
The appeal raises issues concerning whether the impugned order went beyond the scope of the show cause notice and whether Section 73 of the Central Goods and Services Tax Act, 2017, empowers the authorities to recover irregular transitional credit.
The Bench comprising Praveen Kumar Jain (Judicial Member) and Shaik Khader Rahman, (Technical Member) directed that the appeal be listed before the appropriate Division Bench on December 1, 2026, for hearing on merits and determined the composition of the Bench that will hear the dispute; it does not decide whether the credit recovery was valid.
The dispute concerns credit under the erstwhile tax regime sought to be carried forward into GST under Section 140 of the CGST Act, 2017, read with Rule 117 of the CGST Rules, 2017.
At this stage, the Tribunal took up the appeal to determine whether it involved a question of law for the purposes of deciding the appropriate Bench composition.
Advocate Gunjan Prabakaran appeared for the company, while Bhoopesh, Superintendent and authorised representative of the Central Government, represented the Revenue.
The company’s representative referred to the appeal memorandum uploaded on the Tribunal’s portal on March 29, 2026, and identified two principal legal objections.
The first was that the impugned order travelled beyond the scope of the show cause notice. The second was that Section 73 of the GST Act did not empower the authorities to recover irregular transitional credit.
The company submitted that these objections involved questions of law requiring consideration by a Division Bench.
The Revenue, in its written submissions dated October 6, 2026, also accepted that the appeal involved questions of law. The Tribunal recorded that the Revenue had additionally framed possible questions of law for consideration.
The Tribunal observed that the CGST Act does not define the expression “question of law”.
It explained that an issue involving the interpretation of legal principles, statutory provisions or precedents constitutes a question of law and must be decided jointly by a Judicial Member and a Technical Member.
The Bench further stated that determining whether an appeal involves a question of law requires consideration of the memorandum of appeal and the written submissions filed by both parties.
Applying that approach, the Tribunal examined the objection that the impugned order exceeded the scope of the show cause notice issued under Section 73, along with the legal grounds raised by the company and the Revenue. It also took into account the submissions of both representatives that questions of law arose in the appeal.
The Tribunal concluded that the appeal involved a question of law within the meaning of Section 109(8) of the CGST Act. Consequently, it directed that the matter be heard by a Division Bench comprising one Judicial Member and one Technical Member.
Section 109(8) permits specified appeals involving amounts up to ₹50 lakh to be heard by a single member, subject to the prescribed approval and conditions, where no question of law arises. In other cases, the provision requires a Judicial Member and a Technical Member to hear the appeal together.
The Tribunal’s finding therefore settles the procedural question of which Bench must hear this appeal, while leaving the underlying transitional credit dispute open for adjudication.
The order does not hold that Section 73 is inapplicable to the recovery of irregular transitional credit. That proposition was advanced by the company as a ground of challenge and remains to be examined on merits.
Similarly, the Tribunal has not concluded that the impugned order actually went beyond the show cause notice. It has identified that objection as an issue involving a question of law.
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