Judicial discipline bars direct referral to a five-Member Bench where a larger Bench view is doubted and affirmed rulings stand.
Judicial discipline required a two-Member Tribunal Bench, if unable to accept an earlier larger Bench view, to refer the matter first to a three-Member Bench rather than to a five-Member Bench; the direct five-Member reference was impermissible. The three-Member Larger Bench ruling in South Indian Bank on eligibility of CENVAT credit for service tax paid on mandatory deposit insurance remained sound, as Dilip Kumar on exemption notifications did not control that issue, so reconsideration by a five-Member Bench was unnecessary. Once that ruling had also been upheld by the Kerala and Bombay High Courts, the reference could not survive and the settled view remained operative.
Issues: (i) Whether a Division Bench of the Tribunal, after disagreeing with a three-Member Larger Bench, could directly refer the matter for constitution of a five-Member Larger Bench; (ii) Whether the three-Member Larger Bench decision in South Indian Bank required reconsideration by a five-Member Larger Bench; (iii) Whether the reference survived after the three-Member Larger Bench decision had been upheld by the Kerala High Court and the Bombay High Court.
Issue (i): Whether a Division Bench of the Tribunal, after disagreeing with a three-Member Larger Bench, could directly refer the matter for constitution of a five-Member Larger Bench.
Analysis: Judicial discipline required a Bench of two Members to follow the decision of a larger co-ordinate Bench. If it found the earlier decision to be untenable, the proper course was to refer the matter first to a Bench of three Members, and only if that Bench also doubted the earlier view could a reference to five Members be justified. The Constitution Bench authorities relied upon, read with the earlier Tribunal practice, did not permit a direct reference from a two-Member Bench to a five-Member Bench.
Conclusion: The direct reference to a five-Member Larger Bench was impermissible and was not justified.
Issue (ii): Whether the three-Member Larger Bench decision in South Indian Bank required reconsideration by a five-Member Larger Bench.
Analysis: The controversy concerned availability of CENVAT credit on service tax paid to the Deposit Insurance Corporation for mandatory insurance of bank deposits. The earlier three-Member Larger Bench had held that the insurance service was an input service and that credit was admissible after considering the statutory scheme and the relevant credit rules. The reliance placed on Dilip Kumar was misplaced because that decision dealt with interpretation of exemption notifications and did not govern the eligibility of CENVAT credit in the present context. The earlier larger-bench ruling was also consistent with the statutory framework and with the reasoning adopted by the High Courts.
Conclusion: No reconsideration by a five-Member Larger Bench was required.
Issue (iii): Whether the reference survived after the three-Member Larger Bench decision had been upheld by the Kerala High Court and the Bombay High Court.
Analysis: Once the three-Member Larger Bench view had been affirmed by both High Courts, there was no basis to keep the reference open for a larger bench reconsideration. The appellate structure and the principle of judicial discipline required acceptance of the affirmed view, and no surviving ground justified a five-Member reference.
Conclusion: The reference did not survive.
Final Conclusion: The matter was returned to the Division Bench for disposal of the appeals in accordance with the settled position that the three-Member Larger Bench ruling remains operative and does not call for reconsideration by a five-Member Bench.
Ratio Decidendi: A co-ordinate or smaller Bench cannot directly send a matter to a still larger Bench in disregard of the hierarchical discipline governing references, and a settled larger-bench view, especially one affirmed by High Courts, should not be reopened absent a legally sustainable basis.