CBDT Circular prescribing monetary limits for Revenue to file appeals to higher courts will have retro application to even pending cases: SC

THE issue before the Bench is - Whether CBDT Circular prescribing monetary limits for Revenue to file appeals to higher courts will have retro application to even pending cases. And the SC verdict is YES.

Facts of the case

The Union of India framed the National Litigation Policy to to bring down the pendency of cases and get meaningful issues decided from the judicial forums. Accordingly, the CBDT issued an instruction in 2011 providing for appeals not to be filed before the High Court(s) where the tax impact was less than Rs.10 lakh. It also contains certain other conditions. That instruction was in supersession of the earlier Instruction No.1979 of 2000 where the limit of the tax effect was Rs.4 lakh. The Instruction/Circular in question was stated to had a prospective effect as per the Revenue and, thus, cases which were pending in the High Court(s) and had been filed prior to the Instruction in question but had tax effect of less than Rs.10 lakh were, thus, required to be determined on their merits and not be dismissed by applying the circular/instruction.

However, the Karnataka High Court, the Bombay High Court, Madhya Pradesh High Court, Delhi High Court had taken the view that the Circular in question would apply to pending appeals as well. On the other hand the Madras High Court, Kerala High Court, Chhattisgarh High Court and the Punjab and Haryana High Court had taken a contra view that there would be no retrospective application of the circular.

After hearing the parties, the Apex Court held that,

++ the retrospective applicability of the Circular dated 9.2.2011 was not interfered with, but with two caveats – (i) Circular should not be applied by the High Courts ipso facto when the matter had a cascading effect; (ii) where common principles may be involved in subsequent group of matters or a large number of matters. It was opined that in such cases, the attention of the High Court would be drawn and the Department was even given liberty to move the High Court in two weeks. In our view this order holds the field and should continue to hold the field;

++ the matter needs to be put to rest and a clarity be obtained in view of the impact of this issue on pending cases before the High Courts as well as the cases which have been disposed of by various High Courts by applying the Circular of 2011 to pending litigations. In our view the matter has been squarely put to rest taking further care of the interest of the Revenue by the order passed by the three Judges Bench of this Court in Surya Herbal Ltd. case, which had put two caveats even to the retrospective application of the Circular. The subsequent orders have been passed by the two Judges Bench without those orders being brought to the notice of the Court, a duty which was cast on the Department to have done so to avoid the ambiguity which has arisen. Thus, the said view of the three Judges Bench would hold water and the Circular would apply even to pending matters but subject to the two caveats provided in Surya Herbal Ltd. case