Low Tax Effect Circular: The view of the two-judge bench in Suman Dhamija & Gemini Distilleries that CBDT’s low tax Circular dated 09.02.2011 cannot be given retrospective effect cannot be followed as it is contrary to the three-judge bench verdict in Surya Herbal. A beneficial circular has to be applied retrospectively while an oppressive circular has to be applied prospectively. Circular dated 9.2.2011 has retrospective operation except for two caveats: (i) The Circular should not be applied ipso facto when the matter has cascading effect and/or (ii) where common principles are involved in subsequent group of matters or a large number of matters
We are of the view that 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 (supra), 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 (supra).