Page 52 - ELT_1st August 2020_Vol 373_Part 3

A90 EXCISE LAW TIMES [ Vol. 373

Understanding “substantial question of law”
A Full Bench of the Supreme Court, in Santosh Hazari v. Purushottam [251
ITR 84], held :
“the word ‘substantial’ as qualifying ‘question of law’, means having sub-
stance, essential, real, of sound worth, important or considerable. It noted that
the expression ‘substantial question of law’ has not been suffixed by the
words ‘of general importance’ as has been done in other provisions such as
Section 109 of the Code of Civil Procedure or Article 133(1)(a) of the Constitution,
and therefore, the Apex Court held that the substantial question of law on
which a second appeal shall be heard need not necessarily be a substantial
question of law of general importance .”
Hon’ble Court further observed :
To be ‘substantial’, a question of law must be debatable, not previously set-
tled by law of the land or a binding precedent, and must have a material
bearing on the decision of the case, if answered either way, in so far as the
rights of the parties before it are concerned.
The Supreme Court and several High Courts have also laid down that
any of the following five tests can be applied to determine whether a substantial
question of law is involved. [Arvind P. Datar, Kanga & Palkivala - The Law & Prac-
tice of Income Tax-Vol.-II, 2765, (Tenth edition, Lexis Nexis - 2014)] A question is a
substantial question of law if :
(i) it directly or indirectly affects substantial rights of the parties; or
(ii) it is of general public importance;
(iii) it is an open question in the sense that the issue has not been settled
by a pronouncement of the Supreme Court;
(iv) it is not free from difficulty; or
(v) it calls for a discussion for alternate view.
These tests are only illustrative and in no way exhaustive of the powers
of the High Court to entertain an appeal under this section; it is desirable not to
place a restricted meaning to such a provision [ibid]. The High Court must make
an effort to distinguish the issues between questions of law and substantial ques-
tions of law [ibid]. Further, explaining the meaning, the Supreme Court in Vijay
Kumar Talwar v. CIT [330 ITR 1] set out a substantial question of law would inter
alia arise when :
(1) The findings are based on no evidence;
(2) While arriving at the said finding, relevant admissible evidence has
not been taken into consideration;
(3) While arriving at the said finding, inadmissible evidences have been
taken into consideration;
(4) Legal principles have not been applied in appreciating the evidence;
(5) When the evidence has been misread.
The Supreme Court in Santosh Hazari’s case additionally held that “as a
matter of law if the appraisal of the evidence by the Trial Court suffers from a
material irregularity or is based on inadmissible evidence or on conjectures or
surmises, the appellate Court is entitled to interfere with the finding of fact”.

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