2013 (9) TMI 135 - HC - Central Excise

Court upholds revenue's appeal on penalty enhancement despite Commissioner's decision. Merger doctrine not applicable.

JR. Steel Industries Versus Customs Excise And Service Tax Appellate Tribunal & 1

JR. Steel Industries Versus Customs Excise And Service Tax Appellate Tribunal & 1 - 2014 (306) E.L.T. 302 (Guj.) Issues Involved:1. Whether revenue can file an appeal before the Commissioner seeking enhancement of the penalty once the Appellate Tribunal rejects the assessee's challenge to the penalty imposed by the adjudicating authority.2. Whether the revenue's appeal for enhancement would be barred since the order of the adjudicating authority would have merged in the order of the Commissioner rejecting the appeal of the assessee.Detailed Analysis:[1.0] The court addressed two primary legal questions in this group of appeals: (i) Whether the revenue can file an appeal for penalty enhancement after the Appellate Tribunal rejects the assessee's challenge to the penalty, and (ii) Whether the revenue's appeal for enhancement is barred due to the merger of the adjudicating authority's order with the Commissioner's order rejecting the assessee's appeal.[2.0] The facts of Tax Appeal No. 227/2013 were considered for convenience. The assessee, a manufacturer of Non-Alloy Hot-Rerolled Products, failed to discharge its duty liability within the stipulated time under Rule 96ZP(3) of the Central Excise Rules, 1944. Consequently, a penalty of Rs. 6000 was imposed by the Deputy Commissioner, Central Excise Division, Bhavnagar. The Commissioner (Appeals) dismissed the assessee's appeal against this penalty. Subsequently, the revenue's appeal for enhancement of the penalty was also dismissed by the Commissioner (Appeals) on the ground of merger. The CESTAT, however, held that the revenue's appeal for enhancement was maintainable and remanded the matter for fresh decision.[3.0] The assessee argued that the Tribunal erred in holding that the revenue's appeal for enhancement was maintainable despite the Commissioner (Appeals) confirming the penalty. The assessee contended that the doctrine of merger barred the revenue's appeal for enhancement. The assessee relied on several Supreme Court decisions, including CIT, Bombay vs. Amritlal Bhogilal & Co., to support their argument.[4.0] The revenue opposed the appeals, arguing that the Tribunal correctly held that the revenue's appeal for enhancement was maintainable. The revenue contended that the issue before the Commissioner (Appeals) in the assessee's appeal was limited to the liability for penal action, not the quantum of the penalty. Therefore, the doctrine of merger did not apply to the quantum of penalty, and the revenue could appeal for enhancement.[5.0] The court noted that the only issue before the Commissioner (Appeals) in the assessee's appeal was the liability for penal action, not the quantum of the penalty. Therefore, the doctrine of merger did not apply to the quantum of the penalty, and the revenue's appeal for enhancement was maintainable.[6.0] The court referred to the Supreme Court's decision in Pearl Drinks Ltd., which held that the doctrine of merger applies only when the issue raised subsequently has already been answered by the higher appellate authority. In this case, the Commissioner (Appeals) did not consider the quantum of the penalty, so the doctrine of merger did not apply.[6.1] The court also referred to the Bombay High Court's decision in Godrej & Boyce Mfg. Co. Ltd., which held that the doctrine of merger does not apply when the appeal by the assessee is restricted to a specific issue, and the revenue's appeal challenges a different part of the order.[6.3] The court distinguished the decisions relied upon by the assessee, noting that they were not applicable to the facts of this case. The court held that the doctrine of merger did not apply to the quantum of the penalty, and the revenue's appeal for enhancement was maintainable.[7.0] The court rejected the assessee's argument that the revenue's appeal for enhancement was barred because the Commissioner (Appeals) had the power to enhance the penalty suo moto. The court held that the revenue's appeal for enhancement was maintainable, and the doctrine of merger did not apply.[8.0] The court concluded that the revenue's appeal for enhancement of the penalty was not barred on the ground of merger and was maintainable. The court dismissed the appeals and upheld the Tribunal's decision to remand the matter to the Commissioner (Appeals) for fresh decision.