TaxTMI 
TaxTMI 
TaxTMI 
2013 (9) TMI 135
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....ioner rejects assessee's appeal against penalty, the revenue's appeal for enhancement would be barred since the order of adjudicating authority would have merged in the order of the Commissioner rejecting appeal of the assessee?" [2.0] As common question of facts arise in all these appeals, facts of Tax Appeal No.227/2013 would be considered for the sake of convenience. Facts in Tax Appeal No.227/2013 in nutshell are as under: [2.1] That the appellant herein - assessee was manufacturing NonAlloy HotRerolled Products falling under Chapter 72 of the First Schedule to the Central Excise Tariff Act, 1985. That the said products were notified goods under erstwhile Section 3A of the Central Excise Act, 1944 [hereinafter referred to as "Act"] and the levy and payment of duty in respect of the goods were governed by erstwhile Rule 96ZP of the Central Excise Rules, 1944 [hereinafter referred to as "Rules"]. That the assessee was availing the scheme described under Rule 96ZP(3) of the Rules for the purpose of the payment of duty leviable on the goods. The assessee was required to pay amount equally to onetwelfth of their full and final duty liability for the year, every month by 10th of su....
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....3] That thereafter feeling aggrieved and dissatisfied with the order passed by the Deputy Commissioner imposing the penalty of Rs.6000/only, the revenue preferred appeal before the Commissioner (Appeals) for enhancement of the penalty. However, the Commissioner (Appeals) dismissed the said appeal solely on the ground that as against the Order in Original passed by the Deputy Commissioner the appeal preferred by the assessee came to be dismissed by it and the order of penalty came to be confirmed, thereafter the appeal preferred by the revenue against the very order would not be maintainable on the ground of merger. [2.4] Feeling aggrieved and dissatisfied with the order passed by the Commissioner (Appeals) dismissing the said appeal, the revenue preferred appeal before the Customs, Excise and Service Tax Appellate Tribunal [hereinafter referred to as "CESTAT"]. That at the time of hearing of the appeal, there was a difference of opinion between the Members of the Bench. One Member took the view that on the ground of merger the appeal preferred by the revenue would not be maintainable and another Member held that appeal preferred by the revenue would be maintainable therefore, the ....
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....fore the Appellate Commissioner under section 35A of the Act, challenging the penalty imposed by the adjudicating authority, it was open for the Appellate Commissioner even to consider the enhancement of the penalty. It is further submitted that even in the present case while rejecting the appeal preferred by the assessee against the penalty imposed by the adjudicating authority, the Appellate Commissioner had specifically observed that the lower adjudicating authority while adjudicating the OIO has already taken the lenient view by imposing nominal penalty and therefore, the OIO does not warrant interference. It is submitted that under the circumstances thereafter it was not open for the revenue to prefer appeal against the OIO before the Appellate Commissioner and in such a situation the only remedy which would be available to the revenue would be either to prefer the appeal against the order passed by the Appellate Commissioner passed in an appeal preferred by the assessee or to take the order passed by the Appellate Commissioner under revision in exercise of powers under section 35E of the Act. It is submitted, therefore, while passing the impugned order, the Tribunal has not p....
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.... Commissioner rejects assessee's appeal against the penalty, the revenue's appeal for enhancement would be barred on the ground of merger. [4.0] All these appeals are opposed by Shri Hriday Buch, learned Central Government Standing Counsel appearing on behalf of the revenue. It is submitted that in the facts and circumstances of the case, the learned Tribunal has not committed any error and/or illegality in holding that the appeals preferred by the revenue for enhancement of penalty would be maintainable before the Appellate Commissioner, despite the fact that the appeal preferred by the assessee against the order of penalty imposed by the adjudicating authority has been dismissed and the appeal for enhancement of penalty by Revenue would not be barred on the ground of merger. [4.1] It is further submitted by Shri Buch, learned counsel appearing on behalf of the revenue that as such the issue before the Appellate Commissioner in the appeal preferred by the assessee was a limited issue and the limited issue raised by the assessee was whether the assessee is liable for penal action on account of delay on their part in discharging their duty liability within time stipulated under e....
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....it would not debar the revenue in preferring an independent appeal against the order passed by the adjudicating authority for enhancement of the penalty. It is submitted that as such the learned advocate appearing on behalf of the appellant is not disputing that against the order of adjudicating authority imposing the penalty, the revenue cannot prefer appeal before the Appellate Commissioner for enhancement of the penalty. [4.4] It is further submitted by Shri Buch, learned counsel appearing on behalf of the revenue that as such the Commissioner (Appeals) while dismissing the appeal preferred by the assessee against the order of penalty imposed by the adjudicating authority, did not consider the adequacy and/or quantum of the penalty at all as the said issue was not at all before it. It is submitted that while dismissing the appeal preferred by the assessee dealing with the issue with respect to the liability of the assessee to pay the penalty in breach of Rule 96ZP(3) of the Rules, passing observation is made that the lower adjudicating authority while adjudicating the OIO has already taken a lenient view by imposing nominal penalty. It is submitted that any passing observation ....
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.... Whether once the Commissioner rejects assessee's appeal against penalty, the revenue's appeal for enhancement would be barred on the ground of merger i.e. on the ground that the order of adjudicating authority would merge in the order of the Appellate Commissioner rejecting appeal of the assessee? [5.1] In the present case as stated hereinabove, against the order passed by the adjudicating authority imposing the penalty under Section 96ZP(3) of the Rules, the assessee preferred appeal before the Commissioner (Appeals). Before the Appellate Commissioner the limited issue raised by the assessee was whether the assessee is liable for penal action on account of delay on their part in discharging their duty liability within the time stipulated under the erstwhile Rule 96ZP(3) of the Central Excise Rules, 1944 under the compounded levy of scheme or not. No other issue was at large before the Appellate Commissioner. The Appellate Commissioner decided the aforesaid issue against the assessee and consequently dismissed the appeal. Therefore, at the relevant time when the Appellate Commissioner decided the appeal preferred by the assessee against the penalty imposed by the adjudicating aut....
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....is merged into the order of Appellate Commissioner. Question of merger would be applicable only when the issue raised subsequently is already answered directly by the higher appellate authority/revisional authority and/or there was a lis between the parties with respect to the said issue which is sought to be raised subsequently. [6.0] Identical question came to be considered by the Hon'ble Supreme Court in the case of Pearl Drinks Ltd (Supra). In the said decision the Hon'ble Supreme Court has considered the doctrine of merger in detail and in extenso. In the said decision the Hon'ble Supreme Court has also considered its earlier decision in the case of Amritlal Bhogilal & Co. (Supra), which has been relied upon by the learned counsel appearing on behalf of the assessee. In the case before the Hon'ble Supreme Court, the Principal Commissioner of Central Excise, Delhi passed an OIO disallowing deductions under two heads i.e. on account of loss in transit from the said godown to the customers and discount on account of free supply of bottles of aerated water and insofar as the remaining six heads under which deductions were claimed by the Company, the OIO accepted the said Scheme.....
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....t the order passed by a lower authority would lose its finality and efficacy in favour of an order passed by a higher authority before whom correctness of such an order may have been assailed in appeal or revision. The doctrine applies regardless whether the higher court or authority affirms or modifies the order passed by the lower court or authority. 14. The juristic basis of the doctrine has been examined by this Court in a long line of decisions. One of the earliest of the said decisions was rendered in Commissioner of Income Tax, Bombay v. Amritlal Bhogilal & Co. (AIR 1958 SC 868). The Court in that case declared that as a result of the confirmation or affirmation of the decision of the Tribunal by the Appellate Authority, the original decision merges in appellate decision whereupon it is only the appellate decision which subsists and is operative and capable of enforcement. 15. In State of Madras v. Madurai Mills Co. Ltd. (AIR 1967 SC 681) this Court had another occasion to examine the true scope and purport of the doctrine of merger. The court declared that the doctrine of merger was not a doctrine of rigid and universal application nor could it be said that where there ar....
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....cating authority was justified in disallowing deductions under the said two heads. It had no occasion to examine the admissibility of the deductions under the remaining six heads obviously because the assessee's appeal did not question the grant of such deductions. Admissibility of the said deductions could have been raised only by the Revenue who had lost its case qua those deductions before the adjudicating authority. 19. Dismissal of the appeal filed by the assessee could consequently bring finality only to the question of admissibility of deductions under the two heads regarding which the appeal was filed. The said order could not be understood to mean that the Tribunal had expressed any opinion regarding the admissibility of deductions under the remaining six heads which were not the subject matter of scrutiny before the Tribunal. 20. That being so, the proceedings instituted by the Commissioner, Central Excise pursuant to the order passed by the Central Board of Excise and Customs brought up a subject matter which was distinctively different from that which had been examined and determined in the assessee's appeal no matter against the same order, especially when the decisi....
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....esaid issue only, the Appellate Commissioner had any occasion to consider the issue with respect to quantum of appeal. Under the circumstances and considering the aforesaid direct decision of the Hon'ble Supreme Court in the case of Pearl Drinks Ltd. (Supra), the question posed for consideration in these appeals is required to be held in favour of the revenue and against the assessee by holding that in aforesaid situation, the subsequent appeal and/or the appeal preferred by the Revenue for enhancement of the penalty cannot be said to be barred on the ground of merger. The revenue cannot be precluded from preferring the appeal for enhancement of penalty on the ground that the appeal preferred by the assessee with respect to altogether another issue i.e. with respect to the liability of the assessee for penal action being dismissed. [6.2] At this stage even the decision of the Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. which has been relied upon by the Tribunal while passing the impugned judgment and order is required to be referred to. In the case before the Bombay High Court the assessee preferred the appeal before the CESTAT with respect to the penalty under R....
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....r against the very order which came to be confirmed by the learned single Judge in revision, the writ petition was preferred and to that the Hon'ble Supreme Court held that the subsequent writ petition ought not to have been entertained by the High Court more particularly when the respondent has already chosen a remedy under section 115 of the Code of Civil Procedure, 1908. In the case before the Hon'ble Supreme Court, it is held that if there are two modes of invoking jurisdiction of the High Court and one of the modes has been chosen and exhausted, it would not be a proper and sound exercise of discretion to grant relief in other set of proceedings in respect of the same order of the subordinate court. Thus, the said decision also would not be applicable to the facts of the case on hand. [6.5] Similarly, another decision of the Hon'ble Supreme Court in the case of Somnath Sahu (Supra), which has been relied upon by the learned advocate appearing on behalf of the assessee would not be applicable to the facts of the present case. Learned counsel appearing on behalf of the assessee has sought to rely upon last six lines of the para 6 of the said decision and has sought to submit th....
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....dicating authority in not specifically dealing with the issue with respect to the quantum of penalty, the appeal by the revenue for enhancement of penalty would be barred on the ground of merger or not. [7.1] Similarly, the contention on behalf of the assessee that in the facts and circumstances of the case when the appeal by the assessee against the order of adjudicating authority imposing the penalty is dismissed, the only remedy available to the revenue would be to exercise powers under section 35E and to take the order passed by the Appellate Commissioner in revision is concerned, it is required to be noted that as such in an appeal preferred by the assessee before the Appellate Commissioner, the only issue raised was with respect to the liability of the assessee to pay the penalty and not with respect to quantum of penalty and while dismissing the appeal preferred by the assessee, the Appellate Commissioner has held that the assessee is liable to pay the penalty and therefore, as such the said order is in favour of the revenue. Therefore, there is no question taking the said order in revision under section 35E of the Act. [8.0] In view of the above and for the reasons stated....