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TMI Blog2013 (1) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... as laid down under Rule 96ZP(3) for the purpose of payment of duty leviable on the goods. The respondents were required to pay amount equal to one-twelfth of their full and final duty liability for the year, every month by 10th of such month. The respondents failed to discharge their duty liability within the time stipulated under erstwhile Rule 96ZP(3) and were therefore liable for penal action under the said Rule. Therefore, respondents were issued show cause notices proposing imposition of penalty on them. Accordingly, the show cause notices were adjudicated and the adjudicating authority imposed penalties. 3. The said order of imposition of penalties by the original adjudicating authority was challenged by the appellants before Commissioner (Appeals), who confirmed the same by two orders-in-appeals dated 7-1-2005 and 17-2-2005, rejecting the appeals and upholding the imposition of penalties of Rs. 6000/-. 4. It is seen that after passing of the above orders-in-appeal by Commissioner (Appeals), Revenue also filed appeals for enhancement of penalties equal to duty outstanding at the end of such month. The said appeals were filed on the following grounds :- (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal was dismissed by the Hon'ble Supreme Court as barred by limitation, as reported in 2003 (157) E.L.T. A200 (S.C.). Accordingly, Commissioner (Appeals) observed as under :- "On going through the above oft-relied upon judgments I find that the Respondents' plea invoking the doctrine of merger, is not out of place considering the observations of the Apex Court and the Larger Bench of the Tribunal. Once the impugned orders under challenge imposing penalty of Rs. 6000/- each passed by the adjudicating authorities have been upheld by the appellate authority, that is in this case, the Commissioner (Appeals), subsequent, appeals on the very same Orders-in-Original by the Department does not revive or restore the operationality of the orders-in-original. Once the decision of the lower quasi judicial authority imposing penalty of Rs. 6000/- per show cause notice, is upheld in appeals by the Commissioner (Appeals), the order passed by the lower quasi judicial authority merges with the order of the appellate authority. Here in the instant case propriety of the impugned orders, appealed by the department has already been decided by this authority under its orders-in-appeal Nos. 284 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmed (supra) the Supreme Court held that the question of merger will depend on the nature of jurisdiction exercised by the superior Court or Tribunal and the content or subject matter of challenge laid or capable of being laid before it. The superior Court should be capable of reversing, modifying or affirming the order of the inferior Tribunal. In these premises, the decision in L.M.L. Limited (supra) cannot be relied upon as an authority on the point of merger. 31. I may observe that another test to determine whether the appeal is barred or hit by the doctrine of merger is whether the two orders - one already passed in the assessee's appeal and the other which may be passed in Revenue's appeal - can stand together or not. In other words, whether there will be conflict in the two orders so as not to stand together yet another test may be whether the decision/order in the previous (assessee's) appeal will operate as res judicata. Section 11 of the Civil Procedure Code contains the doctrine of res judicata as per which the bar can be applied when the matter "directly and substantially in issue" has been directly and substantially in issue in the former proceedings - (read appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to enhance the penalty, as is evident from the first proviso to Section 35A. "As such, the distinction made by the majority decision in the case of Ultra Tech Cement Co. Limited does not hold good in the present case, inasmuch as the appeal were disposed off by Commissioner (Appeals) by upholding the penalty of Rs. 6,000/- and it was open to Commissioner (Appeals) to enhance the penalty, if he felt so, even while disposing off the assessee's appeals. 8. We also take note of the Learned DR's plea that as per the observations made in Para 31 of Ultra Tech Cement decision (reproduced above), the doctrine of merger would have applied only if the Commissioner (Appeals) would have set-aside the penalty in toto. We do not find favour with the above contention of the DR as stands observed in Para 31 of Ultra Tech Cement order, the same clearly hold that doctrine of merger would apply when the matter is directly and substantially an issue in the former decision. By giving example, it stands observed that where the appeals filed by the assessee or Revenue involve penalty proceedings and where the assessee's appeal is allowed, Revenue cannot later file appeal. By pressing on expressio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the lower authorities and it is not necessary for doctrine of merger to apply only if the appellate authority has modified or reversed the decision of the lower authorities. In the present case, Commissioner (Appeals) has confirmed the decision of original adjudicating authority as regards imposition of penalty of Rs. 6000/-, even though he had the powers to enhance the penalty. Such powers do not stand exercised by him. As held by the Hon'ble Supreme Court in the above decision, the position would remain the same even if the appellate authority confirms the decision, as a result of which the original decision can be said to have merged in the appellate decision. In the same very judgment, the Court further observed in Para 12 as under :- "12. The logic underlying the doctrine of merger is that there cannot be more than one decree or operative orders governing the same subject matter at a given point of time. When a decree or order passed by inferior court, Tribunal or authority was subjected to a remedy available under the law before a superior forum then, though the decree or order under challenge continues to be effective and binding, nevertheless its finality is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not reverse or modify the decree or order appealed against while deciding a petition for special leave to appeal. What is impugned before the Supreme Court can be reversed or modified only after granting leave to appeal and then assuming appellate jurisdiction over it. If the order impugned before the Supreme Court be reversed or modified at the SLP stage obviously that order cannot also be affirmed at the SLP stage. 44. To sum up our conclusions are : (i) Where an appeal or revision is provided against an order passed by a court. Tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law. (ii) The jurisdiction conferred by Article 136 of the Constitution is divisible into two stages. First stage is up to the disposal of prayer for special leave to file an appeal. The second stage commences if and when the leave to appeal is granted and special leave petition is converted into an appeal. (iii)& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed off by the Tribunal. The appellants when approached the Tribunal for restoration of his appeal, the request was turned down on the ground that Commissioner's appeal before the Tribunal already stands entertained and as such, appellant's application for restoration cannot be allowed. It was in these circumstances, the Hon'ble Supreme Court observed that the assessee's appeal was against the entire order of the lower authorities, whereas Revenue's appeal was restricted only to penalty. The assessee's appeal cannot be dismissed by applying the principal of merger. The ratio of the above decision is clearly not applicable to the facts of the instant case as the issue of penalty is subject matter of both the appeal - one filed by the assessee before Commissioner (Appeals) and one filed by the Revenue before Commissioner (Appeals). We are of the view that appellate authority correctly applied the doctrine of merger and has correctly rejected the appeals filed by the Revenue before him. 12. In view of the above discussions, appeals filed before us are required to be rejected, we order accordingly. (Pronounced in the Court on ___________) Sd/- Memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty was not there before the Commissioner (Appeals) who decided the assessee's appeal by confirming the order of penalty made by the adjudicating authority. The enhancement of penalty was, in the above facts, warranted only in an appeal that could be directed to be filed under Section 35E(2). There was therefore, no scope for applying doctrine of merger to an order, in which the question of enhancement of penalty was not in issue at all. The adjudicating authority's order imposing penalty of Rs. 5,000/- was confirmed by the Commissioner (Appeals) but this did not mean that the right of the revenue to prefer an appeal on the ground that enhancement of penalty was warranted, got nullified...." 14. The observations of the Tribunal reproduced above does not seem to mean that the Tribunal was unaware of the discretionary powers available to the Commissioner (Appeals) to enhance the penalty. Obviously, once the Commissioner does not consider that he has to cause some enquiries and initiate action as per proviso, he would examine only the facts placed by the appellant before him. Just because the Commissioner (Appeals) chooses not to exercise his power of enhancement, the que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e directions of the CBDT has to be dismissed on the principle of merger. The law as settled and explained by the Supreme Court in the various judgments referred to would not support such proposition. The Appellate Tribunal in the absence of that part of the order not being challenged, cannot examine the legality or otherwise considering the statutory power conferred on the Tribunal under Section 35C. 32. Even if Revenue is respondent in the proceedings before the Tribunal, that would not exclude the jurisdiction under Section 35E merely because Revenue could have filed cross-objections. Section 35C(4) enables a Respondent to prefer cross-objection. The Section does not prohibit a Respondent if it has not filed cross-objection from preferring an appeal. The scheme of the Section does not expressly or impliedly bar filing of an Appeal. The power under Section 35B is to the person aggrieved to prefer an appeal. The power under Section 35E is conferred on the Board on its own motion to call for and examine the record and proceedings. If it forms an opinion that the appeal has to be preferred then it can direct filing of such an appeal. Clearly considering the provisions of the Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of merger will not apply even if one of the Appeals is dismissed, provided the other appeal is pending. 4. Even if the Appeal preferred under Section 35B has been disposed off, an appeal can still be preferred pursuant to direction issued under Section 35E, if in the appeal disposed off, the entire order was not the subject matter of the Appeal." 16. The observations of Hon'ble High Court in Para 33 shows that in case the matters before Commissioner (Appeals), doctrine of merger would not apply at all. The Hon'ble High Court had considered all the relevant provisions and thereafter came to the conclusion. Further, the observations of Hon'ble High Court in Para 35 also shows that in the present case, doctrine of merger cannot be applied. 17. I also take note of the fact that Hon'ble High Court had considered all the decisions which were cited before us on behalf of the appellant, including the decision of Larger Bench in the case of LML Limited while reaching above conclusions. 18. In view of the above decision of Hon'ble High Court of Mumbai and the decision of Tribunal in case of Allwin Forgings, both of which are squarely applicable to the facts of this ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mits that the respondents herein preferred the appeal before learned Commissioner (Appeals) against imposition of penalty of Rs. 6,000/- by the adjudicating authority, the said appeals have been rejected by the first appellate authority by upholding the imposition of penalties. It is his submission that subsequently, as per the provisions of Section 35E of the Central Excise Act, 1944, Revenue preferred appeals against the order of the adjudicating authority for imposition of equivalent amount of penalties on all the assessees, as per the provisions of Rule 96ZP. It is his submission that the first appellate authority has dismissed the appeals filed by the Revenue only on the ground of doctrine of merger. It is his submission that as per the judgment of Hon'ble High Court of Bombay in the case of Godrej & Boyce Manufacturing Company Limited - 2009 (233) E.L.T. 446 (Bom.), the doctrine of merger will not apply in this case as the Revenue is in appeal against non imposition of equivalent amount of penalty, as provided in the Rules. He would also rely upon the majority decision of this Bench in the case of Ultra Tech Cement Company Limited - 2009 (236) E.L.T. 480 (Tri.-Ahmd.). 25.&em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned orders-in-original have merged and doctrine of merger will apply. In my considered view, this view of the first appellate authority seems to be in conflict with the judgment of Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Company Limited (supra) and also against the majority decision of this Bench in the case of Ultra Tech Cement Company Limited. 30. As regards the contention raised by the learned counsel that the proviso to sub-section 3 of Section 35A of Central Excise Act, 1944 has been by implication considered by the first appellate authority is a question which needs to be considered by the first appellate authority. In my view, the same question can be raised by the assessees before the first appellate authority as in the difference of opinion before me is limited to the question of whether all appeals can be remitted to the first appellate authority to reconsider the issue afresh after hearing both sides on the enhancement of the penalties or they need to be allowed. 31. To my mind, the judgment of the Hon'ble High Court of Bombay and the majority decision of the Tribunal in the case of Ultra Tech Cement Company Limited (supra) woul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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