2007 (8) TMI 595 - AT - Central Excise

Summary

Issues involved:
The issues involved in this case include imposition of penalty under Rule 25 of the Central Excise Rules, 2002, the application of Section 35E(2) of the Central Excise Act, 1944, and the doctrine of merger in the context of appeals and review.

Imposition of Penalty:
The respondent-assessee, engaged in the manufacture of hand tools, was found to have cleared export through a merchant exporter without following the proper export procedure, leading to a Central Excise duty evasion of Rs. 75,206. A show cause notice was issued, and after due process, a penalty of Rs. 5,000 was imposed on the respondent under Rule 25 of the Central Excise Rules, 2002.

Application of Section 35E(2):
The Commissioner, u/s 35E(2) of the Act, reviewed the penalty imposed and directed the Assistant Commissioner to file an appeal before the Commissioner (Appeals) for enhancing the penalty from Rs. 5,000 to Rs. 10,000. However, the Commissioner (Appeals) held that the appeal of the Revenue was not maintainable due to the doctrine of merger, as the order of the adjudicating authority had merged with the order-in-appeal of the assessee before the review order was passed.

Doctrine of Merger and Appeal Jurisdiction:
The Revenue contended that the doctrine of merger should not apply in this case as the nature of challenge by the Revenue was different from that of the assessee's appeal. They argued that the Commissioner (Appeals) erred in dismissing the appeal solely based on the timing of the review order, as the question of enhancement of penalty was not part of the initial appeal by the assessee. Citing legal precedents, including decisions by the Supreme Court and the Tribunal, the Revenue emphasized that the doctrine of merger should be applied based on the nature of jurisdiction exercised and the subject matter of the challenge.

Conclusion:
The Appellate Tribunal set aside the Commissioner (Appeals) order, ruling that the appeal of the Revenue was indeed maintainable. The matter was remanded back to the Commissioner (Appeals) for a fresh decision after considering all aspects and hearing both parties.