2024 (10) TMI 321 - AT - Central Excise

Doctrine of merger - Jurisdiction - proper statutory authority to issue impugned order - Rule 6(2) of Pan Masala Rules, 2008 - Commissioner has not offered any comments on certain observations made in the earlier order made by his predecessor in respect of the same show cause notice - violation of principles of natural justice - HELD THAT - In case of KUNHAYAMMED AND OTHERS VERSUS STATE OF KERALA AND ANOTHER 2000 (7) TMI 67 - SUPREME COURT (LB) Hon ble Supreme Court has observed ' Once the superior court has disposed of the lis before it either way - whether the decree or order under appeal is set aside or modified or simply confirmed, it is the decree or order of the superior court, tribunal or authority which is the final, binding and operative decree or order wherein merges the decree or order passed by the court, tribunal or the authority below.' The observations made in the order set aside in appeal cannot be a ground for preferring the appeal - appeal dismissed.

Issues:
1. Appeal against dropping of proceedings by Commissioner of Central Excise & Service Tax.
2. Failure of the Adjudicating Authority to address a basic issue.
3. Doctrine of merger and its application in the present case.

Analysis:
1. The appeal was filed by the Revenue against the dropping of proceedings by the Commissioner of Central Excise & Service Tax. The impugned order dropped the proceedings initiated by a show cause notice against the Respondent. The Revenue contended that the observations made by the Adjudicating Authority in the earlier order were not properly addressed in the impugned order. The Revenue argued that a demand of Rs.7,82,00,000 should have been confirmed, and a penalty should have been imposed based on the earlier order. The Tribunal considered the impugned order and the submissions made during the appeal. The primary ground for the appeal was the lack of comments by the Commissioner on certain observations made in the earlier order, which was set aside by the Tribunal and remanded for reconsideration without specific directions to consider the matter in light of those observations.

2. The Adjudicating Authority was criticized for failing to address a basic issue raised in the earlier order. The issue pertained to the statutory right of the party to file an appeal against an order under Rule 6(2) of the Pan Masala Rules, 2008. The failure to decide or comment on this fundamental issue was highlighted by the Revenue as a flaw in the impugned order. The Revenue argued that the demand should have been confirmed, and a penalty should have been imposed based on the statutory provisions. However, the Tribunal found that the observations made in the order that was set aside could not serve as grounds for the appeal, as per the doctrine of merger.

3. The Tribunal delved into the doctrine of merger, emphasizing that it is a common law doctrine based on principles of propriety in the justice delivery system. Citing previous judgments, including Kunhayammed [2000 (6) SCC 359], the Tribunal explained that the doctrine dictates that the decision of the appellate authority becomes the operative decision in law. Whether the appellate decision modifies, reverses, or confirms the lower tribunal's decision, it is the appellate decision that subsists and is enforceable. The Tribunal clarified that the observations from the order that was set aside could not be used as a basis for the appeal, as the doctrine of merger dictates that the final, binding, and operative decision is that of the superior court or authority. Consequently, the appeal was dismissed based on these principles.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, emphasizing the application of the doctrine of merger and the inadmissibility of using observations from a set-aside order as grounds for appeal.

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