IF ANY APPEAL IS DISMISSED ON LIMITATION AND NOT ON MERITS, THAT ORDER WOULD NOT MERGE WITH THE ORDERS PASSED BY THE FIRST APPELLATE AUTHORITY.

[Mr. M. GOVINDARAJAN]

                        It is trite that when an appellate court passes a decree, the decree of the trial court merges with the decree of the appellate court and even if and subject to any modification that may be made in the appellate decree, the decree of the appellate court supersedes the decree of the trial court.   In other words, merger of a decree takes place irrespective of the fact as to whether the appellate court affirms, modifies or reserves the decree passed by the trial court.   When a special leave petition is dismissed summarily, doctrine of merger does not apply but when an appeal is dismissed, it does.

                        In ‘Chandi Prasad V. Jagdish Prasad’ – 2004 (10) TMI 550 - SUPREME COURT OF INDIA the Supreme Court held that the doctrine of merger would not apply to a case where an appeal is dismissed only on the ground of limitation.

                        In ‘State of Kerala V. Kondottyparambanmoosa’ – 2008 (8) TMI 595 - SUPREME COURT OF INDIA the Supreme Court held that since the earlier revision application was not rejected on the merit, the said order rejecting the same on the ground of delay cannot be said to be the order of affirmance and that being the position it must be held that since the earlier revision petition was not decided on the merits, the doctrine of merger cannot be applied to the facts and circumstances of the present case.

                        In ‘Raja Mechanical Co., P Limited V. Commissioner of Central Excise’ – 2012 (5) TMI 35 (SC) the assessee is a manufacturer of dutiable goods.   It had purchased certain capital goods, namely Windsor model injection moulding machine and screw assembly along with tool kit.   The assessee has availed MODVAT credit by filing a declaration on 30.06.1995 under Rule 57T (1).   The assessee declared the receipt of the said goods vide invoice dated 18.06.1995 along with the application for condonation of delay, before the adjudicating authority.   The assessee, however, did not file the declaration within the time.   The Adjudicating Authority issued a show cause notice on 11.10.1995 to the assessee directing it to show cause as to why the MODVAT credit availed by it, should not be disallowed and recovered under Rule 57G of the Central Excise Rules, 1944 read with Section 11 A of the Central Excise Act, 1944 and penalty under Section 173Q of the Rules should not be imposed.

                        After this corrigendum to the show cause notice was issued to the assessee in which the assessee was directed to show cause to Assistant Commissioner instead of Deputy Collector as mentioned in the original show cause notice.   The assessee was further directed to show cause as why the penalty under Section 11AC should not be imposed and interest should not  be recovered under Section 11AB  of the Act.

                        The assessee gave reply to the show cause notice in which the assessee indicated that it had received the goods in the factory only on 30.09.1995 and the date has been wrongly mentioned as 18.06.1995.  The assessee further submitted that it had filed the application for condonation of delay in filing the declaration.   The Adjudicating Authority observed that the cash voucher which shows the payment made is the evidence of delivery of the goods to the party.   Therefore the actual delivery was made on 30.06;1997 instead of 30.06.1995.  The whole machinery was transported by one consignment, as evident from the invoice, which bear vehicle number used for transportation.   In this the Adjudicating Authority has confirmed the show cause notice and disallowed the benefit of MODVAT credit availed by the assessee vide his order dated 17.10.1997 and also imposed penalty.

                        The assessee preferred an appeal against the order of the Adjudicating Authority before the same authority instead of filing with the Commissioner of Central Excise (Appeals).  The assessee realized that the appeal has filed in wrong forum after the lapse of a year.  The assessee, then preferred an appeal before the Commissioner (Appeals) along with an application for delay condonation.   The Commissioner (Appeals) rejected the appeal as it is of the opinion that it has no power to condone the delay beyond the prescribed period vide its order dated 01.03.2000.  The assessee preferred an appeal before the Tribunal.  The Tribunal also confirmed the order vide its order dated 17.10.2000.

                        Then the assessee filed an application for rectification of the order of the Tribunal on the ground that the Tribunal ought to have considered his appeal not only on the ground of limitation but also on merits.  But the same was rejected.   The assessee approached the High Court by filing a reference application with a request to direct the Tribunal to state the case and the question of law for its consideration and decision.  The High Court also ordered negative to the assessee.   The present appeal has been filed against the order.

                        The assessee contended before the court as follows:

• The Tribunal ought to have considered the assessee’s appeal not only on the ground of limitation but also on merits;
• Since that has not been done the Tribunal committed a serious error;
• The ‘doctrine of merger’ theory would apply in the sense that though the first appellate authority has rejected the appeal filed by the assessee on the ground of limitation, the orders passed by the original authority would merge with the orders passed by the first appellate authority and, therefore, the Tribunal ought to have considered the appeal filed by the assessee not only on the grounds of limitation but also on merits;

The Department contended that when an appeal is dismissed on the ground that delay in filing the same is not condoned the doctrine of merger shall not apply.

                        The High Court observed that the facts are not in dispute and cannot be disputed that there was a delay in filing the prescribed forms before the assessing authority.  Therefore the claim has been rejected by the adjudicating authority.  Against this order the assessee belatedly filed the appeal before the proper appellate authority.  The appellate authority rejected the appeal on the ground of delay.  The assessee, in its appeal before the Tribunal, requested the Tribunal to first condone the delay and next to decide the appeal on the merits.  The Tribunal has not conceded to the second request of the assessee and rejected the appeal accepting the findings and conclusions reached by the Commissioner (Appeals).

                        The High Court held that if for any reason an appeal is dismissed on the ground of limitation and not on the merits that order would not merge with the orders passed by the first appellate authority.  The High Court rejected the appeal.