2013 (1) TMI 528 - AT - Central Excise

Applicability of Doctrine of merger Penalty imposed on late deposition of duty - Rule 96ZP of the Central Excise Rules, 1944 - Revenue impose penalty - Assessee preferred appeals before the first appellate authority who has sustained the said penalties imposed - Subsequently, the Revenue had preferred appeals against non-imposition of equivalent amount of penalties on all the assessee - The first appellate authority dismissed the appeals of the Revenue only on the question of doctrine of merger Held that - Difference of opinion - Whether it can be said that the orders of adjudicating authority have merged with the orders of Commissioner (Appeals) on appeals filed by the respondents as held by learned Member (Judicial) - The doctrine of merger is not applicable and the Commissioner should have decided the appeals filed by the Revenue on merits as held by Member (Technical). Third member decision agree with Member (Technical) - First appellate authority has erred in coming to a conclusion that his order of sustaining the penalties imposed by the adjudicating authority would be an order in which the impugned orders-in-original have merged and doctrine of merger will apply. Following the decision in case of Godrej & Boyce Mfg. Co. Ltd. (2008 (12) TMI 45 - BOMBAY HIGH COURT) that the doctrine of merger will not apply in the case as the Revenue is in appeal against non-imposition of equivalent amount of penalty, as provided in the Rules. Also following the decision in case of ULTRA TECH CEMENT CO. LTD. (2008 (9) TMI 246 - CESTAT AHMEDABAD) that doctrine of merger will not be applicable inasmuch as the subject matter of appeal by party was entirely different with the subject matter of appeal by the Revenue. Set- aside the order and the matters are to be remitted back to the Commissioner (Appeals) for reconsideration. Remand back

Issues Involved:
1. Imposition of penalties under Rule 96ZP(3) of the Central Excise Rules, 1944.
2. Application of the doctrine of merger.
3. Enhancement of penalties by the appellate authority.
4. Jurisdiction and powers of the Commissioner (Appeals) under Section 35A of the Central Excise Act, 1944.

Detailed Analysis:

1. Imposition of Penalties:
The respondents were engaged in the manufacture of Non Alloy Steel Hot-Re-Rolled Products and were required to pay duty under Rule 96ZP(3). They failed to discharge their duty liability within the stipulated time and were issued show cause notices proposing penalties. The adjudicating authority imposed penalties, which were upheld by the Commissioner (Appeals).

2. Application of the Doctrine of Merger:
The Commissioner (Appeals) rejected the Revenue's appeals for enhancement of penalties, applying the doctrine of merger. The doctrine was supported by the Larger Bench judgment in Commissioner v. L.M.L. Limited, which was affirmed by the Supreme Court. The Commissioner (Appeals) held that once the penalty of Rs. 6000/- was upheld, the original order merged into the appellate order, making further appeals by the Revenue not maintainable.

3. Enhancement of Penalties by the Appellate Authority:
The Revenue argued that the doctrine of merger should not apply because the subject matter of their appeal (enhancement of penalties) was different from the assessee's appeal (imposition of penalties). They cited the case of Commissioner of Central Excise Bhavnagar v. Ultra Tech Cement Co. Limited, where it was held that the doctrine of merger does not apply if the subject matter of the appeals is different. The Tribunal noted that the Commissioner (Appeals) had the power to enhance penalties under Section 35A but did not exercise this power.

4. Jurisdiction and Powers of the Commissioner (Appeals) under Section 35A:
The Tribunal observed that under Section 35A, the Commissioner (Appeals) has the power to enhance penalties, provided a show cause notice is issued to the appellant. The Tribunal found that the Commissioner (Appeals) could have enhanced the penalties but chose not to, and this did not nullify the Revenue's right to appeal for enhancement. The Tribunal referred to the Supreme Court's decision in Mumbai Mills Co. Limited and Kunhayammed v. State of Kerala, which clarified that the doctrine of merger applies even if the appellate decision merely affirms the lower authority's decision.

Separate Judgments:
- Majority Opinion (Member Judicial and Member Technical):
The majority held that the doctrine of merger applied and rejected the Revenue's appeals, stating that the Commissioner (Appeals) had the power to enhance the penalties but did not exercise it, thereby merging the original order into the appellate order.

- Dissenting Opinion (Member Technical):
The dissenting member argued that the doctrine of merger should not apply, as the Revenue's appeal for enhancement of penalties was a separate issue. The member cited the Bombay High Court's decision in Godrej & Boyce Mfg. Co. Ltd., which supported the Revenue's right to appeal for enhancement of penalties even after the appellate authority's order.

Final Order:
In view of the majority decision, the Tribunal set aside the Commissioner (Appeals)'s order and remanded the matter for fresh decision after following the principles of natural justice. The Revenue's appeals were allowed in this manner.

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