2010 (7) TMI 10 - SC - Central Excise

Doctrine of merger - in the show cause notice disallowance under 8 (eight) heads where proposed - finally commissioner of central excise disallowed deductions in respect of two heads and allowed deductions in respect of six heads - assessee filed an appeal before CESTAT and SC against rejection of deduction in respect of two heads - CESTAT and SC dismissed the appeal filed by the asessee - now revenue filed an appeal before the CESTAT against the order of commissioner of central excise on the ground that the order under challenge had merged in the earlier order dated 24th January, 2002 passed by the Tribunal in the company s appeal whereby disallowance of two of the eight deductions in dispute had been upheld. - Held that The Tribunal was in that appeal concerned only with the question whether the adjudicating authority was justified in disallowing deductions under the said two heads. It had no occasion to examine the admissibility of the deductions under the remaining six heads obviously because the assessee s appeal did not question the grant of such deductions. Admissibility of the said deductions could have been raised only by the Revenue who had lost its case qua those deductions before the adjudicating authority - The Tribunal obviously failed to notice this distinction and proceeded to apply the doctrine of merger rather mechanically. - order of the tribunal dismissing revenue s appeal set aside.

Summary

Issues:
1. Application of the doctrine of merger in a case involving Central Excise Act, 1944.

Analysis:
The judgment involves an appeal filed under Section 35(L) (b) of the Central Excise Act, 1944, challenging an order passed by the Customs, Excise and Gold (Control) Appellate Tribunal. The Tribunal dismissed the Revenue's appeal against an order by the Commissioner of Central Excise on the principle of merger, stating that the order passed by the Excise Commissioner had merged in a previous appeal filed by the assessee. The controversy arose from deductions claimed by a company engaged in the manufacture and sale of aerated water under various heads, including losses, discounts, and service charges.

The respondent-company had not sold aerated water at the factory gate but cleared products to a duty paid godown before delivering them to customers. The excise authorities challenged deductions claimed by the company, leading to an order disallowing certain deductions. The company appealed, and the CEGAT upheld the disallowance of deductions related to losses and discounts. However, the remaining deductions were allowed. The Central Board of Excise and Customs later reviewed the order and directed the Commissioner to seek a correct determination on the remaining deductions.

The Commissioner appealed the decision on the remaining deductions, which was dismissed by the CEGAT based on the doctrine of merger with a previous order upholding the disallowance of two deductions. The Revenue challenged this decision, arguing that the doctrine of merger did not apply as the subject matter of the appeals by the assessee and the Revenue were different. The Court examined the doctrine of merger in detail, citing various precedents, and concluded that the doctrine's application depends on the nature of jurisdiction and the subject matter of challenge before the superior court.

The Court held that the doctrine of merger did not apply in this case as the subject matter of the appeals by the assessee and the Revenue was distinct. The Tribunal's application of the doctrine of merger was deemed erroneous, and the matter was remanded for fresh disposal. The judgment emphasized that dismissal of an appeal on certain aspects does not foreclose the right to challenge other aspects of the same order, especially when the issues are separate and not fully examined in the initial appeal.

In conclusion, the judgment provides a detailed analysis of the doctrine of merger in the context of Central Excise Act appeals, highlighting the importance of considering the distinct subject matters of different appeals before applying the doctrine.