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TMI Blog2010 (7) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... and accordingly paid an amount of Rs. 3,56,460 towards service tax and education cess and an amount of Rs. 52,255 towards interest thereon. These payments were made on 23-12-2006. Later on, the Dy. Commissioner of Central Excise issued show-cause notice dated 22-2-2007 under section 73(1) of the Finance Act, 1994 proposing to appropriate the above payments towards demand of service tax and interest as also to impose penalties on the appellant under sections 76, 77 and 78 of the Act. In reply to this notice, the assessee mentioned their financial difficulties and also pleaded ignorance of the relevant rules as an explanation for the delayed payment of tax plus interest. They prayed for a lenient view in the matter of penalties. In adjudication of the show-cause notice, the Dy. Commissioner confirmed the demand of Rs. 3,56,460 (service tax and education cess) against the assessee on a taxable value of Rs. 34,94,709 under the head "Business Auxiliary Services" for the period from 16-6-2005 to 31-12-2005 and appropriated their earlier payments towards such demand. The adjudicating authority, however, refrained from imposing any penalty on the assessee, considering the fact that they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has heavily relied on the Hon'ble Supreme Court's judgment in Kunhayammed v. State of Kerala 2001 (129) ELT 11 wherein the scope of the doctrine of merger was examined by their Lordships and landmark rulings were laid down in para 44 of their judgment, reproduced below :- "44. To sum up our conclusions are : (i) Where an appeal or revision is provided against an order passed by a court, Tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law. (ii) The jurisdiction conferred by Article 136 of the Constitution is divisible into two stages. First stage is up to the disposal of prayer for special leave to file an appeal. The second stage commences if and when the leave to appeal is granted and special leave petition is converted into an appeal. (iii) Doctrine of merger is not a doctrine of universal or unlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as provided by sub-rule (1) of Rule (1) of Order 47 of the C.P.C." The learned counsel has particularly referred to clauses (i) and (iii) of the above para of the Apex Court's judgment and has argued that the order passed by the Dy. Commissioner should be deemed to have merged with the Commissioner's order in revisionary jurisdiction, under section 84 of the Finance Act, 1994 so much so that the assessee has become entitled to challenge the tax demand as well. 3. Learned JCDR has made an endeavour to distinguish Kunhayammed's case (supra) by submitting that section 84 of the Finance Act, 1994 is not pari materia with section 263 of the Income-tax Act considered by the Apex Court. 4. After considering the argument of both sides, we find that under sub-section (1) of section 84 of the Finance Act, 1994, the Commissioner may call for the record of proceedings in which the adjudicating authority subordinate to him has passed any decision or order and may make such enquiry or cause such enquiry to be made and pass such order therein as he thinks fit. Sub-section (2) mandates that no order prejudicial to the assessee shall be passed under this section unless the assessee has been giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her authority before superior forum and such superior forum modifies, reverses or affirms the decisions put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remain operative and is capable of enforcement in the eye of law." [Emphasis supplied] In the instant case, the Commissioner, as revisionary authority under section 84 of the Finance Act, 1994, did not want to disturb the Dy. Commissioner's decision on tax liability of the appellant and hence, in the show-cause notice issued by him, he only proposed to impose penalties on the assessee under sections 76 to 78 of the Act. The assessee was asked to show cause why such penalties should not be imposed on them. Submissions which were made by the assessee on this point were relevant to the Commissioner's proceedings and the same were duly considered. The submissions made by the assessee touching tax liability were irrelevant to the revisionary jurisdiction and hence not addressed. In other words, tax liability was not in issue before the revisionary authority and hence it cannot be said that there was merger of the Dy. Commissioner's order and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of section 80 and hence the penalties imposed on the appellant by the Commissioner should be vacated. In this context, the learned counsel has relied on the decision in the case of CCE v. Darmania Telecom [2009] 20 STT 98 (Punj. & Har.) wherein the benefit of section 80 was given to the respondent by the Hon'ble High Court after holding that the Commissioner as revisionary authority had no jurisdiction to impose any penalty on the party under section 78 of the Act in the absence of any finding of fraud, misstatement etc., against them by the original authority. 6. Learned JCDR has contested the above arguments also. According to him, the facts and circumstances of this case would not constitute "reasonable cause" for purposes of section 80. He also submits that the benefit of section 80 was not claimed by the appellant before the original authority and, therefore, it was not open to that authority to refrain from imposing penalties on them. According to the learned JCDR, the error of the original authority was duly remedied by the revisionary authority by imposing appropriate penalties on the party under the relevant provisions. 7. After considering the submissions, we note ..... X X X X Extracts X X X X X X X X Extracts X X X X
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