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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CENTRAL EXCISE APPEAL NO.175 OF 2006
The Commissioner of Central Excise, )
Mumbai-II, having office at 9th Floor, )
Piramal Chambers, Jijibhoy Lane, )
Parel, Lalbaug, Mumbai-400 012. )..APPELLANT
Versus
1.M/s.Godrej & Boyce Mfg. Co. Ltd. )
having office at Pirojsha Nagar, )
L.B.S. Marg, Vikhroli (W), )
Mumbai-400 079 )..RESPONDENT
Mr. R.B. Raghuvanshi, Additional Solicitor General with
Mr. P.S. Jetly, Mr.A.M.Sethna, Ms.Anamica Malhotra and Mr.
H.P. Chaturvedi, for the Appellant.
Mr. Arshad Hidayatullah, Senior Counsel with Mr.
M.Baxi and Mr.Ricabchand K, for the Respondent
WITH
CENTRAL EXCISE APPEAL NO.262 OF 2006
The Commissioner of Central Excise, )
4th Floor, Kendriya Utpad Shulk )
Bhawan, Plotl No.1, Sector -17, )
Khandeshwar, New Panvel, Dist.Raigad )
Maharashtara-410 206 )..APPELLANT
Versus
1.M/s.Castrol India Ltd., )
Plot No.A-8/A-14, M.I.D.C., Patalganga )
District Raigad, )..RESPONDENT
Mr. R.B. Raghuvanshi, Additional Solicitor
General with Mr. P.S. Jetly, Ms. Heena P. Shah
and Mr. H.P. Chaturvedi, for the Appellant.
Mr. Anupam Dighe with Ms. Raji Radhakrishnan
Nair & Mr. Pratik Pawar i/b. India Law Alliance,
for respondent.
WITH
CENTRAL EXCISE APPEAL NO.269 OF 2006
The Commissioner of Central Excise, )
Belapur, 1st Floor, C.G.O. Complex, )
C.B.D. Belapur, Navi Mumbai )..APPELLANT
Versus
1.M/s.Philips India Ltd. )
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3, M.I.D.C. Industrial Area, )
Thane Belapur Road, Thane-400 601 ).RESPONDENT
Mr. R.B. Raghuvanshi, Additional Solicitor
General with Mr. P.S. Jetly, Ms. Heena P. Shah
and Mr. H.P. Chaturvedi, for the Appellant.
Mr. Prakash Shah with Mr. Jitu Motwani i/b. P.D.S.
Legal, for the Respondent
CORAM: F.I. REBELLO & J.P. DEVADHAR, JJ.
DATE : 17TH DECEMBER, 2008
JUDGMENT: (PER F.I. REBELLO, J.).
. Before we frame the question of law for
consideration, a few relevant facts in each of the cases
need to be set out.
2. Central Excise Appeal No.175 of 2006 is by the
Revenue against the order dated 26th October, 2005 passed by
the CESTAT dismissing the Appeal preferred by the Revenue.
In this case seven show cause notices were issued by the
Department claiming differential duty, penalty and interest
under Section 11AB between 2nd November, 1090 to 11th April,
2000. By order of 9th March, 2001 the Deputy Commissioner
confirmed the duty and penalty as claimed by the Department.
No finding was given on interest as claimed in the show
cause notice. The Company preferred an Appeal before the
Commissioner (Appeals) against the demand for duty and
penalty. That Appeal came to be allowed on 16th July, 2001.
The issue of interest was not in issue before the
Commissioner (Appeals). An order then came to be passed on
7th August, 2001 in exercise of the powers conferred under
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Section 35E(2) directing that an appeal be preferred against
the non-granting of interest as demanded in the show cause
notice by the Deputy Commissioner by his order dated 9th
March, 2001. Accordingly, an appeal was preferred by the
Revenue before the Commissioner (Appeals) on 23rd August,
2001. By order of 31st December, 2001 the Commissioner
passed an order allowing the Departmental Appeal for
interest. The Company preferred an Appeal before the CESTAT
which appeal is allowed based on the doctrine of merger
considering the orders of 9th March, 2001 and 16th July,
2001 and placing reliance on the judgment of the larger
Bench of the Tribunal in the case of CCE, New Delhi vs.
L.M.L.
(Tri-LB).
Ltd. (Scooter
ig Division) 2002 (143) ELT 431
3. Central Excise Appeal No.262 of 2006 has been
preferred by the Revenue against the order dated 2nd March,
2006 whereby the Tribunal applied the doctrine of merger
placing reliance on the judgment in L.M.L. Ltd. (supra)
and accordingly dismissed the appeal preferred by the
Revenue against the portion of the impugned order in
original dated 31st December, 2003 whereby the Commissioner
dropped the penalties under Section 11AC and confirmation of
interest under Section 11AB. Show cause notice was issued
to the Company. The Commissioner by order dated 31st
December, 2003 set aside the duty demanded in the SCN with
direction that duty for the year 2001 shall be considered by
the Assistant Commissioner, but dropped the penalty under
Section 11AC and demand for interest under Section 11AB.
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Penalty was imposed under Rule 173 of the Central Excise
Rules. Penalty was also imposed on an employee. In an
Appeal preferred by the Company, the appeal was allowed by
order dated 11th June, 2004 as the Tribunal found, that the
Commissioner had dropped the demand for duty on the ground
that the same was raised before finalisation of the
provisional assessment and as such there was no
justification for imposing penalty upon the appellants. By
order dated 2nd November, 2004, an order was passed by
C.B.E.C. directing the Commissioner to apply to CESTAT for
correct determination of the points as set out in the order.
4.
the
Central
Revenue against
Excise Appeal No.269 of 2006 is preferred by
the order of the CESTAT dated 28th
October, 2005, where CESTAT held that the doctrine of merger
will apply and in the light of that allowed the appeal filed
by the company and set aside the order passed in Review
dated 20th March, 2003. The learned Tribunal referred to
the decision of the larger Bench in L.M.L. Ltd. (supra).
Five show cause notices were served on the company. By
order dated 29th September, 2000 the Additional Commissioner
held that the show cause notice dated 30th April, 1996 was
time barred. The additional Commissioner, however,
confirmed the demands in respect of the other show cause
notices demanding duty, but did not impose any penalty. The
company preferred an appeal. The Commissioner (Appeals)
allowed the appeal and remanded the matter to the original
authority for verifying the facts and to decide and to
conduct an enquiry whether the disputed product “capping
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cement” is actually marketable and as such excludable by
order dated 20th February, 2001. On 24th August, 2001 the
Commissioner of Central Excise under powers conferred by
Section 35E(2) directed that an appeal be filed against the
order in original dated 29th September, 2000 whereby the
show cause notice dated 30th April, 1996 had been held to be
time barred. Accordingly an appeal was preferred which was
allowed by order dated 1st April, 2002. Against that the
Company went in Appeal before CESTAT.
5. The question of law as raised in Central Excise
Appeal No.175 of 2006 is as under:-
“Whether
the CESTAT was right in law in applying the
doctrine of merger, when the issue involved in the
appeal filed by the assessee was whether duty and
penalty were rightly imposed whereas in the appeal
filed by the Revenue the issue involved was whether
interest could be levied under Section 11AB of the
Central Excise Act, 1944.”
6. In Central Excise Appeal No.262 of 2006 the question
of law as framed is as under:-
“Whether the Customs, Excise & Service Tax Appellate
Tribunal is right in law in holding that the appeal
filed by the revenue, pursuant to the Review Order
passed by the Central Board of Excise & Customs, on
the issues of duty, levy of penalty under Section
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11AC and interest under Section 11AB is notmaintainable on the principle of merger as it had set
aside the Order-in-Original passed by the
Commissioner, on appeal filed by the assessee in
respect of the issue of levy of penalty under Rules
173Q and 209A.”
7. In Central Excise Appeal No.269 of 2006 the question
of law involved is as under:-
“Whether the CESTAT was right in relying on the
judgment in LML Limited by invoking the doctrine of
the
merger when admittedly the matter was at large before
Additional Commissioner pursuant to the order of
Commissioner (Appeals) dated 20th February, 2001.”
8. The Scheme of the Act may be firstly considered.
Against any decision or order in original by a Central
Excise Officer, lower in rank than a Commissioner of Central
Excise, an Appeal lies under Section 35 to the Commissioner
of Appeals. Under Section 35B any person aggrieved by any
order from authorities as set out therein can prefer an
appeal to the Appellate Tribunal. Appellate Tribunal as
defined under Section 2(aa) to mean, the Customs, excise and
Service Tax Appellate Tribunal constituted under Section 127
of the Customs Act. Under Section 35A, the Commissioner
(Appeals) at the hearing of the Appeal allow the Appellant
to go into any ground of appeal even if not raised if the
Commissioner is satisfied that the omission was not wilful
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or unreasonable.
. Under Section 35B(4) on the respondent receiving a
notice that an appeal has been preferred under that Section
before the Appellate Tribunal, a party against whom the
appeal has been preferred (respondent) may notwithstanding
that he may not have appealed against such order or any part
thereof can file, within forty-five days of the receipt of
the notice, a memorandum of cross-objections verified in the
prescribed manner against any part of the order appealed
against and such memorandum shall be disposed of by the
Appellate Tribunal as if it were an appeal. The relevant
provision of Section 35B(4) reads as under:-
“35B(4). On receipt of notice that an appeal has
been preferred under this section, the party against
whom the appeal has been preferred may,
notwithstanding that he may not have appealed against
such order or any part thereof, file, within
forty-five days of the receipt of the notice, a
memorandum of cross-objections verified in the
prescribed manner against any part of the order
appealed against and such memorandum shall be
disposed of by the Appellate Tribunal as if it were
an appeal presented within the time specified in
sub-section (3).”
9. Section 35E confers suo mottu power on the Board to
examine an order passed by Commissioner of Central Excise as
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an adjudicating authority and to apply to the Appellate
Tribunal or as the case may be the Customs and Excise
Revenue Tribunal for determination of such points as may be
ordered by the Committees of Chief Commissioner of Central
Excise under Section 35E(1) or the Commissioner of Central
Excise under Section 35E(2) against order of adjudicating
authority subordinate to him to direct filing of appeals for
determination of such points as may be specified. . The
power conferred on the Board and the Commissioner of Central
Excise is under Section 35E and which reads as under:-
“35E.(1) Powers of Board or Commissioner of Central
Excise
to pass certain orders.– (1) The Board
of its own motion, call for and examine the record of
may,any proceeding in which a Commissioner of Central
Excise as an adjudicating authority has passed any
decision or order under this Act for the purpose of
satisfying itself as to the legality or propriety of
any such decision or order and may, by order, direct
such Commissioner or any other commissioner to apply
to the Appellate Tribunal or, as the case may be, the
Customs and Excise Revenues Appellate Tribunal
established under section 3 of the Customs and Excise
Revenues Appellate Tribunal Act, 1986 (62 of 1986)
for the determination of such points arising out of
the decision or order as may be specified by the
Committee of Chief Commissioners of Central Excise in
its order:
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Provided that where the Committee of ChiefCommissioners of Central Excise differs in its
opinion as to the legality or propriety of the
decision or order of the Commissioner of Central
Excise, it shall state the point or points on which
it differs and make a reference to the Board which,
after considering the facts of the decision or order,
if is of opinion that the decision or order passed by
the Commissioner of Central Excise is not legal or
proper, may, by order direct such Commissioner or any
other Commissioner to apply to the Appellate Tribunal
for the determination of such points arising out of
the
order.”
decision
or order, as may be specified in its
“35E(2).The Commissioner of Central Excise may, of
his own motion, call for and examine the record of
any proceeding in which an adjudicating authority
subordinate to him has passed any decision or order
under this Act for the purpose of satisfying himself
as to the legality or propriety of any such decision
or order and may, by order, direct such authority or
any Central Excise Officer subordinate to him to
apply to the Commissioner (Appeals) for the
determination of such points arising out of the
decision or order as may be specified by the
Commissioner of Central Excise, in his order.”
10. From these provisions some distinctions can be noted
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in respect of the procedure for appeals before the Appellate
Forums. In so far as the Commissioner (Appeals) is
concerned, there is no provision under Section 35A for
filing cross objections from decisions or orders passed by
an Officer of Central Excise lower in rank than a
Commissioner of Central Excise Officer in an Appeal provided
under Section 35. On the other hand if an appeal is
preferred under Section 35B(1) on receiving notice of the
appeal, a party against whom an appeal has been preferred
may notwithstanding that he may not have appealed against
such order or any part thereof file within time prescribed
cross objections. These cross objections shall be disposed
off by the Appellate Tribunal as if it were an appeal.
11. Apart from this jurisdiction under Section 35EA there
is a suo motto power of revision conferred on the Board or
the Commissioner as the case may be. Similarly Section 35EE
confers a power on the Central Government to exercise
revisional powers at the instance of an aggrieved party
against an order passed under Section 35A. This power of
revision can also be exercised on behalf of the Revenue if
proceedings are taken under Section 35EE(2).
12. On behalf of the Revenue, learned Counsel, submits
that the doctrine of merger is not a doctrine of rigid and
universal application and it cannot be said that wherever
there are two orders one by an inferior authority and the
other by superior authority, passed in appeal or revision
there is a fusion or merger of the two orders, irrespective
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of the subject matter of the appellate or revisional order
and the scope of the Appeal or Revision contemplated by the
particular statute. The application of the doctrine depends
on the nature of the Appellate or Revisional jurisdiction in
each case and the scope of the statutory provisions
conferring the Appellate or Revisional jurisdiction. The
Court, therefore, while considering the doctrine of merger
will have to consider the issues which were in Appeal before
the Appellate or Revisional Authority and also the reliefs
sought in Appeal or Revision. The learned Counsel has
relied on several judgments.
.
Respondents
On the other
hand on behalf of
more specifically in Appeal No.175 of 2006
the Private
the
learned Counsel submits that the principle of merger has
been accepted by the Supreme Court and this Court and the
issue is no longer res integra. Reliance is also placed on
several judgments in support of the said contention.
. Counsel submits that the orders passed in the appeals
preferred the Appellate Tribunal has correctly applied the
doctrine of merger and the Appellate Tribunal was within its
jurisdiction to dismiss the Appeals.
13. The doctrine of merger is neither a doctrine of
Constitutional law nor a doctrine statutorily recognised.
It is a common law doctrine founded on the principles of
propriety in the hierarchy of justice delivery system. The
logic underlying the doctrine of merger is that there cannot
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be more than one decree or operative orders governing the
same subject-matter at a given point of time. When a decree
or order passed by inferior court, tribunal or authority was
subjected to a remedy available under the law before a
superior forum, then though the decree or order under
challenge continues to be effective and binding,
nevertheless its finality is put in jeopardy. 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
authority below.
or order passed by the court, tribunal
However, the doctrine is not of universal
or the
or unlimited application. The nature of jurisdiction
exercised by the superior forum and the content or
subject-matter of challenge laid or which could have been
laid shall have to be kept in view.” See Kunhayammed Vs.
State of Kerala, 2001 (129) E.L.T. 11 (S.C.). (emphasis
supplied).
14. Revenue has placed reliance on the judgment in Mauria
Udyog Ltd. vs. Commissioner of Central Excise, Delhi II
(2003) 9 SCC 139.
139 The ratio of that judgment can now be
considered. Pursuant to a show cause notice, the demand was
confirmed and penalty was imposed. Interest was also held
to be liable. In Appeal before the Commissioner (Appeals)
the order of adjudication was maintained but the amount of
penalty was reduced. Two Appeals were preferred to CESTAT,
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one by the Company and the other by the Revenue. Revenue
challenged in its appeal the order of Commissioner (Appeals)
to the extent of reduction of the penalty amount. In the
Appeal preferred by the Company a conditional order of
predeposit was made by the Tribunal for entertaining the
Appeal. The High Court in the Writ Petition declined to
interfere with the order of predeposit, however, extended
time to deposit. As the Company failed to deposit the
amount the appeal was dismissed. The Company filed an
application for restoration which was opposed on behalf of
the Revenue. It was submitted that in the meanwhile the
Appeal filed by the Revenue against the order of
Commissioner
and
(Appeals)
ighad been dismissed by the
consequently the impugned order of the Commissioner got
Tribunal
merged in the order of the Tribunal and, therefore, the
Company’s appeal cannot be entertained. The Supreme Court
answered the issue in the following words:-
“4. It is evident from the facts noticed above that
the principle of merger has no applicability. The
appeal of the Revenue was restricted to the reduction
of the penalty amount by the Commissioner (Appeals).
In the appeal of the appellant, the challenge was not
only to the penalty but to the entire order including
the order of the Commissioner confirming the demand
and holding that the freight expenses of the
appellant’s factory to the buyer’s factory are
includeable in the assessable value. The restricted
question which was the subject matter of the appeal
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of the Revenue, under these circumstances, cannotresult in the dismissal of the appellant’s appeal by
application of the principle of merger. The said
principle on the factual situation herein has no
applicability whatsoever. Mr. Raval, the learned
Additional Solicitor-General very rightly did not
support the order on the ground of the applicability
of the principle of merger.”
. From this judgment, the ratiodecendi, would be that
even if an Appeal preferred by one of the parties against an
order of Commissioner (Appeals) before the CESTAT is
dismissed, the doctrine of merger would not apply in respect
of the appeal preferred by the other party as what has to be
considered is the scope of the two appeals, the reliefs
claimed and the jurisdiction to grant relief by the
Appellate Forum. It may be noted that though the company’s
Appeal had been dismissed it was on the ground of
non-deposit, but an application for restoration was pending.
In other words if the two appeals filed are in respect of
different parts of the same order merely because an appeal
preferred by one of the parties is dismissed on the ground
of non-deposit, the doctrine of merger would not apply and
the other appeal will have to be decided on its own merits.
The Supreme Court in Smt.S.Kalawati vs. Durga Prasad &
Anr., AIR 1975 SC 1272 observed that:-
“The principle behind the majority of the decisions
is thus to the effect that where an appeal is
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dismissed on the preliminary ground that it was notcompetent or for non-prosecution or for any other
reason the appeal is not entertained, the decision
cannot be said to be a decision on appeal nor of
affirmance. It is only where the appeal is heard and
the judgment delivered thereafter the judgment can be
said to be a judgment of affirmance.”
This was reiterated in Chandi Prasad and Ors. v. Jagdish
Prasad and Ors., (2004) 8 SCC 724,as
724, under:-
“When an appeal is dismissed on the ground that delay
in
filing the same is not condoned, the doctrine
merger shall not apply.”
of
The applicability of the doctrine of merger would depend on
the scope of the proceedings already disposed of. The ratio
of the judgment in Mauria Udyog Ltd. (supra) would have to
be considered in that context.
15. In that context we may now consider the judgment o
the larger Bench of the Tribunal in L.M.L. Ltd. (supra) to
find out whether it has laid down any new proposition on the
doctrine of merger. An Appeal was filed by the Revenue
challenging the order in original dated 27th April, 2000
passed by the Commissioner of Central Excise (Adjudication),
New Delhi. By that order the Commissioner had dropped the
demand raised under the show cause notice. While dropping
the demand the Commissioner had imposed penalty on the
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assessee under Rule 178(4). The asseesse filed an appeal
before the Tribunal challenging the imposition of penalty.
The Appeal was allowed by the Tribunal by order dated 29th
June, 2000, holding that it is settled law that when there
is no duty demand there could be no penalty. After this
appeal was dismissed the Central Board of & Customs in
exercise of its power under sub-section (1) of Section 35E
of the Central Excise Act, 1944 passed an order dated 24th
April, 2001 directing the Commissioner to apply to the
Tribunal for determination of the question, whether order
passed by the Commissioner not confirming to the demand of
duty was erroneous in law. Pursuant to that, an Appeal was
filed
Appeal
before the
Tribunal on 13th July, 2001.
came up for hearing the assessee filed Memorandum of
When the
cross objections and raised an objection that the appeal
against the order of the Commissioner dated 27th April, 2000
is not maintainable since the order had already merged with
the order of the Tribunal dated 29th June, 2000 much before
the Board of Revenue passed the proceedings under Section
35E(1) on 24th April, 2001. The issue for consideration was
whether after the Tribunal had disposed of the Appeal, could
the appeal filed on the direction of the Board under
sub-section (1) of Section 35E before the Tribunal be
maintainable. The larger Bench after considering the
controversy held that the Appeal filed by the Revenue is not
maintainable as the order impugned had already merged with
the final order passed by the Tribunal dated 29th June, 2000
much before any order was passed by the Board of Revenue
under Section 35E(1) and any application filed pursuant
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thereto before the Tribunal. The S.L.P. preferred was
dismissed on the ground of delay.
. From the above facts, what follows is that the
Tribunal there held that after the Tribunal had disposed of
an Appeal though that Appeal was restricted to the relief of
penalty under Rule 173Q, the Appeal preferred pursuant to
the directions of the Board under Section 35E would not be
maintainable, even though it was in respect of a challenge
to a different part of the order as in the meantime the
appeal preferred by the Company (Assessee) had been disposed
of considering the doctrine of merger.
16. The Tribunal
in deciding the appeal in L.M.L.
(supra) relied upon judgments of the Supreme Court. In
Kunhayammed Vs. State of Kerala, 2001 (supra). The issue
before the Supreme Court in Kunhayammed (supra) related to
application of doctrine of merger in relation to orders
passed in petition for special leave under Article 136 of
the Constitution. The Tribunal relied on the following
three conclusions:-
"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 in
issue before it, the decision by the subordinate
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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)……
(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 content or subject-matter of
challenge laid or capable of being laid shall be
determinative of
ig the applicability of
superior jurisdiction should be capable of reversing,
merger, the
modifying or affirming the order put in issue before
it. Under Article 136 of the Constitution the
Supreme Court may reverse modify or affirm the
judgment, decree or order appealed against while
exercising its appellate jurisdiction and not while
exercising the discretionary jurisdiction disposing
of petition for special leave to appeal. The
doctrine of merger can therefore, be applied to the
former and not to the latter.
(iv) ….
(v) ……
(vi) Once leave to appeal has been granted and
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appellate jurisdiction of Supreme Court has been
invoked the order passed in appeal would attract the
doctrine of merger, the order may be of reversal,
modification or merely affirmation.”
. The learned Tribunal then noted as has been held in
the case of Kunhayammed (supra) that the doctrine of merger
will depend upon the nature of the jurisdiction exercised by
the superior forum and the content or the subject matter of
challenge laid or capable of being laid before that forum.
The superior jurisdiction should be capable of reversing,
modifying or affirming the order put in issue before it. It
was
Court in State of Tamil Nadu v.
the very same principle that was applied by the Supreme
Tul. Jeevanlal Ltd. etc.,
1997 (91) E.L.T. 268 = A.I.R. 1996 S.C.2699. The Supreme
Court there affirmed the view taken by the High Court that
where the appeal had been preferred only in respect of part
of the order by which the Appellant was aggrieved, Revenue
could invoke the revisional jurisdiction to consider the
legality of the other part of the order which was not in
issue before the Tribunal. The Supreme Court considering
the relevant provisions held that no exception could be
taken to the view expressed by the High Court. The issue
discussed there was in the context to whether two
authorities could exercise jurisdiction in respect of the
very same order. The Supreme Court held that where the
challenge in appeal was distinct from what was being
considered by the revisional authority, the exercise of
revisional power by the revisional authority even if an
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appeal had been filed could not be faulted. The learned
Tribunal also referred to the judgment of the Supreme Court
in State of Madras vs. Madurai Mills Co. Ltd., AIR 1967
S.C.681 where the Supreme Court held that there will be no
merger when the challenge is only against part of the order.
17. From a consideration of the judgment of the Special
Bench what emerges is that if an appeal had been preferred
before the Appellate Tribunal against part of the order and
that appeal had been dismissed, it was not open to the
Commissioner or the Board to exercise their revisional
powers to direct filing of an appeal if Revenue could have
filed
cross objections against that part of the order
which no appeal had been preferred.
from
. The matter was taken to the Supreme Court. The
Special Leave Petitions was dismissed on the ground of
delay. The subsequent observations considering the
principles of ratio decendi, cannot be said to be laying
down any law. They appear to be observations on the
findings recorded by the Special Bench. The settled law is,
dismissal of a Special Leave Petition does not result in the
Supreme Court affirming the order on merits. See V.M.
Salgacar Bros Pvt. Ltd. vs. Commissioner of Income Tax,
2000 (1) SCALE 240, which has been affirmed in Kunhayammed
(supra).
18. The expression “to merge” means to sink or disappear
in something else, to become absorbed or extinguished; to
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be combined or be swallowed up. Merger in law is defined as
the absorption of a thing of lesser importance by a greater,
whereby the lesser ceases to exist, but the greater is not
increased; and absorption or swallowing up so as to involve
a loss of identity and individuality. See Corpus Juris
Secundum, Vol. LVII, pp.1067-1068.
19. Appellants apart from relying on the judgment in
Mauria Udyog Ltd. (supra) have also relied on the judgment
in Commissioner of Income Tax vs. Shri Arbuda Mills Ltd.,
(1998) 231 ITR 50 (S.C.).
(S.C.) The I.T.O. on completing the
assessment proceedings made while computing the loss of
income
by the assessee
and accepted three claims. An appeal was
before the Commissioner (Appeals).
preferred
The
Commissioner of Income Tax exercised his power under Section
263 of the Act. The contention by the assessee before the
Tribunal was that the three items in respect of which
assessee had no occasion to prefer an appeal had merged in
the order of the Commissioner (Appeals). The matter was
referred by the Appellate Tribunal under Section 257 of the
Income Tax Act, 1961 to the Supreme Court on the question
whether or not the order of the Income-tax Officer regarding
the three items had merged in that of the Commissioner
(Appeals). The Supreme Court considered the explanation to
Section 263(1) which was substituted by the Finance Act,
1988, with effect from June 1, 1988, which was again amended
by the Finance Act, 1989, with retrospective effect from
June 1, 1988. The effect of the amendment was that, where
any order referred to in the sub-section and passed by the
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Assessing Officer had been the subject matter of any appeal
(filed on or before or after the 1st day of June, 1988), the
powers of the Commissioner under sub-section shall extend
and shall be deemed always to have extended to such matters
as had not been considered and decided in such appeal.
Considering this the learned Supreme Court observed that :-
“The consequence of the amendment made with
retrospective effect is that the powers under section
263 of the Commissioner shall extend and shall be
deemed always to have extended to such matters as had
not been considered and decided in an appeal.
the powers of
Accordingly, in respect of the aforesaid three items,
the Commissioner under Section 263
shall extend and shall be deemed always to have
extended to them because the same had not been
considered and decided in the appeal filed by the
assessee. Therefore, the order of assessment passed
by the Income-tax Officer on march 31, 1978, had not
merged with that of the Commissioner (Appeals), dated
December 15, 1979, in respect of the three items in
dispute so as to exclude the jurisdiction of the
Commissioner of Income-tax under Section 263.”
20. We may now refer to some of the judgments relied upon
on behalf of the Respondents. A Full Bench of the Punjab
and Haryana High Court in Punjab State Civil Supplies
Corporation Ltd. vs. Commissioner of Income Tax,
Tax 2000 ITR
( P. & H) (FB) 536 was considering the issue of merger.
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The Full Bench firstly relied upon the Supreme Court
judgment in State of Madras v. Madurai Mils Co. Ltd.
(1967) 19 STC 144 where the supreme observed as under:-
“The doctrine of merger is not a doctrine of rigid
and universal application, and it cannot be said that
wherever there are two orders, one by an inferior
Tribunal and the other by a superior Tribunal, passed
in an appeal or revision, there is a fusion or merger
of the two orders irrespective of the subject matter
of the appellate or revisional order and the scope of
the appeal or revision contemplated by the particular
statute.”
The Full Bench which considering the issue under the
provisions of the Income Tax Act, was pleased to hold that
once an appeal against an order of the Income Tax Officer
under Section 143(3) of the Act has been heard and decided
by the Appellate Assistant Commissioner, the Commissioner
under Section 263 has no jurisdiction with regard to the
issues considered and decided in appeal. In other words the
jurisdiction would be restricted only to that part of the
order of assessment that was not the subject matter of the
appeal. From this judgment what will appear is that the
doctrine of merger would apply to the extent of the issues
considered and decided in Appeal.
21. In Commissioner of Income-tax, Bombay North vs.
Tajaji Farasram Kharawala, 23 ITR 412, a learned Division
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Bench considering the provisions of the I.T. Act held that
:-
“It is well established principle of law that when an
appeal is provided from a decision of a Tribunal and
the appeal Court after hearing the appeal passes an
order, the order of the original Court ceases to
exist and is merged in the order of the appeal Court,
and although the appeal Court may merely confirm the
order of the trial Court, the order that stands and
is operative is not the order of the trial Court but
the order of the appeal Court.”
22. In
Commissioner of Income-tax vs. P. Muncherji and
Company, (1987) 167 ITR 671 the learned Division Bench
referred to the following observations in C.I.T., vs.
Amritlal Bhogilal & Co., (1958) 34 ITR 130:-
“As a result of the confirmation or affirmance of the
decision of the tribunal by the appellate authority,
the original decision merges in the appellate
decision and it is the appellate decision alone which
subsists and is operative and capable of
enforcement;…..”
The learned Division Bench then held that the judgment in
C.I.T. v. Tajaji Farasram Kharawala (supra) continues to
hold the field.
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23. In J.K. Synthetics Ltd. vs. Additional
Commissioner of Income-tax U.P. & Anr., 105 ITR (Allahabad)
344 the learned Bench there observed that on a finding given
by the I.T.O. if such finding could have been canvassed
before the Appellate Assistant Commissioner in the appeal
filed by the assesses on other points, if the department
chose to do so. In view of the scope and nature of the
appellate power, the entire subject-matter of the assessment
order was within the jurisdiction of the Appellate Assistant
Commissioner. That being so, the entire assessment order
merged in the appellate order, irrespective of the points
urged by the parties or decided by the appellate
authorities.
24. Sheodan Sigh vs. Daryao Kuwait, AIR 1966 S.C. 1332
is really not an authority on the doctrine of merger, but on
the principles of res judicata.
25. We may next refer to the Judgment of the Full Bench
of the Karnataka High Court in Commissioner of Income Tax
vs. Hindustan Aeronautics Ltd., (1986) 157 IR 315
(Karnataka).
(Karnataka) The assessee there filed an appeal against
part of the order of A.A.C. by which the assesses was
aggrieved, however, withdrew the appeal and filed Revision
before the Commissioner. The Department preferred an appeal
to Tribunal against that part of the order of A.A.C. by
which relief was given to the assessee. That appeal came to
be disposed of. The question was whether the Commissioner
could exercise revisional jurisdiction. The learned Full
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Bench held that the Appellate Assistant Commissioner can
look into and adjudicate upon the findings recorded by the
Income Tax Officer which may expressly be the subject matter
of an appeal but also upon a matter which has been
considered and determined by the Income-tax Officer in the
course of the assessment. In other words, the entire
subject matter of the assessment would be within the
jurisdiction of the Appellate Assistant Commissioner and the
revisional authority would not entertain the revision
considering the express bar under Section 264(4) of the I.T.
Act.
26.
Maharashtra
In Khandelwal
1991 80
Ferro
STC 42
Alloys
a
Ltd.
learned
vs.
Division
State
Bench
of
considered the doctrine of merger and held that it depends
on the subject matter of decision and scope of appellate
jurisdiction.
27. Reference was made to the judgment of this Court in
Commissioner of Income Tax vs. Smt. A.S. Narendrakumari
Basaheba, (1989) 176 ITR 515. The learned Division Bench
there had held that the order of the Income Tax Officer
merges with the order of the Appellate Assistant
Commissioner on all points irrespective of which an Appeal
could have been filed before him or in respect of which the
Appellate Assistant Commissioner could have modified the
order. The Commissioner of Income Tax cannot, therefore,
cannot revise the order of the Income Tax Officer.
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28. In Commissioner of Income Tax vs. International
Computers Indian Manufacture Ltd. 187 ITR 580 the learned
Division Bench held that the Tribunal was right in law in
holding that the passing of an order by the Commissioner of
Income Tax (Appeals) resulted in the merger of the order of
Commissioner (Appeals) thereby ousting the jurisdiction of
the Commissioner of Income Tax from exercising his powers
under Section 263 of the Income Tax Act, 1961 in respect of
the order appealed against.
29. We have also considered the judgment in State of
Kerala & Anr. Vs. Kondotty Paramban Moosa & Ors. 2008 AIR
SCW 5677.
considered
The case
including
law on the doctrine
the ratio of the
of merger
judgment
was
in
Kunhayammed when the principles laid down in Shankar
Ramchandra Abhtyankar vs. Krishnaji Dattatraya Bapat (1969)
2 SCC 74 were approved. The ratio of the judgment in
Kunhayammed (supra) is in applying the doctrine of merger,
what the Court must consider is the nature of the
jurisdiction exercised by the superior forum and the
contract or subject matter of challenge laid or which could
have been laid. In that case the earlier revision petition
was not rejected on merits but only on the ground of delay
and as such could not be said to be an order of affirmance
and as such the doctrine of merger would not apply.
30. Section 35B(4) enables the respondents to file cross
objections against that part of the order from which no
appeal has been preferred. Can the Tribunal in the absence
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of cross objections have jurisdiction to confirm, modify or
reverse that part of the order from which no appeal has been
preferred? The language of the Section makes it clear that
on filing of cross objections against any part of the order,
the cross objections be treated as an Appeal against that
part of the order only. The Relspondent ‘may’ file cross
objection and not “shall”. It is, therefore, the choice of
the Appellants. Under Section 35C, the Appellate Tribunal
has powers to confirm, modify or annul the decree or order
appealed against. In other words the jurisdiction is
limited to examine the legality of that part of the order in
respect of which the Appeal or cross objection have been
preferred.
of
Thus it cannot exercise jurisdiction in respect
that part of the order in respect of which no appeal has
been preferred. Under these circumstances will the doctrine
of merger apply in respect of an appeal preferred only
against part of the order.
31. Section 35E is an independent power conferred on the
Board or Commissioner, as the case may be, to direct filing
of an Appeal in respect of the entire order or part of the
order where the appeal has not been preferred. Considering
the nature of jurisdiction exercised by the Tribunal under
Section 35B if the appeal filed before the Tribunal is
dismissed, is the Board precluded from directing filing an
appeal or if an appeal is filed the same be dismissed on the
ground of merger. For the principle of merger to apply the
order must result in the challenge to the entire order
becoming final. As observed by Supreme Court in State of
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Madras vs. Madurai Mills Co. Ltd., AIR 1967 S.C.681 there
can be no fusion or merger of two orders irrespective of the
subject matter of the appellate or revisional order and the
scope of the appeal or revision contemplated by the
particular statute. Thus merely because under Section 35B
(4) the respondent on notice may file cross objections, if
cross objection is not filed cannot result in holding that
the doctrine of merger would apply and the appeal preferred
against the directions of the CBDT has to be dismissed on
the principle of merger. The law as settled and explained
by the Supreme Court in the various judgments referred to
would not support such proposition. The Appellate Tribunal
in the
challenged,
absence
cannot
of
that
examine
part
the
of the
legality
order
or
not being
otherwise
considering the statutory power conferred on the Tribunal
under Section 35C.
32. Even if Revenue is respondent in the proceedings
before the Tribunal, that would not exclude the jurisdiction
under Section 35E merely because Revenue could have filed
cross objections. Section 35C(4) enables a Respondent to
prefer cross objection. The Section does not prohibit a
Respondent if it has not filed cross objection from
preferring an appeal. The scheme of the Section does not
expressly or impliedly bar filing of an Appeal. The power
under Section 35B is to the person aggrieved to prefer an
appeal. The power under Section 35E is conferred on the
Board on its own motion to call for and examine the record
and proceedings. If if forms an opinion that the appeal has
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to be preferred then it can direct filing of such an appeal.
Clearly considering the provisions of the Central Excise
Act, 1944 in terms of what we have discussed, the doctrine
of merger would not apply in the absence of the entire order
being the subject matter of the Appeal and the Appeal being
heard and finally decided on merits.
33. It may be further clarified that in so far as an
appeal filed under Section 35, the procedure is governed by
Section 35A. There is no provision for filing cross
objections against the order in original. The doctrine of
merger in such case would not apply. The final order
considering
result in
the
‘principle or doctrine
a challenge to the entire order becoming
of merger’ must
final.
34. The applicability of the doctrine thus depends on the
nature of the Appellate or revisional jurisdiction. The
scope of the statutory provisions conferring the appellate
or revisional jurisdiction must be first considered. As
rightly argued by the Appellants the doctrine of merger is
not a doctrine of rigid and universal application. Merely
because there are two orders, one by the inferior authority
and the other by a superior authority passed in an appeal or
revision, it cannot be said that there is a merger of the
two orders irrespective of the subject matter of the
appellate or revisional order and this scope of the appeal
or revision contemplated by the particular statute. A Court
or Tribunal while applying the doctrine must consider the
nature of the order and the scope of the statutory
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provisions conferring the appellate or revisional
jurisdiction.
35. The following principles will have to be considered
while applying the doctrine of merger in the context of the
provisions of “The Central Excise Act, 1944′.
1. In the proceedings from which the matter arises, the
Court or Tribunal hearing the appeal or revision, should
have jurisdiction to decide all issues arising from the said
order of the inferior Court or Tribunal from whose order the
proceedings arise.
2. The Appeal
should not have been dismissed on the
ground of limitation or failure to deposit as ordered. The
Appeal should have been heard and decided on merits on the
issues raised and or could have been raised including by the
Respondent. In such an event the doctrine of merger would
apply.
3. If the proceedings are pending before the same
Appellate Tribunal the power under Section 35E can still be
exercised by the Competent Authority. The doctrine of
merger will not apply even if one of the Appeals is
dismissed, provided the other appeal is pending.
4. Even if the Appeal preferred under Section 35B has
been disposed off, an appeal can still be preferred pursuant
to direction issued under Section 35E, if in the appeal
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disposed off, the entire order was not the subject matter of
the Appeal.
36. In the light of the above the question raised in each
of the Appeals can be disposed off as under:-
(i) In Central Excise Appeal No.175 of 2006 the Revenue
had no occasion to raise the issue against the order
impugned before the Commissioner (Appeals) in respect of
that part of the order which they were aggrieved. There is
also no provision for filing cross objections. Disposal of
the Appeal, therefore, by the Commissioner (Appeals) would
not
be filed on
prelude the Commissioner from directing that an
points not in issue in the Appeal filed
Appeal
by
company and in respect of that part of the order by which
revenue was aggrieved. Accordingly, the question of law
raised in the Appeal will have to be answered in the
negative and in favour of the Appellants. The impugned
order is set aside and the matter is remanded to the
Appellate Tribunal for redetermination of the questions on
merits according to law.
(ii) In so far as Central Excise Appeal No.262 of 2006 is
concerned, the appeal had been preferred by the Company only
in respect of that part of the order by which they were
aggrieved. The entire order there was not the subject
matter of Appeal. In these circumstances the doctrine of
merger would not apply. In the light of that the question
of law will have to be answered in the negative and in
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favour of the Revenue. Order is accordingly set aside and
the matter is remanded to the Tribunal for deciding the
appeal on merits.
(iii) In so far as Central Excise Appeal No.269 of 2006 is
concerned, the Company preferred an Appeal before the
Commissioner (Appeals) which was remanded to the original
Authority. An Appeal thereafter was preferred before the
Commissioner (Appeals) pursuant to the directions issued
under Section 35E(2) against that part of the order which
was not an Appeal before Commissioner (Appeals). In the
light of that the doctrine of merger would not apply. The
Revenue.
question of law is answered in the negative and in favour of
The Appeal is allowed and consequently the order
of CESTAT is set aside and the matter is remanded back to
CESTAT for deciding the appeal on merits.
(iv) All the Appeals stand disposed off accordingly.
(J.P.DEVADHAR, J) (F.I.REBELLO, J)
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