-1- IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION CENTRAL EXCISE APPEAL NO.175 OF 2006 CENTRAL EXCISE APPEAL NO.175 OF 2006 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 WITH WITH CENTRAL EXCISE APPEAL NO.262 OF 2006 CENTRAL EXCISE APPEAL NO.262 OF 2006 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 WITH WITH CENTRAL EXCISE APPEAL NO.269 OF 2006 CENTRAL EXCISE APPEAL NO.269 OF 2006 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. ) -2- 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. CORAM: F.I. REBELLO & J.P. DEVADHAR, JJ. CORAM: F.I. REBELLO & J.P. DEVADHAR, JJ. DATE : 17TH DECEMBER, 2008 DATE : 17TH DECEMBER, 2008 DATE : 17TH DECEMBER, 2008 JUDGMENT: (PER F.I. REBELLO, J.). JUDGMENT: (PER F.I. REBELLO, J.). 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 -3- 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. Ltd. (Scooter Division) 2002 (143) ELT 431 (Tri-LB). 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. -4- 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. Central Excise Appeal No.269 of 2006 is preferred by the Revenue against 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 -5- 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 -6- 11AC and interest under Section 11AB is not maintainable 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 merger when admittedly the matter was at large before the 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 -7- 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 -8- 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 may, of its own motion, call for and examine the record of 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: -9- Provided that where the Committee of Chief Commissioners 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 decision or order, as may be specified in its order." "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 -10- 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 -11- 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. . On the other hand on behalf of the Private Respondents more specifically in Appeal No.175 of 2006 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 -12- 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 or order passed by the court, tribunal or the authority below. However, the doctrine is not of universal 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 Mauria Mauria Udyog Ltd. vs. Commissioner of Central Excise, Delhi II Udyog Ltd. vs. Commissioner of Central Excise, Delhi II Udyog Ltd. vs. Commissioner of Central Excise, Delhi II (2003) 9 SCC 139 (2003) 9 SCC 139 (2003) 9 SCC 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, -13- 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 (Appeals) had been dismissed by the Tribunal and consequently the impugned order of the Commissioner got 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 -14- of the Revenue, under these circumstances, cannot result 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 & Smt.S.Kalawati vs. Durga Prasad & Smt.S.Kalawati vs. Durga Prasad & Anr., AIR 1975 SC 1272 Anr., AIR 1975 SC 1272 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 -15- dismissed on the preliminary ground that it was not competent 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 Chandi Prasad and Ors. v. Jagdish Chandi Prasad and Ors. v. Jagdish Prasad and Ors., (2004) 8 SCC 724, Prasad and Ors., (2004) 8 SCC 724, Prasad and Ors., (2004) 8 SCC 724,as under:- "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 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 -16- 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 before the Tribunal on 13th July, 2001. When the Appeal came up for hearing the assessee filed Memorandum of 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