Case: The Commissioner of Central Excise, Mumbai-Ii Vs. M/S. Godrej &amp; Boyce Manufacturers Company Limited &amp; Others

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 Section 35E(2) directing that an appeal be preferred against theCentral 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.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 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.

Reasoning:
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 Sectionapplication 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.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 be more than one decree or operative orders governing the sameat 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 waywhether 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.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 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 ofCustoms in exercise of its power under(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(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 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.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 from which no appeal had beenthe 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 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 absence of that part of the order not being challenged, cannot examine the legality or 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 forms an opinion that the appeal has 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.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 provisions conferring the appellate or revisional jurisdiction.