Doctrine of Merger - When Commissioner (Appeals) decided issue on appeal by assessee, Order-in-Original does not survive and subsequent appeal filed by revenue against the same Order-in-Original is hit by Doctrine of Merger: HC
By TIOL News Service
CHENNAI, FEB 05, 2015: THE assessee cleared pre-stressed pipes manufactured in their factory to the work site for execution of a water supply scheme. For the purpose of payment of duty, the assessee adopted the cost construction method as per Rule 8 of the Central Excise (Determination of Price of Excisable Goods), Rules, 2000. According to the Department, the cost construction method can be adopted only in case of captive consumption and since the assessee had claimed before the various forums that the impugned goods have been sold at the factory gate, the Deputy Commissioner issued show cause notice dated 4.4.2005 demanding differential duty, which is based on the contractual price of the impugned goods agreed by the assessee and the customer.
The Adjudicating Authority was of the view that the usage of pipes for the project has to be treated as captive consumption and since the goods are consumed not in the factory but removed to the work site and utilized for laying of pipes, the freight component should be added to the cost construction method adopted by the assessee. Accordingly the Adjudicating Authority passed an order dated 10.1.2006 demanding duty of Rs.27,624/-.
Aggrieved by the order passed by the Adjudicating Authority, the assessee filed an appeal before the Commissioner (Appeals) contending that the addition of freight charges under cost construction method (captive consumption) was not correct and the duty paid on the cost of production plus profit margin as per Rule 8 of the Valuation Rules was correct. The Commissioner (Appeals) allowed the appeal.
As against this order, the Department did not pursue the matter any further. After the order passed by the Commissioner (Appeals), in Order-in- Appeal No.63 of 2006 dated 12.7.2006, the Revenue sought to file an appeal against the Order-in-Original dated 10.1.2006 before the Commissioner (Appeals) contending that the excise duty should be charged on the basis of sale price. The Commissioner (Appeals) allowed the appeal filed by the Revenue.
Aggrieved by the order passed by the Commissioner (Appeals) in the appeal filed by the Revenue, the assessee pursued the matter before the Tribunal by way of appeal.
The Tribunal allowed the appeal by holding that doctrine of merger will apply to the case.
The department is now in appeal before the High Court.
After hearing both sides, the High Court held:
The core issue in both the appeals before the Commissioner (Appeals), whether the payment of duty should be on the cost of production plus profit margin as per Rule 8 of the Valuation Rules or whether the demand of duty should be on the basis of sale price, i.e, tender breakup price of pipe per metre as laid, having been decided by the Commissioner (Appeals) in the order-in-Appeal No.63 of 2006 dated 12.7.2006, there is no scope for re-construction of the same in the appeal filed by the Department in Appeal No.25 of 2007.
When once the first Appellate Authority has set aside the order of the Adjudicating Authority setting aside the demand, thereby upholding the assessable value, it should be treated as the order passed by the Adjudicating Authority is merged with the Order-in-Appeal. There is no infirmity in the order of the Tribunal.
In the result, the question of law raised is answered in favour of the assessee and against the Revenue.
(See 2015-TIOL-285-HC-MAD-CX)
