The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that once the main noticee settles the case under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS), any penalty imposed on co-noticees for the same matter cannot survive independently.
Banas Enterprises, the appellant, was penalised under Rule 26(1) of the Central Excise Rules, 2002, for allegedly purchasing excisable goods (plastic granules) illegally cleared without payment of duty by Narendra Plastics Pvt. Ltd. Following an investigation by the Directorate General of Central Excise Intelligence ( DGCEI ), it was found that Narendra Plastics Pvt. Ltd. had cleared 1309 metric tons of plastic granules without issuing excise invoices and without paying duty.
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The department alleged that Banas Enterprises knowingly purchased these illicit goods, and the adjudicating authority imposed a penalty of Rs. 10 lakh on the appellant. On appeal, the Commissioner (Appeals) reduced the penalty to Rs. 5.35 lakh but upheld the finding of involvement and knowledge on the part of Banas Enterprises. Aggrieved by the partial relief and insisting on complete exoneration, the appellant filed a further appeal before the CESTAT.
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The appellant’s counsel argued that the main party to the case, Narendra Plastics Pvt. Ltd,. had already settled their central excise liability under the SVLDRS, 2019. They argued that once the principal case is resolved under the statutory dispute resolution mechanism, the penalty on co-noticees becomes unsustainable.
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In support, the appellant relied on the Division Bench ruling of the Tribunal in Vipinbhai Kantilal Patel v. CCE, Ahmedabad, where it was held that penalties on co-noticees cannot survive when the main noticee settles under SVLDRS. The appellant also cited a similar decision in Shilpa Polypack Pvt. Ltd., decided by a Single Member Bench.
The revenue opposed the appeal, citing the tribunal’s decision in Four R Associates v. Commissioner of GST & CE, Chennai, where the penalty on a co-noticee was only reduced, not fully set aside. The department maintained that the penalty on Banas Enterprises was justified since it was based on independent grounds related to its complicity in receiving non-duty-paid goods.
After hearing both sides, the single-member bench Dr. Ajaya Krishna Vishvesha (Technical Member) observed that the decision in Vipinbhai Kantilal Patel, rendered by a Division Bench, was binding and directly applicable to the facts of the case. The tribunal distinguished the revenue’s reliance on Four R Associates, observing that it was a single-member decision and could not override the binding precedent laid down by a Division Bench.
The tribunal ruled that once the main noticee’s liability is settled under SVLDRS, the penalty imposed on co-noticees arising from the same show cause notice cannot survive. The tribunal set aside the penalty of Rs. 5.35 lakh imposed on Banas Enterprises and allowed the appeal in full. The order was pronounced in open court on 08.05.2025.
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