The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that penalty on co-noticee not sustainable on settlement of case of main noticee under Sabka Vishwas – (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS 2019).It was settled that once the duty demand case is settled under SVLDRS-2019,there is a waiver of penalties on the main assessee against whom the demand was confirmed as well as on other co-noticees.
Prakash Steelage Ltd, the appellant/assessee submitted that now it is a settled law that when the main case of demand of duty is settled under SVLDRS 2019, the penalty on the co-noticee will not sustain.
Anil K Modani vide final order stated that the decision in re Indi-Swift Laboratories Ltd, relied upon by the Authorised Representative, was in the specific context of “conjunctions” employed in rule 14 of CENVAT Credit Rules, 2004 and the consequence thereof for recovery of credit along with interest. Chapter V of Finance Act, 2019 expressly pertains to “legacy dispute resolution scheme‟ which considered deposit of duty involved in dispute to suffice for grant of relief of interest, penalty and any other consequence under Central Excise Act, 1944 or Finance Act, 1944.
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The scheme is all about “tax dues‟ which itself has been set out in section 123 of Finance Act, 2019 with all the alternatives restricting themselves to the total amount of duty or total amount of duty in dispute, as the case may be. Furthermore, section 124 of Finance Act, 2019 specifies relief as percentage of „tax dues‟ and of late fee/penalty should those be the only detriments contemplated in a proceeding. It would, therefore, appear that a person imposed with penalty would be eligible to be „declarant‟ subject to there being no demand of tax pending in the impugned proceedings.
The impugned order upheld recovery of duties under section 11A of Central Excise Act, 1944 none of the individual appellant herein would have been eligible to be declarant; the scheme itself does not acknowledge the existence of such appellant even though the scheme is intended to erase the detriment of penalty in each and every case. It is on record that the principal-noticee has been accorded the prescribed relief including erasure of penalties arising therefrom.
Even though the appellants herein could not, at the time of existence of the scheme have derived the benefits from the coverage by the scheme, the intent and purpose of the scheme being collection of the duty or some percentage thereof, and forgoing interest, fine and penalty, the disposal of the application of M/s JSW Ispat Steel Ltd renders the continuance of the penalty against the three appellants to be not in conformity with the relief scheme.
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Shri P Ganesan Superintendent appeared for the revenue and reiterated the finding of the impugned order. It was observed that since, the appellant has been penalized under Rule 26 in connection with the duty evasion made by M/s. Atlas Plastics and their case has been settled under SVLDRS and the appeal was disposed by the Tribunal vide order dated 07.11.2023, the personal penalty of the appellant is not sustainable in the light of the judgment.
The two member bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that once the duty demand case is settled under SVLDRS 2019, as per Scheme itself, there is a waiver of penalties on the main assessee against whom the demand was confirmed as well as on other co-noticees.
The tribunal held that the penalties imposed on the co-noticees in a case where the main noticee against whom the demand is confirmed, the case is settled under SVLDRS then in respect of other co-noticees penalty will not sustain even if they have not filed a declaration under SVLDRS-2019.
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