Co-Noticees Cannot Be Penalized Independently Once Main Noticee Settles Dispute Under SVLDRS Scheme: CESTAT [Read Order]

Shri Rajnesh Kumar Jain, the appellant, was a director of Ved Jyoti Alloys Pvt. Ltd. A show cause notice was issued on November 7, 2017, proposing a penalty under Rule 15 of the CENVAT Credit Rules, 2004. The adjudicating authority dropped the penalty against the appellant, who was only a co-noticee.

The department filed an appeal before the Commissioner (Appeals), who reversed the adjudication and imposed the penalty. Aggrieved by the Commissioner’s order, the appellant filed the present appeal before the CESTAT.

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The appellant argued that Ved Jyoti Alloys Pvt. Ltd., the main noticee, had already settled the dispute under the SVLDRS Scheme and obtained a discharge certificate under Section 127 of the Finance Act, 2019. He submitted that once the main noticee settles the tax dues under the Scheme, no penalty can be imposed on the co-noticee.

In support of this argument, the appellant relied on decisions of the Tribunal in cases such as JPFL Films Pvt. Ltd. v. CCE, Ludhiana, Ekam International v. CCE, Ludhiana, and Auto Ignition Ltd. v. CCE, Delhi-IV, where it was consistently held that no separate penalty is sustainable against co-noticees after settlement by the principal noticee.

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The single-member bench comprising S.S. Garg (Judicial Member) considered the submissions and reviewed the case records. The tribunal found that the main noticee had settled the matter in full and final terms under SVLDRS and was issued a discharge certificate. It referred to its earlier rulings, particularly in Auto Ignition Ltd., where it was clearly held that once the main noticee has resolved the dispute under the SVLDRS Scheme, penalties on co-noticees cannot be sustained.

The tribunal held that the penalty imposed on the co-noticee was not legally tenable and set aside the impugned order. The appeal was allowed with consequential relief, if any, as per law.

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