The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Mumbai held that when the main demand is settled through SLVDR (Sabka Vishwas (Legacy Dispute Resolution)) Scheme, then the liability of co-noticees stands extinguished.

The fact is that M/s Nashik Strips Pvt. Ltd., the main noticee, had opted to settle its entire tax liability through the SVLDR Scheme after years of litigation. Despite this settlement, the tax authorities continued to pursue penalties of ₹1 lakh each against co-noticees under Rule 26 of the Central Excise Rules, 2002.

The appellants, M/s. Salasar Ispat Pvt. Ltd. and Vijay Kumar Jindal challenged these penalties, asserting that their alleged involvement was entirely consequential to the main transaction. They submitted that since the primary dispute had attained finality through a government-sanctioned settlement scheme, the secondary proceedings against them should also be terminated.

The Tribunal accepted this contention and said that ‘when the scheme permits extension of benefits of settlement to co-noticees after the main noticee has settled the determined tax dues and on the merit of the case also imposition of penalty is found to be not sustainable”.

On merits as well, the Tribunal found that the case against the co-noticees was weak and unsupported by credible evidence. The allegations were primarily based on statements of witnesses and certain private documents, which were either retracted or not subjected to cross-examination despite earlier directions.

The bench of Dr. Suvendu Kumar Pati [Judicial Member] observing that the once main demand was settled through the scheme, decided that no independent liability can survive against co-noticees, and consequently, penalties imposed under Rule 26 of the Central Excise Rules, 2002.

Therefore, the bench set aside the penalties imposed.

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