Penalty on Co noticee is invalid when main case is settled under SVLDRS: CESTAT [Read Order]
Where the main case is settled under SVLDRS, the penalties in respect of other co-noticees will not sustain even if they have not filed a declaration under SVLDRS-2019.
The Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held 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 appellants, Shri Rajendra Pyarelal Agrawal,Bhagyalaxmi Steel Industries challenged the impugned Order-in-Appeal passed by the learned Principal Commissioner (Appeals) Rajkot dated 14th February, 2019 through which the learned Principal Commissioner upheld the Order-in-Original passed by the Assistant Commissioner Central Goods and Service Tax Division Bhavnagar dated 22nd December, 2017 and rejected the appeals.
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A show cause notice was issued to the appellant No. 1 Bhagyalaxmi Steel Industries and appellant No. 2 Shri Rajendra Pyarelal Agrawal for clearance of M.S. Round/TMT bars clandestinely to various customers. Itwas alleged that Bhagyalaxmi Steel Industries had clandestinely manufactured and cleared their finished excisable goods, namely, M.S. Round/TMT Bars attracting Central Excise duty of Rs. 20,36,913/- to various customers without issuing the invoices and without payment of Central Excise duty.
Shri Rajendra Pyarelal Agrawal partner of appellant No. 1, concerned himself in selling, storing, keeping and removing of the excisable goods which he knew and had reason to believe that the same were liable to confiscation, which has made him liable to penalty under Rule 26 of the Central Excise Rules, 2002.
The above mentioned show cause notice was adjudicated by the lower adjudicating authority vide the order dated 22.12.2017 confirming demand of Central Excise duty of Rs. 20,36,913/- against appellant No. 1 under Section 11A(10) of the Central Excise Act, 1944 along with interest on the confirmed demand under Section 11AA of the Act and imposed penalty of Rs. 20,36,913/-. Upon appellant No. 1 under Section 11AC(1) of the Act with benefit of reduced penalty and also imposed penalty of Rs. 2,00,000/- upon appellant No. 2 under Rule 26(1) of the Rules.
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On appeal, the Principal Commissioner came to the conclusion that the department has adduced sufficient oral and documentary corroborated evidence to demonstrate that the appellants were engaged in clandestine removal of the goods. Therefore, the confirmation of demand of Central Excise duty of Rs. 20,36,913/- by the lower Adjudicating Authority is correct, legal and proper. Thus, he upheld the impugned order regarding the demand of Central Excise duty to the tune of Rs. 20,36,913/- along with interest. The Principal Commissioner also came to the conclusion that imposition of penalty upon appellant No. 2 under Rule 26 (1) of the rules is correct legal and proper.
Counsel for the appellant argued that the main appellant M/s. Bhagyalaxmi Steel Industries, on whom duty demand was confirmed, has been granted Form-4 on 13th February, 2020 under the Sabka Vishwas Scheme (SVLDRS). Therefore, appeal of the appellant Bhagyalaxmi Steel Industries is liable to be withdrawn in view of form-4 having being granted to the appellant. It has also been submitted by the learned counsel for the appellant that since, the appeal of the main appellant is being withdrawn, having been settled under SVLDRS, appeal of Shri Rajendra P. Agrawal who is partner of main appellant merits to be allowed.
Reliance has been placed on the decision in appellant’s own case in Final Order No. 10089/2025 dated 5th February, 2025. It has been held in that decision that, when matter of the main appellant, on whom duty demand has been confirmed, has been settled under SVLDRS form-4, appellant, who is the co-noticee in the matter on whom penalty is confirmed is eligible for the benefit. In that view, appeals of the appellants merits to be allowed.
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It is settled 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. In Anil K. Modani case, it has been held that where the main case is settled under SVLDRS, the penalties in respect of other co-noticees will not sustain even if they have not filed a declaration under SVLDRS-2019.
A single bench of Dr. Ajaya Krishna Vishvesha, Member ( Judicial ) viewed that when appeal of the main appellant – Bhagyalaxmi Steel Industries has been allowed and the order regarding demand of Central Excise Duty and penalty imposed by the lower Adjudicating Authority and the Commissioner have been set aside, it appears just and proper that penalty imposed on co-noticee Shri Rajendra P. Agrawal should also be set aside.
The appeal filed was allowed and the impugned order passed by the Principal Commissioner (Appeals) passed by the first Adjudicating Authority are set aside.
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