Settlement under Kar Vivad Samadhan Scheme extends to co-noticee directors, ending penalties arising from the same show cause notice.

Penalties on co-noticee directors under Rule 209-A of the Central Excise Rules, 1944 were found unsustainable where the main noticee had settled the same common show cause notice under the Kar Vivad Samadhan Scheme. The settlement was treated as a full and final resolution of the dispute arising from the joint proceedings, and that consequence could not be confined only to the main declarant while leaving the same penalties intact against other noticees. The same settlement benefit was therefore extended to the co-noticees, and the penalties on the directors were set aside.

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Issues: Whether penalties imposed on co-noticee directors under Rule 209-A of the Central Excise Rules, 1944 could survive when the main noticee had settled the same show cause notice under the Kar Vivad Samadhan Scheme.

Analysis: The settlement granted to the main noticee was treated as a full and final resolution of the dispute arising from the common show cause notice. The reasoning accepted that where the same proceedings covered both the company and the co-noticees, the benefit of the statutory settlement could not be confined only to the main declarant while continuing penalties against other noticees for the same matter. The earlier decisions relied upon were applied to hold that the co-noticees were entitled to the same consequence flowing from the settlement.

Conclusion: The penalties on the directors could not be sustained and were liable to be set aside.

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