Co-noticee penalty and settlement immunity remained disputed where fake invoices and wrongful Cenvat credit were alleged.

Penalty on co-noticees for issuing fake invoices and abetting wrongful Cenvat credit remained contested where the main noticee had settled before the Settlement Commission and obtained immunity. One view held that settlement by the main noticee concluded the proceedings and, on earlier Tribunal decisions, the co-noticees' penalties could not survive. The contrary view held that immunity under settlement proceedings did not automatically extend to persons who were not before the Settlement Commission, especially where they were found to have independently ated in the fraudulent invoice chain and passing of credit. The Members disagreed on the result, and the matter was referred to the President for appropriate reference.

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Issues: Whether penalties imposed on co-noticees for issuing fake invoices and abetting fraudulent availment of Cenvat credit could be sustained when the main noticee had settled the dispute before the Settlement Commission and obtained immunity from penalty.

Analysis: One view held that the settlement of the dispute by the main noticee concluded the proceedings in entirety and, following earlier Tribunal decisions, the penalty on co-noticees could not survive. The other view held that immunity granted to the main noticee under settlement proceedings could not automatically extend to persons who were not before the Settlement Commission, particularly where they were found to have independently participated in the fraudulent invoice chain and wrongful passing of credit.

Outcome: The Members differed on whether the appeals should be allowed or dismissed, and the matter was directed to be placed before the President for appropriate reference.

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