Co-noticee penalty fails when the main demand is set aside, removing the basis for penal action.

A penalty on a co-noticee under the Central Excise Rules could not survive once the duty demand and penalty on the main noticee had already been set aside. The Tribunal held that, with the foundation for penal action against the co-noticee removed, the penalty could not be sustained. It also waived pre-deposit of the penalty for hearing the appeal. The penalty on the co-noticee was therefore set aside and the appeal and stay petition were allowed.

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Issues: Whether a penalty imposed on a co-noticee under Rule 25 of the Central Excise Rules, 2002 could survive after the duty demand and penalty on the main noticee had already been set aside.

Analysis: The Tribunal noted that the demand against the main appellant had been set aside in an earlier order. On that basis, the basis for imposing penalty on the present appellant, who was a co-noticee, no longer survived. The Tribunal also waived the requirement of pre-deposit of penalty and proceeded to hear the appeal.

Conclusion: The penalty imposed on the present appellant was set aside and the appeal and stay petition were allowed.

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