Penalty on authorised signatory fails once demand against principal assessee is dropped and no liability survives.

Where the demand against the principal assessee had already been dropped and the penalty on it set aside, the penalty on the authorised signatory of the manufacturing unit could not survive. The reasoning was that the employee was only the production in charge and authorised signatory, so once no liability remained against the main noticee, there was no basis for penal action against the appellant. The penalty was therefore held unsustainable and was set aside.

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Issues: Whether the penalty imposed on the authorised signatory of the manufacturing unit was sustainable after the demand and penalty against the main assessee had been set aside.

Analysis: The demand against the main assessee had already been dropped and the penalty imposed on it had also been set aside by the lower appellate authority. In that situation, there was no justification for continuing the penalty on the employee who was only the production incharge and authorised signatory of the unit. The absence of any surviving liability against the principal noticee removed the basis for penal action against the appellant.

Conclusion: The penalty on the authorised signatory was not sustainable and was set aside in favour of the assessee.

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