Sabka Vishwas scheme discharge barred co-noticee penalty where the main duty demand stood settled.

Penalty on co-noticee directors did not survive once the main noticee obtained discharge under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The Tribunal noted that the scheme, read with Section 124(1) of the Finance (No. 2) Act, 2019 and the binding departmental circular, treated the underlying liability as settled on issuance of the discharge certificate. It held that co-noticee cases were covered where the main duty demand stood discharged, and that any failure by the co-noticees to separately opt for the scheme was only a procedural lapse. The penalty was therefore set aside.

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Issues: Whether penalty imposed on co-noticee directors could survive after the main noticee had obtained discharge under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.

Analysis: The liability proposed in the show cause notice stood settled on issuance of the discharge certificate in favour of the main noticee. Section 124(1) of the Finance (No.2) Act, 2019, read with the departmental circular clarifying the scheme, contemplated waiver of penalty in such circumstances and treated co-noticee cases as covered once the main duty demand was discharged. The Tribunal held that the failure of the co-noticees to separately opt for the scheme was only a procedural lapse and could not justify continuation of penalty when no duty demand survived against the main noticee and the circular issued by the department was binding.

Conclusion: The penalty on the appellants was not sustainable and the impugned order was set aside.

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