Sabka Vishwas settlement extinguishes pending excise appeals and penalty where conscious knowledge for Rule 26 is not established.

Settlement under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 can bring pending excise disputes to an end by operation of law once discharge certificates in Form-4 are issued; the three appeals were therefore treated as dismissed as deemed withdrawn. The remaining appellant's penalty under Rule 26 of the Central Excise Rules, 2002 could not survive because the underlying dispute had been settled and, independently, the allegation did not establish the specific conscious knowledge or involvement required for such penalty. The penalty was accordingly set aside, and the matter was concluded by treating the settled appeals as withdrawn and annulling the surviving penalty.

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Issues: (i) whether the appeals of the three appellants who had settled the dispute under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 were liable to be treated as dismissed as deemed withdrawn; and (ii) whether penalty imposed on the remaining appellant under Rule 26 of the Central Excise Rules, 2002 could survive in the facts of the case.

Issue (i): whether the appeals of the three appellants who had settled the dispute under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 were liable to be treated as dismissed as deemed withdrawn.

Analysis: The three appellants had settled their disputes under the scheme and produced discharge certificates in Form-4 showing nil duty liability. Once the dispute stood settled and the statutory discharge certificates were issued, the appeals no longer survived. The scheme and the linked clarification were treated as bringing the disputes to an end by operation of law.

Conclusion: The three appeals were treated as dismissed as deemed withdrawn.

Issue (ii): whether penalty imposed on the remaining appellant under Rule 26 of the Central Excise Rules, 2002 could survive in the facts of the case.

Analysis: The penalty was examined both in the light of the scheme and on merits. The reasoning accepted that, where the demand itself stood settled under the scheme, penalty on a co-appellant should not survive. Independently, the allegation against the appellant was found to be general and lacking specific establishment of conscious knowledge of the goods being liable for confiscation, which is necessary for penalty under Rule 26.

Conclusion: The penalty on the remaining appellant could not survive and was set aside.

Final Conclusion: The dispute was finally concluded by treating the settled appeals as withdrawn and by annulling the penalty imposed on the remaining appellant.

Ratio Decidendi: Settlement under the Sabka Vishwas (Legacy Dispute Resolution) Scheme can extinguish penalty consequences, and penalty under Rule 26 of the Central Excise Rules, 2002 requires a specific finding of conscious involvement or knowledge.

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