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Issues: (i) Whether penalty could be sustained against a dealer/co-noticee merely on the basis of shortage of raw material noticed at the consignee's premises and the consequent presumption that goods were not supplied under invoice; (ii) Whether the appellant could claim the benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 after the main noticee had settled the duty dispute, with the result that penalty on the co-noticee was not sustainable.
Issue (i): Whether penalty could be sustained against a dealer/co-noticee merely on the basis of shortage of raw material noticed at the consignee's premises and the consequent presumption that goods were not supplied under invoice.
Analysis: The finding against the appellant rested on a presumption drawn from shortage found in the consignee's factory. Such discrepancy, by itself, was not sufficient to fasten liability on the appellant because the shortage could arise for several reasons and could not be attributed only to one supplier. The record also reflected cheque payments for the invoices, and the departmental authorities did not dispute the dealer's RG 23D register or the quarterly CENVAT returns showing receipt and passing of credit. In these circumstances, the evidentiary basis for sustaining the penalty was inadequate.
Conclusion: The penalty could not be sustained on this basis and the issue was decided in favour of the appellant.
Issue (ii): Whether the appellant could claim the benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 after the main noticee had settled the duty dispute, with the result that penalty on the co-noticee was not sustainable.
Analysis: The scheme circular and the statutory scheme recognized that, once the main noticee settles the duty demand, co-noticees may obtain the consequential benefit in penalty-related proceedings. The materials showed that the main noticee had already settled the dispute under the scheme, and the circular specifically contemplated waiver of penalty in cases where only penal action survives against co-noticees after discharge of the duty demand. On that footing, continuation of the penalty against the appellant was not justified.
Conclusion: The appellant was entitled to the consequential benefit arising from the main noticee's settlement and the penalty was not sustainable.
Final Conclusion: The penalty imposed on the appellant was set aside and the appeal succeeded with consequential relief.
Ratio Decidendi: A penalty on a co-noticee cannot be sustained merely on a speculative presumption drawn from shortages at the consignee's premises when the documentary record supports the transaction, and once the main noticee settles the duty dispute under the statutory scheme, the consequential penalty claim against the co-noticee cannot survive.
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