Personal penalty on a director under excise law needs proof of direct culpable participation; settlement scheme rendered the appeal infructuous.

A personal penalty on a company director under excise law cannot be sustained without material showing direct and culpable participation in the alleged duty evasion, and the director's role in sales and marketing alone was insufficient. The related appeal also ceased to have practical survival after the underlying dispute was settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, with the scheme treated as extending to connected penalty proceedings arising from the same show-cause notice. On both the settlement-based procedural ground and the merits, the penalty was set aside and the appeal became infructuous.

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Issues: (i) whether the appeal against penalty on the director survived after the earlier order of penalty had already been set aside and the matter had been remanded only on limitation, and after the related dispute stood resolved under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019; (ii) whether penalty under Rule 26 of the Central Excise Rules, 2002 could be sustained against the director of sales and marketing on the facts of the case.

Issue (i): whether the appeal against penalty on the director survived after the earlier order of penalty had already been set aside and the matter had been remanded only on limitation, and after the related dispute stood resolved under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019

Analysis: The earlier order against the company had already been set aside, leaving only the question of limitation open in that connected matter. In the meantime, the principal dispute was settled under the Sabka Vishwas scheme, and the scheme provisions were read as extending relief to penalty and connected proceedings arising from the same show-cause notice. On that basis, the pending appeal was treated as having no practical survival and as having become infructuous.

Conclusion: The appeal survived only technically and was treated as infructuous; the issue is answered in favour of the assessee.

Issue (ii): whether penalty under Rule 26 of the Central Excise Rules, 2002 could be sustained against the director of sales and marketing on the facts of the case

Analysis: Penalty under Rule 26 requires a legally sustainable basis for fastening personal liability. The findings recorded against the appellant showed participation in sales and marketing functions, but not material establishing personal involvement in the manufacture-based duty evasion or a role making him equally responsible for non-payment of excise duty. Since excise duty is levied on manufacture, and the record did not support direct culpability of the director for the alleged evasion, the penalty could not stand.

Conclusion: The penalty on the director was unsustainable and is set aside; the issue is answered in favour of the assessee.

Final Conclusion: The impugned penalty order did not survive either on account of the settled dispute and the procedural posture of the connected matter or on merits, and the appellant obtained complete relief.

Ratio Decidendi: A personal penalty on a company director under excise law cannot be sustained in the absence of material showing direct and culpable participation in the duty evasion, and a pending connected appeal may be treated as infructuous where the underlying dispute has already been resolved under the statutory settlement scheme.

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