Co-noticee penalty under Rule 26 fails after Sabka Vishwas settlement by the main noticee discharges the duty liability.

Penalty under Rule 26 of the Central Excise Rules, 2002 could not be sustained against co-noticees where the main noticee had settled the legacy dispute under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and obtained a discharge certificate. The Tribunal treated the co-noticees' failure to file separate declarations as a procedural omission because the underlying duty liability had already been discharged and no revenue loss survived. On that basis, the penalty orders were set aside.

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Issues: Whether penalty under Rule 26 of the Central Excise Rules, 2002 could be sustained against co-noticees after the main noticee had settled the dispute under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and obtained discharge.

Analysis: The appeal turned on the settled position that once the main noticee had discharged the duty liability and received a discharge certificate under the scheme, the remaining co-noticees could not be visited with penalty merely because they had not separately filed declarations. The omission was treated as procedural in nature, particularly where the underlying demand stood settled and no revenue loss survived. The Tribunal relied on its earlier decisions applying the same approach and also noted that, had the appellants opted for the scheme, the relief available under Section 124(1)(b) of the Finance Act, 1994 would have resulted in nil liability.

Conclusion: Penalty under Rule 26 of the Central Excise Rules, 2002 was not sustainable against the appellants, and the penalty orders were liable to be set aside.

Ratio Decidendi: Where the main noticee has settled the legacy dispute under the Sabka Vishwas scheme and the duty liability stands discharged, penalty cannot be sustained against co-noticees solely for not separately opting for the scheme when the omission is merely procedural and no revenue loss remains.

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