Co-noticee penalty under Central Excise Rules falls away when the main demand is settled under Sabka Vishwas scheme.

Penalty on a co-noticee under Rule 26(1) of the Central Excise Rules, 2002 does not survive where the main demand against the principal noticee has been settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. CESTAT noted that the principal dispute had been disposed of as withdrawn under Section 127(6) of the Finance (No. 2) Act, 2019, and applied its earlier view that settlement of the main demand extinguishes the basis for co-noticee penalty. The penalty on the appellant, a broker and transporter arranger, was therefore held unsustainable and set aside, and the impugned order was annulled.

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Issues: Whether penalty imposed on a co-noticee under Rule 26(1) of the Central Excise Rules, 2002 survives when the main demand against the principal noticee has been settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.

Analysis: The appeal concerned penalty imposed on the appellant as a broker and transporter arranger in proceedings arising from alleged clandestine removal of excisable goods. The main noticee's dispute had already been settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, and the Tribunal noted that the principal demand stood disposed of as withdrawn in terms of Section 127(6) of the Finance (No.2) Act, 2019. The Tribunal followed its earlier view that where the principal demand is settled under the scheme, the penalty against the co-noticee does not survive.

Conclusion: The penalty imposed on the appellant was held to be unsustainable and was set aside.

Final Conclusion: The appeal succeeded and the impugned order was annulled, resulting in deletion of the penalty against the appellant.

Ratio Decidendi: Once the main demand against the principal noticee is settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, the penalty proceedings against a co-noticee under Rule 26(1) cannot be sustained.

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