Co-noticee penalty does not survive after settlement of the principal duty dispute under the legacy dispute resolution scheme.

Where the principal duty demand was settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, the connected penalty on a co-noticee under Rule 26(1) of the Central Excise Rules, 2002 was held not to survive independently. The Tribunal followed the view that once the substantive dispute of alleged duty evasion is concluded through the scheme and the main case stands withdrawn by deeming fiction, the ancillary penalty on the co-noticee has no separate footing. The appellant therefore obtained relief and the penalty was set aside.

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

Analysis: The appeal turned on the effect of the settlement of the principal noticee's dispute under the scheme. The Tribunal treated the settlement and deemed withdrawal of the main case as decisive for the co-noticee's liability. It followed the Division Bench view that once the substantive dispute of duty evasion stands concluded under the scheme, the connected penalty on a co-noticee does not survive independently.

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

Final Conclusion: The co-noticee penalty failed once the principal dispute was settled under the legacy dispute resolution scheme, and the appellant obtained complete relief.

Ratio Decidendi: Where the principal demand in a duty-evasion matter is settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, a connected penalty on a co-noticee under Rule 26(1) of the Central Excise Rules, 2002 does not survive independently.

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