Co-noticee penalty cannot survive once the principal noticee settles under Sabka Vishwas and receives discharge.

Penalty on a co-noticee could not be sustained after the main noticee obtained a discharge certificate under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and settled the tax dues in full and final settlement. The Tribunal treated the principal settlement as removing the foundation for penal action against the co-noticee on the same demand, and held the impugned penalty order unsustainable. The resulting legal position is that, where the principal noticee has been discharged under the scheme, penalty proceedings against the co-noticee based on that settled liability cannot survive.

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Issues: Whether penalty could be imposed on a co-noticee when the main noticee had settled the dispute under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and obtained discharge.

Analysis: The main noticee had already been issued a discharge certificate under the scheme for full and final settlement of the tax dues. The Tribunal followed its earlier view that, once the main assessee settles the dispute under the scheme, the foundation for penal action against the co-noticee does not survive. The impugned order imposing penalty on the co-noticee was therefore found unsustainable.

Conclusion: Penalty on the co-noticee was not sustainable after settlement by the main noticee under the scheme, and the issue was decided in favour of the appellant.

Ratio Decidendi: Where the principal noticee has obtained discharge and settled the dispute under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, penalty on the co-noticee cannot be sustained on the same settled demand.

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