2026 (3) TMI 1627 - AT - Central Excise

SVLDRS settlement does not absolve co-noticees where evidence shows active abetment in fraudulent Cenvat credit misuse.

Settlement of the principal noticee under SVLDRS does not automatically extinguish the liability of co-noticees; each noticee must independently seek and ... Fraudulent cenvat credit - Effect of settlement by the main party under SVLDRS on penalty liability of co noticees - admission in statement as evidence - illicit manufacture and clandestine clearance of excisable goods in the guise of job work goods under the cover of job work challans - Whether settlement of the case of main party under SVLDR Scheme will absolve other co-noticees of their wrongful deeds and its consequences. Liability of co noticees despite settlement by main party under SVLDRS - HELD THAT: - The appellant has cited some decisions to plead that once case of the main party is settled under SVLDRS, 2019, penalty on other co-noticees automatically goes away and therefore, impugned order may be set aside as far as penalty on the appellant Shri Brij Kishor Choudhary is concerned. I find that in this case there are total 21 co-noticees including the present appellant out of which some of conoticees have already settled their cases under SVLDRS. Imposition of penalty - This Tribunal in the case of Vinod Bhadra [2022 (12) TMI 366 - CESTAT AHMEDABAD] decided the very same issue of imposition of penalty under Rule 26 of the Central Excise Rules, 2002 on co-noticees involved in the case made against M/s. Shri Ram Tubes Pvt. Ltd. After considering various evidences against various co-noticees, this Tribunal dismissed their appeal(s) and upheld the penalty imposed on them by the Adjudicating Authority. The issue of imposition of penalty on co-noticees under Rule 26 of the Central Excise Rules, 2002, when main party’s case is settled under SVLDRS, 2019, has recently been considered by CESTAT Allahabad in the case of Sushila Steel, Ghaziabad [2025 (7) TMI 1992 - CESTAT ALLAHABAD] it held that each noticee has to approach separately under SVLDRS for settlement of their case if case against the main party is settled The Adjudicating Authority in para 96.1 & 96.2 of the impugned order has discussed the role of the appellant in availment of fraudulent Cenvat Credit by M/s. Shri Ram Tubes Pvt. Ltd. The appellant had issued two bogus LRs showing transportation of 49,210 Kgs of copper ingots from ICD, Tughlaquabad to the factory of M/s. Shriram Tubes Pvt Ltd., Ahmedabad, whereas, the said goods had been diverted to different parties in Shahdara Delhi and were never received in said unit. M/s. Shriram Tubes Pvt Ltd. availed fraudulent Cenvat Credit which has also been confirmed by their various concerned persons in their respective statements. It is also on record that M/s. Shriram Tubes Pvt Ltd., after accepting their involvement in fraudulent availment of Cenvat Credit, applied under SVLDRS, 2019 and settled their case. Admission by the appellant of issuance of bogus LRs in his statements clearly establishes abetment on his part in availment of fraudulent Cenvat Credit by M/s. Shri Ram Tubes Pvt. Ltd. I therefore do no find any merit in his appeal and retain the penalty imposed by the learned Adjudicating Authority in the impugned order. Final Conclusion: The Tribunal held that settlement of the main noticee's case under the Sabka Vishwas scheme did not extinguish the appellant's separate liability as a co-noticee. Since the appellant's own role in issuing bogus transport documents and thereby abetting fraudulent availment of Cenvat credit was established, the penalty was sustained and the appeal was dismissed. Issues: (i) Whether settlement of the main party's case under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) absolves co-noticees from penalties imposed under the Central Excise Rules, 2002; and (ii) Whether the penalty imposed on the appellant for abetment in fraudulent availment of Cenvat credit is sustainable on the facts and evidence.Issue (i): Whether settlement of the main party under SVLDRS relieves co-noticees from penalties.Analysis: The Tribunal examined precedent and recent decisions including this Tribunal's earlier decisions and CESTAT Allahabad rulings which hold that settlement by the main party does not automatically absolve other noticees; each noticee must independently seek settlement under SVLDRS. The appellate record shows no independent settlement application by the appellant and the impugned order contains findings against co-noticees based on direct and circumstantial evidence linking them to the wrongful availment of credit. The Tribunal considered whether the factual findings and documentary admissions sustain independent liability of co-noticees despite settlement by the principal party.Conclusion: The Tribunal concludes that settlement of the main party under SVLDRS does not automatically absolve co-noticees; co-noticees must separately approach SVLDRS. This conclusion is adverse to the appellant.Issue (ii): Whether the penalty imposed on the appellant for abetment in fraudulent availment of Cenvat credit is sustainable.Analysis: The impugned order records that the appellant issued bogus LR(s) and admitted in statements knowledge of diversion and misuse of documents. The Tribunal reviewed the adjudicating authority's findings (paras 96.1 & 96.2) and relied on documentary and statement evidence showing issuance of fake LRs and facilitation of diversion of goods, as well as prior Tribunal precedent upholding penalties where a person played an active role in the modus operandi. The Tribunal found no reason to disturb the factual findings or penalties imposed under the Central Excise Rules, 2002.Conclusion: The Tribunal upholds the penalty imposed on the appellant for abetment in fraudulent availment of Cenvat credit; the appeal is dismissed and the decision is adverse to the appellant (in favour of the Revenue).Final Conclusion: The decision confirms that liability for abetment in fraudulent Cenvat credit is determined on the facts and evidence against each noticee, and that settlement by the main party does not negate independent liability of co-noticees.Ratio Decidendi: Settlement of the principal party under SVLDRS does not automatically extinguish liability of co-noticees; each co-noticee must independently establish entitlement to settlement, and where direct or circumstantial evidence (including admissions) establishes a co-noticee's active role in facilitating fraudulent Cenvat credit, penalties under the Central Excise Rules, 2002 are sustainable.