Settlement under the legacy dispute scheme waives Rule 26 penalties for co-noticees despite no separate declarations.

Settlement of the underlying duty dispute under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 entails waiver of penalties for both the principal noticee and co-noticees. Where the principal noticee resolves an allegedly irregular CENVAT credit demand under the Scheme, penalties under Rule 26 of the Central Excise Rules, 2002 cannot be sustained against co-noticees merely because they did not file separate Scheme declarations. Coordinate Division Bench decisions on materially identical facts govern over a contrary Single Member Bench view. Consequently, the penalties imposed on the co-noticees are unsustainable.

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Issues: Whether penalties under Rule 26 of the Central Excise Rules, 2002 can be sustained against co-noticees where the principal noticee has settled the underlying duty dispute under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.

Analysis: The principal noticee had settled the dispute concerning allegedly irregular CENVAT credit under the Scheme. Applying binding coordinate-Bench decisions on materially identical facts, the settlement of the demand under the Scheme entailed waiver of penalties not only for the principal noticee but also for co-noticees, notwithstanding that the co-noticees had not independently filed declarations under the Scheme. The contrary view of a Single Member Bench could not prevail over the coordinate Division Bench decisions.

Conclusion: Penalties imposed on the co-noticees under Rule 26 of the Central Excise Rules, 2002 are unsustainable. The issue is decided in favour of the assessee.

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