Penalty waiver under the Sabka Vishwas Scheme extends to co-noticees after the principal noticee settles the service-tax demand.

Settlement of the underlying service-tax demand by the principal noticee under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, waives the related penalty for both the principal noticee and co-noticees. The Tribunal analysis states that this consequence applies even where a co-noticee did not independently file a Scheme declaration. Coordinate division-bench precedent was preferred over a contrary single-member view. Accordingly, the penalty imposed on the co-noticee was unsustainable and was set aside.

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Issues: Whether a penalty imposed on a co-noticee can survive after the principal noticee has settled the underlying service-tax dispute under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.

Analysis: The principal noticee settled the demand under the Scheme. The applicable Tribunal precedent recognises that settlement of the demand by the principal noticee carries waiver of penalty not only for that noticee but also for co-noticees, even where the co-noticee did not independently file a declaration under the Scheme. The contrary single-member view could not prevail over the coordinate division-bench decisions.

Conclusion: The penalty imposed upon the co-noticee was unsustainable and was set aside, in favour of the assessee.

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