Kar Vivad Samadhan Scheme immunity extended to co-noticee director; penalty could not survive after main noticee settlement.

Settlement of the main noticee's dispute under the Kar Vivad Samadhan Scheme was treated as extending immunity to the co-noticee director under a binding departmental circular then in force. The appellate authority could apply that circular even without a specific prayer, and departmental authorities were bound by it. On that basis, continuation of penalty against the co-noticee was not proper, and the penalty order against the director was set aside.

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Issues: Whether the penalty imposed on a co-noticee director could survive after the dispute against the main noticee company had been settled under the Kar Vivad Samadhan Scheme.

Analysis: The dispute against the company had already been settled under the Scheme, and the department was bound by the Board's circular then in force, which stated that settlement of the main noticee's dispute would extend immunity to co-noticees. The appellate authority could have applied the circular even without a specific prayer. The circular was binding on departmental authorities, and the cited trade notice and Tribunal decision supported the view that once the main manufacturer's liability stood settled, it was not proper to sustain penalty on the co-noticee director.

Conclusion: The penalty on the co-noticee could not be sustained and was liable to be set aside in favour of the assessee.

Final Conclusion: The impugned penalty order against the director was annulled, and the appeal succeeded.

Ratio Decidendi: Where the main noticee's dispute is settled under the Kar Vivad Samadhan Scheme, a binding departmental circular may extend immunity to co-noticees and preclude continuation of penalty against them.

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