2025 (1) TMI 416 - AT - Central Excise

Eligibility (of co-noticee) for waiver of penalty imposed under Rule 26 of the Central Excise Rules, 2002 - main case of M/s Suryansh Trading Company has been settled under SVLDRS- 2019 - HELD THAT - As per the judgments of not only Single Member Bench but also of the division bench cited by the learned Counsel, it has been held that in case of settlement of case under SVLDRS-2019 against the main party on whom there is duty demand, the co-noticee/co-appellant shall not liable to penalty under Rule 26 of Central Excise Rules, 2002. The one division bench judgment, in the case of Prakash Steeladge Ltd 2024 (11) TMI 468 - CESTAT AHMEDABAD held that ' the penalties imposed on the co-noticees in a case where the main noticee against whom the demand is confirmed, the case is settled under SVLDRS then in respect of other co-noticees penalty will not sustain even if they have not filed a declaration under SVLDRS-2019 and decision on the issue of SVLDRS-2019 in the case of Four R Associates and others reported as 2023 (11) TMI 9 - CESTAT CHENNAI given by Single Member Bench whereas the aforesaid cited decisions are given by Division Bench. Therefore, Division Bench judgment will prevail over Single Member Bench.' Conclusion - When a main case is settled under SVLDRS 2019, penalties on co-noticees involved in the same case are not sustainable. The penalty on the appellant is set aside. Appeal is allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal question in this judgment is whether the appellant is eligible for a waiver of the penalty imposed under Rule 26 of the Central Excise Rules, 2002, given that the main case of M/s Suryansh Trading Company has been settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS) 2019, and the Tribunal has disposed of the appeal as deemed withdrawn.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents:

The relevant legal framework involves Rule 26 of the Central Excise Rules, 2002, which pertains to the imposition of penalties. The SVLDRS 2019 is a scheme aimed at resolving legacy disputes by providing relief from penalties, interest, and other consequences upon payment of the disputed duty. Precedents cited include judgments from various cases such as Prakash Steeladge Ltd, Anil K Modani, and others, which have established that penalties on co-noticees are not sustainable when the main case is settled under SVLDRS 2019.

Court's Interpretation and Reasoning:

The court interpreted the SVLDRS 2019 as providing relief not only to the main party against whom the duty demand was confirmed but also to co-noticees or co-appellants involved in the same case. The reasoning is based on the intent of the scheme to resolve disputes by focusing on the collection of duty and waiving penalties and interest. The court emphasized that the relief scheme's purpose is to erase the detriment of penalties in cases where the main demand is settled.

Key Evidence and Findings:

The court considered the submissions and judgments from previous cases where penalties on co-noticees were waived once the main case was settled under SVLDRS 2019. The evidence presented included past judgments from both single and division benches that consistently supported the waiver of penalties under similar circumstances.

Application of Law to Facts:

The court applied the principles established in previous judgments to the facts of the current case. It concluded that since the main case involving M/s Suryansh Trading Company was settled under SVLDRS 2019, the penalty imposed on the appellant under Rule 26 should also be waived. The court found that the appellant was similarly situated to the co-noticees in the cited precedents.

Treatment of Competing Arguments:

The court addressed the arguments presented by the Revenue, which relied on a single-member bench decision in the case of M/s Four R Associates. However, the court distinguished this case by emphasizing that division bench decisions, which supported the appellant's position, prevail over single-member bench decisions. The court found that the division bench judgments provided a more authoritative interpretation of the SVLDRS 2019.

Conclusions:

The court concluded that the penalty imposed on the appellant is not sustainable under the circumstances, as the main case was settled under SVLDRS 2019. The appeal was allowed, and the penalty was set aside.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:

"It is settled that once the main case of duty evasion is settled under SVLDRS 2019, the penalty on the co-appellant shall not survive."

"Division Bench judgment will prevail over Single Member Bench."

Core Principles Established:

The core principle established is that when a main case is settled under SVLDRS 2019, penalties on co-noticees involved in the same case are not sustainable. The intent of the SVLDRS 2019 is to resolve disputes by focusing on the collection of duty and waiving penalties and interest.

Final Determinations on Each Issue:

The final determination is that the penalty imposed on the appellant under Rule 26 of the Central Excise Rules, 2002, is set aside, and the appeal is allowed. The court's decision aligns with the principles established in previous division bench judgments, which support the waiver of penalties under the SVLDRS 2019.

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