CESTAT Quashes Penalty on Co-Noticees After Main Noticee Settles Dispute Under SVLDRS

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai Bench has set aside penalties imposed on two co-noticees after the main noticee settled the underlying tax dispute under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS). The bench of Dr. Suvendu Kumar Pati (Judicial Member) held that once the principal dispute is resolved under the scheme, consequential proceedings against co-noticees cannot survive in the absence of independent evidence. The case arose from proceedings initiated against the main noticee, M/s. Nashik Strips Pvt. Ltd., alleging irregularities leading to confirmation of duty demand. During the course of litigation, penalties of ₹1,00,000 each were also imposed on the present appellants as co-noticees. However, after the matter reached the Tribunal in the second round of litigation, the main noticee opted to settle the dispute under the SVLDR Scheme, 2019 and paid the determined tax dues of ₹7,57,617, following which a discharge certificate (Form SVLDRS-4) was issued on 3 January 2020. The Tribunal had earlier disposed of the main noticee’s appeal on that basis. Despite the settlement by the main noticee, the penalties against the co-noticees continued to remain in force, prompting the present appeals before the Tribunal. The appellants argued that once the main noticee settles the dispute under the SVLDR Scheme, the proceedings arising from the same show cause notice attain finality. Consequently, penalties against co-noticees, which are dependent and consequential to the duty demand on the main noticee, cannot survive independently. The appellants relied on several earlier decisions of the Tribunal where penalties on co-noticees were set aside after the main assessee resolved the dispute under the scheme. The appellants argued on merits that no recovery of M.S. Ingots was made from Vijay Kumar Jindal. Documents allegedly seized from the premises of Salasar Ispat Pvt. Ltd. did not belong to the company. Statements of witnesses relied upon by the department had been retracted at the earliest opportunity. Despite directions in earlier proceedings, cross-examination of the witnesses could not be conducted because they failed to appear. No discrepancies were found in the statutory records or physical stock of the main noticee during investigation. The departmental representative defended the order of the Commissioner (Appeals), contending that cross-examination opportunities had been provided during de-novo proceedings. However, some witnesses could not be traced or did not appear for examination. The department further argued that the SVLDR Scheme does not automatically extend benefits to every noticee who has not independently applied for settlement. After examining the record, the Tribunal observed that the main noticee had already been granted a discharge certificate under the SVLDR Scheme upon payment of the determined tax dues. The Tribunal further noted that the case against the co-noticees was primarily based on statements of witnesses and certain private documents. Since cross-examination of those witnesses could not be conducted, the statements could not be relied upon as evidence. The Bench reiterated the settled legal principle that statements recorded during investigation lose evidentiary value when cross-examination is not provided, and therefore must be disregarded. Once those statements were excluded, the Tribunal found no incriminating material on record to justify the imposition of penalties on the appellants. The Tribunal also observed that under the SVLDR Scheme, co-noticees could obtain relief if they filed declarations before the designated authority. In fact, had the appellants applied under the scheme, they would have been liable to pay nil penalty in view of the relief provided under Section 124(1)(b) of the Finance Act, 2019. Considering both the scheme’s intent and the absence of substantive evidence, the Tribunal concluded that continuation of penalties was unjustified. The Tribunal set aside the Order-in-Appeal passed by the Commissioner (Appeals), Nashik, and granted consequential relief to the appellants. Case Details Case Title: M/s. Salasar Ispat Pvt. Ltd. Versus Commissioner of CGST & Central Excise, Nashik Citation: JURISHOUR-351-CES-2026(MUM) Case No.: Excise Appeal No. 85722 of 2019 Date: 12.03.2026 Counsel For Petitioner: Ashok Singh, Advocate Counsel For Respondent: Ranjan Kumar, Assistant Commissioner Click Here To Read Order Read More: Service Tax Demand Barred After VCES Discharge Certificate: CESTAT

CESTAT Quashes Penalty on Co-Noticees After Main Noticee Settles Dispute Under SVLDRS

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