Case Law Details
Salasar Ispat Pvt. Ltd. Vs Commissioner of CGST & Central Excise (CESTAT Mumbai)
The CESTAT Mumbai considered appeals involving penalties imposed on co-noticees under Rule 26 of the Central Excise Rules, 2002, arising from proceedings against a main noticee. The main noticee had settled the entire dispute under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDR Scheme), and obtained a discharge certificate upon payment of the determined tax dues. Consequently, the appeal of the main noticee had already been disposed of by the Tribunal.
The co-noticees challenged the continuation of penalties imposed on them, arguing that once the main noticee had settled the dispute, no independent proceedings could survive against them, as their liabilities were consequential to the primary demand. They relied on several Tribunal decisions supporting the view that penalties against co-noticees cannot continue once the main demand is settled under the SVLDR Scheme. The appellants also contended on merits that there was no incriminating evidence linking them to the alleged violations, as no excess stock or discrepancies were found and statements relied upon were retracted and not subjected to cross-examination.
The department argued that the benefit of the SVLDR Scheme does not automatically extend to co-noticees who have not independently applied for it and supported the findings of the appellate authority. It was also submitted that opportunities for cross-examination had been provided, though witnesses did not appear.
The Tribunal examined the records and noted that the main noticee had settled the dispute under the SVLDR Scheme and received the discharge certificate, thereby bringing finality to the proceedings arising from the show cause notice. It further observed that the penalties imposed on co-noticees were dependent on the main demand and that, in the absence of such demand, continuation of penalties lacked independent basis.
On merits, the Tribunal found that apart from statements of witnesses and certain private documents, no substantive evidence existed against the co-noticees. It reiterated the settled principle that statements recorded during investigation carry no evidentiary value if cross-examination is not conducted. Since such statements could not be relied upon and no other incriminating material was available, the basis for imposing penalty was found to be unsustainable.
The Tribunal also noted that the SVLDR Scheme provided relief to co-noticees, including the possibility of nil penalty upon settlement, and that consistent decisions had recognized extension of such benefits where the main noticee had settled the dispute. Considering both the legal position and merits of the case, the Tribunal held that the penalties imposed on the co-noticees were not sustainable.
Accordingly, the Tribunal allowed the appeals, set aside the order of the Commissioner (Appeals), and granted consequential relief to the appellants.
FULL TEXT OF THE CESTAT MUMBAI ORDER
These two appeals were heard on 20.01.2026 and taken up for order.
2. As could be noticed main Appellant M/s. Nashik Strips Pvt. Ltd. had settled the entire dispute under “Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019” (SVLDR Scheme, 2019) after the matter had reached this Tribunal in the second round of litigation challenging the order of confirmation of duty, demand, etc. against the main Appellant and penalties of ₹1,00,000/- each against these two Appellants in the de novo adjudication and appeal.
3. During course of hearing learned Counsel for the Appellant Mr. Ashok Singh submitted that after main noticee had settled the dispute, the proceedings arising out of the said show-cause notices have attained finality, for which no other independent proceeding would survive against the co-noticees since liabilities of co-noticees were dependent/consequential to the alleged duty liability of the main noticee. In citing decision of this Tribunal passed in the case of Dinesh Kanoria Vs. Commissioner of Central Excise, Thane-I (date of decision 20.12.2022 at CESTAT, Mumbai), B. Vyas and Ors. Vs. Commissioner of Central Excise, Mumbai-III, reported in 2021 (378) ELT 177 (Tri.-Mumbai), M/s. Exotica Housing Pvt. Ltd. Final Order dated 17.02.2020, V.K. Agarwal Vs. Commissioner of Central Tax, CGST & Central Excise in Excise Appeal No. 54946 of 2023 decided on 29.08.2023 as well as B.V. Kshatriya Vs. Commissioner of GST & CE, Nashik in Excise Appeal No. 86039 of 2020 decided on 11.01.2023 he further argued that consistently this Tribunal had held that when demand of duty is settled under the SVLDR Scheme, 2019 by main noticee, penalty against co-noticees can’t be allowed to continue. Further, in respect of the merit of appeal, he pointed out that no recovery of M.S. Ingots was made from Appellant Vijay Kumar Jindal and the recovery and seizure of private documents allegedly made from premises of the Appellant M/s. Salasar Ispat Pvt. Ltd. does not belong to the said Appellant and apart from statements of witnesses which were all retracted at the earliest possible opportunity, whose cross examination could not be conducted despite direction of this Tribunal given in the first round of litigation due to their nonappearance, there is nothing available on record to implicate these noticees namely Broker and Supplier. He asserted that no discrepancy was noticed from the statutory record or physical stock in the factory of the main noticee at Nashik during seizer and not a single kilogram of excess raw material or finished goods were found, for which otherwise on the merit of the case also, the penalty is not sustainable.
4. Learned Authorised Representative Mr. Ranjan Kumar argued in support of the reasoning and rationality of the order passed by the Commissioner (Appeals) and submits that opportunity of cross-examination was granted in the de novo proceeding and even witnesses were noticed for their cross-examination but Postal Department returned back the notices with remark that addressee R.L. Gautam of M/s. Gautam Enterprises had left the premises and other witnesses had not turned up, as reveals from para 62 of the Order-in-Appeal. He further submits that scheme designed under SVLDRS, 2019 does not extend the benefit to every noticee who had not applied for such benefit.
5. Submissions are taken note of and appeal paper book is perused. As could be noticed, main Appellant was issued with discharge certificate in the nature of Form No. SVLDRS-4 on dated 03.01.2020 upon payment of the declared amount of ₹7,57,617/- as tax dues as determined under Section 126 of the Finance Act, 2019 covering the SVLDR Scheme, 2019 and this Tribunal on dated 06.04.2021 had disposed of the appeal of main Appellant M/s. Nashik Strips Pvt. Ltd. on that ground. These two Appellants are co-noticees on whom penalty of ₹1,00,000/- each was imposed under Rule 26 of Central Excise Rules, 2002 and further perusal of the Order-in-Appeal would reveal that apart from statements of witnesses and certain private documents seized no incrementing materials are available against these Appellants and it is a settled principle of law that in the absence of cross-examination, the statements recorded at the time of investigation would carry nil evidencing value and the same is required to be expunged, applying which nothing would remain against these Appellants to confirm the penalty, apart from the fact that had these Appellants sought for availment of the benefit of SVLDR Scheme, 2019 by simply filing application/declaration before the designating authority, they would have paid nil penalty in view of the relief available to them under Section 124(1)(b) of the SVLDR Scheme, 2019 which is further clarified by Board Circular No. 1071/4/2019-CX8 dated 27.08.2019 and supported by consistent decisions of this Tribunal. Therefore, when the scheme permits extension of benefits of settlement to co-noticees after the main noticee has settled the determined tax dues and on the merit of the case also imposition of penalty is found to be not sustainable, I am of the considered view that Appellants deserve to succeed in these appeals. Hence the order.
THE ORDER
6. The appeals are allowed and the order passed by the Commissioner of GST & CX (Appeals), Nashik vide Order-in-Appeal No. NSK/EXCUS/000/APPL/291/17-18 dated 30.08.2018 is hereby set aside with consequential relief, if any.
(Order pronounced in the open court on 12.03.2026)
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