When you close SW2 while SW1 is open, any charge that might be on the capacitor is discharged. Thus the voltage across the capacitor is zero volts.
When you open SW2 (SW1 still open), nothing changes...there is still zero volts across the capacitor.
The physics of how a capacitor works says that the voltage across a capacitor cannot change instantaneously.
So, when you close SW1, the + side of the capacitor rises instantly to about 12 volts. Because the voltage across the capacitor cannot change instantly, the - side of the capacitor ALSO rises to about 12 volts and THEN begins discharging through the LED. The time constant is pretty fast (milliseconds), so you only see a quick blink.