Compounding of offences under the Customs Act – CBEC issues guidelines
On the basis of the decision of the Supreme Court in the case of U.O.I. vs. Anil Chanana - that compounding of offences is undertaken based on the principle of Disclosure, the Board clarifies that the basic rule of disclosure, underlying Section 137(3) read with Rule 6 of the Customs (Compounding of Offences) Rules, 2005, is that if there are demonstrable contradictions or inconsistencies or incompleteness in the case of the applicant, then the application for compounding cannot be entertained. Board reiterates that the aforesaid decision of the Supreme Court and rule of disclosure shall be followed while considering the compounding of offences. Accordingly, compounding of offences may not be allowed where there are demonstrable contradictions, inconsistencies or incompleteness in the case.
Board also reiterates the following important points.
(i) Offence committed by officers of Customs/ Central excise does not merit compounding as it is a matter between the State and its employee. Accordingly the definition of the applicant excludes the departmental officers.
(ii) As the Chief Commissioner has to decide about the eligibility of the applicant and allow compounding in respect of an application filed before him on the basis of certain facts given by the applicant, it may be ensured that verification of such facts is done by calling for a report or any other facts or information available on record from the reporting authority.
(iii) As per Rule 6 of the Customs (Compounding of Offences) Rules, 2005, any person who has made the application for compounding of offence and has made full and true disclosure of facts relating to the case, is given immunity from prosecution for any offence under the Customs Act, 1962 with respect to the case covered by the compounding of offence. Since the filing of application under compounding rules is the individual option of the person to avoid prosecution, other persons involved in the case/ offence and who have not filed the application would not be given immunity from prosecution. In such situation, remaining persons would face regular proceedings of the department for adjudication/ prosecution/ appeal.
(iv) A new proviso has also been inserted in this rule, which provides that if a person has, in respect of same goods, committed offences falling under more than one category, i.e., Sl.No.1 to 8 of the table specified in this rule and where amount of duty evasion or amount of drawback or exemption from duty, or amount of market value of the goods is same for all such offences, then the compounding amount, in such cases, shall be the amount determined for the offence for which a higher compounding amount has been prescribed.
(v) In terms of Rule 4, an applicant is required to pay duty, penalty, and interest before submission of an application for compounding of offences. Correspondingly, the Application Form also contains a specific column under Sl.No.12A requiring the applicant to declare whether he has paid the same and their details. Hence, it is clarified that the compounding of offences shall not be allowed unless the aforesaid duty, penalty and interest thereon are paid by the applicant.
Board further reiterates that at the time of intimation/ initiating action for launching of prosecution itself, the assessees should be given an offer of compounding. It may, however, be clarified that the application for compounding shall be decided on merits and in exercise of the powers vested with the Chief Commissioner. In respect of cases where the Chief Commissioner is not inclined to accede to the applicant's request for compounding, the same may be rejected duly informing the grounds and after following the principles of natural justice.
CBEC Circular No. 29/2009 Dated: October 15, 2009