2014 (6) TMI 87 - HC - Customs

Compounding of offences - Illegal import of goods - Contradictory statements given by assessee - Redemption fine paid to avoid confiscation - Held that - The power to permit compounding of offences contained in Section 137 (3) is apparently wide; the concerned official is not empowered to allow compounding in respect of offences under Section 135 and 135 (A) and the class of offences which are spelt out in clauses (b) & (c) of the proviso to Section 137 (3). Likewise, an embargo has been placed upon the power of compounding in respect of a person who has been allowed to compound once in respect of any offence under Chapter XVI of the Customs Act, 1962. The requirement of disclosure, apparently spelt out in Anil Chanana 2008 (1) TMI 50 - SUPREME COURT was read in to the power under Section 137 (3) of the Act, having regard to the given circumstances of the case. It was highlighted during the hearing, that the offence with which the importer or smuggler was charged with in that case attracted a minimum sentence - which impelled the Court s observation that the petitioner was not entitled to claim compounding. it is apparent that the petitioner after initially refuting ownership, later on admitted ownership in his subsequent statements and paid up the duty amount, penalty and redemption fine. In these circumstances, considering that no minimum sentence or penalty was attracted for the offence that the petitioner was charged with, the denial of compounding meant that he would have to face a long trial which ultimately would, in all probability, culminate in a small fine. The impugned order of the Chief Commissioner in our opinion is erroneous, because apart from the initial contradiction and the first denial, there were in fact no subsequent conflicting statements in that that subsequent statements recorded under Section 108 (on 20.07.2011 and 09.08.2011) clearly admit that he purchased the articles for sale in India - The respondents are hereby directed to accept the compounding application and pass consequential orders - Decided in favour of assessee.

Summary

Issues:
Petitioner seeks to quash Chief Commissioner's order rejecting compounding application under Section 137 of the Customs Act.

Analysis:
1. The petitioner imported micro chips without declaration, later admitted ownership, and deposited duty, penalty, and redemption fine to avoid confiscation and prosecution.
2. The Chief Commissioner rejected compounding application citing contradictions in petitioner's statements, following the decision in Union of India v. Anil Chanana.
3. Petitioner argued that since the offenses did not attract a minimum penalty, compounding should have been allowed, emphasizing revenue loss due to rejection.
4. The Revenue justified the rejection, stating the petitioner's inconsistent statements did not demonstrate voluntary disclosure.
5. The Court examined Section 137 of the Act, emphasizing the importance of disclosure and the compounding authority's duty to conduct a thorough inquiry.
6. The Court noted the wide power to permit compounding under Section 137(3) but highlighted restrictions under clauses (b) & (c) of the proviso and for repeat offenders.
7. Considering the lack of minimum penalty for the offense, the Court found the Chief Commissioner's rejection erroneous as subsequent statements confirmed ownership.
8. The Court quashed the impugned order, directing acceptance of the compounding application within four weeks.