2020 (2) TMI 358 - AT - Customs

Compounding of offences - Section 137(3) of the Customs Act, 1962 - Appellant filed an application under the said Rules for compounding of offence on 10/02/2006 but since the offence committed by the Appellant is punishable under Section 120B IPC r/w Section 135 of the Customs Act, 1962 therefore the said application was not considered being outside the purview of the then Compounding of Offences Rules, 2005. HELD THAT - The purpose of compounding of offences against payment of compounding amount is to prevent litigation and encourage early settlement of dispute. In the guidelines issued vide Circular No. 15/10/2009 no prohibition has been imposed against deciding the application for compounding of offences which were earlier rejected on the technical ground being outside the purview, nor there is any embargo that if the application has been rejected earlier the same cannot be entertained again even if it falls within the purview of compounding of offences as per the guidelines of 2009. A perusal of the said circular/guidelines makes it clear that it is not applicable only qua those case which has been specifically excluded in that circular/guidelines from the purview of compounding. It is not the case of the Appellant that the offence committed by him is no longer an offence. His only plea is that now the offence under the Provision of IPC can also be compounded as per the Circular of 2009. Going by the reasoning given by the learned Commissioner, the very purpose of compounding of offence i.e. to prevent litigation and encouraged earlier settlement of dispute, will be defeated. The Application for compounding of offences can be rejected only on the grounds mentioned in the guidelines issued by Circular dated 2009 and not otherwise. After going through the guidelines issued by Circular dated 2009, I am of the view that the Application filed by the Appellant for compounding falls within the four corners of the Circular dated 2009 and the same deserve to be allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Compounding of offence under Section 137(3) of the Customs Act, 1962 - Rejection of compounding application under the Compounding of Offences Rules, 2005 - Rejection of subsequent application under amended rules in 2016 - Legality of rejection based on finality of earlier rejection - Applicability of Circular No. 29/2009 dated 15/10/2009 for compounding of offences under Customs Act, 1962.

Analysis:
The appeal was against the order dismissing the compounding application under Section 137(3) of the Customs Act, 1962. The case involved the importation of Stainless Steel Plates by a company for manufacturing thread protectors for pipes supplied to O.N.G.C. Investigations revealed that the protectors supplied were not made of Stainless Steel as required, leading to duty demands and penalties. The appellant was alleged to have abetted smuggling by certifying false requirements. The initial penalty imposed on the appellant was reduced in a subsequent adjudication order. A criminal complaint was filed under IPC, and the appellant paid the penalty in 2004. The Compounding of Offences Rules, 2005 excluded IPC offences from compounding. In 2009, Circular No. 29/2009 amended the rules, removing the exclusion. The appellant applied for compounding under the amended rules in 2016, which was rejected based on the finality of the 2006 rejection.

The circular excluding IPC offences from compounding was held ultra vires by the Bombay High Court in 2007, leading to the 2009 amendment. The purpose of compounding is to prevent litigation and encourage early dispute settlement. The guidelines in Circular No. 29/2009 did not prohibit reconsideration of earlier rejections if they fell within the purview of the amended rules. The appellant's offence was not excluded from compounding, and the rejection based on the 2005 circular was deemed incorrect. The rejection by the Chief Commissioner was set aside, and the appeal was allowed, granting consequential relief.

The judgment highlighted the importance of following the guidelines in Circular No. 29/2009 for compounding offences under the Customs Act, 1962. It emphasized that rejections should be based on the guidelines issued and not on outdated circulars. The decision focused on promoting early dispute resolution and preventing unnecessary litigation.