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2025 (3) TMI 1039 - HC - CustomsRejection of the petitioner s application for compounding of the offence under Section 137 of the Customs Act 1962 - failure to follow the instructions and guidelines issued by the respondents themselves - HELD THAT - In the instant case after the applicant had submitted his application the application was first got scrutinized by the compounding officer within the Department and thereafter the petitioner was called for personal hearing. The petitioner had availed the opportunity of personal hearing appeared before the compounding officer accepted his guilt and offence and prayed for allowing the compounding application and also expressed his willingness to pay the compounding fees. There is no need for another show-cause notice to be issued to the petitioner or the applicant seeking compounding of an offence. Secondly what also weighs more in the minds of this Bench is the fact that every application for compounding of offence need not be accepted as a matter of routine. There has to be an element of scrutiny to be done and in addition there has also to be the subjective satisfaction of the compounding officer for reaching to the conclusion that the contents of the compounding application is full and true disclosure of the relevant facts. It would be difficult to accept the situation where the petitioner at the first instance takes a different stand both in his statement under Section 108 and also in the statement at the time of preparation of Panchnama and later to take a somersault and take an entirely different version while applying for compounding of the offence. In the instant case admittedly there is a vast variance in the contents in the statement under Section 108 that which is recorded in the Panchnama when compared to the contents made in the application for compounding of the offence - Surprisingly there has been no statement available on record to show that the petitioner had retracted from the statement that he had given under Section 108 as also in the Panchnama. If the compounding officer found substantial variance in the statements so made by the petitioner the rejection of the compounding application cannot be held to be bad in law or being contrary to the circulars governing the field of determining the compounding application. Conclusion - The rejection of the compounding application was justified due to the petitioner s failure to make a full and true disclosure of facts. It is held that every application for compounding of offence need not be accepted as a matter of routine. Petition dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS 1. Rejection of Compounding Application The relevant legal framework includes Section 137 of the Customs Act, 1962, and Rule 4(3) of the Customs (Compounding of Offences) Rules, 2005. The Court examined whether the compounding authority's rejection of the application was consistent with these provisions. The Court found that the petitioner had not made a full and true disclosure of facts, as there were contradictions between the petitioner's statements under Section 108 and the contents of the compounding application. The compounding officer identified these discrepancies, leading to the conclusion that the petitioner may have had a malafide intention to evade prosecution. The Court reasoned that the compounding authority's decision to reject the application was based on a thorough examination of the facts and circumstances, and it was not obligatory for the authority to accept every compounding application as a matter of routine. 2. Requirement of Show-Cause Notice or Hearing The petitioner argued that the compounding authority should have issued a show-cause notice or disclosed its intention to reject the application before passing the order. The petitioner relied on several judgments from the High Courts of Delhi and Kerala to support this contention. The Court analyzed these judgments and determined that they did not mandate a show-cause notice or pre-rejection hearing. The Court noted that the petitioner had already been given a personal hearing where he admitted his guilt and requested leniency. Therefore, the Court concluded that there was no procedural requirement for an additional notice or hearing before the rejection. 3. Full and True Disclosure of Facts The Court emphasized the importance of full and true disclosure in compounding applications. The discrepancies between the petitioner's statements under Section 108, the Panchnama, and the compounding application were significant. The petitioner had not retracted his earlier statements, which further undermined his credibility. The Court found that the compounding authority's decision to reject the application was justified given the lack of full and true disclosure and the petitioner's acceptance of the penalty imposed in the Order in Original. SIGNIFICANT HOLDINGS The Court held that the rejection of the compounding application was justified due to the petitioner's failure to make a full and true disclosure of facts. The Court stated that "every application for compounding of offence need not be accepted as a matter of routine," emphasizing the necessity for scrutiny and subjective satisfaction by the compounding officer. The Court also clarified that the cited judgments did not require a show-cause notice or pre-rejection hearing, as the petitioner had already been afforded a personal hearing. In conclusion, the Court dismissed the writ petition, finding it devoid of merit, and upheld the compounding authority's decision to reject the application. The Court's decision underscores the importance of honesty and transparency in compounding applications and affirms the discretionary power of compounding authorities to reject applications that do not meet the required standards.
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