SC prescribes Test for compounding of Offences by Customs

NEW DELHI. Vide a ruling dated 25th January 2008 AIT-2008-23-SC; Setting aside the Order No.2/CCC(DZ)/SCM/2006 passed by Chief Commissioner of Customs (Compounding Authority) compounding the offences under Sections 132 and 135(1)(a) of the Customs Act, 1962; the Apex Court has laid down the criteria for compounding of offences under Customs Act.

The Apex Court has ruled as under:

  • Applications for compounding ought to be disallowed if there are such contradictions, inconsistencies or incompleteness.  The reason is obvious.  If the applicant is trying to hoodwink the Authority such applications would not be maintainable.  That aspect is required to be kept in mind by the Compounding Authority. 
  • The test is as follows :

·         Is the applicant candid in the matter of placing of materials and facts before the Compounding Authority without in any way trying to hoodwink the Authority to escape his criminal liability?  Equally, the Compounding Authority is bound to discharge the statutory duty of making proper enquiry by examining with care and caution the materials that have been made available.  The said Compounding Authority must be satisfied that the applicant has done all he could or need to do in the matter.  The applicant has to be One-Time Evader.  He has to make clean breast of his affairs. 

·         He has to give exhaustive account of the circumstances in which he came to Delhi, how he came in possession of the diamond earrings, whether he had knowledge of the said earrings to be smuggled into India, he has to disclose the name, address and telephone number of the person who gave him the diamond earrings, whether the applicant knew that the earrings were meant to be smuggled into India etc.  The applicant has also to explain the circumstances in which he received the goods without knowing that they were being illegally imported or smuggled.  In the present case, none of the above tests stands fulfilled.  Therefore, the Application for compounding the offences under Sections 132 and 135(1)(a), was not maintainable.  The contradictions in the two versions given by Anil per se made the Application for compounding liable to be rejected.  In our view, neither Anil has fulfilled his obligations nor has the Compounding Authority discharged its statutory duty of making proper enquiries. 

·         the compounding mechanism in Section 137(3) is to be allowed only in cases of doubtful benefit to the Revenue and to prevent needlessly proliferating litigation and holding up of collections.  Compounding cannot be allowed if there are apparent contradictions, inconsistencies or incompleteness in the case of the applicant before the Compounding Authority.  It is the duty of the Compounding Authority to ascertain such contradictions before compounding is ordered.  In the present case, different versions given by Anil “ in his statement under Section 108, in his first bail Application and in his Application for compounding “ itself disqualifies Anil from claiming the benefit of compounding  under Section 137(3) of the 1962 Act.

(Source: Allindiantaxes)


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