PUBLIC NOTICE No. 31/2008 Date: 06.06.2008

Guidelines for compounding of offences under Customs and Central Excise Acts - Regarding.
Attention of all Importers, CHAs & Trade is invited to the Board Circular No. 54/2005 - Cus. dated 30.12.2005 issued vide F. No. 450/67/2003 - Cus.IV. The Central Government has brought into force the Customs (Compounding of Offences) Rules, 2005 with effect from 30th December, 2005, the date of publication of these rules in the Official Gazette and the Notification No. 114/2005-Customs (N.T.) dated 30-12-2005 has been issued in this regard.

2. The purpose of compounding of offences against payment of compounding amount is to prevent litigation and encourage early settlement of disputes. Considering the wide range of offences listed in the relevant Chapters of the Customs Act, it has been decided to classify these offences as (i) technical offences; and (ii) substantive or non-technical offences for the purpose of compounding. ‘Technical offences’ are those offences that can be compounded more than once and would be accorded a more liberal treatment. However, ‘Substantive or non-technical offence’ are offences, where it has been decided not to allow compounding for the second time. For the purpose of compounding, ‘Substantive or non-technical offence’ would mean offences covered under Section 135 and 135A of the Customs Act. On the other hand ‘Technical Offence’ would mean offences covered under Section 132, 133 and 134 of the Customs Act. Accordingly compounding for substantive offence shall be allowed only once.

3. Considering the serious implications of certain offences mentioned below, these shall not be considered for compounding and any applications received from one or more categories of the following persons shall be rejected.

(i) Any person who along with offence under Customs Act, has also committed or has also been accused of committing an offence under any of the following Acts:-

(a) Narcotics Drugs and Psychotropic Substances Act, 1985;

(b) Chemical Weapons Convention Act, 2000;

(c) Arms Act, 1959;

(d) Indian Penal Code;

(e) The wild life (Protection) Act, 1972.

(ii) Any person who is involved in cases of smuggling of goods falling under any of the following categories,-

(a) Special Chemicals, Organisms, Materials, Equipments & Technologies (SCOMET), as specified in Appendix-3 to Schedule 2 of ITC (HS);

(b) Prohibited items for import or export as specified in the ITC (HC) Classifications of Export and Import items, 2004-09 issued under Section 3 of the Foreign Trade (Development and Regulation) Act, 1992;

(c) Any other goods or a document, which is likely to affect friendly relations with any foreign state or is derogatory to national prestige.

(iii) Any person who has already exercised the option of compounding of an offence in respect of goods of value exceeding rupees one crore in the past.

(iv) Any person who has been convicted under the Act by an order issued subsequent to the date of publication of the Customs (Compounding of Offences) Rules in the Official Gazette.

4. While the Compounding of Offence Rules have been made as simple and unambiguous as possible, it would be worthwhile to clarify a few provisions as follows:

(i) Offence committed by officers of Customs does not merit compounding as it is a matter between the State and its employee. Accordingly the definition of the applicant exclude 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 is provided for verification of such facts and call for any other facts or information available on record from the reporting officer.

(5) The Chief Commissioners have been empowered to compound offences before or after filing of the complaint subject to the above general guidelines. While there would be no difficulty in cases where complaint has not been filed by the department, as regards existing cases pending in the Court, the following procedure may be followed. No such application for compounding shall be processed unless the applicant within 30 days of filing such application, files an affidavit before the Court before whom such prosecution is pending undertaking to comply with the provisions of these rules and submit a copy of such affidavit to the compounding authority. On receipt of such affidavit, the compounding authority shall examine the application in accordance with the above guidelines and pass an appropriate order under sub-rule (3) to Rule 4. A copy of such order shall also be forwarded to the Court. After payment of compounding amount as per the above order, the reporting authority shall move an application before the said Court informing about the compounding of offence and requesting the Court to dispose of the case accordingly. If the Court accepts the order of compounding of offence and disposes of case, then the order of compounding authority becomes final. However, in cases where the Court rejects the request of the department for grant of immunity from prosecution by compounding of offences, then the compounding amount paid by the applicant as per order of the compounding authority shall be refunded to the applicant.

6. In order to make best of use of compounding of offence, assesses at the time of intimation / initiating action for launching of prosecution shall be given an offer of compounding. It is however clarified that the application for compounding shall be decided on merits and in the absolute discretion of the Chief Commissioner. The cases where the Chief Commissioner is not inclined to accede to applicant’s request for compounding as detailed in para 3 above, may be rejected informing the grounds accordingly.

7. All concerned may take note of the above.

F. No. S/26– 326/07-08 A(G)

(SANGHAMITRA PANDA)
COMMISSIONER OF CUSTOMS (IMPORT)
MUMBAI

Copy to:
1) The Chief Commissioner of Customs Mumbai-I.
2) The Commissioner of Customs (Gen), Mumbai-I.
3) The Commissioner of Customs (Export), Mumbai-I.
4) The Commissioner of Customs (Appeals), Mumbai-I.
5) ADG (Systems), Dir General of Systems and Data Management, Customs& Central Excise, 4th & 5th Floor, Hotel Samrat, Chanakyapuri, New Delhi - 110021.
6) The Commissioner, Directorate of Publicity & Public Relations, Customs & Central Ex. C.R. Building, I.P. Estate, New Delhi 02.
7) Addl. Commissioner of Customs (P&V) and Jt. Commissioner of Customs Preventive (General).
8) Office Copy
9) To All-As per mailing list.

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