CENTRAL EXCISE (COMPOUNDING OF OFFENCES) RULES, 2005 - AN OVERVIEW

[Mr. M. GOVINDARAJAN]

Offences under Central Excise Act;

     Sec. 9 of Central Excise Act, 1944 ('Act' for short) provides for offences and penalties.  Sec. 9(1) provides that whoever commits any of the following offences, namely-

(a)    contravenes any of the provisions of Sec. 8 or of a rule made under Sec.37(2)(iii) or (xxvii);

(b)   evades any payment of any duty payable under this Act;

(bb) removes any excisable goods in contravention of any of the provisions of this Act or any rule made there under or in anyway concerns with such removal;

(bbb) acquires possession of, or in any way concerns himself in transporting, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with any excisable goods which he knows or has reason to believe are liable to confiscation under this Act or any rule made there under;

(bbbb) contravenes any of the provisions of this Act or the rules made there under in relation to credit of any duty allowed to be utilized towards payment of excise duty on final products;

(c) fails to supply any information which he is required by rules made under this Act to supply, or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information;

(d)   attempts to commit, or abets the commission of, any of the offences mentioned in clauses (a) and (b) of this section

shall be punishable -

(i)      In the case of an offence relating to any excisable goods, the duty leviable thereon under this Act exceeds one lakh rupees, with imprisonment for a term which may extend to seven years and with fine; In the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court such imprisonment shall not be for a term of less than six months;

(ii)    In any other case, with imprisonment for a term which may extend to three years or with fine, or with both.

Sec. 9(2) provides that if any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to seven years and with fine.  In the absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court such imprisonment shall not be for a term of less than six months.

     Sec. 9A (2) provides that any offence under this Chapter may, either before or after the institution of prosecution, be compounded by the Chief Commissioner of Central Excise on payment, by the person accused of the offence to the Central Government, of such compounding amount as may be prescribed.

     The Central Government made the 'Central Excise (Compounding of Offences) Rules, 2005 in exercise of the powers conferred by Sec. 37(2)(id) read with Sec. 9A(2) of the Act.

Form and application:

     Any assessee or any other person may, but shall not include officers of Central Excise may, either before or after institution of prosecution, make an application in the form prescribed to the compounding authority to compound the offence.   The Compounding authority is the Chief Commissioner of Central Excise, having jurisdiction over the place where the offence under the Act have been or alleged to have been committed.   Where an offence under this Act has been committed at more than one compounding authority, then the Chief Commissioner of Central Excise having jurisdiction over such place falling under the jurisdiction over such place where the value of goods seized, or the amount of duty evaded or attempted to be evaded is more than the others shall be the competent authority.

     The applicant cannot claim, as of right, that his offence shall be compounded.

Procedure:

1.      On receipt of an application, the compounding authority shall call for a report from the reporting authority with reference to the particulars furnished in the application, or any other information, which may be considered relevant for examination of such application; 

2.      The reporting authority is the Commissioner of Central Excise, having jurisdiction over the factory/place where the offences under the Act have been alleged  or alleged to have been committed or any other officer as may be authorized in this regard by the Chief Commissioner of Central Excise having jurisdiction over the place where such offences under the Act have been or are alleged to have been committed;

3.      The report shall be furnished by the reporting authority within a period of one month or within such extended period as may be allowed by the compounding authority from the date of receipt of communication from the compounding authority;

4.      The compounding authority, after taking into account the contents of the said application, may, by order, allow the application indicating the compounding amount as detailed below:

Offence	Compounding Amount
Sec. 9(1)(a)	Rs.25000 for the first offence and to be increased by 100% of this amount for each subsequent offence
Sec. 9(1)(b)	Up to 50% of the amount of duty evasion, subject to minimum of 10% of duty evasion
Sec. 9(1)(bb)	Up to 50% of the amount of duty evasion, subject to minimum of 10% of duty evasion
Sec. 9(1)(bbb)	Up to 25% of the amount of duty evasion, subject to minimum of 10% of duty evasion
Sec. 9(1)(bbbb)	Up to 50%  of the amount of CENVAT credit wrongly taken or utilized, subject to minimum of 10% of said amount
Sec. 9(1)©	Rs.50,000 for the first offence and to be increased by 100% of this amount for each subsequent offence
Sec. 9(1)(d)	Up to 25% of the amount of duty evasion, subject to minimum of 10% of duty evasion.

If a person has, in respect of same goods, committed offences falling under more than one category specified above and where amount of duty evasion or amount of CE NVAT credit wrongly taken or utilized is same for all such offences, the compounding amount, in such cases, shall be the amount determined for the offence for which a higher compounding amount has been prescribed;

5.      The compounding authority may grant the applicant immunity from prosecution if he is satisfied that any person who has made the application for compounding of offence has co-operated in the proceedings before him and has made full and true disclosure of facts relating to the case, grant to such person, subject to such conditions as he may think fit to impose, immunity from prosecution for any offence under the Central Excise Act, 1944 shall apply as if no such immunity has been granted;

6.      The application shall not be rejected unless an opportunity has been given to the applicant of being heard and the grounds of such rejection are mentioned in such order;

7.      The application shall not be allowed unless the duty, penalty and interest liable to be have been paid for the case for which application has been made;

8.      A copy of every order shall be sent to the applicant;

9.      The applicant shall, within a period of thirty days from the date of receipt of order allowing the compounding of offences, pay the compounding amount, as ordered to be paid by the compounding authority and also furnish the proof of such payment to the compounding authority;

10.  The compounding amount once paid shall not be refunded except in cases where the court rejects grant of immunity from prosecution.

Withdrawal of immunity:

     An immunity granted to a person shall stand withdrawn if such person fails to pay any sum specified in the order of compounding passed by the compounding authority, within the time specified in such order or fails to comply with any other condition subject to which the immunity was granted and there upon the provisions of the Central Excise Act, 1944 shall apply as if no such immunity has been granted.

     An immunity granted to a person  may, at any time,  be withdrawn by the compounding authority, if he is satisfied that such person had, in the course of compounding proceedings, concealed any particulars, material or had given false evidence, and thereupon such person may be tried for the offence with respect to which immunity was granted or for any other offence that appears to have been committed by him in connection with the compounding proceedings and thereupon the provisions of the Central Excise Act, 1944 shall apply as if no such immunity has been granted.