TMI Blog2011 (8) TMI 872X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions precedent, it does not whittle down the purpose of compounding - Petition is dismissed - 5786 of 2011 - - - Dated:- 11-8-2011 - Dipak Misra, C.J. and Sanjiv Khanna, J. REPRESENTED BY : Shri Sidharth Luthra, Sr. Advocate with Ms. Arundhati Katju, Advocate, for the Petitioner. S/Shri Himanshu Bajaj and Satish Kumar, Advocates, for the Respondent. [Judgment per : Dipak Misra, C.J.]. By this writ petition preferred under Article 226 of the Constitution of India, the petitioners have prayed for declaring the second proviso to Rule 4(3) of the Central Excise (Compounding of Offences) Rules, 2005 (for short the 2005 Rules ) as ultra vires the Central Excise Act, 1944 (for brevity the Act ) as it runs counter to the provisions of the Act and also as it plays foul of Article 14 of the Constitution of India. 2. We have heard Mr. Sidharth Luthra, learned senior counsel along with Ms. Arundhati Katju, learned counsel for the petitioner, Mr. Himanshu Bajaj and Mr. Satish Kumar, learned counsel for the respondents No. 1 and 2 respectively. 3. It is submitted by Mr. Luthra, learned senior counsel that the proviso to the Rule in question runs counter to the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 30th day of December, 2005. 6. Section 37, which confers power on the Central Government to make rules in sub-section (1) clearly postulates the Central Government may make rules to carry into effect the purposes of this Act. Section 37(2)(id) lays the following postulates :- 37. Power of Central Government to make rules. - (1) The Central Government may make rules to carry into effect the purposes of this Act. (2) In particular, and without prejudice to the generality of the foregoing power, such rules may (i) to (ic) xxx xxx xxx (2)(i)(d) provide for the amount to be paid for compounding and the manner of compounding under sub-section (2) of section 9A. 7. In pursuance of the aforesaid provision, the 2005 Rules have been framed and there has been insertion of the second proviso to Rule 4 in 2007, which is under assail. For the sake of completeness, we shall produce Rule 4 in entirety. 4. Procedure on receipt of application under rule 3. (1) On receipt of an application under Rule 3, the compounding authority shall call for a report from the reporting authority with reference to the particulars furnished in the application, or any other i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e manner in which the compounding can be made under Section 9A(2) of the Act. The compounding amount has not been defined or prescribed in the Act though it is implicit that to compound an offence, payment of the compounding amount has to be made. In terms of rule making power, the compounding amount has been fixed under the Rules. There cannot be any dispute that the Act postulates rules shall be framed to fix the compounding amount. The contention of the learned senior counsel for the petitioner that the compounding amount will only mean the amounts specified as specified in the table and will not include duty, penalty or interest payable by an assessee should be rejected. Compounding an offence under the Act has an in segregable nexus with the evasion of duty, etc. and consequently tax, penalty and interest is payable thereon. There is no cavil over the factum that duty, penalty and interest are adjudicated. At the time of launching of prosecution the person concerned is well aware of the duty, penalty and interest element. Read in this manner, the compounding amount can mean the amounts specified in the rule as well as duty, penalty and interest relatable to the alleged evasion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 9(1)(b) of the Act Upto fifty percent of the amount of duty evasion, subject to minimum of ten percent of duty evasion. 3. Offence specified under Section 9(1)(bb) of the Act Upto fifty percent of the amount of duty evasion, subject to minimum of ten percent of duty evasion. 4. Offence specified under Section 9(1)(bbb) of the Act Upto twenty five percent of the amount of duty evasion, subject to minimum of ten percent of duty evasion. 5. Offence specified under Section 9(1)(bbbb) of the Act Upto fifty percent of the amount of CENVAT Credit wrongly taken or utilized, subject to minimum of ten percent of said amount. 6. Offence specified under Section 9(1)(c) of the Act Rupees fifty thousand for the first offence and to be increased by hundred per cent of this amount for each subsequent offence. 7. Offence specified under Section 9(1)(d) of the Act Upto twenty five percent of the amount of duty evasion, subject to minimum of ten percent of duty evasion. 12. On a bare perusal of the said table, what has been provided therein is the rate for first offence or the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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