Case Law Details

Case Name : M C Punjwani Vs Commissioner of Custom (CESTAT Mumbai)
Appeal Number : Custom Appeal No. 88972 of 2018
Date of Judgement/Order : 06/02/2020
Related Assessment Year :
Courts : All CESTAT (964) CESTAT Mumbai (190)

M C Punjwani Vs Commissioner of Custom  (CESTAT Mumbai)

Application for Compounding of Offence can’t be rejected on Technical Grounds since It’s Prime Object is to prevent Litigation.

The purpose of compounding of offences against payment of compounding amount is to prevent litigation and encourage early settlement of dispute. In the guidelines issued vide Circular No. 15/10/2009 no prohibition has been imposed against deciding the application for compounding of offences which were earlier rejected on the technical ground being outside the purview, nor there is any embargo that if the application has been rejected earlier the same cannot be entertained again even if it falls within the purview of compounding of offences as per the guidelines of 2009. A perusal of the said circular/guidelines makes it clear that it is not applicable only qua those case which has been specifically excluded in that circular/guidelines from the purview of compounding. It is not the case of the Appellant that the offence committed by him is no longer an offence. His only plea is that now the offence under the Provision of IPC can also be compounded as per the Circular of 2009.

Going by the reasoning given by the learned Commissioner, the very purpose of compounding of offence i.e. to prevent litigation and encouraged earlier settlement of dispute, will be defeated. The Application for compounding of offences can be rejected only on the grounds mentioned in the guidelines issued by Circular dated 2009 and not otherwise. After going through the guidelines issued by Circular dated 2009, CESTAT is of the view that the Application filed by the Appellant for compounding falls within the four corners of the Circular dated 2009 and the same deserve to be allowed.

FULL TEXT OF THE CESTAT JUDGEMENT

This Appeal has been filed from the impugned order dated 12.04.2018 passed by the Chief Commissioner of Customs in Order-in-Appeal No. 01/2018 by which the application filed by the Appellant for compounding of offence under Section 137(3) of the Customs Act, 1962 was dismissed.

2. As per Revenue, the offence committed by the Appellant relates to a case of importation of Stainless Steel Plates (approx-547,962 MTS & CIF value of Rs. 2,83,85,493/-) by M/s P.J. Pipes and Vessels Ltd., under two Special Import Licences dated 27.07.89. As per the lincences, the imported material was to be utilized for manufacture of thread protectors for pipes to be supplied to the O.N.G.C. The importer claimed and was granted benefit of duty exemption under Notification No. 513/86-Cus dated 30.12.86 which allows import of raw materials and components required for manufacture of goods supplied to O.N.G.C. On certain specific information, D.R.I. investigated the matter and during the course of investigation it was revealed that as required by licences, the threads protectors supplied to O.N.G.C. were not made of Stainless Steel, and the goods supplied to O.N.G.C. were ordinary Carbon Steel threads protectors, which were procured locally by the importer. Out of the total imported quantity of 547,962 MTS, the importer sold 276.928 MTS in the open market and the rest were seized by D.R.I. Based on investigation a Show-Cause-Notice dated 25.04.1991 was issued to the importer and other co-noticees [including the Appellant herein] whereby total duty of Rs. 7,18,95,049/- was demanded from the importer with fine & penalty. The said show cause notice also alleges that the Appellant herein had abetted the act of smuggling of S.S Plates by first certifying the requirement of S.S. Plates, which were not required and then giving false consumption certificate. Adjudicating Authority passed the Order-in-Original dated 26.11.1991 whereby demand for differential duty was confirmed and the same was ordered to be recovered by invoking Section 142 of the Custom Act, 1962. The seized quantity of 271.034 MTS was ordered to be confiscated, with an option to clear it on payment of fine of Rs. Ten Lakhs. Penalty was also imposed on M/s P. J. Pipes & others. By the same Order-in-Original a penalty of Rs. 1,00,000/-(Rupees One Lakh) was imposed on the Appellant which was subsequently reduced to Rs. 10,000/-, vide remand Adjudication Order dated 30.03.2004 passed by Commissioner of Customs(Adjudication), Mumbai. On the other hand, sanction for prosecution was accorded on 16.09.1992 by the then Collector of Bombay under Section 135(1) of the Customs Act, 1962 against the Appellant for his alleged role. Subsequently, a Criminal complaint was filed by DRI, Mumbai under Section 120B of Indian Penal Code 1860 before the Court of Metropolitan Magistrate, Esplanade, Mumbai being Criminal Complaint No. 330/CS/1992. The penalty amount of Rs. 10,000/- as per the Adjudicating Order dated 30.03.2004 was paid by the Appellant on 13/09/2004. Later on in the Year, 2005, compounding and the Offences Rules,2005 were enacted and thereafter vide Circular No. 54/2005-CUS dated 30/12/2005 guidelines were issued by the board excluding certain offences from the purview of compounding and offences under the provisions of IPC was also mentioned therein. The Appellant filed an application under the said Rules for compounding of offence on 10/02/2006 but since the offence committed by the Appellant is punishable under Section 120B IPC r/w Section 135 of the Customs Act, 1962 therefore the said application was not considered being outside the purview of the then Compounding of Offences Rules, 2005

3. In the year 2009, CBEC issued another Circular being Circular No. 29/2009 dated 15/10/2009 by which guidelines for compounding of offences under Customs Act, 1962 were issued amending the Compounding of Offence Rules, 2005 and in the said amendment the exclusion of the offences committed under IPC was deleted. When the Appellant came to know about the said amendment on 10.10.2016, he filed another application for compounding of offence under the amended Rules, 2005. The said application was considered and rejected by the learned Chief Commissioner of Customs vide impugned order dated 12/04/2018. I have heard Learned Counsel for the Appellant and Learned Authorised Representative for the Revenue and perused the case records. The only ground to reject the Application of the Appellant by the Learned Commissioner was that according to him, the earlier compounding Application filed by the Appellant in the year 2006 which was rejected under the provisions of unamended Compounding of Offences Rules, 2005 attained finality and any subsequent change in law does not require any authority to review its own order and re-open the matter which has attained finality.

4. The Board’s Circular dated 13/12/2005 by which the offences under IPC were excluded from the purview of compounding relying upon which the earlier application of the Appellant was rejected, was held as ultra virus to the Customs Act, 1962 and rules made therein by the Hon’ble High Court of Judicature at Bombay vide order dated 25/10/2007 in Writ Petition No. 1884 of 2007 reported in 2008 (223) ELT 19 Bom. and it is due to that reason another Circular of 2009 was issued. The purpose of compounding of offences against payment of compounding amount is to prevent litigation and encourage early settlement of dispute. In the guidelines issued vide Circular No. 15/10/2009 no prohibition has been imposed against deciding the application for compounding of offences which were earlier rejected on the technical ground being outside the purview, nor there is any embargo that if the application has been rejected earlier the same cannot be entertained again even if it falls within the purview of compounding of offences as per the guidelines of 2009. A perusal of the said circular/guidelines makes it clear that it is not applicable only qua those case which has been specifically excluded in that circular/guidelines from the purview of compounding. It is not the case of the Appellant that the offence committed by him is no longer an offence. His only plea is that now the offence under the Provision of IPC can also be compounded as per the Circular of 2009. Admittedly, the earlier Application of the Appellant was dismissed only due to embargo contained in the circular dated 2005. If the observation of the learned Commissioner, that the Circular dated 2009, did not mention about the offence committed before the issuance of Circular dated 2009 is accepted then the learned Commissioner is forgetting one thing that the said circular also do not mention that it will be applicable only in cases where the offence is committed after the passing of the aforesaid circular. Going by the reasoning given by the learned Commissioner, the very purpose of compounding of offence i.e. to prevent litigation and encouraged earlier settlement of dispute, will be defeated. The Application for compounding of offences can be rejected only on the grounds mentioned in the guidelines issued by Circular dated 2009 and not otherwise. After going through the guidelines issued by Circular dated 2009, I am of the view that the Application filed by the Appellant for compounding falls within the four corners of the Circular dated 2009 and the same deserve to be allowed.

5. Accordingly, the impugned order passed by the learned Commissioner is set aside and the Appeal filed by the Appellant is allowed with consequential relief if any.

(Order pronounced in the open Court on 06.02.2020)

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