Compounding of customs offences requires prior payment, authority review, hearing before rejection, and timely payment of the compounding amount.

Compounding procedure under the Customs (Compounding of Offences) Rules, 2005 requires the compounding authority to call for a report from the reporting authority after receiving an application. After considering the material, the authority may allow compounding by specifying the compounding amount and granting immunity from prosecution, or reject the application after giving the applicant an opportunity of being heard. Compounding cannot be allowed unless duty, penalty, and interest have been paid. If allowed, the compounding amount must be paid within thirty days, is generally non-refundable, and compounding cannot be claimed as of right.

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