Compounding discretion in excise matters must be rational; extra payment for duty-paid stock cannot be imposed without reasons.

Section 47(2) of the A.P. Excise Act, 1968 confers discretion to compound an excise offence by collecting the compounding fee, the value of seized stock, or both, but that discretion must be exercised reasonably and on rational grounds. Where the seized liquor had already suffered duty, there was no allegation of unlawful diversion or dealings in non-duty-paid liquor, and no reasons were recorded for insisting on payment of the stock value in addition to the compounding fee, the extra monetary condition was treated as harsh and unjustified. The condition requiring payment of the stock value was set aside, and refund of the amount paid was directed.

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Issues: Whether, after levy of compounding fee for an excise offence, the petitioner could still be required to pay the value of the seized duty-paid stock and whether the condition requiring such payment was valid.

Analysis: The statutory scheme under Section 47(2) of the A.P. Excise Act, 1968 vested discretion in the Commissioner to compound the offence by collecting the compounding fee, the value of the seized stock, or both, depending on the facts and gravity of the offence. That discretion was required to be exercised reasonably and rationally, and not mechanically. On the facts, the seized liquor had already suffered duty, there was no allegation of unlawful diversion or dealing in non-duty-paid liquor, and no specific reasons were recorded for insisting upon payment of the stock value in addition to the compounding fee. The condition was therefore found to be harsh, irrational, and unjustified.

Conclusion: The condition requiring payment of the value of the seized stock was set aside, and refund of Rs. 78,953/- was directed in favour of the petitioner.

Ratio Decidendi: Where a statute confers discretion to compound an offence by collecting the fee, the stock value, or both, that discretion must be exercised on rational grounds and cannot be used to impose an additional monetary burden without reasons, especially where the goods are duty-paid and no aggravating circumstances are shown.

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