Court quashes order rejecting compounding app under Customs Act, stresses disclosure & thorough inquiry

The Court quashed the Chief Commissioner's order rejecting the compounding application under Section 137 of the Customs Act. The Court found the rejection erroneous as there was no minimum penalty for the offense, the petitioner admitted ownership, and subsequent statements confirmed ownership. The Court emphasized the importance of disclosure and the compounding authority's duty to conduct a thorough inquiry, directing acceptance of the compounding application within four weeks.

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Issues:
Petitioner seeks to quash Chief Commissioner's order rejecting compounding application under Section 137 of the Customs Act.

Analysis:
1. The petitioner imported micro chips without declaration, later admitted ownership, and deposited duty, penalty, and redemption fine to avoid confiscation and prosecution.
2. The Chief Commissioner rejected compounding application citing contradictions in petitioner's statements, following the decision in Union of India v. Anil Chanana.
3. Petitioner argued that since the offenses did not attract a minimum penalty, compounding should have been allowed, emphasizing revenue loss due to rejection.
4. The Revenue justified the rejection, stating the petitioner's inconsistent statements did not demonstrate voluntary disclosure.
5. The Court examined Section 137 of the Act, emphasizing the importance of disclosure and the compounding authority's duty to conduct a thorough inquiry.
6. The Court noted the wide power to permit compounding under Section 137(3) but highlighted restrictions under clauses (b) & (c) of the proviso and for repeat offenders.
7. Considering the lack of minimum penalty for the offense, the Court found the Chief Commissioner's rejection erroneous as subsequent statements confirmed ownership.
8. The Court quashed the impugned order, directing acceptance of the compounding application within four weeks.

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