TaxTMI 
TaxTMI 
2011 (8) TMI 872
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....vely. 3. It is submitted by Mr. Luthra, learned senior counsel that the proviso to the Rule in question runs counter to the language employed in Section 9A(2) of the Act and also travels beyond the rule making power as enshrined under Section 37(2)(id) of the Act. It is his submission that by incorporating such a provision by way of an amendment in the Rules in 2007, the right to appeal of the petitioner under Section 35G of the Act stands frustrated and once a statutory right of appeal is provided in an enactment, the same cannot be defeated by envisaging such conditions, as has been done in the Rule in question. It is also highlighted by him that the concept of compounding has a different connotation under the Code of Criminal Procedure and in a criminal case an accused at best can be convicted and burdened with fine but for the purpose of compounding, the rule making authority has imposed such conditions which are really rigorous and, therefore, it frustrates the concept of reasonableness, which offends Article 14 of the Constitution of India. 4. Learned counsel for the respondents have submitted that the challenge is absolutely baseless and does not deserve acce....
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....viso 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 information, which may be considered relevant for examination of such application. (2) Such report shall be furnished by the reporting authority within a period of one month or within such extended period as may be allowed by the compounding authority, from the date of receipt of communication from the compounding authority. (3) The compounding authority, after taking into account the contents of the said application, may, by order, either allow the application indicating the compounding amount in terms of rule 5 and grant him immunity from prosecution in terms of rule 6 or reject such application : Provided that application shall not be rejected unless an opportunity has been given to the applicant of being heard and the grounds of such rejection are mentioned in such order. Prov....
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....on 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/offence and payable by the assessee. The legislative intendment that can be gathered from the scheme of the Act supports the said interpretation. Any other interpretation would lead to absurdity with only the compounding amount being paid without any obligation to pay tax, penalty and interest due on account of the evasion/offence. The same would result in the dropping of prosecution on payment of the compounding amount but the person concerned can continue to avoid payment of tax, penalty and interest due. What the rule seeks to do is to prescribe and fix the compounding amount, which means a prescribed/fixed amount to be paid in addition to the duty, penalty and interest. The rule has rightly fixed and quantified the compounding amount least it is l....
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....ndred 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 percentage qua in respect of the punishment for certain offences. The said table does not anyway run counter to the concept of tax, penalty and interest. There is no waiver therein. The table is in accord with the rule and the anomalous situation, which has been conceived by Mr. Luthra is not acceptable. 13. Learned senior counsel would further submit that his right to appeal, which is statutory one under Section 35G stands frustrated. It is urged by him that once he has challenged the demand, the tax, penalty and interest in the statutory forum, he has to pay the same for compounding. It is apt to note that the concept of compounding is different under the Code of Criminal Procedure and, therefore, the fixation of the amount is rigorous. In essence, learned senior counsel has endeavoured to bring it under the umbrella of protection o....