{"id":409,"date":"2023-08-19T04:20:58","date_gmt":"2023-08-19T04:20:58","guid":{"rendered":"https:\/\/theleagle.in\/?p=409"},"modified":"2023-08-19T04:20:58","modified_gmt":"2023-08-19T04:20:58","slug":"compounding-fee-is-not-tax","status":"publish","type":"post","link":"https:\/\/theleagle.in\/?p=409","title":{"rendered":"Compounding Fee is Not Tax"},"content":{"rendered":"<div id=\"bsf_rt_marker\"><\/div>\n<p>In a recent judgment<a href=\"applewebdata:\/\/189D38A3-74DA-4585-970D-0A217CA30751#_ftn1\"><sup>[1]<\/sup><\/a>, the Delhi High Court clarified that merely because appellants paid a compounding fee after initiation of legal proceedings against them, does not permit the State to retain the said amount if there was no legal provision under which the appellants were obligated to make the payment. The High Court clarified that in order to successfully claim the refund of compounding fee, it was not necessary for the appellants to have stated that it was paid under protest.&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<p><strong>Introduction&nbsp;<\/strong><\/p>\n\n\n\n<p>The appellants imported fuel dispensing equipment for use at retail outlets in the country but without obtaining registration under the Legal Metrology Act, 2009. The respondents \u2013 Director of Legal Metrology and Others \u2013 took the view that appellants did not comply with the statutory requirements under Legal Metrology Act, 2009 and initiated proceedings against the appellants. During proceedings, the appellants paid compounding fee to the respondents.&nbsp;<\/p>\n\n\n\n<p>On examining the issue as to whether appellants need to obtain registration before importing the equipment, a Single Judge of the Delhi High Court held that the appellant was not liable to register under the Legal Metrology Act, 2009. However, the Judge refused to accept the appellant\u2019s plea for refund of the compounding fee reasoning that the payment was not made under coercion, but voluntarily. The judge observed, that at the time of making payment, the appellants did not communicate that they were making the payment under coercion or under protest.&nbsp;<\/p>\n\n\n\n<p><strong>Decision&nbsp;<\/strong><\/p>\n\n\n\n<p>The Division Bench of the Delhi High Court held that it was unable to sustain the conclusions reached by the Single Judge. As per the Division Bench, once it was clear that the appellants were not liable under the Legal Metrology Act, 2009 it was difficult to accept the proposition that they should be held liable to pay the compounding fee.&nbsp;&nbsp;<\/p>\n\n\n\n<p>The Division Bench concluded:&nbsp;<\/p>\n\n\n\n<p><em>We also deem it pertinent to observe that the respondents being \u201cState\u201d cannot be countenanced to retain monies which are otherwise not payable by the appellants under the provisions of the 2009 Act. When viewed in that light, it is evident that the issue of deposit without demur or protest could not have justified the retention of compounding fee<\/em>. (para 8)<\/p>\n\n\n\n<p>It is evident that the retention of money by the Metrology Department \u2013 termed as State \u2013 by the Division Bench by viewed as illegal. The Division Bench was clear in stating that a&nbsp;<em>compounding fee was not in the nature of a tax or duty but a payment made to avoid the rigours of a legal proceeding<\/em>. Payment of compounding fee should not be understood mean acceptance of violation of the statutory provisions or an acceptance of guilt.&nbsp;<\/p>\n\n\n\n<p>The Division Bench adopted a comparatively more coherent approach in ordering the refund of the compounding fee. If the action of respondents was held to be not violative of the impugned statute, there was little to no reason for disallowing their request to refund the compounding fee paid to thwart legal proceedings initiated under the said statute. Merely not stating that the compounding fee was paid under protest was not a valid ground to deny the refund of compounding fee, and the Single Judge Bench erred in denying the refund.&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><a href=\"applewebdata:\/\/189D38A3-74DA-4585-970D-0A217CA30751#_ftnref1\"><sup>[1]<\/sup><\/a>&nbsp;<em>Indian Oil Corporation Ltd v Director of Legal Metrology &amp; Ors<\/em>&nbsp;2023 LiveLaw (Del) 654.&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In a recent judgment[1], the Delhi High Court clarified that merely because appellants paid a compounding fee after initiation of legal proceedings against them, does not permit the State to retain the said amount if there was no legal provision under which the appellants were obligated to make the payment. The High Court clarified that &#8230; <a title=\"Compounding Fee is Not Tax\" class=\"read-more\" href=\"https:\/\/theleagle.in\/?p=409\" aria-label=\"Read more about Compounding Fee is Not Tax\">Read more<\/a><\/p>\n","protected":false},"author":2,"featured_media":410,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_themeisle_gutenberg_block_has_review":false,"cybocfi_hide_featured_image":"","footnotes":""},"categories":[10],"tags":[101,18,94,96],"class_list":["post-409","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-constitution_and_tax","tag-compounding-fee","tag-delhi-high-court","tag-ravpratapsingh","tag-tax"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.9 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Compounding Fee is Not Tax - TheLeagle | Eco Law Forum<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/theleagle.in\/?p=409\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Compounding Fee is Not Tax - TheLeagle | Eco Law Forum\" \/>\n<meta property=\"og:description\" content=\"In a recent judgment[1], the Delhi High Court clarified that merely because appellants paid a compounding fee after initiation of legal proceedings against them, does not permit the State to retain the said amount if there was no legal provision under which the appellants were obligated to make the payment. The High Court clarified that ... Read more\" \/>\n<meta property=\"og:url\" content=\"https:\/\/theleagle.in\/?p=409\" \/>\n<meta property=\"og:site_name\" content=\"TheLeagle | Eco Law Forum\" \/>\n<meta property=\"article:published_time\" content=\"2023-08-19T04:20:58+00:00\" \/>\n<meta name=\"author\" content=\"Rav Singh\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Rav Singh\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/theleagle.in\/?p=409\",\"url\":\"https:\/\/theleagle.in\/?p=409\",\"name\":\"Compounding Fee is Not Tax - TheLeagle | Eco Law Forum\",\"isPartOf\":{\"@id\":\"https:\/\/theleagle.in\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/theleagle.in\/?p=409#primaryimage\"},\"image\":{\"@id\":\"https:\/\/theleagle.in\/?p=409#primaryimage\"},\"thumbnailUrl\":\"https:\/\/theleagle.in\/wp-content\/uploads\/2023\/08\/COMPOUNDING-FEE-IS-NOT-TAX-pdf.jpg\",\"datePublished\":\"2023-08-19T04:20:58+00:00\",\"dateModified\":\"2023-08-19T04:20:58+00:00\",\"author\":{\"@id\":\"https:\/\/theleagle.in\/#\/schema\/person\/3cf683f6a55fd613e1bc28173c8e0917\"},\"breadcrumb\":{\"@id\":\"https:\/\/theleagle.in\/?p=409#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/theleagle.in\/?p=409\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/theleagle.in\/?p=409#primaryimage\",\"url\":\"https:\/\/theleagle.in\/wp-content\/uploads\/2023\/08\/COMPOUNDING-FEE-IS-NOT-TAX-pdf.jpg\",\"contentUrl\":\"https:\/\/theleagle.in\/wp-content\/uploads\/2023\/08\/COMPOUNDING-FEE-IS-NOT-TAX-pdf.jpg\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/theleagle.in\/?p=409#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/theleagle.in\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Compounding Fee is Not Tax\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/theleagle.in\/#website\",\"url\":\"https:\/\/theleagle.in\/\",\"name\":\"TheLeagle | Eco Law Forum\",\"description\":\"Analyse. Discuss. Learn.\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/theleagle.in\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/theleagle.in\/#\/schema\/person\/3cf683f6a55fd613e1bc28173c8e0917\",\"name\":\"Rav Singh\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/theleagle.in\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/88a0d335c97cf709c9618d1d1c19ff328612a3144c986c21e6756b1e84bc15e5?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/88a0d335c97cf709c9618d1d1c19ff328612a3144c986c21e6756b1e84bc15e5?s=96&d=mm&r=g\",\"caption\":\"Rav Singh\"},\"sameAs\":[\"https:\/\/www.ravsingh.in\/\"],\"url\":\"https:\/\/theleagle.in\/?author=2\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Compounding Fee is Not Tax - TheLeagle | Eco Law Forum","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/theleagle.in\/?p=409","og_locale":"en_US","og_type":"article","og_title":"Compounding Fee is Not Tax - TheLeagle | Eco Law Forum","og_description":"In a recent judgment[1], the Delhi High Court clarified that merely because appellants paid a compounding fee after initiation of legal proceedings against them, does not permit the State to retain the said amount if there was no legal provision under which the appellants were obligated to make the payment. The High Court clarified that ... Read more","og_url":"https:\/\/theleagle.in\/?p=409","og_site_name":"TheLeagle | Eco Law Forum","article_published_time":"2023-08-19T04:20:58+00:00","author":"Rav Singh","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Rav Singh","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/theleagle.in\/?p=409","url":"https:\/\/theleagle.in\/?p=409","name":"Compounding Fee is Not Tax - TheLeagle | Eco Law Forum","isPartOf":{"@id":"https:\/\/theleagle.in\/#website"},"primaryImageOfPage":{"@id":"https:\/\/theleagle.in\/?p=409#primaryimage"},"image":{"@id":"https:\/\/theleagle.in\/?p=409#primaryimage"},"thumbnailUrl":"https:\/\/theleagle.in\/wp-content\/uploads\/2023\/08\/COMPOUNDING-FEE-IS-NOT-TAX-pdf.jpg","datePublished":"2023-08-19T04:20:58+00:00","dateModified":"2023-08-19T04:20:58+00:00","author":{"@id":"https:\/\/theleagle.in\/#\/schema\/person\/3cf683f6a55fd613e1bc28173c8e0917"},"breadcrumb":{"@id":"https:\/\/theleagle.in\/?p=409#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/theleagle.in\/?p=409"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/theleagle.in\/?p=409#primaryimage","url":"https:\/\/theleagle.in\/wp-content\/uploads\/2023\/08\/COMPOUNDING-FEE-IS-NOT-TAX-pdf.jpg","contentUrl":"https:\/\/theleagle.in\/wp-content\/uploads\/2023\/08\/COMPOUNDING-FEE-IS-NOT-TAX-pdf.jpg"},{"@type":"BreadcrumbList","@id":"https:\/\/theleagle.in\/?p=409#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/theleagle.in\/"},{"@type":"ListItem","position":2,"name":"Compounding Fee is Not Tax"}]},{"@type":"WebSite","@id":"https:\/\/theleagle.in\/#website","url":"https:\/\/theleagle.in\/","name":"TheLeagle | Eco Law Forum","description":"Analyse. Discuss. Learn.","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/theleagle.in\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/theleagle.in\/#\/schema\/person\/3cf683f6a55fd613e1bc28173c8e0917","name":"Rav Singh","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/theleagle.in\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/88a0d335c97cf709c9618d1d1c19ff328612a3144c986c21e6756b1e84bc15e5?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/88a0d335c97cf709c9618d1d1c19ff328612a3144c986c21e6756b1e84bc15e5?s=96&d=mm&r=g","caption":"Rav Singh"},"sameAs":["https:\/\/www.ravsingh.in\/"],"url":"https:\/\/theleagle.in\/?author=2"}]}},"_links":{"self":[{"href":"https:\/\/theleagle.in\/index.php?rest_route=\/wp\/v2\/posts\/409","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/theleagle.in\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/theleagle.in\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/theleagle.in\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/theleagle.in\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=409"}],"version-history":[{"count":1,"href":"https:\/\/theleagle.in\/index.php?rest_route=\/wp\/v2\/posts\/409\/revisions"}],"predecessor-version":[{"id":411,"href":"https:\/\/theleagle.in\/index.php?rest_route=\/wp\/v2\/posts\/409\/revisions\/411"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/theleagle.in\/index.php?rest_route=\/wp\/v2\/media\/410"}],"wp:attachment":[{"href":"https:\/\/theleagle.in\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=409"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/theleagle.in\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=409"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/theleagle.in\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=409"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}