The Drugs and Cosmetics (Compounding of Offences) Rules, 2025, notified on April 24, 2025 under Sections 32B and 33(2)(r) of the Drugs and Cosmetics Act, 1940, represent a fundamental transformation in India’s drug enforcement landscape. For the first time, a statutory framework exists for settling specified drug offences by payment of a compounding amount — without criminal prosecution. This article analyses the 2025 Rules in detail, examines their interface with the existing prosecution procedure under Section 32, compares the framework with CBDT’s well-developed compounding regime, identifies the offences eligible for compounding, and addresses key questions of immunity, withdrawal, and the relationship between compounding and the non-statutory DCC prosecution guidelines that preceded the formal rules.

INTRODUCTION

For decades, India’s pharmaceutical manufacturers who found themselves facing prosecution for drug quality violations had two informal escape routes: first, the DCC’s non-statutory prosecution guidelines, which if followed by the Drug Inspector would result in the case being resolved through administrative action rather than criminal complaint; second, under the original Section 32B, limited compounding provisions that were narrowly applied.

The Jan Vishwas (Amendment of Provisions) Act, 2023 changed this landscape fundamentally. The Act amended over 180 laws to decriminalise minor regulatory offences — converting criminal sanctions to civil penalties and establishing formal compounding frameworks. Under this mandate, the Ministry of Health and Family Welfare notified the Drugs and Cosmetics (Compounding of Offences) Rules, 2025 on April 24, 2025.

These Rules are the first statutory, transparent, and rule-bound mechanism for settling drug offences without prosecution. They stand in sharp contrast to the ad hoc, non-statutory, and legally dubious DCC prosecution guidelines that previously served this function.

THE STATUTORY FOUNDATION: SECTIONS 32B AND 33(2)(R)

Section 32B of the Drugs and Cosmetics Act provides for compounding of offences. It authorises the Central Government to frame rules prescribing the authority competent to compound offences, the offences that may be compounded, and the amount that may be accepted.

Section 33(2)(r) confers the specific rulemaking power to prescribe procedures for compounding. Together, Sections 32B and 33(2)(r) provide the statutory transmission belt for the 2025 Rules — the Rules are not administrative guidelines or DCC recommendations. They are statutory rules with the full force of law, tabled before Parliament under Section 38.

This statutory character is the defining difference between the 2025 Rules and the DCC compounding guidance that preceded them. The 2025 Rules bind Drug Inspectors, manufacturers, and the Compounding Authority — their terms cannot be departed from except by amendment following the statutory procedure.

OFFENCES ELIGIBLE FOR COMPOUNDING

The 2025 Rules permit compounding of offences under specific sub-sections of the Act, including:
— Section 27(d): Manufacture, sale, stocking, or distribution of drugs in contravention of other provisions of Chapter IV (minor violations, not spurious or adulterated categories);
— Section 27A(ii): Violations relating to cosmetics;
— Section 28: Obstructing an Inspector in the exercise of their duties;
— Section 28A: Disclosure of information to a person from whom a sample was taken.

Critically, the most serious offences — manufacture of spurious, adulterated, or misbranded drugs under Sections 27(a), (b), and (c), which attract minimum ten-year sentences — are NOT eligible for compounding. Compounding is available only for the less serious end of the offence spectrum.

This structure reflects a deliberate policy choice: decriminalise truly minor regulatory violations (labelling errors, administrative non-compliance, minor quality deviations) while preserving criminal prosecution as the mandatory response for public health threats.

THE COMPOUNDING AUTHORITY AND PROCEDURE

The Compounding Authority for centrally licensed drugs is the Drugs Controller General of India (DCGI). For state-licensed drugs, the State Drug Controller or equivalent authority is the Compounding Authority.

The procedure requires: (i) an application by the accused (compounding is not automatic or ex officio); (ii) the accused’s acknowledgement of the offence; (iii) assessment of the compounding amount by the Authority; (iv) payment of the assessed amount; and (v) issue of a compounding certificate.

Compounding is not a right — it is at the discretion of the Compounding Authority. The Authority may refuse compounding where the public interest requires prosecution, where the offence is of a habitual or recidivist nature, or where the application does not meet the conditions of the Rules.

Once compounding is completed and the certificate issued, the accused is immune from prosecution for that specific offence. Importantly, immunity can be withdrawn if conditions were violated or false information was provided during the compounding process.

COMPARISON WITH CBDT COMPOUNDING FRAMEWORK

CBDT’s compounding guidelines, most recently revised in September 2022 and further updated in June 2024, represent a mature, well-developed compounding regime under Section 279(2) of the Income Tax Act, 1961.

Key comparisons:

Statutory basis: Both the CBDT compounding guidelines and the D&C Compounding Rules are underpinned by statutory authority — Section 279(2) IT Act for CBDT, and Sections 32B/33(2)(r) for the D&C Rules.

Threshold approach: CBDT guidelines specify graduated compounding amounts based on the amount of tax evaded. The D&C Rules specify amounts based on the nature of the offence and the scale of the violation.

Discretion: Both frameworks preserve discretion — compounding is not automatic. CBDT can refuse compounding for habitual offenders; the D&C Compounding Authority can similarly refuse.

Immunity scope: CBDT compounding grants immunity from prosecution under the IT Act for the compounded period. D&C Rules similarly grant immunity from prosecution for the compounded offence.

The key difference: CBDT’s regime has decades of operational experience and detailed guidance on compounding amounts. The D&C framework is newly established and the jurisprudence on its application is yet to develop.

INTERFACE WITH NON-STATUTORY DCC GUIDELINES

The existence of the 2025 Compounding Rules has an important implication for the status of the DCC’s non-statutory prosecution guidelines.

Prior to the 2025 Rules, one argument in favour of the DCC guidelines was that they served a quasi-compounding function — they provided an alternative to prosecution for minor violations, filling a gap in the statutory framework. This argument, while not sufficient to save the guidelines from the ultra vires critique, at least provided a policy justification.

Post-2025 Rules, this justification disappears. Parliament has now provided a statutory mechanism for settling minor drug offences without prosecution. The DCC’s non-statutory framework is not only legally invalid — it is now redundant. Drug Inspectors who decline to prosecute Category B or C cases on DCC guideline grounds, when a statutory compounding mechanism is available, are acting without any legitimate justification.

Further, the existence of statutory compounding actually strengthens the argument that minor violations should be addressed through the Compounding Rules (a transparent, accountable, Gazette-notified process) rather than through opaque administrative screening committees applying non-statutory DCC guidelines.

CONCLUSION

The Drugs and Cosmetics (Compounding of Offences) Rules, 2025 represent the most significant reform of India’s drug enforcement architecture since the 2008 criminal penalty amendments. For the first time, a fully statutory, transparent, and accountable mechanism exists for settling minor drug offences without prosecution. The Rules should be welcomed by industry and regulators alike.

For counsel advising pharmaceutical clients, the 2025 Rules create a new strategic option: rather than relying on the legally tenuous DCC guidelines to avoid prosecution, manufacturers of eligible minor violations can formally apply for compounding — gaining statutory immunity upon successful completion. This is a far more secure legal position than dependence on a non-statutory administrative guideline that any court can declare ultra vires at any time.

REFERENCES

[1] Drugs and Cosmetics (Compounding of Offences) Rules, 2025 — SCC Online (April 24, 2025).  https://www.scconline.com/blog/post/2025/04/29/drugs-and-cosmetics-compounding-of-offences-rules-legal-news/

[2] The Drugs and Cosmetics Act, 1940, Sections 32B, 33(2)(r), 27, 27A, 28, 28A.  https://www.indiacode.nic.in/bitstream/123456789/15278/1/drug_cosmeticsa1940-23.pdf

[3] Jan Vishwas (Amendment of Provisions) Act, 2023 — PIB, Government of India.  https://www.pib.gov.in

[4] CBDT Revised Guidelines for Compounding of Offences under the Income-Tax Act, 1961 (September 2022) — PIB.  https://www.pib.gov.in/Pressreleaseshare.aspx?PRID=1860175

[5] Guidelines for Compounding of Offences under the Income-Tax Act, 1961 (2024 Revision) — Income Tax Department.  https://www.incometaxindia.gov.in/w/guidelines-for-compounding-of-offences-under-the-income-tax-act-1961-reg.-2

[6] CDSCO Guidance Document on Compounding of Offences (Drugs Rules 1945) — CDSCO.  https://cdsco.mohfw.gov.in/opencms/resources/UploadCDSCOWeb/2018/UploadPublic_NoticesFiles/Guidance%20Document%20%5BCompounding%5D.pdf

[7] Compounding of Offences under the Drugs and Cosmetics Act, 1940 — Cliniexperts (January 2026).  https://cliniexperts.com/regulatory-update/guidelines-on-compounding-of-offences-under-the-drugs-and-cosmetics-act-1940-as-per-d

[8] The Drugs and Cosmetics (Compounding of Offences) Rules, 2025 — GKToday.  https://www.gktoday.in/drugs-and-cosmetics-compounding-rules-2025/

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