(1) The prescribed authority may, whether on application made to it in this behalf or otherwise, give any person who has committed or is reasonably suspected of, having committed an offence under this Act, or any rule framed under this Act, option to pay within a specified period by way of composition of such offence,-

(a) where the offence consists of the failure to pay, or the evasion of, any tax recoverable under this Act, in addition to the tax so recoverable, a sum of money not exceeding five thousand rupees or double the amount of the tax recoverable, whichever is greater; and

(b) in other cases, a sum of money not exceeding five thousand rupees.

(2) Where the prescribed authority compounds an offence under this section, he shall serve an order on the dealer who committed the offence specifying,-

(a) the offence committed; and

(b) the sum of money to be paid and due date for payment, and such order shall be final and not subject to any appeal.

(3) On payment of such sum of money and the tax, if any, recoverable under this Act, no prosecution for an offence under this Act shall be instituted in respect of the same offence on which a composition has been allowed under this section.

(4) Where the prescribed authority, on application made under sub-section (1), passes an order refusing to allow composition under this section, it shall record in writing the reasons therefor and furnish to the applicant on request a brief statement of the same unless in any case the prescribed authority is of the opinion that it will not be in the public interest to furnish such statement.