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The Central Drugs Standard Control Organisation has issued an important clarification on compliance regarding applications filed under Rule 4 of the Drugs and Cosmetics (Compounding of Offences) Rules, 2025.
According to the CDSCO circular dated 21 July 2026, it is also made clear that, to apply for compounding of any offence, the application must be made to the competent authority having jurisdiction over such offence. This clarification was needed because, in many cases, the Central Compounding Authority was receiving applications within the jurisdiction of the State/Union Territory Drug Control Administration.
This circular directly impacts all individuals and companies engaged in the manufacture, import, dealing in, distribution, wholesale dealing, marketing, and licensing of drugs and cosmetics, as per the Drugs and Cosmetics Act, 1940.
The point to note is that, simply because CDSCO is the central drug regulatory body, an application to compound the offence cannot be made to the Central Authority. First, the company in question needs to know who took the sample and which licensing authority has jurisdiction over the matter.
An application filed before an authority without jurisdiction may be returned or rejected. This can increase regulatory costs, delay case closure and prolong uncertainty around licences, commercial transactions and business operations.
Importantly, the July 2026 circular does not create a new compounding law. It clarifies how the existing Rule 4 filing mechanism must be used.
| Particular | Details |
| Issuing authority | Central Drugs Standard Control Organisation |
| Administrative department | Directorate General of Health Services, Government of India |
| Circular date | 21 July 2026 |
| CDSCO release date | 22 July 2026 |
| Subject | Clarification regarding submission of applications under Rule 4 |
| Applicable framework | Drugs and Cosmetics (Compounding of Offences) Rules, 2025 |
| Stakeholders covered | Manufacturers, importers, distributors, licence holders and other applicants |
| Main requirement | Application must be filed before the competent compounding authority having jurisdiction |
| Central jurisdiction | Sample drawn by a CDSCO Drugs Inspector or offence concerning the Central Licensing Authority |
| State jurisdiction | Sample drawn by a State/UT Drugs Inspector and offence falling under the State/UT Drugs Licensing Authority |
| Risk of filing before the wrong authority | Application may be returned or rejected, requiring refiling before the competent authority |
Compounding is an administrative procedure that allows certain offences to be handled without going through the entire criminal process, upon payment of the amount set by the concerned authorities and adherence to the stipulated conditions.
In practical terms, it allows an eligible company or individual to approach the designated compounding authority, disclose the facts of the case, submit the prescribed application and request that the offence be compounded.
The authority may examine the application, obtain a report from the relevant licensing or reporting authority, hear the applicant and decide whether the case should be compounded. If the application is accepted, the authority specifies the compounding amount and may grant immunity from prosecution subject to conditions.
Compounding should not be confused with:
It is a formal statutory proceeding available only for eligible offences and only with the competent authority's permission.
Is compounding available as a right?
No. Compounding of offences is not an absolute right of an individual. The application form for compounding of offences explicitly mentions that compounding cannot be claimed as a right by the applicant. The authority takes into account the type of offence, the applicant's disclosures, the applicant's cooperation in the case, relevant documentation, and the regulatory authority's report.
The Drugs and Cosmetics Act, 1940
The Drugs and Cosmetics Act, 1940 regulates the import, manufacture, distribution and sale of drugs and cosmetics in India. It establishes requirements for quality, safety, licensing, labelling, record-keeping, and enforcement for regulated businesses.
The Act works through the regulatory framework at both Central and State levels. The CDSCO and the Central Licensing Authority perform certain roles at the Central level, including those concerning important imports and products under central regulation. The State and UT Drug Control Authorities handle other roles.
This division of authority is one of the main reasons why businesses must carefully determine jurisdiction before filing a compounding application.
Section 32B of the Drugs and Cosmetics Act
Section 32B provides the statutory basis for compounding specified offences. It permits eligible offences to be compounded either before or after the institution of prosecution, subject to the statutory restrictions and prescribed procedure.
The section also provides that:
The complete statutory eligibility conditions must be examined before preparing an application.
Jan Vishwas (Amendment of Provisions) Act, 2023
The Jan Vishwas (Amendment of Provisions) Act, 2023 was introduced to rationalise regulatory offences, support trust-based governance, and promote ease of doing business.
Among other amendments, it expanded the provisions referenced in Section 32B of the Drugs and Cosmetics Act. The relevant amendments became effective on 31 December 2024.
The objective was not to weaken drug-quality regulation. It was to create a structured method for resolving eligible regulatory contraventions while allowing serious public-health violations to continue under the stricter prosecution framework.
Drugs and Cosmetics (Compounding of Offences) Rules, 2025
The Ministry of Health and Family Welfare notified the Drugs and Cosmetics (Compounding of Offences) Rules, 2025 through G.S.R. 259(E) dated 24 April 2025.
The Rules prescribe:
The Central Government appointed the Additional Director General of Health Services, who deals with CDSCO matters, as the Central Compounding Authority.
The appointment authorises the officer to exercise the Central Government's powers and functions in relation to the compounding of eligible offences.
| Date | Regulatory development | Business significance |
| 11 August 2023 | Jan Vishwas Act received presidential assent | Introduced a wider decriminalisation and trust-based compliance framework |
| 31 December 2024 | Relevant Drugs and Cosmetics Act amendments became effective | Expanded the statutory compounding framework |
| 24 April 2025 | G.S.R. 259(E) notified | Compounding of Offences Rules became operational |
| 1 August 2025 | S.O. 3551(E) issued | Central Compounding Authority was appointed |
| 2025â2026 | CDSCO issued guidance, procedural material and FAQs | Application requirements and regulatory process were explained |
| 21 July 2026 | CDSCO jurisdiction clarification issued | Correct Central-versus-State filing position was clarified |
| 22 July 2026 | Circular published on the CDSCO website | Clarification became publicly available to regulated stakeholders |
Applications were being filed before the wrong authority
CDSCO observed that applications were being submitted to the Central Compounding Authority even when the sample had been drawn by a State or UT Drugs Inspector and the alleged offence fell under the jurisdiction of the State or UT Drugs Licensing Authority.
Such applications create a jurisdictional problem. An authority must have legal competence over the alleged offence before it can process and decide the request.
India follows a dual regulatory structure.
Drug and cosmetic regulation in India is divided between Central and State authorities. A company may hold different licences for manufacturing, importing, selling or distributing regulated products, with different authorities controlling different parts of the business.
A single company may therefore have:
This regulatory structure makes it unsafe to select the compounding authority only based on the applicant's registered office or corporate location.
Incorrect filing causes delay and additional cost.
When an application is submitted to the wrong authority, it may have to be returned, rejected, or resubmitted. The business may then face:
For companies facing regulatory due diligence, investment, licence renewal or a business acquisition, an unresolved enforcement proceeding can also become a significant commercial concern.
Uniform implementation was required.
The circular creates a common principle for applicants and regulators: determine the authority connected with the sample, alleged offence and licensing jurisdiction before submitting the Rule 4 application.
The circular clarifies the filing forum for Rule 4 applications.
The following position must now be followed clearly:
The clarification places greater responsibility on applicants and their CDSCO compliance consultants to perform a jurisdiction assessment before filing.
The circular does not:
This is an important difference to make. The 2026 circular is a jurisdictional compliance notice, not a new compounding scheme.
Drug manufacturers
The companies under inspection, test report, show cause notice, or investigation for prosecution shall ascertain whether a State Drugs Inspector or a CDSCO officer initiated the case.
Pharmaceutical importers
Issues related to import tend to be Central in nature. Nevertheless, firms should investigate whether the licence, officer, breach, and enforcing authority have Central jurisdiction.
Cosmetic manufacturers and importers
Firms in the cosmetic sector shall determine whether the violation issue falls under State or Central jurisdiction.
Medical-device and IVD businesses
Medical devices notified as drugs may fall within the wider Drugs and Cosmetics regulatory framework. However, eligibility for compounding and the appropriate authority must be assessed on a case-by-case basis, based on the specific offence and licensing facts.
Distributors, stockists and wholesalers
Distributors and wholesalers may face allegations relating to storage, sale, records, disclosure of the product source or distribution of non-compliant products. The relevant State or Central authority will depend on the facts of the proceeding.
Marketing companies and licence holders
Marketing authorisation holders and businesses that market products manufactured by third parties must review whether they are separately named or implicated in the case.
Directors and responsible officers
Section 32B refers to eligible offences committed by companies or their officers. Separate applications may be required for different persons or entities, depending on how the proceeding was initiated.
Section 32B refers to specified provisions of the Drugs and Cosmetics Act. Their broad nature is set out below, but actual eligibility must be determined from the current statutory language, charge and facts.
| Legal provision | Broad subject | Important eligibility consideration |
| Section 13(1)(b) | Certain prohibited import contraventions not falling within the more serious category under Section 13(1)(a) | Generally connected with Central import jurisdiction, but exact facts must be verified |
| Section 27(d) | Drug-related contraventions not covered by the more serious categories in Sections 27(a), 27(b) or 27(c) | Exact charge and statutory conditions require legal examination |
| Section 27A(ii) | Certain cosmetic contraventions other than the more serious spurious or adulterated cosmetic category | Central or State jurisdiction depends on licensing and enforcement facts |
| Section 28 | Failure to disclose specified manufacturer or source particulars | Authority depends on the inspector and underlying regulatory proceeding |
| Section 28A | Failure to maintain prescribed records or furnish required information without reasonable cause | Licensing and inspection jurisdiction must be examined |
Just because a number exists in Section 32B does not imply that all cases filed under this section can be compounded. All statutory requirements need to be satisfied by the applicant.
Statutory limitations
A business needs to know whether:
Serious offences involving spurious, adulterated or harmful products should never be assumed to be compoundable without a detailed pharmaceutical regulatory and legal assessment.
Rule 4 governs how an application for compounding must be made.
When can the application be submitted?
An application may be made either before or after the institution of prosecution.
However, the stage of the case matters. If the accused has already been committed for trial, or has been convicted and an appeal is pending, court permission may be necessary under Section 32B.
Who can apply?
A company or individual involved in the manufacture, import, sale, distribution or another regulated activity may apply in respect of an eligible offence.
Where multiple entities or individuals are involved, each applicant may need to submit an individual application. A company should not assume that its application automatically covers its directors, responsible officers, marketers or distributors.
Which form must be used?
The application must be submitted in the prescribed form appended to the Rules, along with relevant supporting documents.
What must the applicant declare?
The applicant must:
Correct jurisdiction is now the most important pre-filing step.
Step 1: Identify who drew the sample
Review the sampling documents and establish whether the sample was drawn by:
The circular specifically links the competent authority to the authority that drew the sample.
Step 2: Identification of Licensing Authority
The applicant should find out whether the licence and regulated activities related to the alleged offence are governed by:
Step 3: Identification of Subject Matter of Alleged Offence
The applicant should consider whether the subject matter of the alleged offence relates to:
Step 4: Review the enforcement documents
The following documents can help establish jurisdiction:
Step 5: Verify the designated authority
Businesses should confirm that the relevant Central or State compounding authority has been appointed and obtain the latest filing instructions.
If a State or UT process is unclear, the applicant should seek a written or professional assessment of jurisdiction. It should not automatically redirect the matter to the Central Authority.
| Regulatory situation | Competent authority |
| Sample drawn by a State/UT Drugs Inspector and offence falls under State/UT Licensing Authority | Concerned State/UT Compounding Authority |
| Sample drawn by a CDSCO Drugs Inspector | Central Compounding Authority |
| Alleged offence concerns a Central Licensing Authority matter | Central Compounding Authority |
| State officer drew the sample, and the matter is entirely State-licensed | State/UT Compounding Authority |
| Case involves Central and State licences or multiple inspecting authorities | Detailed jurisdiction assessment required before filing |
| Identity of the sample-drawing officer is unclear | Review original sampling, inspection and enforcement records |
| Application has already been filed before an authority without jurisdiction | It may be returned or rejected, the applicant may have to refile |
| Applicantâs head office is in one State but offence occurred elsewhere | Jurisdiction should be based on the offence, inspector and licensing authority, not merely the head-office location |
Application has already been filed before an authority without jurisdiction. It may be returned or rejected; the applicant may have to refile
The Compounding of Offences Rules were promulgated on 24 April 2025. The clarifications regarding the jurisdiction were released on 21 July 2026.
As the circular provides no future implementation date, firms planning to file new applications must strictly abide by the jurisdictional stance as clarified immediately.
Companies with applications already pending before an authority should review whether the chosen authority has jurisdiction. Where an application appears to have been filed incorrectly, the company should obtain professional advice before withdrawing, amending or refiling it.
The official CDSCO guidance contains the application checklist and the administrative process flow.
| Document category | Documents and information |
| Applicant information | Name, registered address, communication address and contact details |
| Corporate authorisation | Board resolution, power of attorney or authorisation of the signatory |
| Product details | Product name, composition, manufacturer, importer and marketer information |
| Regulatory permissions | Manufacturing licence, import licence, registration certificate and applicable approvals |
| Import documentation | Import Export Code and relevant import records, where applicable |
| Quality documentation | Manufacturerâs Certificate of Analysis or report from an NABL-accredited laboratory, where relevant |
| Sampling documents | Applicable sample-drawing forms, including Form 17, COS-10 or MD-36 |
| Test reports | Applicable reports such as Form 13, Form 2, COS-14, COS-21, MD-31 or MD-32 |
| Enforcement documents | Inspection report, show-cause notice, seizure memo, charge sheet or complaint |
| Offence particulars | Provisions allegedly contravened, date, location and brief facts |
| Case status | Whether prosecution is contemplated, instituted, at trial or under appeal |
| Previous proceedings | Details of earlier offences, convictions or regulatory proceedings |
| Other laws | Details of proceedings concerning the same conduct under any other law |
| Applicantâs declaration | Agreement to pay and acknowledgement that compounding is not a legal right |
| Verification | Confirmation of truthfulness, completeness and non-suppression of facts |
1. Examine the alleged offence
Identify the exact section invoked in the show-cause notice, complaint, test report, or prosecution document.
Do not describe the matter as compoundable until the current statutory provision and Section 32B conditions have been reviewed.
2. Determine first-offence status
Determine whether the company or the concerned officer was previously convicted of the same offence or any other relevant offence.
The offence is not compoundable as per Section 32B.
3. Find out at what stage the proceeding is at
Ascertain if the proceeding is at:
The stage of filing of prosecution,
A complaint has been lodged,
Committed to trial,
A trial is ongoing, or an appeal is pending.
This determines whether additional court permission may be necessary.
4. Conduct a jurisdiction assessment
Identify:
5. Prepare the prescribed form
Complete every applicable field. Where a field is not applicable, clearly mark it as not applicable instead of leaving it unexplained.
6. Compile supporting documents
It is required to gather and organise all documents which include:
7. Prepare the factual statement
The factual submission should explain:
The statement should be transparent and consistent with every document already submitted to the regulator or court.
8. Submit before the competent authority
Follow the latest filing mode prescribed by the concerned Central or State authority.
The filing instructions applicable to the Central Compounding Authority should not automatically be used for a State application.
9. Respond to regulatory queries
The authority may request explanations, documents or additional information. Responses should be accurate, complete and filed within the allowed period.
10. Prepare for the hearing
If a hearing is scheduled, the applicant should prepare:
11. Comply with the order
If the application is allowed, the applicant must pay the specified amount within the prescribed time and furnish proof of payment.
12. Monitor immunity conditions
The applicant should maintain a written record of every condition and track continuing compliance.
Once an application is received, the compounding authority seeks a report from the reporting authority having jurisdiction over the alleged offence.
The reporting authority is generally the relevant licensing authority, the Central Licensing Authority, or the Central Licence Approving Authority connected with the place where the offence was committed or allegedly committed.
After reviewing the application and report, the compounding authority may:
Before rejecting an application, the applicant must be given a hearing, and the grounds for rejection must be recorded.
Every order must be communicated to the applicant.
| Stage | Responsible person or authority | Timeline |
| Submission of application | Applicant | Before or after institution of prosecution |
| Calling for factual report | Compounding Authority | After receiving the application |
| Submission of report | Reporting Authority | Generally within one month, subject to permitted extension |
| Internal request to the relevant CDSCO office in a Central case | Reporting Authority | CDSCO guidance describes an internal five-day step |
| Internal report by the concerned zonal, sub-zonal or port office | Concerned CDSCO office | CDSCO guidance describes an internal ten-day step |
| Opportunity of hearing | Compounding Authority | Before rejection |
| Payment of compounding amount | Applicant | Within 30 days of receiving the order |
| Submission of payment proof | Applicant | Within the prescribed payment period |
| Continuing compliance | Applicant | Throughout the period of any conditions imposed |
The compounding authority may extend the one-month reporting period. Businesses should therefore treat it as a statutory procedural benchmark, not a guaranteed final-disposal date.
A Rule 4 application may face difficulty because of:
A jurisdictional return should be distinguished from a rejection on the merits. If an application is returned because it was submitted to the wrong authority, that does not necessarily mean the underlying offence is ineligible. However, the applicant must still correct the filing and independently establish eligibility before the proper authority.
The compounding authority determines the amount after considering the application, case facts, and reporting authority's comments.
Businesses should not assume there is a single standard CDSCO compounding fee applicable to every case. The amount depends on the legal provision and facts, subject to the statutory ceiling.
Once an order allowing compounding is received, the applicant must generally:
The amount is generally non-refundable. The Rules recognise a limited exception where the court rejects the grant of immunity.
Failure to pay within the required period can result in withdrawal of immunity and continuation of prosecution.
The compounding authority may grant immunity when satisfied that the applicant has:
Withdrawal of immunity
Immunity may be withdrawn where the applicant:
Once immunity is withdrawn, the applicant may be prosecuted as if the immunity had never been granted.
This makes document accuracy and legal review critical. A poorly prepared application can create greater risk if it contains inconsistent statements or incomplete disclosures.
| Business area | Compliance impact |
| Regulatory strategy | Jurisdiction assessment becomes a mandatory practical pre-filing exercise. |
| Application cost | Correct filing can prevent duplicate professional and documentation expenses. |
| Case timelines | Wrong filing can result in return, rejection, and refiling delays. |
| Legal exposure | Compounding remains discretionary and subject to statutory eligibility. |
| Licence management | Separate licensing proceedings may continue despite compounding. |
| Documentation | Sampling, inspection, testing and prosecution records must be traceable |
| Management time | Legal, regulatory, quality and senior-management teams must coordinate |
| Transaction readiness | Pending proceedings may affect investor, lender or acquisition due diligence. |
| Business reputation | Transparent and timely resolution may demonstrate responsible compliance conduct. |
| Governance | Directors and responsible officers need accurate visibility over pending regulatory cases. |
The cost of filing before the wrong authority is not limited to the need for a fresh set of documents.
Businesses may incur:
A timely jurisdiction assessment by a qualified pharma regulatory consultant in India may therefore reduce the total cost of the proceeding.
Immediate compliance actions
Companies with pending cases involving regulatory authorities should:
Long-term compliance controls
Businesses should establish:
Treating every offence as compoundable
Only specified offences can be considered. A legal eligibility review must come before application preparation.
Filing every case before CDSCO
CDSCO is the national regulatory organisation, but the Central Compounding Authority does not automatically have jurisdiction over State matters.
Relying on the company's registered office
The location of the head office is not the sole deciding factor. The inspector, offence, licence and regulatory subject matter must be examined.
Ignoring the sample-drawing documents
The circular gives significant importance to the authority that drew the sample.
Confusing the reporting authority with the compounding authority
The reporting authority provides the factual regulatory report. The compounding authority decides the application.
Previous proceedings suppression
Failure to disclose previous offences, prosecutions, or regulatory proceedings will affect eligibility and immunity.
Inconsistency in facts used
There should be consistency in the facts provided in the Rule 4 application, show-cause responses, licensing applications, lab reports, and pleadings.
Thinking that payments settle all matters
Payment will not suffice. Evidence must be furnished, compliance undertaken, and separate regulatory proceedings might still be needed.
Missing the payment deadline
Failure to pay within 30 days may result in the withdrawal of immunity.
The compounding process can provide substantial benefits in certain cases:
These benefits are subject to approval. No applicant should market or treat compounding as guaranteed immunity.
The circular is broadly a positive administrative clarification because it addresses a genuine filing problem. It can reduce misdirected applications and help Central and State authorities process cases within their respective jurisdictions.
However, it also requires businesses to undertake more careful due diligence before filing.
| Positive outcome | Practical concern |
| Clarifies the appropriate filing authority | Applicants must perform a detailed jurisdiction assessment. |
| Reduces misdirected applications | Mixed Central-State cases may remain complex. |
| Supports faster case processing | State-level procedures may not be identical. |
| Promotes uniform regulatory implementation | Incorrect classification may still result in a return or rejection. |
| Supports ease of doing business | Professional legal and regulatory assistance may be required. |
| Creates a structured alternative for eligible offences | Compounding remains discretionary |
| Encourages corrective compliance | Immunity may be withdrawn for non-compliance |
The clarification should not be viewed as a new burden in itself. The underlying responsibility to file before the competent authority already existed. The circular makes that responsibility explicit and warns applicants about the consequences of incorrect filing.
From a policy perspective, it is the right decision because it improves administrative clarity without diluting enforcement against serious violations.
The clarification is likely to increase demand for specialised regulatory and compliance support.
Regulatory jurisdiction assessment
Pharmaceutical, cosmetic, and medical-device businesses will need professional assistance to determine whether their matters fall under Central or State jurisdiction.
Rule 4 application preparation
Demand may grow for compounding application filing services, document review, and structured factual submissions.
Pharmaceutical compliance audits
Organizations could carry out preventive audits to detect:
Gaps in licences,
Documentation failures,
Labelling problems,
Risk of inspection,
Quality problems documentation, and
Compoundable past cases.
Regulatory case-management services
Multi-State manufacturers and distributors may require centralised monitoring of notices, hearings, prosecutions, payment deadlines and immunity conditions.
Corrective and preventive action support
Consultants in quality and regulation can help organizations establish appropriate corrective actions to improve their application and prevent future violations.
Regulatory compliance technology
The circular creates demand for digital tools that track:
Licenses,
Inspecting bodies,
Samples of documents,
Regulatory cases,
Judicial proceedings,
Application process, and
Deadline for payments.
Transactional regulatory due diligence
Investors, acquirers and lenders may seek specialised pharmaceutical regulatory due diligence to assess whether pending violations are eligible for compounding and whether they could affect a business's value.
Preparing a Rule 4 application requires more than completing a form. The applicant must establish eligibility, identify the correct authority, organise technical records and maintain consistency across regulatory and legal documents.
Corpseed can support pharmaceutical, cosmetic and medical-device businesses through a structured compliance approach.
Preliminary eligibility assessment
Corpseed can assist with:
Central-versus-State jurisdiction assessment
Our regulatory-support process can help businesses:
This service can reduce the risk of an application being returned or rejected for want of jurisdiction.
Documentation and application support
Corpseed can provide support in:
Filing and regulatory coordination
Subject to the applicable procedure and professional scope, Corpseed can assist with:
Hearing preparation
Where a personal hearing is required, Corpseed can help organise:
Legal opinions and representation before courts or authorities should be undertaken through appropriately qualified legal professionals where required.
Post-order compliance
Corpseed can support businesses in:
Preventive pharmaceutical regulatory compliance services
Apart from the application process, Corpseed can provide help in:
Need assistance with a CDSCO Rule 4 compounding application? Get free consultation from Corpseed. We can help assess eligibility, identify the competent authority, organise supporting documents and coordinate the compliance process for pharmaceutical, cosmetic and medical-device businesses.
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