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CASE NO.: Special Leave Petition (civil)  21435 of 2006

PETITIONER: Rajesh Kumar Sharma                             ...Petitioner

RESPONDENT: Union of India & Ors.                           ...Respondents

DATE OF JUDGMENT: 02/02/2007

BENCH: Dr. ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: J U D G M E N T

Dr. ARIJIT PASAYAT, J.

       Though we are not granting leave, in view of re-iteration  of plea taken in this special leave petition in several cases, the  petition is being disposed of by a detailed order.  

Challenge is to the order passed by a  Division Bench of  the Delhi High Court dismissing the writ petition filed by the  petitioner.  Challenge in the writ petition was to the order  dated 28th July, 2006 passed by the Chief Commissioner of  Customs, Gujarat Zone, Ahmedabad.   

Background facts in a nutshell are as follows:

Petitioner had applied for compounding of an offence  committed by him under Section 135 (1)(a) of the Customs  Act, 1962 (in short the ’Act’).  After considering the application  filed by the petitioner, the Compounding Authority allowed the  application and imposed compounding amount of Rs.  10,00,000/-. In the writ petition stand taken by the petitioner  was that the compounding amount as fixed is beyond the  permissible limit.  This plea was rejected by the High Court.   

In support of the petition, it has been stated that the  extent of compounding amount as fixed by the Compounding  Authority was beyond the permissible limit.  It is submitted  that market value of the goods which had not been declared  was Rs. 8,45,176/- and therefore it should have been 20% of  the said market value.

It is stated that since the purpose of compounding is to  prevent unnecessary litigation, if the interpretation given by  the High Court  that the quantum has to be upto 20% of the  market value of the goods or upto  Rs.10,00,000/- whichever  is higher is accepted same would be counter productive.

The guidelines for compounding are contained in the  Circular No.54/2005-Cus dated 30th December, 2005.  Central  Government had brought into force the Customs  (Compounding of Offences) Rules 2005 (in short the ’Customs  Rules’) and Central Excise (Compounding of Offences) Rules,  2005) (in short the ’Central Excise Rules’) with effect from 30th  December, 2005.  The purpose of compounding of offence

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against payment of compounding amount is to prevent  litigation and encourage early settlement of disputes.  The  cases where compounding would be rejected are also spelt out  in the said circular.  The relevant Rule is Rule 5 of the  Customs Rules which so far as relevant reads as follow: Fixation of the Compounding Amount- For  the purpose of compounding of offences under  the various provisions of the Act, the  compounding amount shall be as provided  hereinbelow:-

(1) \026 (3)   xxx              xxx             xxx

(4)     Offence specified under Upto twenty per-         Section 135(1) (a) of the       cent of market         Act.                                    value of the goods                                                 or Rupees ten lakhs                                                          whichever is higher.         (5) \026 (7)    xxx             xxx             xxx                                                 (Underlined for emphasis)          The crucial words in the Rule are "whichever is higher".   According to learned counsel for the petitioner, the word "up  to" applies to both 20% of the market value of the goods or  Rupees Ten Lakhs.  This interpretation as suggested is clearly  unacceptable.  If the interpretation suggested is accepted, it  would render expression "whichever is higher" redundant.   The inevitable conclusion is that the petition lacks merit,  deserves dismissal, which we direct.