2007 (2) TMI 10 - SC - Customs

Compounding of offences As per appellant compounding amount fix by the Compounding Authority was beyond the permissible limit HC rejected the petitioner plea on the basis of 20%of MV of goods or up to one lakh whichever is higher is accepted

Summary

Issues: Challenge to order of Division Bench of Delhi High Court dismissing writ petition regarding compounding amount under Customs Act, 1962.

The judgment pertains to a challenge against an order passed by a Division Bench of the Delhi High Court dismissing a writ petition filed by the petitioner regarding the compounding of an offence under Section 135(1)(a) of the Customs Act, 1962. The Compounding Authority had allowed the application and imposed a compounding amount of Rs. 10,00,000, which the petitioner contended was beyond the permissible limit. The petitioner argued that the compounding amount should have been 20% of the market value of the undeclared goods, which was Rs. 8,45,176. The petitioner claimed that the interpretation by the High Court, which stated that the compounding amount should be up to 20% of the market value of the goods or up to Rs. 10,00,000, whichever is higher, was counterproductive to the purpose of preventing unnecessary litigation. The guidelines for compounding offences are outlined in Circular No. 54/2005-Cus. dated 30th December, 2005, and the relevant Rule 5 of the Customs Rules specifies that the compounding amount for offences under Section 135(1)(a) should be up to twenty percent of the market value of the goods or Rs. 10,00,000, whichever is higher. The petitioner's counsel argued that the phrase "whichever is higher" applies to both 20% of the market value and Rs. 10,00,000, but the Court found this interpretation unacceptable as it would render the phrase redundant. Therefore, the Court concluded that the petition lacked merit and deserved dismissal.

In summary, the key issue in this judgment was the interpretation of the compounding amount under the Customs Act, 1962, specifically regarding the permissible limit set by the Compounding Authority. The Court analyzed the relevant provisions of the Customs Rules and the Circular to determine the correct application of the compounding amount for the offence under Section 135(1)(a). The petitioner's argument that the compounding amount should be 20% of the market value of the goods or Rs. 10,00,000, whichever is higher, was rejected by the Court as it would make the phrase "whichever is higher" redundant. The Court emphasized the purpose of compounding offences to prevent litigation and encourage early dispute resolution. Ultimately, the Court dismissed the petition as lacking merit based on the interpretation of the compounding amount provision.