2007 (10) TMI 153 - HC - Customs

Application for compounding rejected by comp. authority only on basis of instructions in Cir. 54/05 considering power of Ch. comm.. u/s 137(3) impugned circular is ultra vires & contrary to the Cus. Act such circular prescribing power of authority to reject application is also contrary to 151A

Summary

Issues Involved:
1. Whether the Central Board of Excise and Customs (CBEC) Circular No. 54/2005-Cus dated 30.12.2005 is ultra vires Section 137(3) of the Customs Act, 1962.
2. Whether the CBEC Circular No. 54/2005-Cus dated 30.12.2005 is within the powers conferred under Section 151A of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Ultra Vires of Section 137(3):
The petitioner challenged the CBEC Circular No. 54/2005-Cus dated 30.12.2005, arguing it was issued without authority and exceeded the powers conferred under Section 151A of the Customs Act, 1962. Section 137(3) allows the Chief Commissioner of Customs to compound offences under the Customs Act, either before or after the initiation of prosecution. The petitioner contended that the circular restricted this statutory power by prohibiting the compounding of offences if they involved violations under other acts, including the Indian Penal Code. The court agreed, stating that Section 137(3) confers the power to compound offences solely under the Customs Act and does not extend to offences under other laws. Therefore, the circular was found to be ultra vires to the extent that it imposed restrictions beyond the scope of Section 137(3).

2. Powers under Section 151A:
The court examined whether the CBEC Circular No. 54/2005-Cus dated 30.12.2005 was within the powers conferred by Section 151A of the Customs Act, 1962. Section 151A allows the Board to issue orders, instructions, and directions for uniformity in the classification of goods or the levy of duty. The court noted that this power does not extend to controlling the exercise of statutory powers conferred on officers under the Act, particularly in their quasi-judicial capacity. The circular, by imposing restrictions on the compounding of offences, interfered with the discretionary power of the Chief Commissioner of Customs. Therefore, the court held that the circular could not be justified under Section 151A.

Judgment:
1. The court quashed and set aside the order dated 4.5.2007, remanding the matter back to the authority to consider the application for compounding without being influenced by the impugned circular.
2. The court declared that the CBDT circular, to the extent it is contrary to the Act and Rules, is ultra vires. Specifically, Paragraphs 2, 3(iii), and 3(iv) of the circular were declared ultra vires Section 137(3) of the Customs Act.
3. The court clarified that the jurisdiction of courts exercising criminal jurisdiction remains unaffected, and it is for the criminal courts to decide independently whether an offence subsists for them to exercise or continue to exercise jurisdiction.

Conclusion:
The court ruled that the CBEC Circular No. 54/2005-Cus dated 30.12.2005 was beyond the scope of the powers conferred under Sections 137(3) and 151A of the Customs Act, 1962. The circular's provisions restricting the compounding of offences involving violations under other laws were declared ultra vires and set aside. The matter was remanded for reconsideration in accordance with the law, ensuring that the statutory discretion of the Chief Commissioner of Customs is not unduly restricted.