Legal principle

Under Rule 5(4) of the Customs (Compounding of Offences) Rules, 2005, the compounding amount for an offence under Section 135(1)(a) of the Customs Act, 1962 is up to twenty per cent of the market value of the goods or Rupees ten lakhs, whichever is higher — the 'whichever is higher' words cannot be read away by extending 'up to' to both figures.

Court decision

The Supreme Court dismissed the petition, holding that the petitioner's interpretation of Rule 5(4) was 'clearly unacceptable': the compounding amount for an offence under Section 135(1)(a) is up to 20% of the market value of the goods or Rupees ten lakhs, whichever is higher, so the Rs. 10,00,000/- compounding amount was not beyond the permissible limit. The petition lacked merit and was dismissed, upholding the Delhi High Court's view.

Facts

The petitioner, Rajesh Kumar Sharma, applied for compounding of an offence committed by him under Section 135(1)(a) of the Customs Act, 1962, relating to goods which had not been declared and whose market value was Rs. 8,45,176/-. The Compounding Authority (Chief Commissioner of Customs, Gujarat Zone, Ahmedabad, by order dated 28th July, 2006) allowed the application and imposed a compounding amount of Rs. 10,00,000/-. The petitioner's writ petition challenging the compounding amount as beyond the permissible limit was dismissed by a Division Bench of the Delhi High Court, and he then filed the present special leave petition in the Supreme Court.

Key provisions

• Section 135(1)(a), Customs Act, 1962 — Evasion of duty or prohibitions