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 20% of the market value of the goods or Rs. 10 lakhs, whichever is higher, and this express qualifier cannot be read away by applying the words 'up to' to both limbs.

Court decision

The Supreme Court dismissed the special leave petition (without granting leave, disposing of it by a detailed order), holding that the petitioner's suggested interpretation was clearly unacceptable and that the correct reading of Rule 5(4) is that the compounding amount for a Section 135(1)(a) offence is up to 20% of the market value of the goods or Rs. 10 lakhs, whichever is higher. The decision was in favour of the respondents (Union of India).

Facts

The petitioner, Rajesh Kumar Sharma, applied for compounding of an offence he had committed under Section 135(1)(a) of the Customs Act, 1962. The Compounding Authority, the Chief Commissioner of Customs, Gujarat Zone, Ahmedabad, by order dated 28th July 2006 allowed the application but fixed the compounding amount at Rs. 10,00,000/-. The market value of the goods which had not been declared was Rs. 8,45,176/-. The petitioner's writ petition against this order was dismissed by a Division Bench of the Delhi High Court, leading to the present special leave petition before the Supreme Court. The compounding framework involved was Circular No. 54/2005-Cus dated 30th December 2005 and the Customs (Compounding of Offences) Rules, 2005, effective from 30th December 2005.

Key provisions

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