RAJESH KUMAR SHARMA versus UNION OF INDIA AND ORS.

Citation: [2007] 2 S.C.R. 245 · Decided: 02-02-2007 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Dismissed
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Judgment (excerpt)

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RAJESH KUMAR SHARMA 
11. 
UNION OF INDIA AND ORS. 
FEBRUARY 2, 2007 
[DR. ARIJIT PASA Y AT AND S.H. KAPADIA, JJ.) 
Customs Act, 1962; s. 35(1)(a)!Customs (Compounding of offences) 
Rules, 2005; Rule 5/Circular No.5412005-Cus dated December 30, 2005 
issued thereunder: 
A 
B 
c 
Compounding of an offence committed in terms of provisions under 
Customs Act-Fixation of compounding amount in terms of Rule 5-
Permissible limit-Interpretation of-Held: Purpose of compounding of offence 
is to prevent litigation and encourage early settlement of disputes-Jn fixation 
of compounding amount in terms of Rule 5 'Upto' not applies to both 20% 
of market value of goods or Rupees ten lakhs but has to be read along with D 
the phrase 'whichever is higher'-Petition lacks merit, hence dismissed-
lnterpretation of statutes. 
Petitioner had applied for compounding of an offence committed by him 
under Section 135(1)(a) of the Customs Act, 1962. The Compounding 
Authority imposed a sum of Rupees Ten lakhs as compounding amount. The 
order of the authority was challenged by the petitioner on the ground that the 
compounding amount so fixed is beyond the permissible limit. The petition 
was rejected by the High Court. Hence the present special leave petition. 
E 
Petitioner contended that the extent of compounding amount as fixed by 
the Compounding Authority was beyond the permissible limit and it should F 
have been 20% of the market value as declared; and that since the purpose 
of compounding is to prevent unnecessary litigation, ifthe 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. 
G 
Dismissing the appeal, the Court 
HELD:l.l. Purpose of compounding of offence against payment of 
compounding amount is to prevent litigation and encourage early settlement 
245 
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246 
SUPREME COURT REPORTS 
[2007] 2 S.C.R. 
A of disputes. !Para - 611247-CI 
1.2. The crucial words in Rule 5 of the Customs Rules are "whichever 
is higher". According to 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 
B accepted, it would render expression "whichever is higher" redundant. 
!Para 7] (247-G] 
CIVIL APPELLATE JURISDICTION : Special Leave Petition (C) No. 
21435 of2006. 
C 
From the Judgment and final Order dated 15.9.2006 of the High Court 
of Delhi at New Delhi in C.W.P. No. 14639/2006. 
D 
Rajeev Kr. Tiwari, Kumar Parimal and P.V. Yogeswaran for the Appellant. 
The Judgment of the court was delivered by 
Dr. ARIJIT PASAYA T, J. 1. 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. 
2. 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 
E the writ petition was to the order dated 28th July, 2006 passed by the Chief 
Commissioner of Customs, Gujarat Zone, Ahmedabad. 
3. Background facts in a nutshell are as follows: 
Petitioner had applied for compounding of an offence committed by him 
under Section 135(l)(a) of the Customs Act, 1962 (in short the 'Act'). After 
F 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. 
G 
4. Jn support of the petition, it has been stated that the extent of 
H 
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. 
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RAJESHKUMARSHARMAv. U.O.L [PASAYAT,J.] 
247 
5. It is stated that since the purpose of compounding is to prevent A 
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. I 0,00,000/- whichever is higher is accepted same would be cnunter 
productive. 
6. The guidelines for compounding are contained in the Circular No.
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