Attorney General William French Smith yesterday defended his department's failure to prosecute former Environmental Protection Agency administrator Anne M. Burford for contempt of Congress, saying the issue is moot because the Reagan administration has given Congress all the EPA documents it subpoenaed.

But members of the House Judiciary Committee said that the actions of the Justice Department had the effect of preventing Congress from having its case heard in the federal courts.

Rep. Barney Frank (D-Mass.) said he believes the executive branch has improperly restricted the activities of Congress, and warned that unless the House can pursue a contempt action through the courts its only alternative is to put an official like Burford under House arrest.

"Do they want us to "put together a posse of pages . . . to go out and grab Burford . . . and lock her up in the Capitol? That's lunatic government," Frank said.

Frank said he plans to work on legislation that would require appointment of an independent special prosecutor in any case where a high-level administration official is cited for contempt of Congress.

In response to occasionally hostile questioning from the Judiciary Committee, Smith said that the decision not to present evidence to a federal grand jury was made by Stanley Harris, U.S. attorney for the District of Columbia, and not by anyone else at the Justice Department.

Harris has said he could not prosecute Burford because he was simultaneously participating in a lawsuit, filed by the Justice Department, seeking to block her contempt citation.

U.S. District Court Judge John Lewis Smith Jr. dismissed the Justice Department suit, but the deadline for the Justice Department to decide on an appeal is several weeks off, leaving the case technically alive.