Full Judgment Text
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PETITIONER:
ROCHE PRODUCTS LIMITED
Vs.
RESPONDENT:
COLLECTOR OF CUSTOMS AND ANOTHER
DATE OF JUDGMENT19/10/1989
BENCH:
DUTT, M.M. (J)
BENCH:
DUTT, M.M. (J)
PANDIAN, S.R. (J)
CITATION:
1989 SCR Supl. (1) 495 1989 SCC Supl. (2) 532
JT 1989 Supl. 273 1989 SCALE (2)830
ACT:
Customs Act, 1962: Sections 122, 124, 128--Collector
of Customs setting aside order of Customs Officer--Ordering
confiscation and imposing penalty--Held appellant has right
of appeal against such order.
Actual user must not be debarred from utilising the
imported material under its industrial licence.
Administrative Law: Authority has power to do a certain
act--Does the act but refers to wrong provisions of
law--Such order mere irregularity and would not vitiate such
act.
HEADNOTE:
The appellant is engaged in the business of manufacture
of various pharmaceutical products including sulphamethoxa-
zole which is also known as ’SMX’. One of the important
ingredients or raw materials for the manufacture of SMX is a
chemical known as ’isoxamine’.
On April 23, 1974 the Ministry of Industrial Development
of the Government of India issued to the appellant an indus-
trial licence enabling it to manufacture 18 tonnes of SMX
per year. Under one of the conditions of the industrial
licence, the appellant was permitted to import the material,
isoxamine, for a period of two years only from the date of
licence, and thereafter the product SMX was to be manufac-
tured from indigenous materials. The appellant’s request for
permission to import isoxamine till the middle of 1979 was
not acceded to by the Government and the appellant was asked
to manufacture SMX from indigenous materials. In the mean-
time, the appellant had placed orders for the import of
isoxamine under an import licence issued on October 13,
1976, and between March and June 1979 got the goods cleared
after giving a declaration that the appellant was an Actual
User, and that its registration had not been cancelled or
withdrawn or otherwise made inoperative.
496
The Collector of Customs, Bombay, issued show-cause
notice on the appellant for confiscation of goods and impo-
sition of penalty, inter alia, on the ground that it had
made a false statement that its registration had not been
cancelled, withdrawn or otherwise made inoperative for the
manufacture of SMX by using imported material, that is,
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isoxamine, inasmuch as the industrial licence had ceased to
be valid for the manufacture of SMX with imported material
after April 22, 1976.
The Collector of Customs, after bearing the appellant,
held that the appellant was not an Actual User (Industrial)
in respect of the said imported raw material, isoxamine,
after April 22, 1976, and that since the industrial licence
was invalid for manufacture of SMX with imported material
the importation of the raw material, namely, isoxamine, was
impermissible. The Collector also held that the appellant
had furnished a false declaration on the basis of which it
got the goods cleared by the Custom Officer. The Collector,
therefore, set aside the decision of the Custom Officer
allowing clearance of the goods. The Collector of Customs
further directed confiscation of the goods imported by the
appellant and also imposed a penalty. The appellant’s writ
petition was dismissed by the learned Single Judge of the
High Court, and appeal against his judgment was dismissed by
the Division Bench.
Before this Court it was contended on behalf of the
appellant that the goods, namely, isoxamine, having been
imported under a valid Open General Licence (OGL), the
customs authorities had no jurisdiction to confiscate the
same; that the appellant having secured the OGL for the
import of isoxamine for its own use and not for business or
trade in it, the appellant should be held to be an Actual
User; that the Collector of Customs could not, in exercise
of his revisional jurisdiction under section 130(2) of the
Customs Act, 1962, as it stood then, for the first time
confiscate the goods and impose penalty on the appellant;
and that as the goods have been confiscated and the penalty
has been imposed by the Collector of Customs in exercise of
his revisional jurisdiction, the appellant has been deprived
of his right to prefer an appeal before the Central Board of
Excise and Customs under Section 128(a) of the Customs Act.
While dismissing the appeal, this Court,
HELD: (1) There can be no doubt that the definition of
"Actual User (Industrial)", as contained in clause (3) of
paragraph 5 of chapter 2 of Import Policy 1978-79 should be
read with the definition of "Actual
497
User" in clause (1) of paragraph 5. So read, it is clear
that an "Actual User (Industrial)" means an industrial
undertaking which is entitled to utilise the imported goods
"in the manufacturing process or operations conducted within
its authorised premises. In other words, the importer must
not be debarred from utilising the imported goods under the
terms of the industrial licence. [504C-D]
(2) The declaration of the appellant that it is an
Actual User, and that its registration has not been other-
wise made inoperative is a false declaration, as rightly
held by the Collector of Customs. When the industrial li-
cence granted to the appellant does not permit the use of
the imported goods for the manufacture of SMX, the importa-
tion of the goods under the OGL is illegal and could not be
allowed to be cleared by the appellant. [505A-B]
(3) In view of the provisions of section 122 read with
section 124 of the Customs Act, the Collector of Customs has
the jurisdiction to confiscate goods or impose penalty after
issuing show cause notice. He has, therefore, both the
original jurisdiction as also revisional jurisdiction. In
exercise of his revisional jurisdiction under section 130(2)
of the Act, he set aside the order of the Customs Officer
allowing the goods to be cleared by the appellant and,
thereafter, in exercise of his original jurisdiction under
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section 122 read with section 124 of the Act, he issued a
show cause notice on the appellant and, after hearing the
appellant, confiscated the goods and imposed penalty on the
appellant. [506E-F]
(4) It appears, however, that the confiscation was made
and the penalties imposed by the Collector of Customs in
exercise of his revisional power under section 130(2) of the
act. This is a mere irregularity not affecting the order.
When an authority has the power to do a certain act and in
exercise of such power he does the same, but refers to a
wrong provision of the law, that would be a mere irregulari-
ty and would not vitiate such act. [506G-H; 507A]
Addl. Commissioner of Income Tax v. J.K. D’Costa, [1982]
133 ITR 7, distinguished.
(5) In the order of the Collector it has been specifi-
cally stated at the very outset that an appeal against the
order lies to the Central Board of Excise and Customs. It
cannot, therefore, be said that the appellant was misled, as
the order was purported to have been passed by the Collector
of Customs in exercise of his revisional jurisdiction.
498
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4407(NM)
of 1989.
From the Judgment and Order dated 28.7.1989 of the
Maharashtra High Court in Appeal No. 360 of 1984.
Anil B. Divan, A.J. Rana, S. Ganesh, Ravinder Narain,
P.K. Ram, Ms. Amrita Mittar, M.P. Bakshi and D.N. Mishra for
the Appellant.
V.C. Mahajan, Hemant Sharma and P. Parmeshwaran for the
Respondents.
The Judgment of the Court was delivered by
DUTT, J. This special leave petition has been heard at
length and both parties have made elaborate submissions on
the merits of their respective cases and, accordingly, we
proceed to dispose of the special leave petition after
granting leave.
The appellant, Roche Products Limited, a public limited
company has, by this appeal, challenged the propriety of the
decision of the Division Bench of the Bombay High Court
dismissing the appeal preferred by the appellant against the
judgment of a learned Single Judge dismissing the writ
petition of the appellant. In the writ petition, the appel-
lant challenged the order of the Collector of Customs passed
in exercise of his revisional jurisdiction under section
130(2) of the Customs Act, 1962, hereinafter referred to as
’the Act’, directing confiscation of the goods imported by
the appellant, but giving to the appellant an option to pay
in lieu of such confiscation. a fine of Rs. 19,00,000 and
further imposing on the appellant a penalty of Rs.5,00,000.
The appellant is engaged in the business of manufacture
of various pharmaceutical products including sulphamethoxa-
zole which is also known as ’SMX’. One of the important
ingredients or raw materials for the manufacture of SMX is a
chemical known as ’isoxamine’, which is also known as ’3-
amino-5-mithyl-isoxazole’.
On April 23, 1974, the Ministry of Industrial Develop-
ment of the Government of India issued to the appellant an
industrial licence enabling it to manufacture 18 tomes of
SMX per year. Clause 4 of the industrial licence enjoins
that the manufacture of "new articles" shall
499
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be completed and commercial production established within a
period of two years from the date of issue of the industrial
licence. The industrial licence also contains some addition-
al conditions of which the condition contained in clause
5(iv) is relevant for our purpose. Clause 5(iv) provides as
follows:
"5. The industrial licence will also be sub-
ject to the conditions stipulated in Annexure
I. It will be further subject to the following
additional conditions:
(i) ...............................
(ii) ...............................
(iii)...............................
(iv) The undertaking should base the
manufacture of sulphamethaxazole on M.A.I.
(5-methyl-3-Amino in sale). From the third
year onwards, the manufacture of drugs will be
based on T. Butyl alcohol hydroxylamine acid
T. Butyl alcohol hydrexylamine said sulphates
and methyl formulate. The manufacture of
formulations should be based on their own
production of sulphamethaxazole and import
of Tricathopria will be considered only for
one year. There after, it should be based on
locally produced materials."
Clause 10 provides that the industrial licence will be
valid only for a period of two years within which commercial
production is to be established.
It is apparent from the conditions of the industrial
licence that the appellant was permitted to import the
material, isoxamine, for a period of two years only from the
date of the licence, that is to say, up to April 23, 1976
and that, thereafter, the product SMX was to be manufactured
from indigenous materials.
On October 13, 1967, the Import Control Authority issued
to the appellant an import licence for the import of various
raw materials up to an aggregate value of Rs.53,31,000
including isoxamine. The licence was valid for a period of
24 months from the date of issue of the same. It, however,
contained a condition that all the goods that would be
imported under it should only be used in the factory of the
appellant.
500
By its letter dated September 20, 1978, addressed to the
Under Secretary, Government of India, Ministry of Petroleum,
Chemicals and Fertilisers, the appellant stated their diffi-
culties in manufacturing SMX from indigenous materials and
made a request that it might be allowed to import isoxamine
until the middle of 1979. The appellant also wrote another
letter dated September 29, 1978 to the said Under Secretary,
again pointing out to him, inter alia, the difficulties
which the appellant had to face in developing the manufac-
ture of isoxamine from locally produced materials, indige-
nous articles and ingredients and the delays which has
occurred as a consequence.
Although the appellant did not get any reply to its
representation from the Government permitting it to import
isoxamine until the middle of 1979, yet it placed an order
on Hoffmann-La Roche Limited, Basle, Switzerland, for supply
of isoxamine and opened an irrevocable letter of credit in
favour of the said Hoffmann-La Roche Limited. Before the
goods ordered by the appellant had reached India from Switz-
erland, the Under Secretary to the Government of India,
Ministry of Petroleum, Chemicals and Fertilisers, by his
letter dated January 20, 1979 informed the appellant that
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its request for permission to import isoxamine till the
middle of 1979 could not be acceded to and the appellant was
asked to manufacture SMX from indigenous materials.
Between March and June, 1979, consignments of isoxamine
reached the Bombay Port pursuant to the order placed by the
appellant to the said Hoffmann-La Roche Limited. The appel-
lant also gave a declaration that it was an Actual User, and
that its registration had not been cancelled or withdrawn or
otherwise made inoperative, as required to be given under
paragraph 6 of Appendix- 10 of the Import Policy, 1978-79
and got the goods cleared upon such declaration by the
Customs Officers.
On September 7, 1979, the appellant received from the
Collector of Customs, Bombay, a notice issued under section
130(2) of the Act calling upon the appellant to show cause
why the goods imported by the appellant should not be con-
fiscated under section 3 of the Imports and Exports (Con-
trol) Act, 1947 and why a penalty of Rs.7,00,000 should not
be imposed on the appellant under section 112(1,) of Act.
In the said notice to show cause, it was stated inter
alia that the industrial licence granted to the appellant
stipulated that after a period of two years the production
of SMX should be based on indigenous
501
materials and, accordingly, the appellant was not allowed to
use imported materials in the production of SMX after the
expiry of two years, that is, after April 22, 1976. It was
also stated that the appellant was not an Actual User of the
imported material, that is, isoxamine, after April 22, 1976
inasmuch as the industrial licence had ceased to be valid
for the manufacture of SMX with imported materials. Further,
it was stated that the declaration given by the appellant in
terms of paragraph 6 of Appendix 10 of the Import Policy
1978-79, contained a false statement, namely, that the
registration of the appellant had not been cancelled, with-
drawn or otherwise made inoperative for the manufacture of
SMX and, accordingly, the goods, namely, isoxamine, had been
imported by the appellant in contravention of the Import
Trade Control Order issued under section 3 of the Imports
and Exports (Control) Act. In the circumstances, the Collec-
tor of Customs proposed to review the said unauthorised
clearance of the goods.
The appellant submitted its reply to the show cause
notice contending, inter alia, that the industrial licence
dated April 23, 1974 granted to it for the manufacture of
SMX was still valid and operative.
The Collector of Customs, after hearing the appellant
and after considering the facts and circumstances of the
case, by his order dated November 14, 1979, held that the
appellant was not an Actual User (Industrial) in respect of
the said imported raw material, isoxamine, after April 22,
1976, that is to say, after the expiry of two years from the
date of issue of the industrial licence to the appellant,
and that since the industrial licence was invalid for manu-
facture of SMX the importation of the raw material, namely,
isoxamine, was impermissible. It was also held by the Col-
lector of Customs that the appellant had furnished a false
declaration on the basis of which it got the goods cleared
by the Customs Officers. Accordingly, the Collector of
Customs ordered as follows:
"In exercise of powers conferred upon me under
Section 130(1) of the Customs Act, 1962, I
therefore, review the order of clearance
allowing storage in warehouse, the goods shall
be confiscated under Section 111(d) of the
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Customs Act, 1962 read with Section 3 of the
Imports and Exports (Control) Act, 1947. I,
however, allow under Section 125 of the Cus-
toms Act, 1962, an option to pay in lieu of
such confiscation a fine of Rs. 19,00,000
(Rupees nineteen lakhs only) and clear the
goods into town. This option should be exer-
cised within a month from the date of this
502
order or within such extended period as may be
allowed on good and sufficient cause being
shown to the satisfaction of the Adjudication
authority. I also impose a penalty of
Rs.5,00,000 (Rupee five lakhs only) on the
importers under Section 112, of Customs Act,
1962 which is to be paid forthwith".
Being aggrieved by the said order of the Collector of
Customs, the appellant challenged the same by filing a writ
petition before the Bombay High Court. A learned Single
Judge of the High Court, who heard the writ petition, dis-
missed the same by his judgment dated April 11, 1984. The
appellant preferred an appeal against the judgment of the
learned Single Judge to a Division Bench of the High Court
which, as stated already, dismissed the same. Hence this
appeal by special leave.
It is not disputed that the industrial licence granted
to the appellant clearly stipulated that after the expiry of
two years the appellant would not be entitled to manufacture
SMX with the imported material, isoxamine. Such manufacture
of SMX could be made by the appellant from indigenous mate-
rials. It has been strenuously urged by Mr. Anil Divan,
learned Counsel appearing on behalf of the appellant, that
the goods, namely, isoxamine, having been imported under a
valid Open General Licence (OGL), the customs authorities
have no jurisdiction to confiscate the same. It is submitted
that the only thing that can be looked into by the customs
authorities is whether the particular goods have been im-
ported under a valid licence or not. As soon it is found
that it has been so imported under a valid licence, the
customs authorities will have no other alternative than to
clear the goods.
We are unable to accept this contention of the appel-
lant. It is true that the goods have been imported under
OGL. If that had been the only condition for clearance of
the goods then, of course, the customs authorities could not
confiscate the goods. But, that was not the only condition
to be fulfilled by the appellant. Another conditions that
has to be fulfilled by the appellant is that contained in
paragraph (6) of Appendix 10 of the Import Policy 1978-79
which is as follows:
"(6). All Actual Users, at the time of clear-
ance of goods shall furnish to the customs
authorities a declaration giving particulars
of their registration as an Actual User with
the concerned authorities and affirming that
such registration
503
has not been cancelled or withdrawn or other-
wise made inoperative. In case, where separate
registration number is not allotted by the
sponsoring authority concerned, the importers
shall produce other evidence to the satisfac-
tion of the customs authorities that they are
registered as industrial units. Actual Users
(non-Industrial) shall, at the time of clear-
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ance of the goods furnish to the customs
authorities the original or a photostat copy
of the (currently valid) Registration Certifi-
cate held by them under the Shops and Estab-
lishments Act, Cinematographic Act,or con-
cerned local statute."
Thus, under paragraph (6), the Actual User has to fur-
nish a declaration affirming that the registration as an
Actual User has not been cancelled or withdrawn or otherwise
made inoperative. If there be no separate registration
number, as in the case of the appellant, importers shall
produce evidence to the satisfaction of the customs ’author-
ities that they are registered as industrial units. The
appellant has, admittedly, been registered as an industrial
unit which is evidenced by the grant of the industrial
licence. As stated already, the appellant furnished a decla-
ration that its registration had not been cancelled or
withdrawn or otherwise made inoperative. The appellant also
claimed that it was an Actual User. It is urged on behalf of
the appellant that as soon as it is proved that it is an
Actual User, and that its registration has not been can-
celled, the declaration that has been furnished by the
appellant must be held to be a correct one and the customs
authorities had rightly allowed the appellant to clear the
goods.
Clauses (1) and (3) of Paragraph 5 of Chapter 2 of
Import Policy 1978-79 define "Actual User" and "Actual User
(Industrial)" respectively, as follows:
"(1) "Actual User" means a person who applies
for/ secures a licence for the import of any
item or an allotment of a canalised item
required for his own use, and not for business
or trade in it. Thus, in the case of an indus-
trial undertaking, the item concerned shall be
utilised for the manufacturing processes or
operations conducted within its authorised
premises (or made available to jobbing units
outside only as part of such production ef-
fort). In the nonindustrial category, such
as hospitals, research and development or any
other institutions, commercial estab-
504
lishments and individuals, the concerned item
shall be utilised for its/his own use i.e. for
the purpose for which the item was sought for
import.
(3) "Actual User (Industrial)" shall mean an
industrial undertaking, be it in the large
scale, small scale or cottage industries
sector, engaged in the manufacture of any
goods for which it holds a licence or Regis-
tration Certificate from the appropriate
Government authority, wherever applicable."
There can be no doubt and it is also conceded to on
behalf of the appellant that the definition of "Actual User
(Industrial)", as contained in clause (3) of paragraph 5
should be read with the definition of "Actual User" in
clause (1) of paragraph 5. So read, it is clear that an
"Actual User (Industrial)" means an industrial undertaking
which is entitled to utilise the imported goods "in the
manufacturing process or operations conducted within its
authorised premises". Much emphasis has been laid by the
learned Counsel for the appellant on the first sentence of
clause (1) of paragraph 5--"Actual User" means a person who
applies for/secures a licence for the import of any item or
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an allotment of a canalised item required for his own use,
and not for business or trade in it. It is submitted on
behalf of the appellant that the appellant having secured
the OGL for the import of isoxamine for its own use and not
for business or trade in it, the appellant should be held to
be an Actual User. We do not find any substance in the
contention made on behalf of the appellant. The appellant is
not entitled under the industrial licence to utilise the
imported goods for its own use for the manufacture of SMX.
Even otherwise, the latter part of clause (1) makes it very
clear that the imported goods have to be utilised for the
manufacturing process or operations conducted within the
authorised premises of the industrial undertaking which the
appellant is debarred from doing under the terms of the
industrial licence after the expiry of the period of two
years on April 22, 1976. The appellant, therefore, does not
satisfy the first condition of paragraph (6) of Appendix 10
of the Import Policy 1978-79, namely, the importer has to be
an Actual User. In other words, the importer must not be
debarred from utilising, but must be entitled to utilise the
imported goods under the terms of the industrial licence.
The appellant also does not fulfil the other condition
under paragraph (6) that the registration has not been made
otherwise invalid. It may be that the industrial licence is
operative for the
505
manufacture of SMX with indigenous materials but, surely, it
is inoperative for the manufacture of the said product with
imported materials after the expiry of two years from the
date of the issuance of the licence. The declaration of the
appellant that it is an Actual User, and that its registra-
tion has not been otherwise made inoperative is a false
declaration, as rightly held by the Collector of Customs in
the impugned order. When the industrial licence granted to
the appellant does not permit the user of the imported goods
for the manufacture of SMX, the importation of the goods
under the OGL is illegal and could not be allowed to be
cleared by the appellant. There is, therefore, no substance
in the contention made on behalf of the appellant that on a
demurer at the highest, the appellant can only be said to
have infringed a condition of its industrial licence and
such infringement does not constitute a prohibition on
import which is imposed by any law. This submission com-
pletely overlooks the provision of paragraph (6) of Appendix
10 of the Import Policy 1978-79. After the expiry of two
years from the date of issuance of the industrial licence,
the appellant had no right to import isoxamine under the
OGL. Accordingly, the importation of isoxamine after the
expiry of two years from the date of the issuance of the
industrial licence was illegal.
It is next contended on behalf of the appellant that
even if the appellant’s declaration is considered to be
wrong, it would not render the importation invalid, but the
only consequence would be that the clearance of the goods
would not be permitted and that in such situation, the
respondents would only take recourse to clause 10-C(1) of
the Imports (Control) Order. Clause 10-C(1) provides that
where, on the importation of any goods or at any time there-
after, the Chief Controller of Imports and Exports is satis-
fied, after giving a reasonable opportunity to the licensee
of being heard in the matter, that such goods cannot be
utilised for the purpose for which they were imported he
may, by order, direct the licensee or any other person
having possession or control of such goods to sell such
goods to such persons, within such time, at such price and
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in such manner as may be specified in the direction. The
appellant cannot, in our opinion, take resort to the provi-
sion of clause 10-C(1). That provision is not meant for
granting relief to an importer who on the basis of a false
declaration gets his goods cleared, nor does it apply to any
import which is in violation of the conditions of an indus-
trial licence. Clause 10-C(1) will apply to a case where the
goods have been validly imported, but cannot be utilised for
some reason or the other. The contention of the appellant is
unsound and is rejected.
506
Next contention of the appellant is that the Collector
of Customs cannot, in exercise of his revisional jurisdic-
tion under section 130(2) of the Act, as it stood then, for
the first time confiscate the goods and impose penalty on
the appellant. It is submitted that a revisional authority,
as the Collector of Customs is under section 130(2) of the
Act, can set aside the decision or order of an officer of
customs subordinate to him, but cannot either confiscate the
goods or impose penalty. It is contended that in the instant
case, the Collector of Customs could set aside the decision
of the Customs Officer allowing clearance of the goods and
direct issuance of a show cause notice under section 124 of
the Act for the confiscation of the goods. The grievance of
the appellant is that if such a show cause notice was issued
and there was an adjudication of confiscation and penalty
under section 122 of the Act, in that case, the appellant
could challenge the same by way of an appeal as provided in
section 128 of the Act. The Collector of Customs, it is
urged, having himself confiscated the goods and imposed a
penalty, has deprived the appellant of its right of appeal
under section 128 and, accordingly, the impunged order of
the Collector of Customs confiscating the goods and imposing
the penalty on the appellant should be quashed.
We may first consider whether the Collector of Customs
had exceeded his jurisdiction in confiscating the goods and
imposing penalty for the first time in exercise of his
revisional jurisdiction under section 130(2) of the Act. In
view of the provisions of section 122 read with section 124
of the Act, the Collector of Customs has the jurisdiction to
confiscate goods or impose penalty after issuing show cause
notice on the person concerned. He has, therefore, both the
original jurisdiction as also revisional jurisdiction. In
exercise of his revisional jurisdiction under section 130(2)
of the Act, he set aside the order of the Customs Officer
allowing the goods to be cleared by the appellant and,
thereafter, in exercise of his original jurisdiction under
section 122 read with section 124 of the Act, he issued a
show cause notice on the appellant and, after hearing the
appellant, confiscated the goods and imposed penalty on the
appellant. It, however, appears from the impugned order
dated November 14, 1979 that the confiscation was made and
the penalties imposed by the Collector of Customs in exer-
cise of his revisional power under section 130(2) of the
Act. This, in our opinion, is a mere irregularity not af-
fecting the order. Admittedly, the Collector of Customs had
the power to confiscate the goods and impose penalty under
section 122 read with section 124 of the Act. When an au-
thority has the power to do a certain act and in exercise of
such power he does the same, but refers to a wrong provision
of the
507
law, that would be a mere irregularity and would not vitiate
such act. In the instant case also, the Collector of Customs
had admittedly the power to confiscate goods and impose
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penalty and even though in the impugned order it is stated
that the confiscation of the goods was made and the penalty
was imposed in the exercise of his power under section
130(2) of the Act, that would not be fatal and vitiate the
order.
The decision of the Delhi High Court in Addl. Commis-
sioner of Income Tax v. J.K. D’Costa, [1982] 133 ITR 7,
strongly relied upon by the appellant, does not apply to the
facts and circumstances of the instant case. In that case,
the Addl. Commissioner of Income Tax came to the conclusion,
inter alia, that the failure of the Income Tax Officer to
initiate penalty proceedings for both the assessment years,
namely, 1964-65 and 1965-1966 under section 271(1)(a) and
for the assessment year 1965-66 under section 273(b) of the
Income Tax Act, 1961, was erroneous and prejudicial to the
interest of the revenue. In that view of the matter, he
passed orders setting aside the assessment orders and di-
rected the Income Tax Officer to make fresh assessments in
accordance with law. It has been observed by the Delhi High
Court that there is no identity between the assessment
proceedings and the penalty proceedings; the latter are
separate proceedings, that may, in some cases, follow as a
consequence of the assessment proceedings. Further, it has
been observed that the penalty proceedings do not form part
of the assessment proceedings and that the failure of the
Income Tax Officer to record in the assessment order, his
satisfaction or the lack of it in regard to the leviability
of penalty cannot be said to be a factor vitiating the
assessment order in any respect. In that case, as the Income
Tax Officer did not impose a penalty, the Addl. Commissioner
set aside the assessment order. The omission to initiate
penalty proceedings by the Income Tax Officer will not
vitiate an assessment order which is otherwise valid and it
has been rightly observed by the Delhi High Court that the
Addl. Commissioner was not justified in setting aside the
assessment order on that ground.
In the instant case, the facts are completely different.
The Collector of Customs set aside the order of the Customs
Officer allowing the appellant to clear the goods on a false
declaration and also confiscated the goods and imposed
penalty. The Collector of Customs had, as noticed above, the
power to confiscate the goods and impose penalty and he did
the same after issuing a show cause notice and hearing the
appellant. In D’Costa’s case (supra) the Addl. Commissioner
of Income Tax had no power to initiate penalty proceedings
under section 271(1)(a) or section 273(b) of the Income Tax
Act,
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1961. Be that as it may, that decision has no manner of
application to the facts and circumstances of the instant
case.
The appellant has complained that as the goods have been
confiscated and the penalty has been imposed by the Collec-
tor of Customs in exercise of his revisional jurisdiction,
the appellant has been deprived of his right to prefer an
appeal before the Central Board of Excise and Customs under
section 128(a) of the Act. When the Collector of Customs
could confiscate the goods and impose penalties only in
exercise of his original jurisdiction under section 122 read
with section 124 of the Act, surely, the appellant had a
right of appeal against such confiscation and imposition of
penalty. At this stage, we may notice a very significant
fact that in the impugned order of the Collector dated
November 14, 1979, it has been specifically stated at the
very outset that an appeal against the order lies to the
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Central Board of Excise and Customs, New Delhi, within three
months from the date of its despatch. It cannot, therefore,
be said that the appellant was misled, as the order was
purported to have been passed by the Collector of Customs in
exercise of his revisional jurisdiction. The appellant,
however, did not avail itself of its right of appeal under
section 128(a) of the Act and, accordingly, its complaint in
that regard is not justified.
Before we part with this appeal, we may dispose of two
other minor contentions of the appellant. Counsel for the
appellant submits that as the appellant has been found not
entitled to use the imported material in the production of
SMX, it is curious that by the impugned order the appellant
has been given an option to pay in lieu of the confiscation
of the imported materials a fine of Rs. 19,00,000 and clear
the goods into the town. Counsel submits that this shows
that the appellant is entitled to use the imported material
for the production of SMX. This contention is devoid of
merit and is fit to be rejected on the face of it. The
appellant may have been allowed to clear the goods on pay-
ment of a fine in lieu of confiscation, but that does not
mean that the appellant would be entitled to use the goods
for the manufacture of SMX in violation of the industrial
licence. The appellant may sell the goods to some other
person but, surely, it cannot use it in its factory for the
manufacture of SMX.
The other contention of the appellant is that as the
capacity of the appellant to manufacture SMX has been raised
from 18 tomes to 45 tonnes per annum, there is no sense in
confiscating the imported goods. This contention is equally
devoid of merit. It may be that the
509
manufacturing capacity of the appellant has been increased,
but there is nothing to show that the Central Government has
permitted the appellant to manufacture SMX with imported
isoxamine. The appellant may go on manufacturing SMX from
indigenous materials and the manufacturing capacity of the
appellant may have been increased from 18 tonnes to 45
tonnes for the manufacture of SMX from indigenous materials,
but these facts are quite irrelevant and have no bearing on
the question with which we are concerned. The contention is
rejected. No other points have been urged on behalf of the
appellant.
For the reasons aforesaid, the appeal is dismissed.
There will, however, be no order as to costs in this appeal.
R.S.S. Appeal dismissed.
510