Case: Roche Products Limited Vs. Collector of Customs and Another

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. 25. The decision of the Delhi High Court in Addl. CIT v. J. K. DCosta ((1982) 133 ITR 7 (Del HC)), 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 1965-66 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 directed 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 proceeding. 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 Additional 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 Additional Commissioner was not justified in setting aside the assessment order on that ground. 26. 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 DCosta case ((1982) 133 ITR 7 (Del HC)) the Additional 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, 1961. Be that as it may, that decision has no manner of application to the facts and circumstances of the instant case. 27. The appellant has complained 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 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 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 Central Board of Excise and Customs, New Delhi, within three months from the date of its dispatch. 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(1)(a) of the Act and, accordingly, its complaint in that regard is not justified. 28. 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 payment 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. 29. The other contention of the appellant is that as the capacity of the appellant to manufacture SMX has been raised from 18 tonnes to 45 tonnes per annum, there is not sense is confiscating the imported goods. This contention is equally devoid of merit. It may be that the 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.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]16. 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 materials. 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 imported 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 goods17. We are unable to accept this contention of the appellant. 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 condition 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) All Actual Users, at the time of clearance 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 has not been cancelled or with drawn or otherwise made inoperative. In case, where separate registration number is not allotted by the sponsoring authority concerned, the importers shall produced other evidence to the satisfaction of the customs authorities that they are registered as industrial Actual Users (non-Industrial) shall, at the time of clearance of the goods furnish to the customs authorities the original or a photostat copy of the (currently valid) Registration Certificate held by them under the Shops and Establishments Act, Cinematographic Act, or concerned local statute."18. Thus, under paragraph (6), the Actual User has to furnish 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 authorities 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 declaration 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 cancelled, 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 goods19. Clauses (1) and (3) of paragraph 5 of Chapter 2 of Import Policy 1978-79 "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 industrial 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 effort). In the non-industrial category, such as hospitals, research and development or any other institutions, commercial establishments 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 Registration Certificate from the appropriate government authority, wherever applicable."24. 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 exercise of his revisional power under Section 130(2) of the Act. This, in our opinion, is a mere irregularity not affecting 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 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 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 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 order25. The decision of the Delhi High Court in Addl. CIT v. J. K. DCosta ((1982) 133 ITR 7 (Del  HC)), 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 1965-66 under Section 271(1)(a) and for the assessment year 1965-66 under Section 273(b) ofthe 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 directed 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 proceeding. 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 Additional 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 Additional Commissioner was not justified in setting aside the assessment order on that ground26. 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 DCosta case ((1982) 133 ITR 7 (Del  HC)) the Additional Commissioner of Income Tax had no power to initiate penalty proceedings under Section 271(1)(a) or Section 273(b) ofthe Income Tax Act, 1961. Be that as it may, that decision has no manner of application to the facts and circumstances of the instant case27. The appellant has complained 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 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 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 Central Board of Excise and Customs, New Delhi, within three months from the date of its dispatch. 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(1)(a) of the Act and, accordingly, its complaint in that regard is not justified28. 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 payment 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 SMX29. The other contention of the appellant is that as the capacity of the appellant to manufacture SMX has been raised from 18 tonnes to 45 tonnes per annum, there is not sense is confiscating the imported goods. This contention is equally devoid of merit. It may be that the 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