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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giving a declaration that the appellant was an  Actual User,  and that its registration had not been  cancelled  or withdrawn or otherwise made inoperative. 496     The  Collector  of Customs,  Bombay,  issued  show-cause notice on the appellant for confiscation of goods and  impo-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inter alia, on the ground that  it  had made  a false statement that its registration had  not  been cancelled,  withdrawn or otherwise made inoperative for  the manufacture  of  SMX by using imported  material,  that  is,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, 508 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