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TMI Blog1989 (10) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... of such confiscation a fine of Rs. 19,00,000/- and further imposing on the appellant a penalty of Rs. 5,00,000/-. 3. The appellant is engaged in the business of manufacture of various pharmaceutical products including sulphamethoxazole 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 Development of the Government of India issued to the appellant an industrial licence enabling it to manufacture 18 tonnes of SMX per year. Clause 4 of the industrial licence enjoins that the manufacture of "new articles" shall 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 additional 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 subject to-the conditions stipulated in Annexure I. It will be further subject to the following additional conditions :- (i) ................... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tzerland, 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 Switzerland, 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 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. 9. 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 The appellant also gave a declaration that it was an Actual User, and that its registration had not been cancelled or withdrawn or otherwise made inoperative, as required to be given under Paragraph 6 of Appendix 10 of the Import Policy, 1978-79 and got the goods cleared upon such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. 10. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. 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 Customs Act, 1962 read with Section 3 of the Imports and Exports (Control) Act, 1947.I, however, allow under Section 125 of the Customs 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 exercised within a month from the date of this 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/- (Rupees Five Lakhs only) on the importers under Section 112, of Customs Act, 1962 which is to be paid forthwith." 14. 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, dismissed the same by his judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nematographic Act, or concerned local statute." 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 goods. 17. Clauses (1) and (3) of Paragraph 5 of Chapter 2 of Import Policy 1978-79 define "Actual User" and "Actual U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacturing 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. 18. 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 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 registration has not been otherwise made inoperative is a false declaration, as rightly held by the Collector of Customs in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant is that the Collector of Customs cannot, in exercise of his revisional jurisdiction 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 im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een 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. 26. 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 no sense in 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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