Out-of-calibration transponder operation

I was thumbing through the FAR/AIM last night,
trying to fall asleep and I noticed something
that I couldn't understand.

It appeared (in my half-asleep state) that the
FAR says not to operate an out-of-calibration
transponder at all, and the FAR says to operate
it with altitude reporting off.

On the face of it, the FAR would have the authority
of law behind it. Any clarification?