Case: H.M.M. Limited Vs. Director of Entry Tax, West Bengal and Others

that excise duty was not paid at the time of the removal of the concerned consignment from the factory at Nabha.14. According to the appellants case in the Writ Petition, when the goods arrive at the Hussenabad check-post in bulk, packed in steel drums containing 182 kgs. of Horlicks Powder each, the goods have no other value except the cost of manufacture, freight and insurance a nd only after the Horlicks powder, packed in the steel drums, enters the Calcutta Metropolitan Area the cost of bottling inputs, bottling expenses, manufactures profits are added and excise duty is paid on the total value after the g oods are put into marketable condition. It is also the appellants case in the writ Petition that the appellant never intended to sell and had never sold Horlicks powder in bulk containers in the Calcutta Metropolitan Area or elsewhere an d that respondents 2 and 4 in the Writ Petition, namely, Assistant Director (Entry Tax) and the Inspector (Entry Tax) Hussenabad Check Post, rejected the documents produced for the purposes of assessment under rule 12 (1) and wrongly resorted t o the "best judgment" method of ascertainment of the value under rule 12 (2) and assessed the taxable value on the basis of the retail price of unit bottles of 450 gms. each in the local market at Calcutta. It is not possible to accept the appellants contention that the Horlicks powder packed in steel drums containing 182 kgs. each had no value at the Hussenabad Check Post apart from the cost of manufacture, freight and insurance. That may be so from the point of view of the manufacture, but it cannot be the value of the goods in the Calcutta Metropolitan Area where the value should include in addition to the aforesaid items the cost of further transport into the Calcutta Market Area from the Hussenabad Check Post, excise duty if not already paid at the time of the removal of the goods from the factory at Nabha, wholesalers and retailers profits and sales-tax. Under rule 12 (1) the value declared must include cost price of the goods as given in the bill, invoice or consignment note or any other document of like nature, shipping duties where applicable, insurance, excise duty and sales-tax. It may be that the process of bottling and labelling is resorted to after the bulk consignment is received into the Calcutta Metropolitan Area for the purpose of convenience and it may also be that it may not form part of the value of the goods at the point of entry. The cost of bottling and labelling the Horlicks powder into unit bottles inside t he Calcutta Metropolitan Area would be negligible. It may be that the appellant may be entitled to ask the Assessing Officer to take that also into consideration in the case of assessment under rule 12 (1). But since the value declared by the appellant was far less than the value showed by the appellant company itself in Form V as Rs. 1, 22, 304 working out to Rs. 14 per kg. as well as the value shown for the unit bottles in the price list of the appellants selling agent in the Calcutta Metropolitan Area, it is not possible to hold that the Assessing Officer was not justified in rejecting the value declared by the appellant as Rs. 7.694 per kg. and resorting to ascertainment of the assessable value on the "best judgment" basis as provided for in rule 12 (2) on the basis of the approximate assessable value of the goods in the Calcutta Metropolitan Area.15. The learned counsel for the appellant invited our attention to this Courts decision in Commissioner of Income-Tax, West Bengal-1 v. Padamchand Ramgopal, (1) where in his investigation, the Income-Tax Officer found two insignificant mistakes in the assessees accounts for the year 1953-54. Those mistakes were (1) failure to bring into account an item of interest received and (2) incorrectness of an entry relating to the receipt of income. No mistake was found in the accounts relating to assessment years 1954-55 to 1957-58. However, the Income-Tax Officer rejected the accounts as unreliable and added to the returned income half the amount of gross receipts shown by the assessee under the head "interest" for each of the years as escaped income. The Tribunal accepted the additions made by the Income-Tax Officer. But this Court held that the Income-tax Officer and the Tribunal erred in holding that the additions could be made in accordance with law and it was further held that the two mistakes afforded no basis for rejecting the accounts of the subsequent years and the method adopted for determining the escaped income was highly capricious. We think that the ratio of that decision will not apply to the facts of the present case. In Haji Lal Mohd. Biri Works, Allahabad v. The State of U.P. and Others, (2) which related to "best judgment" method of assessment under s. 18 (4) of the M.P. General Sales Tax Act, it has been held that the Assessing Authority while making "best judgment assessment" should arrive at its conclusion without any bias and on a rational basis and that if the estimate made by the Assessing Authority is his bonafide estimate and is based on a rational basis the fact that there is no good proof in respect of that estimate does not render the assessment illegal. There is no material in the present case for us to hold that the Assessing Authority had any bias against the appellant or that his estimate of the assessable value of the goods is not a bonafide estimate or that it has no rational basis. We find that the Assessing Officer had sufficient reason for not accepting the appellants declaration regarding the value of the goods and that his assessment of the saleable value on the "best judgment" basis is rational and based on the appellants own selling agents price list in the Calcutta Metropolitan Area.

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

Explanation:
0[ds]The appellant produced before the Assessing Offic er a copy of the excise gate pass showing the value to be in respect of the same goods and in respect of the same dealer. The copy purported to be of C. No. CE/20/BPE/70 dated 5.12.1970 of the Superintendent of Central Excise and Customs, Patiala , and it was contended on behalf of the appellant before the Assessing Officer that excise duty was paid at Nabha. But the copy produced did not purport to be a certified copy and the original was not produced, and, therefore, the Assessing Officer he ld that excise duty was not paid at the time of removal of the goods from the factory at Nabha. It is the appellants contention that only in the case of export of goods directly from Nabha or Rajahmundry having regard to the central excise re gulations, clearance of goods from the factory is effected on payment of excise duty on the invoice value which includes the cost and manufacturers profit. But the copy produced was not a certified copy and the original gate pass was not produced. There fore, it could not be held that the Assessing Officer was not justified in rejecting the copy and holding that excise duty was not paid at the time of the removal of the concerned consignment from the factory atto the appellants case in the Writ Petition, when the goods arrive at the Hussenabad check-post in bulk, packed in steel drums containing 182 kgs. of Horlicks Powder each, the goods have no other value except the cost of manufacture, freight and insurance a nd only after the Horlicks powder, packed in the steel drums, enters the Calcutta Metropolitan Area the cost of bottling inputs, bottling expenses, manufactures profits are added and excise duty is paid on the total value after the g oods are put into marketable condition. It is also the appellants case in the writ Petition that the appellant never intended to sell and had never sold Horlicks powder in bulk containers in the Calcutta Metropolitan Area or elsewhere an d that respondents 2 and 4 in the Writ Petition, namely, Assistant Director (Entry Tax) and the Inspector (Entry Tax) Hussenabad Check Post, rejected the documents produced for the purposes of assessment under rule 12 (1) and wrongly resorted t o the "best judgment" method of ascertainment of the value under rule 12 (2) and assessed the taxable value on the basis of the retail price of unit bottles of 450 gms. each in the local market at Calcutta. It is not possible to accept the appellants contention that the Horlicks powder packed in steel drums containing 182 kgs. each had no value at the Hussenabad Check Post apart from the cost of manufacture, freight and insurance. That may be so from the point of view of the manufacture, but it cannot be the value of the goods in the Calcutta Metropolitan Area where the value should include in addition to the aforesaid items the cost of further transport into the Calcutta Market Area from the Hussenabad Check Post, excise duty if not already paid at the time of the removal of the goods from the factory at Nabha, wholesalers and retailers profits and sales-tax. Under rule 12 (1) the value declared must include cost price of the goods as given in the bill, invoice or consignment note or any other document of like nature, shipping duties where applicable, insurance, excise duty and sales-tax. It may be that the process of bottling and labelling is resorted to after the bulk consignment is received into the Calcutta Metropolitan Area for the purpose of convenience and it may also be that it may not form part of the value of the goods at the point of entry. The cost of bottling and labelling the Horlicks powder into unit bottles inside t he Calcutta Metropolitan Area would be negligible. It may be that the appellant may be entitled to ask the Assessing Officer to take that also into consideration in the case of assessment under rule 12 (1). But since the value declared by the appellant was far less than the value showed by the appellant company itself in Form V as Rs. 1, 22, 304 working out to Rs. 14 per kg. as well as the value shown for the unit bottles in the price list of the appellants selling agent in the Calcutta Metropolitan Area, it is not possible to hold that the Assessing Officer was not justified in rejecting the value declared by the appellant as Rs. 7.694 per kg. and resorting to ascertainment of the assessable value on the "best judgment" basis as provided for in rule 12 (2) on the basis of the approximate assessable value of the goods in the Calcutta Metropolitanlearned counsel for the appellant invited our attention to this Courts decision in Commissioner of Income-Tax, West Bengal-1 v. Padamchand Ramgopal, (1) where in his investigation, the Income-Tax Officer found two insignificant mistakes in the assessees accounts for the year 1953-54. Those mistakes were (1) failure to bring into account an item of interest received and (2) incorrectness of an entry relating to the receipt of income. No mistake was found in the accounts relating to assessment years 1954-55 to 1957-58. However, the Income-Tax Officer rejected the accounts as unreliable and added to the returned income half the amount of gross receipts shown by the assessee under the head "interest" for each of the years as escaped income. The Tribunal accepted the additions made by the Income-Tax Officer. But this Court held that the Income-tax Officer and the Tribunal erred in holding that the additions could be made in accordance with law and it was further held that the two mistakes afforded no basis for rejecting the accounts of the subsequent years and the method adopted for determining the escaped income was highly capricious. We think that the ratio of that decision will not apply to the facts of the present case. In Haji Lal Mohd. Biri Works, Allahabad v. The State of U.P. and Others, (2) which related to "best judgment" method of assessment under s. 18 (4) of the M.P. General Sales Tax Act, it has been held that the Assessing Authority while making "best judgment assessment" should arrive at its conclusion without any bias and on a rational basis and that if the estimate made by the Assessing Authority is his bonafide estimate and is based on a rational basis the fact that there is no good proof in respect of that estimate does not render the assessment illegal. There is no material in the present case for us to hold that the Assessing Authority had any bias against the appellant or that his estimate of the assessable value of the goods is not a bonafide estimate or that it has no rational basis. We find that the Assessing Officer had sufficient reason for not accepting the appellants declaration regarding the value of the goods and that his assessment of the saleable value on the "best judgment" basis is rational and based on the appellants own selling agents price list in the Calcutta Metropolitan Area.