H.M.M. LIMITlO

DIRECTOR OF ENTRY TAX, WEST

BENGAL & OTHERS.

April 15, 1983

[Y.V. CHANDRACHUD C.J., A. VARADARAJAN AND

A.N. SEN JJ.]

The Taxe~ on Entry of Goods into Calcutta Metropolitan Area Act, 1972s. 37 (2).

The Taxes on Entry of Goods int(l Calcutta Metropolitan Area Rules, 1970 [rained under the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1970-Kept alive by the Taxes on Entry of Goods into Calcutta Metropolitan Area Ordinance, 1972 wlu'cli repealed Act of 1970-Are applicable under the Act of 1972 which replaced the Ordinance(!/ 1'72.

The Taxes on Entry of Goods into Calcutta Metrvpolitan Rules, 1970- Rule 12 (I) and 12 (2)-Scope of

Under s. 34 of the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1970 which provided for levy & collection of a tax on the entry of specified goods into Calcutta M-etropolitan Area for consumption, use or sale therein from any place outside that Area, Taxes on Entry of Goods into Calcutta Metropolitan Area Rules, 1970 were framed. The Act of 1970 was repealed by the Taxes on Entry of Goods into Cnlcutta Metropolitan Area Ordinance, 1972 but the Rules 1970 were continued in operation bys. l(J) of the Ordinance.

This Ordinance was repealed and replaced by the Taxes on Entry of Goods into Calcutta Metropolition Area Act, 1972. Section 37 (2) of this Act provides that anything done or any action taken under the Ordinance of 1972 shall be deen1ed to have been validly done or taken under this Act as if this Act had commenced on the 16th day of November, 1970 (the day when the Act of1970 came into force).

Under r. 12(1) of the Rules of 1970, for the purpose of determining the value of the goods every dealer has to make a declaration regarding their value in a prescribed form and submit the same to the Assessing Officer alongwith a copy of the relevant documents in support thereof. Rule 12(2) provides that if the Assessing Officer is satisfied about the reasonableness of the value declared by the dealer he shall accept the same and levy tax acoordingly. It further provides that if the value is not ascertainable on account of nonavailability or non-production of the documents, or if the Assessing Officer is not satisfied about the reasonableness of the va1ue declared by the dealer, the Assessing Officer shall determine the approximate saleable value of the goods in the Calcutta Metropolitan Area to the best of his judgment and tax accordingly.

The appellant in the Civil appeal and the petitioner in the writ petition is one and the same Company. The Company which used to import Horlicks Powder manufactured at its factory in Punjab into Calcutta Metropolitan Area

i ').,.

11.M.M LT!>. JI. DIRlicTOR, ENTRY TAX

?SS

for purposes of bottling and marketing both inS:ide and outside that Area, imported 8736 kg•. of that Powder in 18 steel drums cif 182 kgs. each in 1974. . A Tho Entry Tax Officer at the Hussenabad Road Check Post assessed and charged entry tax on this po\\der under s.6(1) of the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1972. The Assessing Officer did not accept the declaration and the documents regarding the value, freight and insurance •ubmitted by the Company under r. 12(1) of the Taxes on Entry of Goods into Calcutta Metropolitan Area Rules, 1970 and n1ade -assessment on the 'best judgment" basis under r.12 (2). The original documents regarding the value, B freight and insurance were not produced by the Company before the Assessing Officer in spite of repeated reminders.

On appeal before the second respoi:tdent, Assistant Director, Entry Tax, Government of West Bengal, it was contended that (1) Rules of 1970 framed under the Act of 19i0 cannot be applied for the purpose of the Act of 1972, and (2) as the declaration regarding the value of the goods was submitted and the .documents were st.own to the Assessing Officer, he should have proceeded in accordance withs. 14(1) of the Act of 1972 and since there was no omission or failure on the part of the Company, there was no scope for determining the value of tt, e powder on the ''best judgment" basis under r. 12(2) of the Rules of

1970. The Assistant Director dismissing the appeal observed that s.l (3) of th c Ordinance of 1972 and s. 37(2) of the Act of 1972 prOvided for continuance of the operation of the Rules of 1970 and those provisions could be validly applied under the Act of 1972: since the value declared hy the Company was much lesi than the market value and also far below the value accepted by the Excise Authorities as ascertained while the product came out of the factory, the Assessing Officer proceeded to ascertain the value on the approximate saleable value of the goods in the Calcutta Metropolitan Area ; the value ascertained by the Assessing Officer could not be said to be arbitrary.

The Company filed a writ petition in the High <;:ourt challenging the assessrr:ent under r. 12 (2) and the non-accevtance by the Assessing Officer of the value of the goods declared by the Company. The High Court set aside the Assessment Order and directed fresh assessment to be made. Aggrieved by the fresh assessment n1ade, the Con1pany filed several appeals before the second re!pondent who confirmed the assessment in n1ost of the cases by his order dated September 25, 1979. The appeal is against that Order. The writ petition has bcrn filed by the Company for quashing this order and some notices regarding making fresh assessments and restraining the respondents from levying or demanding entry tax on a basis other than the value declared by the Company at the check post.

The Company contended : (I) though s. I (3) of the Ordinance of 1972 provided for the continued operation of the Rule of 1970, there was no provision in th.e Act of 1972 providing for the continued operation of the Rule of 1970 and as the Ordinance of 1972 ceased to be operative, the

Ases~-ing Officer could not report tor 12(2) and adopt the ''best judgment" method for ascertaining the value of the goods ; (2) the Assessing Officer was bound to accept the value declared by the Company and proceed in accordance

SUPREME COURT REPORTS tJ9S3j 2 S.C.R.

with r. 12(1); the Horiick.s Powder arriving at the Hussenabad Check Post in steel drums containing 182 kgs. each had no other value ex-:ept the cost of its manufacture, freight and insurance ; that they had throughout submitted requisite declaration together with the relevant documents and the value declared was accepted ; and (3) however, towards the latter part of April and early part of May 1974, the repondent declined to issue transport passes under s. 21 of the Act of 19?2 in respect of Horlicks Powder which was not intended for sale, use or consumption within the Calcutta Metropolitan Area and sought to levy tax thereon. Therefore, the Company filed a writ petition in the Calcutta High Court and obtained interim injunction; in retaliation the Entry Tax Officer declined to accept-the Company's declaration of value.

Dismissing both appeal and the writ petition,

HELD : I. Section 1(3) of the Ordinance of 1972 stated that any rule or order made, any notification issued, any direction given, anything done or any action taken under any of the provisions of the Act of 1970 shall on the cessor of operation of that Act, continue to b~ in force and shall be deemed to have teen made, issued, given, done or taken under the corresponding provisions Of the Ordinanc:.::: of 1972, Section 37(2) of the Act of 1972 lays down that an) thing done or any action tak.en under the Ordinance of 1972 shall be deemed to have been done under the Act of 1972 as if that Act had been passed on the 16th of November 1970, on which date the Act of 1970 came into force. Though s. 36 of the Act of 1972 empowers the State

Government to make rµles for carrying out the provisions of that Act, no fresh rules have been framed in e;..ercise of that power and only son1e amend~ ments have been made to certain rules of the Rules of 1970 from time to time in exercise of the power conferred by s. 36 of the Act of 1972. Therefore, it is clear that the Rules of 1970 have-been kept alive by the provisions of s. 1(3) of the Ordinance and s. 37(2) of the Act of 1972. and that it is open to the Entry Tax Officer to resort to the ''best judgment'' method for , ascertainment of the value or the goods under r. 12(2) provided the requirements thereof are satisfied, namely, that the \1alue is not ascertainable on account of non-availability or non-production of the bill or invoice or consignment note issued by the consigner or other 4ocuments of like nature or that the Assessing Officer is not satisfied about the reasonableness of the value shown or .declared by the dealer. [766 C-H]

2. It is not possible to accept the.Company's contention that the Horlicks Powder packed in steel drums containing 182 kgs. each had no value at the H ussenabad c1-1eck Post apart from the cost of manufacture, freight and insurance. That may be so from the point of view of the manufacturer, 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 removal of th_e goods from the factory, wholesaler's and retailer's profits and sales-tax. Under r. 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

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H.M.M LTD. V. DIRECTOR, ENT1 Y TAX 757

the process of bottling and labelling is resorted to after the bulk consignment is receh ed into the Calcutta Metropolitan Area for the purirose of conVenience

and it may also be that it may not form part of the value of the goods at the point of ent1y. The cost of bottling and labelling the Horlicks Powder into unit bottles inside the. Calcutta Metropolitan Area would be negligible. It may be that the company may le entitled to ask the Assessing Officer to take that also into consideration in the case of assessment under r. 12(1). But since the value declared by the Company was far less than the value shown by the Company itself in forpl Vas well as the value &hewn for the .unit bottles in the price list of the Company's selling agent in the Calcutta Metropolitan Area it is not possible to hold that the Assessing Officer was not justified in rejectin_g the value declared by tbe Com1, any and resorting to ascertainment of tt1e assessable value on the "best judgment" basis as provided for in r. 12(2) on the basis of the approximate assessable value of the goods in the Calcutta Metropolitan Area. [768 B G]

3. There is rlo material to hold that the Assessing Authority had any bias against the Company. The Assessing Officer had Sufficient reason for not accepting the Company's declaration regarding tle value of the goo.ds and his assessment of the saleable value on the "best judgment" basis is rational and based .on the Company's own selling agert's price list in the Calcutta

Metropolitan Area. [769 E-P] D

Comn-lissioner of Income Tax, We.st Bengal v. Padamchand .Ramgopal, [1970] 761.T.R. 719 held inapplicable.

Haji Lal Mohd. Biri Works, Allahabadv. The StateofU.P. & Ors., [1974] l S.C. R. 25, referred to.

CIVIL APPELLATE/ORIGINAL JuRISDICTION : Civil Appeal No. 861 (N} of 1980.

Appeal by Special leave from the Judgment and Order dated

the 25th September, 1979 of the Assistant Director, Entry Tax, F Government of West Bengal in Appeal Case No. 3970 H of 1976-77.

WITH

Writ Petition No. 1415 of 1979 G

(Under article 32 of the Constitution of India)

Shankar Ghosh, A.C. Gulati, B.B. Sawhney and P.B. Ghosh for the Appellant/Petitioners.

D.N. Mukherjee, D.P. Mukherjee, t;:hatter/ee for the Respondent.

G.S. Chatterjee and P.K.

SUPREME COURT REPORTS

[1983) 2 S.C.R.

The Judgment of the Court was delivered by

VARADARAJAN J. This Civil Appeal by special ieave is directed against the order of the Assistant Director, Entry Tax, Government of West Bengal, the second respondent, dated 25.9.1979 dismissing the case of the appellant Hindustan Milkfood Manufaturers Limited B in Appeal Case No. 3970 Hof 1976-77. The appeal was filed under s. 27 of Taxes on Entry of Goods into Cakutta Metropolitan Area Act. 1972 (hereinafter referred to as the 'Act of 1972') against the assessment of entry tax made in form V No. D-983001 at the Hussenabad Road Check Post in respect of 8736 kgs. of Horlicks Powder contained in 18 steel drums on the "best judgment assessment" basis with C reference to the sale price of product within the Calcutta Metropolitan Area. The appellan\ is a public limited company.incorporated under the Compaies Act, 1956 having its registered office at Patiala Road, Nabha. The Comapany is engaged in the manufacture and sale of dairy products including the milk food popularly known as Horlicks.

The appellant's product is manufactured in the factories located at D Nabha in Punjab and Rajahmundry in Andhra Pradesh. The product is transported in bulk in several steel drums containing 182 kgs. each. The appellant showed the value of the aforesaid 8736 kgs. of Powder imported into Calcutta at the Hussenabad Road Check

Post in form Vas Rs. 1,22,304.00 working out to Rs. 14.00 per kg. The appellant's contention was that the value as per stock transfer invoice is Rs. 5.891 per kg. and the delivered cost including freight and insurance is Rs. 7.694 per kg. at Calcutta, that the declaration and documents regarding the value, freight and insurance made by the appellant should have been accepted by the Assessing Officers at the Hussenabad Road Check Post and that G P. -1 was F irrelevant for the purpose of assessment of entry tax and it should not have been made the basis for determination of the value of the product at the point of entry. Memo No. 779/ETO/H-76 dated 11.8.1976 of the Entry Tax Officer of the concerned Check Post contains the orders of the Assessing Officers with their reasons for

G arriving at assessable value shown in Form V mentioned above.

The original documents were not produced before the Assessing

Offiers in spite of repeated reminders. Consequently the assessment was made on the "best judgment" basis.

H In the appeal before the second respondent it was argued for the appellant that the Taxes on Entry of Goods into Calcutta Metropolitan Area Rules 1970 (hereinafter referred to as the 'Rules of

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, ltl.u.t Ltb, v. bii.\ECTOR; ENtRY tAX (Yaradarqjan, J.)

\ 759

i 970') framed uhder s. 34 of the Taxes on Entry of Goods into Calcutta Jvletropolitan Area Act, 1970 (hereinafter referred to as A the 'A ct of 1970) were ultra vires on the ground that they were framed under s. 34 of the Act of 1970 and cannot be applied for the purposes of the Act of 1972. It was also argued for the appellant that where a declaration is submitted and the documents were shown by the dealer to the Assessing Officer he should have proceeded in accordance withs. 14 (I) of the Act of 1972 and that there was no B . omission or the failure on the part of the dealer, and therefore, there was no scope for determining the value of the product on the ''best judgment" basis as provided for in rule 12 (2) of Rules of 1970.

The Ordinance of 1972 replaced tlre Act of 1970. According to the second respondent s. 1 (3) of that Ordinance and s. 37 (2) of the Act C . of 1972 provide for continuance of the operation of the Rules of 1970 and that those provisions can be validly applied under the present Act of 1972. The value declared by the appellant, which was much .Jess than the market value and also far below the value accepted by the Excise Authorities as tariff value in G.P.-1 as ascertained while the product came out of the factory at Nabha, was not D accepted by the Assessing Officer for the reason given by him in the aforesaid memo dated 11.8.1976 and, therefore, he proceeded to ascertain the value on the approximate saleable value of the goods in the Calcutta Metropolitan Area with reference to the price list of the goods circulated by the appellant's selling agent as he is author- E ised to do under rule 12 (2) of the Rules of 1970 ifhe is satisfied that the value mentioned by the acsessee does not appear to be reasonable.

The excise gate pass produced before the Assessing Authority, F showing the value, ,;, as in respect of the same goods and the same dealer. The copy produced by the appellant purported to be of C.No.

CE 20 BPE 70 dated 5.12.1970'ofthe Superintendent, Central Excise and Custom, Patiala, and it was contended for appellant the excise duty was not paid at Nabha. But it was not a certified copy and the original was not produced and, therefore it was held that it was not pro- G ved that the excise duty was not paid at the time of the removal of the goods from the factory at Nabha. In these cricumstances the second respondent held that the Assessing Officer considered the materials made available before him and also examined the different aspects of the matter placed before him, that the saleable value ascertained H by him is the whole-sale price and not the. retail sale price of the product and that the value ascertained by the Assessing Officer cannot be said to \le ar\litrary. In this view he dismissed the appeal and


(1983] 2 S.C.R,

cofirmed the assessment of the entry tax made by the Entry Tax A Officer.

The Writ Petition has been filed by the appellant in the above Civil Appeal and shareholder and attorney of that appellant for quashing annexures III, V and VI to the Writ Petition and restraining the repondent (Director of Entry Taxes, Government of West Bengal and others) from levying or demanding entry tax on a basis other than the value of Horlicks Powder declared by the petitioners at the point of" entry into Calcutta Motropolitan Area unless and until. the procedure prescribed in terms of s. 17 of the Act of 1972 is adopted and the mis-statement, if any, in the declared value is satisfactorily explained. Annexure III is a Notice dated 20.7.1976 issued to the petitioners of the hearing fixed on 30.7.1976 for making fresh assessment of the entry tax in view of the High Court's order dated 13.6.1976 setting aside the Assessment Order in Form V. No. 228479 dated 30.6:1974 and directing fresh assessment to be made within three months after giving reasonable opportunity to the petitioners of being heard. Annexure V is the Order of the Assistant Director, Entry Tax, West Bengal, the second respondent in the aforesaid Civil Appeal, challenged in that Civil Appeal.

Annexure VI is the Entry Tax Officer's Notice dated 24/31.5.1979 calling upon the petitioners to appear before him on 12.6.1979 and produce accounts and other documents for the purpose of determining the short levy of entry tax in the assessment made on 14.7.1974 in respect of which, a demand for payment in Part II of Form V No.

C 240284 has been issued to the petitioners.

The petitioners' case in the Writ Petition is that Horlicks powder manufatured by the petitioners in the factories located at Nabha and Rajahhrnndry is transported to several packing stations located, inter a/ia, at Howrah in !age steel drums containing 182 kgs. of Horlicks powder in each drum. The goods entering Calcutta pass through the Check Post situate outside the Metorpolitan Area.

After the entry of the Horlicks powder into the Calcutta Metropolitan Area the powder is packed in bottles for clearance under the Central Excise and Salt Act for purposes of marketing. Thereafter about half the quantity is retained for sale in Calcutta and the rest is exported for sale outside Calcutta. According to the petitioners the H goods arriving at the Check Post have no other value except the cost of manufacture, freight and insurance charges, and only after the Horlicks powder in durms enters the Calcutta Metroplitan Area the cost of bottling inputs, bottling expenses and manufacturin~

, I

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H.M.M LTD. v. DIRECTOR, ENTRY TAX (Varadarajan, J.) 761

profits are added and excise duty is assessed aud paid on the total value. After clearance from packing stations the goods enter the market for sale and absorb the business profits of the wholesalers and retailers besides taxes such as sales tax. In the ca:se of export of goods directly from Nabha or Rahhmundry, havfog regard to Central Excise Regulations, clearnnce is effected on payment of the Excise. duty on the invoice value which includes cost and profit of manufacture. Entry tax is leviable on the Horlicks powder br-0ught into Calcutta Metropolitan Area for sale, use or consumption. The Act of 1970 came into force on or about 16.11.1970. The Rules of 1970 were framed in exercise of the power conferred by s. 34 of the Act of 1970 as mentioned earlier which was replaced by Taxes on Entry

of Goods into Calcutta Metropolitan Area Ordinance, 1972 (herein- C after referred to.as the ('Ordinance of 1972') promulgated on 22.3.1972.

Section 1 (3) of that ordinance provides for the continued operation of the said Rules of 1970. The Ordinance of 1972 was replaced by the Act of 1972. This Act of 1972 does not contain any provision for the continued operation of the Rules of 1970. The petitioners challenge the legality, validity and jurisdiction of the impugned levy and recovery of entry tax made on the ''best judgment" basis with reference to the sale price of the product wihin the Calcutta Metropolitan Area, disregarding the cost of the consignments of the petitioners' goods declared by the petitioners with the relevant documents including Auditor"s certificate and audited accounts of the petitioners.

In respect of the consignment of Horlicks powder imported from the factory at Nabha iiito the Calcutta Metropolitan Area, the petitioner No. 1 had throughout submitted the requisite declaration in the prescribed from together . with the relevant documents suoh as invoice, consignment note and insurance cover envisaged in Rule 12 and cost sheets duly certified by the Auditors M/s A.F. Fergusan & Co., and disclosing the delivered cost of the Horlicks powder at Calcutta including the manufacturing cost, insurance and freight as

Rs. 4.9393 per.kg. in 1970-71, Rs. 4.6922 per kg. in 1971-72 and G Rs. 4.9913 per kg. in 1972-73. The value declared for the Horlicks powder brought into Calcutta).fetropolitan Area in bulk containers was Rs. S.9891 per kg. for which insurance cover bad been obtained .

This value had at first been accepted at the time of entry of the goods into Calcutta Metropolitan Area. But in the latter part of April and H early part of May 1974 the respondents declined to issue transport passes under s. 21 of the Act of 1972, in respect of Horlicks powder

wh.ih was not intended for sale, use or consumption within th.~

762 SUPREME COURT R!l'OllTS [1983] 2 s.c.R. '

Calcutta Metriipa!itan Area and sought to levy entry tax thereon.

Thetefore, the petitioners filed Writ Petition No. 155 of 1974 in the Calcutta High Court and obtained interim injunction on 6.5.1974.

In retaliHtion the Entry Tax Officer at the Check Post declined to accept the petitionets' declared value of the goods and purported to assess, levy and detl!and entry tax on the basis of "best judgment ilssessment" under tule 12 (2) of the Rules of 1970. The petitioners prtld the entry tax as demanded to avoid confiscation of the goods and thereafter, filed Writ Petition No. 4133 of 1974 in the Calcutta High Court challengirtg the assessment ill respect of 10 consigttments nlldet rule 12 (2) and the-tlOnacceptance of the value declared by the petitioners in the t1rescribed form duly supported by relevant docu tll.ents. The Writ Petition was disposed of by a short Otdet dated l:i.5.1976 directing fresh assessment to be made after giving iipI)Ortunity to the petitioners without prejudice to the petitioners' tightto challenge the fresh assessment in accordance with law.

Acct'.lrdlngly, respondent No. 4 completed fresh assessment on t l.8'.1976. Aggrieved by the said fresh assessment order dated 11.8.1976 and the subsequent assessments made on that basis the peti tfoners filed about 250 appeals of which 201 wet'e disposed elf by

re~Ondent Nd. 2 irt terms of the order dated 25.9.1979 made in Appeal No. 3!!70H of 1976·77, cortflrmlng the assessments, relying heavily on the tariff value appearing in Form 0.P.· 1 for purposes of excise duty in respect of the consignment of Horlicks powder from the factory at Nabha in the course of export to Bangladesh, ignoring the fact that the excise duty was paid at Nabha only in respect of consignment cleared in the course of export and in all other cases it was paid only after the goods wereput into marketable conditions after having been packed in unit containers.at Calcutta. Respondents 2 and 4. rejected the documents prodnced by the petitioners tot the purposes of assessment under rule 12 (1} of the Rules of 1970 and resorted to "best judgment assessment" under rule 12 (2) f fh<lse Rules and assessed the taxable value on the basis of the retail sale price of unit bottles of 450 gms. each in the local market at Calcutta though the petitioners never intended to sell and have never sold Horlicks powder in bulk containers in Calcutta Metropolitan Area or elsewhere. There was no justification for arriving at the assess abie value of fforlicks powder in bulk containers as other tJ\an the

de!iverd cost of the powder to the petitioners at the entry Check

Posf. The basis adopted by respondents 2 and 4 is ultra vires ss. 13 and 14 of the Act of 1972. The inipugned orders/demands relate pack to 1974 &nd seelc to deprive the petitioners of their property ' ' '

I. _,,

1t.1u1 L~D. JI. DIRllCTOR, ENTllY l'AX (JlaraJarajan, i.) 76~

without authority of law and are violative of Article 19 (I) {f) and .i.

Article 31 (since repealed) and Article 300 of the Constitution. In _. these circumstances, according to the petitionrs the imp1;1gqed appellate order dated 25.9.1979, assessment order dated ll.8.1976 and subsequent assessment orders and .demands based thereon are illegal and without jurisdiction and are liable to be set aside.

No counter affidavit has been filed in the Writ Petition which has been heard along with above Civil Appeal.

The appellant/writ petitioners manufacture Horlicks powder in

their factories at Nabha in Punjab and Rajahmundry in Andhra C _ Pradesh and get the Horlicks powder transported in bulk in steel drums, each containing 182 kgs., to various centres for the purpose of marketing. We are concerned in the appeal and the W6t Petition with 8736 kgs. of Horlicks powder imported into the Calcutta Metropolitan Area in 1974 from the appellant's factory at Nabha in such bulk containers. It is not disputed that Hor!icks powder is a D taxable item falling within "preserved provisions except food exclusively meant for babies" mentioned in Serial No. 4 (x) of the ScJ:\edule to the Act of 1972, which are liable for entry tax at 6 per - cent advalorem. The charging s. 6 (l) of the Act of 1972 lays down that save as otherwise provided in Chapter III, in which that section E occurs, "there shall be levied and collected . .. .. a tax on the entry of other specified goods into the Calcutta Metropolitan. Area for consumption, use or sale therein, from any place outside that area, at such rate, not exceeding the rate specified in the corresponding entry in column 3 of the Schedule as the State Government may by notification specify". This s. 6 (I) of the Act of 1972 is. the same as F

s. (6} 1 of the Act of 1970, in which Serial No. 4 (x) of the Schedule is "preserved provisions" chargeable to entry tax at the same rate of 6 per cent advalorem.

\Jnder s. 13 of the .Act of 1970 as also of the Ordinance and G the Act of 1972 which are identical, every dealer of the specif\ed goods shall on or before the entry of such goods into the Calcutta

Metropolitan Area deliver to the Prescribed Authority a declaration in such form and containing such particulars as may be prescribed re)ating to S\JCh goods e]\cept goods which are exempted by s. 6 (2); s. 7 and s. 8 from the payment of any tax leviable under the said Acts or the Or<)inance as the case may be. Under s. 14 (1) of the said A, cts and Ordinance which are identical, where a declaration has

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'764 SUPREME COUR'f REPORTS t1983l 2. s.c.R.

been made by the dealer as required bys. 13, the Prescribed Authority shall, after making such verification of the goods as it may consider necessar)', assess the tax leviable on the entri of such goods into the Calcutta Metropolitan Area.

The Rules of 1970 have been framed in exercise of the power B conferred by s. 34 of the Act of 1970. Under Rule 12 (I) for the purpose of determining the value of the goods where the tax under the Act is levied advalorem, every dealer shall declare the value in Form IV referred to in Ruic 16 and such value shall include; (a) cost price of such goods as given in the bill or invoice or consignment note issued by the consignor or any document of like nature, (b) C shipping documents, (c) insurance, (d) excise duty and (c) sales-tax, and such declaration should be submitted to the appropriate Assessing Officer along with a copy of the relevant bill, invoice or consignment note issued by the consignor or other documents of like nature in support of other charges, duties and fees, signed by the person D issuing such bill, invoice, consigment note and other documents.

Rule 12 (2) lays down that if the Assessing Officer is satisfied about the reasonableness of the value quoted in the documents submitted . on behalf of the dealer, he shall accept the same and levy tax accordingly, and if the value is not ascertainable on account of nonavailability or non-production of the bill, invoice or consignment note E or othe, r documents showing other charges, duties and fees or if such Assessing Officer is not satisfied about the reasonableness of the value shown or declared by the dealer, such Assessing Officer shall determine the approximate value of such goods in the Calcutta Metropolitan Area to the best of his judgment and shall levy tax F accordingly. Section 36 of the Ordinance of 197 2 enabled the State Government, subject to the condition of previous publication, to make rules for carrying out the purposes of the Ordinance. Section

I (3) of the Ordinance of 1972 which came into force immediately on the cessor of operation of the Act of 197C' stated that any rule or order made, any notification issued, any direction given, anything done G or any action taken under any of the provisions of the Act of 1970, shall on the cessor of operation 0f tl1at Act continue in force and shall be deemed to have been made, issued, given, done or taken under the corresponding provisions of the Ordinance. Section 36 of the Act of 1972 provides power for the State Government, subject to the condi- H tion of previous publication, to make rules for carrying out the ' purposes of that Act. Clause (l) ofs. 37 of the Act of 1972 repealed the Ordinance. Clause (2) of that section lays down that anything done or any action taken under the Ordinance shall be deemed fo have

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, ll.!.!.M LTD, v. DIRBCTOR, BNTRY tAX (Varadarajan, J.) 765

been done under the Act of 1972 as if that Act had commenced on the 16th day of November, 1970 on which date the Act of 1970 A came into force. Evidently, in view of this saving provision in the Ordinance and Act of 1972, notwithstanding the fact that there is a specific provision by way of s. 36 in the Act of 1972 for framing rules for carrying out the purposes of that Act, no fresh rules under the Act of 1972 have been framed and only the Rules of 1970 are B continued and amendments have been made to some of those rules from time to time in exercise of the power conferred by s. 36 of the Act of 1971. Thus, on 1.4.1973 rules 2 and 4 (!)have been amended; on 15.1.1974 rule 4 (I) has been further amended; on 1.2.1974 rule

3 was substituted by a new rule; on 25.11.1975 rule 42 was added; and on 28.~.1976 a proviso to rule 12 (l) has been added.

 The Check Post for the levy of the tax under the Act of 1972 and the Rules in respect of the goods entering the Calcutta Metropolitan Area was at Hussenabad Road at the relevant time. The appellant's contention is that in respect of the Horlicks powder D imported from its factory in Nabha into Calcutta Metropolitan Area, the appellant had throughout submitted the requisite declaration in the prescribed form together with the relevant documents such as invoice, consignment note, insurance etc. envisaged in rule 12 and cost sheets duly specified by its Auditors M/s A.F. Fergusan & Co., disclosing the delivered costs. of the Horlicks powder at E Calcutta including the manufacturing cost, insurance and freight as R&. 4.9393 per kg. in, 1970-71, Rs. 4.6922 per kg. in 1971-72 and Rs. 4.9913 per kg. in 1972-73, and the value declared for the Horlicks powder brought into the Calcutta Metropolitan Area in bulk containers was Rs. 5.9891 per kg., for which insurance cover had been obtained and that value was accepted until the latter part of April F

1974. The appellant's complaint is that in view of the refusal of the respondents to issue transport passes under s. 21 of the Act of 1972 in respect of Horlicks powder which was not intended for sale, use or consumption within the Calcutta Metropolitan Area the appellant was obliged to file W.P. No. 155 of 1974 in the High Court at G Calcutta and obtained interim injunction on 6.5.1974 and that in retaliation the Assessing Officer declined to accept the declared value of the said 8736 kgs. of Horlicks powder for the reasons given by him in the memo dated 10.8.1976 and he proceeded to ascertain the value on the basis of the approximate saleable value of the goods in H the Calcutta Metropolitan Area with reference to the price iist of the gooM circulated by the appellant's 'selling agent in that area and that he has no right to do so and was bound to accept the value declared


766 SUPREME COURT RBPOR'l'S [1983) 2 s.c.R.

by the appellant and proceed in accordance with rule 12 (1) of the Rules and there was no scope for determining the value of the goods on' best judgment"' basis as provided for in rule 12 (2) .

. The llrst objec\ion of the appellant is that though s. I (3) of the Ordinance provided for the continued operation of the Rules of 197El, that Ordinance was replaced by thd Act of 1972 and there is no provision saving or providing for the continued operation of the Rules of 1970 after the Ordinance ceased to be operative, and therefore, the Assessing Officer could not resort to rule 12 (2) and adopt the "'best judgment" method for ascertainment of the value of the goods. We are of the opinion that there is no force in this contention. As a matter of fact this objection was not even referred to by the learned counsel for the appellant and writ petitioners before us in the course of his arguments. Admittedly, s. I (3) of the Ordinance of 1972 stated t\lat any rule or order made, a!ly notification issued, any direction given, anything done or any action taken under any of the provisions of the Act of 1970 shall on the cessor of operation of that Act continue to be in force and shall be deemed to have been made, issued, given, done or taken under the corresponding provisio, is of t_he Ordinance of 1972, ands. 37 (2) of the Act of 1972 lays down that anything done or any action taken under the Ordinance of 1972 shall l;>e deemed to have been done under the Act of 1972 as if that Act hac\ been passed on the 16th of November 1970, on which date the Act of 1970 cal)le into force and though s. 36 of the Act of 1972 empowers the State Government, subject to previous publication to make rules for carrying out the provisions of that Act, no fresh rules b, ave been framed in exercise of that power and only certain amendi; ne11ts have been rnade (o certain rules of those Rules of 1970 from time to time in exercise of the power conferred by s. 36 of the Act of 1972 as mentioned above. Therefore, it is clear that the Rules of 197.0. have be.en kept alive by the provisions of s. I (3) of the 9rdii; iance and s. 37 (2) of the Act of 1972, and that it is open to the Entry Tax Officer to rsort to the "be.st judgment" method for a, scert.ainment of the va.lue of the goods under rule 12(2) provided t4e rec,.'irements thereof are satisfied, namely, that the value is not ascertainable on account of non-availability or non-product10n of the Jiilloiinvoice or consignment note issued by the consignor or other ff, documents of like nature or other documents showillJ! other charge$,

dutie$ and fees or that the Assessing Officer is not satisfied abo.1Jt ihe reasonableness of the value shown or declared by the dealer.

- -il.M'.i.t LTD: v. DIRECTOR; ENTRY TAX (Varadarajan, J.) 767

. 'Nciw the qestion for consideration io. whether or not the Assessing Officer was justified in resorting tci the "best judgment" method of ascertaining the value of the goods under nile 12 ( Z) and the Appellate Authority was or was not ju; fified in confirming the

order cir assessment made by Assessing Officer. The appellant show- • ed the value of the said 8736 kg;. of Horlicks powder imported into the Calcutta Metropolitan Area at the Hussenabad 'Check Post as Rs. 1,22,304;-working out to Rs. 14/-per kg., but wanted bis declaration of the value as Rs'. 7.694 per kg. in the Calcui1a Metropolitan Area, rnade up of Rs. 5.9891 being the value as r the stock. transfer invoice, freight and insurance to be accepted by lhe Assessing Officer .. The appellant produced before the Assessing Officer a . copy ot the exdse gate pass showing the value to be in respect of the

same goods and in respect of die same deafer; The copy purported to be of C. No. CE/20/BPE/70 dated 5J2.197o of the Superintendent of Central Excfre and Custom's, Patiafa, and it was contended on behalf cif the appellant befo.rc the Assessing Officer tbllt ex'cisedrity was paid at Nabba. Bui tlie copy produced did not . purport io be. a

! certified copy. and the original was nOt produced, and; therefore; the . Assessing Officer beid that excise duiy was not pild a{ the time of

teinoat of the goods from the fac'.ory at Nab'iia. ti!s' the appellant'~ contention that onty ID. the case ot export o'f good.s. directly from Nabha or Rjahmrindry having regard to the central excise regulations, clearince of goods fom the factory is effeCted .. on payment Of excise duty on the invoice value whti:lt includes the cost arid irfariufactuer's profit. But the copy produced was not a certified copy and the original gate pass was not produced. Tn'erefore, ii coufd not. lie . held that the Assessi'ng Officer was not justified in rejecting the copy . and holding that 'excise duty was not paid at the time of tne removal Or t!ie concerned consignment froin the factory at :Nabha.

A'ccoiding to the appeliant's case in the Writ Petition: when the goods arrive at the H'.uosenabad check.post in bull::, pacl.:edin steel drums containing 182 kgs. of H'.orlick's Powder each; the goods hav~ no other vaiue except the cost of manufacture, . freight and insu'nince am!. only after the Horlicks powder,' packed in the sieel drrin;'s, enters the Calcutta Metiopoiltan Area the cost of bottling iripuis, . bottling expenses, manufacture's profits are added an.a excise duty is paid ori the total value after the goods are put into marketable . condition. It is also the appellant's . case in the writ Pet; tion that the aJ'pellant never iniended to sell acl had never sold' H.orlicks powder iii blk coniallieis i~ the Caicutta Meiroolitaii Area <ir

H .

'.768

 SUPREME COURT REPORTS (1983J :2 s.C.R.

' elsewhere and that respondents 2 and 4 in the wr; t Petiton, amely.

Assistant Director (Entry Tax) atid the Inspector (Entry Tax) Husse- nabad Check Post, rejected the documents produced for the purposes of assessment under rule 12 ·(I) and wrongly resorted to the "best . judgment". method of ascertainment of the value under fU]e 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 appelant's 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 nd insurance. That may be so from the point of view of the manufacture, but it cannot be the value of the gdods in: the. Calcutta Metropolitan . Area . where the value sliould 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, wholesaler's and retailer's 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 documeni. of like nature, shipping duties . where applicable; insurance, excise. duty and sales-iax. 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 atthe point of entry. The 'cost of bottling and labelling the Hor licks powder into unit bottle.3 in side the Ca'cutta Metropolitan' Area would be negligible. It my be that the appellant may be entitled to ask the Assessing Officer to take that also into c01isideration in the case of assessment under. rule 12 (!). But since the value. declared by the F . appellant was far less than the value. showed by the appellant company itScl{ in Form Y as Rs. 1,22,304 working out to Rs. 14 per kg. as wdl as the value shown for the unit bottles in the price list of the. appellant's 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 , lei' 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 tJ:e :goods inc the Calcutta Metropolitai; i Area.. ·

The learned counsel for the appellantinvited our attention to this Col!rt's decision in Commissioner of Income:Tax; West Bengal\ '. ' - . ~

H.M.M LTD. v. DIRECTOR, ENTRY TAX ( Varadarajan, J.) 769

v. Padamchand Ramgopal,(1) where in his investigation, the Income-Tax Officer found two insignificant mistakes in the assessee's 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 IncomeTax 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,(') 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 appellant's 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 appellant's own selling agent's price list in the Calcutta Metropolitan Area. We find no merit in the Appeal and Writ Petition. The Appeal and Writ Petition, therefore, fail and are dismissed. The appellant shall pay the respondents' costs in the appeal. There will be no order as to costs in the Writ Petition.

H.S.K.

(I) (1970) 76 I.T.R. 719.

(2) [1974] 1 S.C.R. 25,

Appeal & Petition dismissed.

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