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PETITIONER: H.M.M. LIMITED

       Vs.

RESPONDENT: DIRECTOR OF ENTRY TAX, WEST BENGAL & OTHERS.

DATE OF JUDGMENT15/04/1983

BENCH: VARADARAJAN, A. (J) BENCH: VARADARAJAN, A. (J) CHANDRACHUD, Y.V. ((CJ) SEN, AMARENDRA NATH (J)

CITATION:  1983 SCR  (2) 754        1983 SCC  (3)   1  1983 SCALE  (1)390

ACT:      The Taxes  on Entry of Goods into Calcutta Metropolitan Area Act,  1972-s. 37  (2). The Taxes on Entry of Goods into Calcutta Metropolitan  Area Rules,  1970  framed  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Area Act, 1970-Kept alive by the Taxes on Entry of Goods into Calcutta Metropolitan Area  Ordinance, 1972  which  repealed  Act  of 1970-Are applicable under the Act of 1972 which replaced the Ordinance of 1972.      The Taxes  on Entry of Goods into Calcutta Metropolitan Rules, 1970-Rule 12 (1) and 12 (2)-Scope of.

HEADNOTE:      Under s.  34 of  the  Taxes  on  Entry  of  Goods  into Calcutta Metropolitan Area Act, 1970 which provided for levy JUDGMENT: Calcutta Metropolitan  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 The  Act of  1970 was repealed by the Taxes on Entry of Goods into Calcutta Metropolitan Area Ordinance, 1972 but the Rules 1970 were continued in operation by s. 1(3) of the Ordinance. This  Ordinance was  repealed and replaced by the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1972. Section 37 (2) of this Act provides that anything done or any  action taken  under the  Ordinance of  1972 shall be deemed 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 of 1970 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 accordingly. It further provides that  if the  value is not ascertainable on account of non-availability  or non-production  of the documents, or if  the   Assessing  Officer  is  not  satisfied  about  the reasonableness of  the value  declared by  the  dealer,  the

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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 755 for purposes  of bottling  and  marketing  both  inside  and outside that  Area, imported  8736 kgs. of that Powder in 18 steel drums  of 182 kgs. each in 1974. The Entry Tax Officer at the Hussenabad Road Check Post assessed and charged entry tax on  this powder  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 submitted by  the Company  under r.  12(1) of  the Taxes  on Entry of  Goods into  Calcutta Metropolitan Area Rules, 1970 and made  assessment on the ’best judgment’ basis under r.12 (2). The original documents regarding the value, freight and insurance were  not  produced  by  the  Company  before  the Assessing Officer in spite of repeated reminders.      On  appeal  before  the  second  respondent,  Assistant Director, Entry  Tax, Government  of  West  Bengal,  it  was contended that  (1) Rules  of 1970  framed under  the Act of 1970 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 shown to the Assessing Officer, he  should have  proceeded in  accordance  with  s. 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  the powder on the "best judgment" basis under  r. 12(2)  of the  Rules of  1970. The Assistant Director dismissing  the appeal observed that s.1 (3) of the 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 by the Company was much less 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 Court challenging the  assessment under  r. 12  (2) and  the  non- acceptance 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 made,  the Company filed several appeals  before the  second respondent who confirmed the assessment  in most  of the  cases by  his  order  dated September 25,  1979. The  appeal is  against that order. The writ petition  has been  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: (1)  though s.  1  (3)  of  the Ordinance of  1972 provided  for the  continued operation of the Rule  of 1970, there was no provision in the Act of 1972 providing for  the continued  operation of  the Rule of 1970 and as  the Ordinance  of 1972  ceased to  be operative, the Assessing Officer  could not report to r 12(2) and adopt the

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"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 756 with  r.   12(1);  the   Horlicks  Powder  arriving  at  the Hussenabad Check  Post in  steel drums  containing 182  kgs. each had  no other value except 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 respondent  declined 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 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: 1.  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 be in force and shall be deemed to have been made, issued, given, done or taken under the corresponding  provisions  of  the  Ordinance  of  1972. Section 37(2)  of the  Act of  1972 lays  down that anything done or  any action  taken 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 rules for carrying out the provisions of that Act, no fresh rules have been  framed  in  exercise  of  that  power  and  only  some amendments 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 of the goods under  r. 12(2)  provided the requirements thereof are satisfied, namely,  that the  value is  not ascertainable on account of non-availability or non-production of the bill or invoice or consignment note issued by the consignor or other documents 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  Hussenabad Check 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  the 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,

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excise duty and sales tax. It may be that 757 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 the Calcutta Metropolitan Area  would be  negligible. It  may be that the company may be 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 form V as  well as  the value  shown 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 rejecting the value declared by  the Company  and resorting  to ascertainment of the  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 no  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 the  value of the goods and his assessment  of the saleable value on the "best judgment" basis is  rational and  based on  the Company’s  own selling agent’s price  list in  the Calcutta Metropolitan Area. [769 E-F]      Commissioner of  Income Tax,  West Bengal v. Padamchand Ramgopal, [1970] 76 I.T.R. 719 held inapplicable.      Haji Lal  Mohd. Biri  Works, Allahabad  v. The State of U.P. & Ors., [1974] 1 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, Government of West Bengal in Appeal Case No. 3970 H of 1976-77.                             WITH                Writ Petition No. 1415 of 1979       (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,  G.S.  Chatterjee  and P.K. Chatterjee for the Respondent. 758      The Judgment of the Court was delivered by      VARADARAJAN J.  This Civil  Appeal by  special leave 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 Manufacturers  Limited in Appeal Case No. 3970 H of 1976-77. The  appeal was filed under s. 27 of Taxes on Entry of  Goods   into  Calcutta   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 reference to the sale price

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of  product  within  the  Calcutta  Metropolitan  Area.  The appellant is a public limited company incorporated under the Companies Act,  1956 having its registered office at Patiala Road, Nabha.  The Company  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 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 V  as 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 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 arriving at assessable value shown in Form V  mentioned above.  The original  documents  were  not produced before  the Assessing Officers in spite of repeated reminders. Consequently the assessment was made on the "best judgment" basis.      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 759 1970’) framed  under s.  34 of  the Taxes  on Entry of Goods into  Calcutta  Metropolitan  Area  Act,  1970  (hereinafter referred to  as the  ’Act 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 with  s. 14 (1) of the Act of 1972 and that there was no  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 the Act of 1970. According to the second respondent s. 1  (3) of that Ordinance and s. 37 (2) of the Act 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  less 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 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 authorised to do under rule 12 (2) of the Rules  of  1970  if  he  is  satisfied  that  the  value mentioned by the assessee does not appear to be reasonable.      The excise  gate pass  produced  before  the  Assessing

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Authority, showing  the value,  was 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 of  the 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 proved that the excise duty was not paid at the time  of the  removal of  the goods  from the factory at Nabha. In  these circumstances  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 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 be arbitrary. In this view he dismissed the appeal and 760 confirmed the  assessment of the entry tax made by the Entry Tax 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  respondent (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 Metropolitan  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  manufactured  by  the  petitioners  in  the factories located at Nabha and Rajahmundry is transported to several packing  stations located,  inter alia, at Howrah in lage steel  drums containing  182 kgs. of Horlicks powder in each drum.  The goods  entering Calcutta  pass  through  the Check Post  situate outside the Metropolitan 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 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  drums enters  the Calcutta  Metropolitan Area the cost of bottling inputs, bottling expenses and manufacturing 761

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profits are  added and  excise duty  is assessed and 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 case of export of goods directly from Nabha  or  Rajahmundry,  having  regard  to  Central  Excise Regulations, clearance  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 brought 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  (hereinafter 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  within  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  into  the  Calcutta Metropolitan Area,  the  petitioner  No.  1  had  throughout submitted the  requisite declaration  in the prescribed from together  with  the  relevant  documents  such  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 Rs. 4.9913 per kg. in 1972-73. The  value declared for the Horlicks powder brought into Calcutta  Metropolitan Area  in bulk containers was Rs. 5.9891 per  kg. for which insurance cover had 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  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 which was not intended for sale, use or consumption within the 762 Calcutta Metropolitan  Area and  sought to  levy  entry  tax thereon. Therefore,  the petitioners filed Writ Petition No. 155 of  1974 in the Calcutta High Court and obtained interim injunction on 6.5.1974. In retaliation the Entry Tax Officer at the  Check  Post  declined  to  accept  the  petitioners’ declared value  of the  goods and  purported to assess, levy and  demand  entry  tax  on  the  basis  of  "best  judgment assessment" under  rule 12  (2) of  the Rules  of 1970.  The petitioners  paid   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 challenging the  assessment in  respect of  10  consignments under rule  12 (2)  and  the  non-acceptance  of  the  value declared by  the petitioners  in the  prescribed  form  duly supported by  relevant  documents.  The  Writ  Petition  was disposed of by a short Order dated 13.5.1976 directing fresh

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assessment to  be  made  after  giving  opportunity  to  the petitioners without  prejudice to  the petitioners’ right to challenge the  fresh  assessment  in  accordance  with  law. Accordingly, respondent  No. 4 completed fresh assessment on 11.8.1976. Aggrieved  by the  said  fresh  assessment  order dated 11.8.1976  and the subsequent assessments made on that basis the  petitioners filed  about 250 appeals of which 201 were disposed  of by  respondent No. 2 in terms of the order dated  25.9.1979  made  in  Appeal  No.  3870H  of  1976-77, confirming the  assessments, relying  heavily on  the tariff value appearing  in Form  G.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 were  put into marketable conditions after having been packed in  unit containers  at Calcutta. Respondents 2 and 4 rejected the  documents produced  by the petitioners for the purposes of  assessment under  rule 12  (1) of  the Rules of 1970 and  resorted to  "best judgment assessment" under rule 12 (2)  of those 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 assessable value  of Horlicks  powder in  bulk containers as other  than   the  delivered  cost  of  the  powder  to  the petitioners at  the entry  Check Post.  The basis adopted by respondents 2  and 4 is ultra vires ss. 13 and 14 of the Act of 1972. The impugned orders/demands relate back to 1974 and seek to deprive the petitioners of their property 763 without authority of law and are violative of Article 19 (1) (f) and  Article 31  (since repealed) and Article 300 of the Constitution.  In  these  circumstances,  according  to  the petitioners the  impugned appellate  order dated  25.9.1979, assessment order  dated 11.8.1976  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 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 Writ 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  Horlicks powder  is a taxable item  falling within  "preserved  provisions  except food exclusively meant for babies" mentioned in Serial No. 4 (x) of the Schedule to the Act of 1972, which are liable for entry tax  at 6  percent advalorem. The charging s. 6 (1) of the Act of 1972 lays down that save as otherwise provided in Chapter III,  in which  that section 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 (1) of the  Act of  1972 is  the same  as s. (6) 1 of the Act of

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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.      Under s. 13 of the Act of 1970 as also of the Ordinance and the Act of 1972 which are identical, every dealer of the specified 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 relating to such goods except 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 Ordinance as the case may be. Under s. 14 (1) of the said  Acts and  Ordinance which  are identical,  where a declaration has 764 been made by the dealer as required by s. 13, the Prescribed Authority shall, after making such verification of the goods as it may consider necessary, assess the tax leviable on the entry of such goods into the Calcutta Metropolitan Area.      The Rules  of 1970  have been framed in exercise of the power conferred  by s.34  of the  Act of 1970. Under Rule 12 (1) 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 Rule 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) 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 issuing such bill,  invoice, consignment  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 non-availability or non- production of the bill, invoice or consignment note or other 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 accordingly. Section 36 of the Ordinance of  1972 enabled  the State Government, subject to the condition  of previous  publication, to  make rules  for carrying out the purposes of the Ordinance. Section 1 (3) of the Ordinance  of 1972  which came into force immediately on the cessor  of operation  of the Act of 1970 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 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  condition of previous publication, to make rules for carrying out  the purposes  of that Act. Clause (1) of s. 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 to have 765 been done under the Act of 1972 as if that Act had commenced

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on the  16th day  of November, 1970 on which date the Act of 1970 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 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 (1) have been amended;  on 15.1.1974  rule 4  (1)  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 28.9.1976 a proviso to rule 12 (1) 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  imported from  its factory in Nabha into Calcutta Metropoitan 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 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 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  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  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 the  Calcutta Metropolitan Area with reference to  the price  list of the goods 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 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 first objection of the appellant is that though s.1 (3) of the Ordinance provided for the continued operation of the Rules of 1970, 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.  1 (3)  of the  Ordinance of 1972 stated that

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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 be in force and shall be deemed to have been made, issued, given, done or taken under the corresponding  provisions of  the Ordinance of 1972, and s. 37 (2) of the Act of 1972 lays down that anything done or any action taken 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 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 have  been framed  in exercise of that power  and only  certain amendments  have been  made to 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 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 of the goods under rule  12(2)  provided  the  requirements  thereof  are satisfied, namely,  that the  value is  not ascertainable on account of non-availability or non-production of the bill or invoice or consignment note issued by the consignor or other documents of  like nature  or other  documents showing other charges, duties  and fees  or that  the Assessing Officer is not satisfied about the reasonableness of the value shown or declared by the dealer. 767      Now the  question for  consideration is  whether or not the Assessing  Officer was  justified in  resorting  to  the "best judgment"  method of  ascertaining the  value  of  the goods under  rule 12  (2) and the Appellate Authority was or was not justified in confirming the order of assessment made by Assessing  Officer. The appellant showed the value of the said 8736 kgs. 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  his declaration of  the value  as  Rs.  7.694  per  kg.  in  the Calcutta Metropolitan  Area, made up of Rs. 5.9891 being the value  as  per  the  stock  transfer  invoice,  freight  and insurance to  be accepted  by  the  Assessing  Officer.  The appellant produced  before the  Assessing Officer  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 held  that excise  duty was  not paid at the time of removal of  the goods  from the  factory at Nabha. It is the appellant’s contention  that only  in the  case of export of goods directly  from Nabha  or Rajahmundry  having regard to the central  excise regulations, clearance of goods from the factory is effected on payment of excise duty on the invoice value which includes the cost and manufacturer’s profit. But the copy  produced was not a certified copy and the original gate pass  was not produced. Therefore, 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

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factory at Nabha.      According to the appellant’s 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  and  only  after  the Horlicks powder,  packed in  the  steel  drums,  enters  the Calcutta Metropolitan  Area the  cost  of  bottling  inputs, bottling  expenses,  manufacture’s  profits  are  added  and excise duty  is paid  on the total value after the goods are put into  marketable condition.  It is  also the appellant’s 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 768 elsewhere and 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  to  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  appellant’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  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,  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 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 the  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  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 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.      The learned  counsel  for  the  appellant  invited  our attention  to  this  Court’s  decision  in  Commissioner  of Income-Tax, West Bengal-1 769 v. Padamchand  Ramgopal,(1) where  in his investigation, the

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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 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 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.                          Appeal & Petition dismissed. 770