Holding

The 1970 Rules remained in force under Sections 1(3) of the 1972 Ordinance and 37(2) of the 1972 Act, allowing the officer to determine value by best‑judgment when the declared value is unreasonable or unsupported.

Summary

H.M.M. Ltd., a manufacturer of Horlicks powder, imported 8,736 kg of the product into the Calcutta Metropolitan Area in 1974 and declared its value under Rule 12(1) of the 1970 Rules. The Entry Tax Officer rejected the declared value, citing non‑availability of supporting documents and resorted to a "best judgment" assessment under Rule 12(2), levying entry tax based on the approximate saleable value in the metropolitan market. The company challenged the assessment, arguing that the 1970 Rules could not be applied after the 1972 Act replaced the 1970 Act and that the officer was bound to accept the declared value. The Court held that Section 1(3) of the 1972 Ordinance and Section 37(2) of the 1972 Act continued the operation of the 1970 Rules, permitting the officer to use the best‑judgment method when the declared value is unreasonable or unsupported. It further ruled that the value of goods at entry must include freight, insurance, excise duty, sales tax, and market‑related profits, not merely the manufacturing cost. The officer’s assessment was found to be a rational, bonafide estimate based on the appellant’s own price list, and no bias was shown. Consequently, the appeal and the writ petition were dismissed.

Issues considered

The applicability of the 1970 Rules on value determination after the enactment of the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1972.
Whether the Entry Tax Officer was obligated to accept the value declared by the dealer under Rule 12(1) when supporting documents were submitted.
Whether the officer could lawfully employ the "best judgment" assessment under Rule 12(2) in the circumstances.
The proper components of the assessable value of goods entering the Calcutta Metropolitan Area.

Legislation cited

Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1972s. 13, s. 1(3) (Ordinance), s. 14(1), s. 21, s. 27, s. 36, s. 37(2), s. 6(1)

Subjects

Entry taxBest judgment assessmentValue determinationStatutory continuationRule 12(1) and 12(2)Calcutta Metropolitan AreaTax assessment

Judgment

754
H.M.M. LIMITlO
A
v.
DIRECTOR OF ENTRY TAX, WEST
BENGAL & OTHERS.

April 15, 1983
B
[Y.V. CHANDRACHUD C.J., A. VARADARAJAN AND
A.N. SEN JJ.]

The Taxe~ on Entry of Goods into Calcutta Metropolitan Area Act, 1972-
s. 37 (2). The Taxes on Entry of Goods int(l Calcutta Metropolitan Area
c 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
D 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
E 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).
F
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
G 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 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.
II '
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
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.
i
').,.
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, c
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
D
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 E
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 F
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. G

' 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 H
A~ses~-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
A 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 re~pondent 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
B 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,

c 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
D 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
E 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 require-
ments thereof are satisfied, namely, that the \ alue is not ascertainable on
1

account of non-availability or non-production of the bill or invoice or
F 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
G 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
H. 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
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 A
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 l~e 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 B
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] c
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 tl~e 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.
E
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. H
D.N. Mukherjee, D.P. Mukherjee, G.S. Chatterjee and P.K.
t;:hatter/ee for the Respondent.
758 SUPREME COURT REPORTS [1983) 2 S.C.R.

The Judgment of the Court was delivered by
A
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 Hussena-
bad Road Check Post in respect of 8736 kgs. of Horlicks Powder con-
tained 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
E kg. The appellant's contention was that the value as per stock trans-
fer 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
arriving at assessable value shown in ·Form V mentioned above.
G The original documents were not produced before the Assessing
Offi~ers 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 Metro-
politan Area Rules 1970 (hereinafter referred to as the 'Rules of
\
-
, 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 can-
not be said to \le ar\litrary. In this view he dismissed the appeal and
-
760 SUPREME COURT REPORTS (1983] 2 S.C.R,
'
cofirmed the assessment of the entry tax made by the Entry Ta·x
A Officer.

The Writ Petition has been filed by the appellant in the above
Civil Appeal and shareholder and attorney of that appellant for qua-
shing annexures III, V and VI to the Writ Petition and restraining the
B 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
.C 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
D 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
E produce accounts and other documents for the purpose of determin-
ing 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
F 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.
G After the entry of the Horlicks powder into the Calcutta Metro-
politan Area the powder is packed in bottles for clearance under the
Central Excise and Salt Act for purposes of marketing. Thereafter , I

about half the quantity is retained for sale in Calcutta and the rest is
exported for sale outside Calcutta. According to the petitioners the I
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~
-
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 A
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 B
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 D
and recovery of entry tax made on the ''best judgment" basis with
reference to the sale price of the product wihin the Calcutta Metro-
politan Area, disregarding the cost of the consignments of the petiti-
oners' goods declared by the petitioners with the relevant documents
including Auditor"s certificate and audited accounts of the
E
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 F
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.i~h 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.
A 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-tlOn·acceptance of the value declared by the
petitioners in the t1rescribed form duly supported by relevant docu·
c 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
E 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
J 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
F 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
G Horlicks powder in bulk containers in Calcutta Metropolitan Area
or elsewhere. There was no justification for arriving at the assess·
J
abie value of fforlicks powder in bulk containers as other tJ\an the
de!iver~d 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 I.
H and 14 of the Act of 1972. The inipugned orders/demands relate _,,
pack to 1974 &nd seelc to deprive the petitioners of their property
' ' '
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 petition~rs 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.
B
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 exclu-
sively 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

!
,.
-~-,~- -·"----··--->-----· -><·. , ___ , __ ~ _ _ ........_...,_,~
'764 SUPREME COUR'f REPORTS t1983l 2. s.c.R.

been made by the dealer as required bys. 13, the Prescribed Autho-
A rity 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 Assess-
ing Officer along with a copy of the relevant bill, invoice or consign-
ment 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 non-
availability 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
,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. C

· 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 Metro-
politan 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 declara-
tion 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 con-
tainers 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

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

by the appellant and proceed in accordance with rule 12 (1) of the
A 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
B 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 there-
fore, the Assessing Officer could not resort to rule 12 (2) and adopt
the "'best judgment" method for ascertainment of the value of the
c goods. We are of the opinion that there is no force in this conten-
tion. 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
0 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
E 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 amend-
F i;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 r~sort to the "be.st judgment" method for
G
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
Jiilloi- invoice 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 q~estion 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 B
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 Metro-
politan Area, rnade up of Rs. 5.9891 being the value as ~r the stock.
transfer invoice, freight and insurance to be accepted by lhe Assess-
ing Officer.. The appellant produced before the Assessing Officer ·a
ot
. copy the exdse gate pass showing the value to be in respect of the c
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'cise·drity was
paid at Nabba. Bui tlie copy produced did not . purport io be. a
D
! certified copy. and the original was nOt produced, and; therefore; the
. Assessing Officer beid that excise duiy wasnot pild a{ the time of
teino~at 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 R~jahmrindry having regard to the central excise regula-
is
tions, clearince of goods f~om the factory effeCted . on payment Of E
excise duty on the invoice value whti:lt includes the cost arid irfariu-
factu~er'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
F
· 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~ G
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 · Metiopoilta·n· 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 H .
. condition. It is also the ·appellant's . case in the writ Pet;tion that
the aJ'pellant never iniended to sell · a~·cl had never sold' H.orlicks
powder iii b~lk coniallieis i~ the Caicutta Meiro~olitaii Area <ir
'.768 · SUPREME COURT REPORTS (1983J :2 s.C.R.
'

elsewhere and that respondents 2 and 4 in the wr;·t Petiton, ~amely.
A 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 •
B 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
c 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
D 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
E 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 m~y 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 com-
pany 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 appellant- invited 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 A
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 B
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 c
mistakes afforded no basis for rejecting the accounts of the sub-
sequent 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 D
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 E
, 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 F
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 G
costs in the Writ Petition.

H.S.K. Appeal & Petition dismissed.
H
(I) (1970) 76 I.T.R. 719.
(2) [1974] 1 S.C.R. 25,

~-~·