9911796707
TMI Blog1993 (9) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... evied is payable on demand. Every dealer of specified goods is to deliver to the prescribed authority a declaration in the prescribed form relating to such goods. On the basis of such declaration the prescribed authority is to assess, after making such verification of the specified goods as it may consider necessary, the tax leviable on the entry of such goods into the Calcutta metropolitan area. The applicants allege that at the entry point of wood and timber, brought by them from places outside the Calcutta metropolitan area, the assessing authorities are ignoring the declaration made by the importer as to the quantity, specification and value of the goods and are also ignoring the value mentioned in the documents in respect of the purchase of the goods, though these documents are issued or certified by the original sellers, which are mostly Government departments or Government owned of controlled agencies without assigning any reason whatsoever. In order to enrich the coffer of the State, the assessing authorities are arbitrarily and with ill-motive fixing the value of the goods which is even two to five times more than the actual value and are thereafter determining the tax lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prayed for declaration that sections 6, 11, 14 and 15 of the Act and rule 12(2) of the Rules are bad, illegal, void and ultra vires articles 14, 19, 21 and 304(b) of the Constitution as also the principles of natural justice. The applicants have prayed, alternatively, for a declaration that the respondents have no power or authority under the Act or the Rules to assess, levy or collect taxes on entry of wood and timber brought to the Calcutta metropolitan area from outside the area, except in accordance with the principles of natural justice, namely, (a) upon issuing a notice on the consignor or consignee or the nominated dealer of the goods who intend to bring the goods within the Calcutta metropolitan area, recording reasons for non-satisfaction about the reasonableness of the value of the goods in question shown or declared by such consignee or consignor or dealer; (b) giving an opportunity to the consignor or consignee or the dealer to make a representation in writing against such reasons; (c) thereafter upon giving a personal hearing to the consignor or consignee or dealer as the case may be and (d) passing a reasoned order in case of nonacceptance of the value of the goods sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the Act read with the Rules. There is no question of existence of any manner of arbitrariness in the provisions of the Act and the Rules, particularly when there are elaborate provisions of appeal and revision against any order passed under the Act. 6.. Before dealing with the respective contentions between the parties, it will be necessary to recite the relevant provisions in the Act and in the Rules for appreciating the rival contentions. Act: "Section 2. In this Act, unless the context otherwise requires, (a) and (b).............................. (c) "Dealer", in relation to any specified goods entering the Calcutta metropolitan area, means a person, (i) who either on his own account or on account of a principal or any other person causes such entry, or (ii) who takes delivery, or is entitled to take delivery, of such goods on such entry. Explanation I.-When the consignor or consignee of any specified goods entering the Calcutta metropolitan area nominates, according to such rules as may be prescribed, a person to be the dealer for the purposes of this Act, such person shall be deemed to be a dealer in relation to such specified goods. Explanation II.- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith a view to ascertaining whether any tax leviable under this Act is being or has been assessed or duly paid. Section 15. (1) The amount of tax assessed under sub-section (1), subsection (2) or sub-section (3) of section 14 and the amount of penalty imposed under sub-section (2) or sub-section (3) of that section shall be paid forthwith by the dealer to the prescribed authority and that authority shall, on payment of the assessed amount of tax and the penalty, if any, grant to the dealer a receipt showing the payment of such amount. (2) and (3) .........." Rules: Rule 12. Determination of value.-(1) For the purpose of determining value of the goods, where tax under the Act is levied ad valorem, every dealer shall declare the value in a declaration in form IV referred to in rule 16 and such value shall include (a) the cost price of such goods as given in the bill or invoice or consignment note issued by the consignor or document of like nature, (b) shipping duties, (c) insurance, (d) excise duty, and (e) sales tax. Such declaration shall be submitted to the appropriate assessing officer along with a copy of the relevant bill, invoice, or consignment note issued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on station within the Calcutta metropolitan area: (e) Description of goods: (f) Gross weight of goods including weight of containers and packing materials: (g) Quantity and value of such goods: (h) Particulars of bills or invoices or consignment notes issued by the consignor along with number of bundles or packages: (i) Mode of transport and particulars of document issued by the public carrier or of documents relating to the transport in the case of transport by private carrier: Date of arrival or expected arrival of goods within the Calcutta metropolitan area: (k) Particulars of indemnity bond where delivery is taken from a public carrier on indemnity bond: (l) Whether the goods are intended for consumption, use or sale in the Calcutta metropolitan area: (m) If the goods are meant for destination outside the Calcutta metropolitan area, the ultimate destination of goods and the mode by which goods will be despatched: (n) Particulars of the contract of sale, if any, as a result of which the goods are to be despatched outside the Calcutta metropolitan area and the particulars of the contracting parties: (o) Reference to application, if any, made to customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appropriate assessing officer. (5) Where any dealer or his agent has omitted or failed to make the declaration in form IV or where the declaration so made is not complete, or where the dealer or his agent has omitted or failed to produce supporting documents the appropriate assessing officer shall after such inspection and examination of the goods as may be necessary or practicable and after making such verification (including weighment) as he may deem necessary, assess to the best of his judgment the tax leviable under the Act on such goods. The provisions of subrule (4) shall apply mutatis mutandis to an assessment made under the sub-rule. (6) to (11) ................" 7. Mr. Tapas Roy, the learned advocate for the applicants, has advanced no argument for declaration that sections 6, 11, 14 and 15 of the Act are bad, illegal, void and ultra vires articles 14, 19 and 21 of the Constitution, though such a declaration has been sought for in the main application. His argument is directed against the provisions of rule 12(2) of the Rules. He has attacked rule 12(2) of the Rules on several grounds. His first contention is that the State Legislature has no authority, in exer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, make rules for carrying out the purposes of this Act. (2) In particular, and without prejudice to the generality of the foregoing power; such rules may provide for all or any of the following matters, namely: (a) the procedure for, and other matters (including provisions for payment of fees) incidental to, the disposal of appeals under section 27; (b) anything which may be or is required to be prescribed under this Act. (3) ......................." Section 37 of the Act reads as follows: "37. (1) The Taxes on Entry of Goods into Calcutta Metropolitan Area Ordinance, 1972, is hereby repealed. (2) Anything done or any action taken under the Taxes on Entry of Goods into Calcutta Metropolitan Area Ordinance, 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." 9.. Section 36 of the Act is similar to section 34 of the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1970. In exercise of the power conferred by section 34 of the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1970, the Rules (the Taxes on Entry of Goods into Calcutta Metropolitan Area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch as the scheme and policy of the statute under which the power is delegated, the presence of guidelines in the statute regarding the exercise of delegated power, the lack of time for the Legislature to make provision with regard to all the details involved in the administration of the law, the incapacity of the Legislature to foresee all future events, the nature of the subject-matter of legislation and the nature of the donee of power, etc. Even in matters relating to taxation laws, it has been consistently held by the Honourable Supreme Court that the Legislature can delegate the power to fix rates of tax, provided there are necessary guidelines regarding such fixation, on the ground that in a modern society, taxation is one of the methods by which economic and social goals of the State can be achieved and the power to tax, therefore, should be a flexible power and capable of being easily altered to meet the exigencies of circumstances. Such delegation has been held to be not amounting to delegation of essential legislative function. The scheme and policy of the Act under which power has been delegated to State Government to frame the Rules and the guidelines in section 6 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer [1963] 48 ITR 21 (SC); AIR 1963 SC 591, Federation of Hotel Restaurant Association of India v. Union of India [1989] 74 STC 102 (SC), Elel Hotels and Investments Ltd. v. Union of India [1989] 74 STC 146 (SC)]. As such, the State Legislature has authority, in exercise of its power under entry 52 of List II in the Seventh Schedule of the Constitution, to impose tax on the entry of goods into the Calcutta metropolitan area for consumption, use or sale therein. Rule 12(2) of the Rules for determining the approximate saleable value of goods in the Calcutta metropolitan area for making best judgment assessment for levying entry tax is within the rule making power of the State Government under section 34 of the Taxes on Entry of Goods into the Calcutta Metropolitan Area Act, 1970 and section 37(2) of the Taxes on Entry of Goods into the Calcutta Metropolitan Area Act, 1972. The "approximate saleable value" as mentioned in rule 12(2) of the Rules is not, thus, ultra vires entry 52 of List II in the Seventh Schedule of the Constitution, as argued by Mr. Tapas Roy, the learned Senior Advocate for the applicants. 12.. The second contention of Mr. Tapas Roy, the learned Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry Tax Officer resorted to "best judgment assessment". Mr. Tapas Roy has contended that even that saleable value was the wholesale price and not the retail price and that reasonable opportunity of being heard was given to the appellants in that case before ascertainment of the saleable value of the goods in the Calcutta metropolitan area. In short, Mr. Tapas Roy, learned Senior Advocate for the applicants, has contended that the present case is to be distinguished from the case of H.M.M. Ltd. v. Director of Entry Tax, West Bengal AIR 1983 SC 586 as in that case the appellants had not declared the cost price and other items as mentioned in rule 12(1) of the Rules. On a scrutiny of the decision in the case of H.M.M. Ltd. AIR 1983 SC 586 it cannot be stated that on the basis of the aforesaid distinguishing facts in that case, the decision in the case of H.M.M. Ltd. AIR 1983 SC 586 is not an authority for the proposition that entry tax could be calculated on the sale value of the goods in the Calcutta market after entry of the goods into the Calcutta metropolitan area. It is no doubt true that the entry tax was assessed in that case with reference to the price list of the goods circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customs duties, excise duties, sales tax, vend fees, freight charges, carrier charges and all other incidental charges except the octroi incurred by the importer, till the articles arrive at (prior to July 28, 1976), or are removed from (from July 28, 1976 to June 27, 1983) the place of import. On construing the provisions in rule 2(7)(a) of the Bombay Municipal Corporation (Levy of Octroi) Rules, 1965, as amended from time to time, it was held by the Supreme Court in that case that countervailing duty was includible in the octroi, which was a tax on the entry of goods into the local area (for consumption use or sale therein) under entry 52 of List II in the Seventh Schedule of the Constitution. In the case of Shroff and Company [1989] 72 STC 150 (SC); [1989] Supp 1 SCC 347 value of goods at the time of entry was only relevant for the purpose of calculation of octroi. In rule 2(7)(a) of the Bombay Municipal Corporation (Levy of Octroi) Rules, 1965, as it read before July 28, 1976, value of articles, where octroi was charged ad valorem, was to mean the value of the article made up of several items mentioned in that rule "till the arrival of the article at the place of import". In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the applicants, is that rule 12(2) of the Rules is a bar to inter-State trade and is ultra vires article 301 of the Constitution. This contention cannot be accepted. It has been held by the Calcutta High Court in the case of State of West Bengal v. Nitai Mohan Saha [1989] 74 STC 221 that where the alleged interference with the freedom of trade is not direct, particularly in the case of taxation, article 301 of the Constitution is not attracted. The Act is also protected by article 304(b) of the Constitution. 15.. Mr. Tapas Roy, the learned Senior Advocate for the applicants, has next contended that fixation of saleable value under rule 12(2) of the Rules will be violative of article 14 of the Constitution as such fixation of saleable value will be arbitrary in the absence of any provision in the Act about any saleable value. This contention cannot be accepted. Entry tax is to be levied ad valorem as per Schedule of the Act read with section 6 of the Act, and the determination of saleable value cannot be beyond the jurisdiction of the assessing officer. It is no doubt true that article 14 hits against any arbitrary State action. An act which is arbitrary cannot but be unequal. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... functions and that they are bound to observe principles of natural justice in reaching their conclusions. The principles of natural justice are, thus, to be observed by the assessing authority while determining approximate saleable value of goods under rule 12(2) of the Rules for levying entry tax. The rules of natural justice are not constant. They are not absolute and rigid rules having universal application. One of the rules which constitutes a part of the principles of natural justice is the rule of audi alteram partem which requires that no man should be condemned unheard. The case of the respondents is that as there was colossal loss of revenue on account of under valuation of the timber by the importing dealer in the value disclosed by him in the declaration in form IV, the department thought it advisable to post the assessing authority with the latest market valuation of specified goods by supplying them with periodically revised market bulletins about valuation after making survey of the market value as regards the retail sale value of the specified goods. The Revenue wants us to accept as proper the determination of approximate saleable value by the assessing authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gree with the reasons and disposing of the dispute with regard to the value of the goods on giving a personal hearing to the consignor, consignee or dealer, as the case may be and thereafter passing a reasoned order in case of non-acceptance of the value of the goods shown or declared by the dealer or consignor or consignee, as the case may be. The applicants are, thus, entitled to get the alternative declaration for complying with the principles of natural justice before determining approximate saleable value of goods in the Calcutta metropolitan area under rule 12(2) of the Rules. 17.. Before concluding, I am to state that on the last date of hearing Mr. Tapas Roy, the learned Senior Advocate for the applicants, drew our attention to sections 17 and 20 of the Act and contended that when there were provisions in sections 17 and 20 of the Act for short-levied tax or advance deposit of tax, taxes should be assessed on taking into consideration the items mentioned in rule 12(1) of the Rules and thereafter, in case the assessed tax was short-levied, action should be taken under section 17 of the Act for recovery of the shortlevied tax. This contention cannot be accepted. Section 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lteram partem rule (hear the other side) will apply at the pre-decisional stage will depend upon the degree of urgency of each case. There will be, however, no declaration that sections 6, 11, 14 and 15 of the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1972 and rule 12(2) of the Taxes on Entry of Goods into Calcutta Metropolitan Area Rules, 1970 are bad, illegal, void and ultra vires articles 14, 19, 21 and 304(b) of the Constitution of India. The application is, accordingly, disposed of There will be no order as to costs. S.N. MUKHERJEE (Judicial Member).-We agree with the Honourable Chairman's conclusions about the validity of rule 12(2) of the Rules and about the necessity of granting an opportunity of hearing to the dealer and of passing a reasoned order by the assessing officer while making a best judgment assessment of approximate saleable value under rule 12(2) of the Rules. We would, however, like to add a few words by way of elaboration of our views on the contents of saleable value and right of hearing of the dealer under rule 12(2) of the Rules. Since the facts and the relevant provisions of the Act and the Rules have been already noted by the Honou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then it would be ultra vires section 6 of the Act and entry 52 in the List II of the Seventh Schedule of the Constitution. There may be some force in Mr. Roy's contention that the Supreme Court decision in H.M.M. Ltd. v. Director of Entry Tax AIR 1983 SC 586 is not a decision directly on the question whether entry tax would be calculated on the value of the goods at the point of entry or on the saleable value in the Calcutta market in retail after its entry. But this is not to suggest that rule 12(2) can be successfully impeached as ultra vires section 6 of the Act and entry 52 in List II of the Seventh Schedule read with article 246 of the Constitution as the best judgment determination under rule 12(2) has been approved by the Supreme Court in the same case. 22.. The subject-matter of rule 12 is determination of value and it is contained in two parts. In the first part, i.e., in rule 12(1) it provides for elements to be included in determining value of goods for the purposes of declaration by every dealer. In the second part, i.e., in rule 12(2), it provides for levying of tax by the assessing officer in the following situations, namely: (i) when he is satisfied about the rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, shape or size or due to addition of the entry tax itself. The rule providing for best judgment determination of saleable value cannot suffer from invalidity on the ground that section 6 of the Act does not contemplate such determination since in our view it does. We have noted above that the rate of entry tax given in the Schedule to the Act is related to the valuation of the goods. Rule 12(2) provides for a method for arriving at the approximate valuation by the assessing officer. Such a method cannot be seen to be beyond the limits of entry 52 in List II of the Seventh Schedule read with article 246 of the Constitution. 24.. With regard to the challenge of the rule being arbitrary or the same being violative of the principles of natural justice, we would only like to note that rule 12(2), as it stands, does not suffer from either of the two ills. Though right of hearing has not been specifically provided in rule 12(2), such a right has been clearly provided in rule 16(4) where the assessing officer is required to make an assessment of the tax after scrutiny, enquiry, verification, inspection or examination and after due consideration of such submissions or objections as the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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