TaxTMI 
TaxTMI 
1993 (9) TMI 320
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....olitan area (for consumption, use or sale therein) from any place outside that area is levied and collected. The tax levied 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 va....
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.... tax payable there will amount to double taxation and will be bad in law. On alleging these facts, the applicants have 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 consig....
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....een more or less excluded from the provisions in the Act and instead the concept of summary assessment has been introduced 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 pers....
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.... any specified goods or through whom the specified goods are suspected by the prescribed authority to have passed, to produce before it any accounts, register or document for examination with 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,....
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....with regard to such consignment for proper assessment and collection of the tax: (a) Name and address of the consignor: (b) Name and address of the consignee: (c) Station of despatch: (d) Destination 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 des....
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....e form in Part II of form V. A copy of the declaration in form IV with a copy of the assessment order in Part I of form V and the notice in Part II of form V shall be handed over to the dealer or his agent for immediate payment. The other two copies of these documents shall be retained 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 Const....
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....ding entry in column 3 of the Schedule to the Act, as the State Government may, by notification, specify. The rule-making power of the State Government is to be found in section 36 of the Act, which runs as follows: "36. (1) The State Government may, subject to the condition of previous publication, 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, 197....
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....the Directive Principles of State Policy." 10.. The same view is also expressed in the case of Babu Ram Jagdish Kumar and Co. v. State of Punjab [1979] 44 STC 159 (SC) at page 164; AIR 1979 SC 1475 at page 1478. Delegations of legislative power have been upheld by the Supreme Court on several varied and diverse grounds such 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 flex....
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....tions, the Legislature may delegate that power to some other authority [see Narinder Chand Hem Raj v. Lt. Governor, Administrator, Union Territory, Himachal Pradesh [1972] 29 STC 169 (SC)]. Legislature has wide latitude in the matter of selection of persons, subject-matter and events for taxation [Khandige Sham Bhat v. Agricultural Income-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 Cal....
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.... invoice was Rs. 5.9891 per kg. and the delivery cost including freight and insurance was Rs. 7.694 per kg. at Calcutta and that G.P-1. was irrelevant for the purpose of assessment of entry tax. According to Mr. Roy, as the original document in support of this claim of the appellants was not produced before the Entry Tax Officer, the Entry 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 o....
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....vailing duty was clearly contained in rule 2(7)(a) of those Octroi Rules prior to June 28, 1983 by enjoining that the "value of the articles" where the octroi was charged ad valorem should mean the value of the articles made up of the cost price of the articles, as ascertained from the original invoice, plus shipping duties, insurance, 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 calc....
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....e best of his judgment and to levy tax accordingly. The Bombay Rule is, thus, different from the Rules and on the basis of the Bombay Rule, it cannot be stated that value of goods at the time of entry is only relevant for the purpose of calculation of entry tax. 14.. The next contention of Mr. Tapas Roy, the learned Senior Advocate for 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 can....
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.... even before the decision by the Supreme Court in the case of State of Orissa v. Dr. Binapani Dei AIR 1967 SC 1269. It has been held by the Supreme Court in the case of State of Kerala v. K.T. Shaduli Yusuff [1977] 39 STC 478; AIR 1977 SC 1627, that tax authorities entrusted with the power to make assessment of tax discharge quasi-judicial 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 wi....
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....minated dealer of the goods recording reasons for non-satisfaction about the reasonableness of the value of the goods in question shown or declared by such consignor or consignee or dealer and thereupon giving an opportunity to the consignor or consignee or the dealer to make a representation in writing against such reasons if he does not agree 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 ....
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....espondents will have to assess and levy entry tax on entry of wood and timber produce into the Calcutta metropolitan area by passing an order with reasons after observing the principles of natural justice and after giving a reasonable opportunity of hearing to the concerned dealer. The question as to what extent and in what measure the audi alteram 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 assessmen....
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....a commodity is generally higher than its cost price. The rate of tax prescribed in the Schedule cannot be related to the cost price of the goods since it has been related to the value of the goods. Mr. Roy's contention is that if the value of the goods is taken to be the saleable value after the goods have entered into the Calcutta metropolitan area, 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 co....
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....saleable value of such physically altered goods. It would be, therefore, reasonable to conclude that the approximate determination of the saleable value of the goods is required to be made at the point of entry before such goods have undergone any substantial physical alteration or the saleable value has gone up as a result of physical alteration in the form, 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 fro....