State Taxation Tribunal - West Bengal
Rashik Lal Keshab Lal Patel And Anr. vs Entry Tax Officer, Hossenabad ... on 28 February, 1995
Equivalent citations: [2003]133STC6(TRIBUNAL)
JUDGMENT
M.K. Kar Gupta (Technical Member).
1. As common questions of law and fact are involved in Cases Nos. RN-358 of 1992 and RN-108 of 1993, this judgment will govern both the cases. Both these cases arise out of applications under Section 8 of the West Bengal Taxation Tribunal Act, 1987, which are in the nature of writ petitions under Article 226 of the Constitution. Though the names of the applicant are different in the two cases, both the applicants are distributors of "Nirma" powder in the district of Calcutta.
2. The case of the applicant in RN-358 of 1992 is briefly as follows :
The applicant is a businessman and is the distributor of "Nirma" powder in the district of Calcutta. The said product is imported from M/s. Alpa Marketing Enterprise of Ahmedabad who is the sole distributor of "Nirma" powder all over India. Under the provisions of the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1972 (hereinafter referred to as "the Act") and under Taxes on Entry of Goods into Calcutta Metropolitan Area Rules, 1970 (hereinafter called "the Rules"), the applicant is liable to pay tax on the entry of goods into Calcutta Metropolitan Area on the basis of the value of such goods. The value is determined on the basis of cost price of such goods as is given in the bill or invoice or consignment note issued by the consignor or documents of like nature, shipping duties, insurance, excise duty and sales tax. No tax under the Act is payable on the freight paid for carriage of the goods. Till July 29, 1992, the applicant was regularly paying entry tax under the Act on entry of goods into Calcutta Metropolitan Area on the basis of the value determined by the respondent No. 1 and there was no dispute. On or about August 1, 1992, the applicant received a letter from the respondent No. 1 (annexure A) wherein it was alleged that more than 50 per cent of freight was not added to the invoice value in respect of "Nirma" powder and "Nirma" detergent cake consigned from Ahmedabad. It was further alleged in the said notice that freight was a factor for the composition of value for the purpose of assessment, and the applicant was directed to appear with all previous documents for re-determination of the value of the goods already consigned by adding freight and realisation of tax on such re-valuation.
3. Two consignment of "Nirma" powder were despatched on July 30, 1992 to the applicant by M/s. Alpa Marketing Enterprise, Ahmedabad. On arrival of the goods at the check-post on August 5, 1992, the applicant submitted declaration showing the actual value of the goods as shown in the two invoices prepared by the consignor. The respondent No. 1 refused to accept the said declaration and directed the applicant to submit a fresh declaration by adding the total freight shown in invoice to the actual value of the goods shown in the invoice. The applicant was threatened that the goods would not be released from the check-post unless the declaration was prepared as per the instruction. The applicant submitted such declaration under protest and thereafter tax was imposed on the actual value of the goods and also on the freight shown in the invoice.
4. When the applicant appeared before the respondent No. 1 on August 6, 1992 in connection with the notice dated July 29, 1992, he was informed by the respondent No. 1 that the notice had been issued for re-determination of the value of the goods and imposition of tax on re-determination and the respondent No. 1 directed the applicant to appear with all previous documents for re-determination of the value for imposition of the balance amount of tax which was not imposed on freight shown in these bills. The respondent No. 1 further informed the applicant that on all future consignments, the value of the goods for the purpose of levy of the tax would be determined by adding the cost of freight shown in the invoice. The applicant has approached the Tribunal on being aggrieved by such decision, and has prayed for quashing the letter dated July 29, 1992 and/or the decision for addition of freight for determination of value for levy of tax under the Act on the ground that such determination of value is contrary to the provisions of the Act and/or the Rules. The applicant has prayed for a declaration that freight should not be included for the purpose of determination of value of goods in terms of Rule 12 of the Rules. The applicant has prayed further for refund of the amount of tax paid on freight for carriage of the goods.
5. The respondent No. 2 has filed an affidavit-in-opposition on behalf of the respondents and according to him, the scheme of the Act is such as to levy entry tax on the saleable value of the specified goods in the Calcutta Metropolitan Area and there is no dispute that Rule 12 of the Rules has been prescribed for determination of such value. Rule 12 provides for the procedure of determination of value for the purpose of assessment which has to be done under Section 14 of the Act read with Rule 16 of the Rules. The said rule, inter alia, includes the cost price of the goods as given in the bill or invoice or consignment note. The "cost" here in common parlance means the "price" at which the article in question could be purchased. It does not contemplate any other cost, i.e., production cost, manufacturing cost, etc. Where a dealer in case of stock transfer fails to furnish the "cost", the valuation is required to be made under Rule 12(2) of the approximate saleable value of such goods in the Calcutta Metropolitan Area to the best of judgment of the concerned assessing authority. Freight for transportation of goods up to the entry tax check-post cannot but form part of such "cost" or "value" of these specified goods. The freight incurred for transportation of the goods into the Calcutta Metropolitan Area can never be excluded for the purpose of determination of saleable value, whether it is declared to be equalised freight or otherwise. The requisition made by the respondent No. 1 (annexure A to the application) was made in accordance with law for the purpose of roping in admitted evasion of entry tax that arose out of non-inclusion of the element of freight in the previous consignments of "Nirma" powder. The saleable value of the specified goods like the one imported by the applicant could not be arrived at unless the element of freight is added to the price and the applicant could not satisfy the assessing authority, the respondent No. 1, about the saleable value of the specified goods in Calcutta Metropolitan Area. Under the circumstances, the action taken by the respondent No. 1 in arranging for re-determination of the value of the goods in respect of which entry was caused by the applicant and payment of entry tax in respect of which was avoided by the petitioner was quite legal and within the powers of the respondent No. 1 and hence, the applicant was not entitled to any relief.
6. In Case No. RN-108 of 1993, the first consignment of "Nirma" powder reached the check-post on April 26, 1993. The respondent No. 1 determined the value of the goods by adding with the cost of the goods the amount of freight which the applicant was required to pay at the time of taking delivery of the goods. The assessment was done on this value, and the applicant paid the tax assessed without prejudice to his rights and contention. The same procedure was followed in subsequent consignments. The submissions of the applicant and the defence in this case are the same as in Case No. RN-358 of 1992.
7. Mr. A. Chakraborty, learned advocate for the applicant argued that the question at issue was whether freight can at all be included in calculation of value for the purpose of assessment and, if the answer is in the affirmative, whether equalised freight charged as per the contract of sale or the actual freight should be taken into account. He argued that freight is not included in the items which should be indicated in a declaration in form IV. He referred in this connection, to Rule 12(1) of the Rules wherein it is indicated that every dealer shall declare the value in a declaration 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 document of like nature, (b) shipping duty, (c) insurance, (d) excise duty and (e) sales tax.
8. Mr. Chakraborty argued that the word "include" should be taken to be equivalent to "means and includes" and from this it would be seen that the list of items to be furnished in the declaration in form IV was exhaustive and not indicative. He referred, in this connection, to the judgment of the Supreme Court in the case of South Gujarat Roofing Tiles Manufacturers Association v. State of Gujarat AIR 1977 SC 90, wherein it has been held by the Supreme Court that "though 'include' is generally used in interpretation clauses as a word of enlargement, in some cases the context might suggest a different intention". Mr. Chakraborty was of the view that in the instant case, the word "include" has been used in the sense of "means" and it is not a word of extension but limitation and it is exhaustive of the items which are to be included in the declaration in form IV. He also referred to the cases reported in [1998] 71 STC 285 (SC) (Mahalakshmi Oil Mills v. State of Andhra Pradesh), [1971] 82 ITR 44 (SC) (Commissioner of Income-tax v. Taj Mahal Hotel) and [1977] 40 STC 572 (AP) (Sikakollu Subbarao & Co. v. State of Andhra Pradesh) in support of his contention that the word "include" should be construed in the exhaustive sense. As there was no mention of freight in the items (a) to (e) which are required to be declared for the purpose of determination of value under Rule 12(1) of the Rules, the question of freight being taken into consideration for determination of value did not arise. Mr. Chakraborty further argued that shipping duties could not mean the freight to be paid for transportation by road. It is a well-settled principle of construction that if the words of a statute are precise and unambiguous, they must be accepted as declaring the express intention of the Legislature. The term "ship" has been specifically defined in Clause 55 in Section 3 of the General Clauses Act, 1897 and the definition shows that the term "ship" means a mechanised vessel which moves over water. In view of the fact that the word "ship" is defined in the General Clauses Act, 1897, dictionary meaning could not be attached to the term "shipping duty" in favour of the interpretation that shipping duty includes freight in the case of road transportation also. Mr. Chakraborty further argued that even if it is held that freight is an admissible element for computation of value it should be the equalised freight which the buyer pays that should be taken into calculation as that is the only portion that goes into the cost of the goods to the buyer.
9. Mr. S.N. Bose, appearing on behalf of the respondents, argued that the law on this point is well-settled. The Supreme Court has held in the case of H.M.M. Ltd. (vide AIR 1983 SC 586) that it was not possible to accept the contention that the imported goods had no value at the check-post apart from the cost of manufacture, freight and insurance. "That may be so", the Supreme Court held "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 transportation into the Calcutta Market Areas from the..............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". In view of this definitive judgment of the Supreme Court, the application has no legs to stand on. Mr. Bose also referred to the judgment of the Calcutta High Court in the case of Hindustan Gas and Industries Limited v. Entry Tax Officer, Calcutta Jetty, where it was held that there can be little doubt that in the general sense of the term "value" will include freight charge and customs duty. If an importer sells the goods, it was held, he will not sell at a price exclusive of freight charge and customs duty. If he does so he will be selling at a loss. The market value is decided on the basis of hypothetical sale by a willing seller and a willing buyer and no seller will normally sell his goods at a loss. In ordinary course of business, therefore, value would include freight and customs duty. In view of these two judgments, Mr. Bose argued, the applicant does not have any case and the same should be rejected.
10. Mr. Chakraborty argued that the decision in the Supreme Court case did not bar an examination of the question whether freight was an element which could be included in the computation of the value of an item as the question whether freight should be included or not was not specifically posed before the Supreme Court. As far as the decision of the Calcutta High Court is concerned, Mr. Chakraborty was of the opinion that the law was wrongly interpreted in that case and therefore the High Court judgment was not binding on the Tribunal.
11. I am unable to agree with the contentions of Mr. Chakraborty on these points. The decision in [1971] 82 ITR 44 (SC) (Commissioner of Income-tax, Andhra Pradesh v. Taj Mahal Hotel) actually does not support his contention at all. In the other cases also the decisions show that for a proper interpretation of the term "include" the context has to be taken into consideration. There is no reason why the interpretation of the statute by the Calcutta High Court should be considered to be wrong. I am in entire agreement with the views of the honourable Mr. Justice Suhas Chandra Sen in the case of Hindustan Gas and Industries Limited where His Lordship has held that Rule 12(1) of the Rules specifically lays down that the assessee will have to produce "other documents in support of other charges, duties and fees". This clearly goes to show that the specific items mentioned in Rule 12(1) like cost price, shipping duty and excise duty will not be the only components for determining value of the goods. "Other charges, duties and fees" will also have to be included as components of the value of the goods. Mr. Chakraborty"s assertion that this is not the correct interpretation of the law cannot be accepted.
12. Mr. Chakraborty's contention that in spite of the judgment of the Supreme Court in the H.M.M. Ltd. case, AIR 1983 SC 586, this Tribunal is competent to examine the question whether freight should be a component in the computation of value of specified goods is not tenable. The apex Court had categorically held that although the applicant contended that the imported goods at the check-post had no value there apart from the cost of manufacture, freight and insurance, the same 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 transportation into the Calcutta Market Area from the 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" (emphasis* by me). It, therefore, indicates categorically that it is the decision of the apex Court that cost of manufacture, freight up to the check-post and insurance should be supplemented by the cost of further transport into the Calcutta Metropolitan Area, excise duty, etc. The decision of the Supreme Court cannot be ignored on the ground that the relevant provision was not brought to the notice of the Supreme Court. Hence, Mr. Chakraborty's argument that the Supreme Court had no opportunity to consider the legality of inclusion of freight charges because the applicant had not contested the inclusion of freight charges cannot be entertained. The valuation should, therefore, include the actual transportation cost up to the Calcutta Metropolitan Area in its entirety and not merely equalised freight, an alternative case about which has been made out by the applicant by filing a supplementary affidavit.
13. In view of what has been stated above, the two applications should be dismissed.
14. The applications in Cases Nos. RN-358 of 1992 and RN-108 of 1993 are accordingly dismissed without any order as to cost.
Operation of this judgment and order is stayed for a period of eight weeks from this date as prayed for by the learned advocate for the appellants in the two cases.
S.P. DAS GHOSH (Chairman)--I agree.
S.N. MUKHERJEE (Judicial Member)--I agree.