High Court Division

(Special Original Jurisdiction)

Borhanuddin J Sardar Md Rashed Jahangir J} Square Toiletries Ltd...........Petitioner

VS

Judgment August 17th, 2020. } National Board of Revenue and others................Respondents

Value Added Tax Act (XXII of 1991)

Section 31(3)

Before issuance of notice after prescribed period of limitation it was the duty of VAT authority to take action against the person/ persons who approved such price declaration without imposing supplementary duty or VAT prevailing at the relevant period.                  .........(13)

British American Tobacco Bangladesh Company Limited, Dhaka vs National Board of Revenue, 70 DLR 601; Provati Insurance Company Lid vs Commissioner of Customs, Excise and VAT, 17 BLC 450 ref.

Munshi Moniruzzaman with Fariha Zaman, Advocates-For the Petitioner.

Pratikar Chakma, DAG with Humayun Kabit, AAG Ziaul Hakim, AAG and Nurun Nahar Akter, AAG-For the Respondent.

Judgment

Borhanuddin J: This Rule has been issued calling upon the respondents to show cause as to why the demand notice dated 15-6-2005 issued under Nothi No. 4/Saban (9) Nirikha/VAT/2003/2134 (Annexure-'F' to the writ petition) by the respondent No. 3 demanding Taka 27,34,417.00 from the petitioner should not be declared to have been issued without lawful authority and is of no legal effect and/or such other or further order or orders passed as to this Court may seem fit and proper.

2.   Facts relevant for disposal of the rule are that the petitioner company, manufacturer of toiletries soap, submitted price declaration on 6-4-1998 and 11-5-1998 respectively as per rule 3(1) of the Value Added Tax Rules, 1991, (hereinafter stated as 'VAT Rules') for it's products which were received by the concern VAT authority on 12-4-1998 and 12-5-1998; Said declarations were approved by the relevant VAT authority on 20-4-1998 and 20-5-1998 respectively; Accordingly, the petitioner was paying VAT regularly on the price approved by the VAT authority; All of a sudden, respondent No. 3 issued a show cause cum demand notice under Nothi No. 4/Saban (9) Nirikha/VAT/ 2003/4302 dated 10-8-2004 stating that 10% supplementary duty has been imposed on the products manufactured by the petitioner vide SRO No.125/Ain/98/186/Musak dated 10-61998 and thus claimed Taka 9,77,275 as less paid Value Added Tax (hereinafter stated as VAT) and Taka 17,57,142 as supplementary duty from the petitioner for the period between 1-4-1998 to 30-6-2000 with a direction to deposit the amount in the treasury and submit copy of the challan in support of such deposit within 7(seven) days from the date of receipt of the notice; After receiving the notice, the petitioner by filing a representation on 16-8-2004 to the respondent No. 3 stated that the demand is barred by limitation under section 55(1) of the VAT Act, 1991 since the demand has been claimed beyond the prescribed period of limitation and sought time to file written objection to the notice; The petitioner replied elaborately on 26-12-2004 denying allegations brought in the show cause notice stating relevant facts and circumstances and prayed for withdrawal of the notice; Thereafter, respondent No. 3 issued demand notice dated 15-6-2005, which is impugned herein, stating that the audit team of the Customs, Excise and VAT, Dhaka (South), has audited petitioner's business concern and found evasion of supplementary duty at Taka 17,57,142 and VAT at Taka 9,77 275 for the period between 1-4-1998 to 30-6-2000; On the basis of the impugned demand notice respondent No. 4 issued another notice on 27-7-2005 to the petitioner for payment of the amount by treasury challan within 7(seven) days.

3.   Mr Munshi Moniruzzaman, learned advocate appearing for the petitioner challenged impugned notice on two counts. Firstly, the petitioner submitted price declarations as per rule 3(1) of the VAT Rules, 1991, without showing any supplementary duty and the relevant VAT authority approved the same on 20-4-1998 and 20-5-1998 as per rule 3(3) of the VAT Rules, 1991, and accordingly, the petitioner marketed it's products as per approved price on payment of VAT regularly to the VAT authority as such impugned demand notice is liable to be declared to have been issued without lawful authority and is of no legal effect. Secondly, the impugned demand notice has been issued beyond the prescribed period of limitation under section 55(1) of the VAT Act, 1991, inasmuch as section 55 (1) prescribed limitation period for issuance of notice within 3(three) years but impugned notice has been issued much beyond the prescribed period of limitation as such impugned notice is liable to be declared to have been issued without lawful authority and is of no legal effect. In support of his submissions, learned advocate referred to the case of British American Tobacco Bangladesh Company Limited, Dhaka vs National Board of Revenue, reported in 70 DLR 601 and the case of Provati Insurance Company Ltd us Commissioner of Customs, Excise and VAT, reported in 17 BLC 450.

4.   On the other hand, Mr Humayun Kabir learned Assistant Attorney-General appearing for the respondent No.2 by filing an affidavit-in-opposition submits that prescribed period of limitation under section 55(1) of the VAT Act is not applicable when fraud is apparent. In continuation of his submission, learned Assistant Attorney-General argued that the petitioner fraudulently evaded VAT and supplementary duty as such the plea of limitation is not tenable in this case. In support of his submissions, learned Assistant Attorney-General referred to an unreported decision passed in writ petition No.1139 of 2015 (Square Cephalosporin's Ltd us Commissioner, Customs, Excise and VAT Commissionerate, Dhaka and others).

5.   Heard learned advocate for the petitioner and learned Assistant Attorney-General for the respondent. Perused the writ petition and annexure appended thereof along with the affidavit-in-opposition and decisions cited by the learned counsels.

6.   On perusal of the show cause notice dated 10-8-2004 as well as impugned demand notice dated 15-6-2005 (Annexure-'B' and 'F' to the writ petition respectively) it is apparent that show cause notice was issued to the petitioner on 10-8-2004 for evading supplementary duty and VAT for the period between 1-4-1998 to 306-2000 under section 36(4) and 55(1) of the VAT Act. Section 36 and 55(1) of the VAT Act prevailing at the relevant period are reproduced below:

aviv 36|-(1) mswkøó Kg©KZ©v †Kvb e¨w³ KZ©…K aviv 35 Gi Aaxb †ckK…Z `vwLjK…Z wewa wba©vwiZ c×wZ‡Z h_vkxNª m¤¢e cix¶v Kwi‡eb Ges cix¶v‡šÍ hw` cÖgvwbZ nq †h, D³ e¨w³ KZ©…K cwi‡kvwaZ [g~j¨ ms‡hvRb Ki ev, †¶ÎgZ, g~j¨ ms‡hvRb Ki I m¤ú~iK ïé] ZrKZ©…K GB AvB‡bi Aaxb cÖ‡`q [g~j¨ ms‡hv¾b Ki ev, †¶ÎgZ, g~j¨ ms‡hvRb Ki I m¤ú~iK ïé] A‡c¶v Kg Zvnv nB‡j mswkøó Kg©KZ©v D³ e¨w³‡K Av‡`k Øviv, Av‡`k cÖvwßi mvZ w`‡bi g‡a¨-

(K(ক)cY¨ mieiv‡ni †¶‡Î, PjwZ wnmv‡e mgš^‡qi gva¨‡g; Ges

(L(খ)  †mev cÖ`v‡bi †¶‡Î, ZrKZ©…K GZ`y‡Ï‡k¨ wba©vwiZ cš’vq, Acwi‡kvwaZ cwigvb [g~j¨ ms‡hvRb Ki ev, †¶ÎgZ, g~j¨ ms‡hvRb Ki I m¤ú~iK ïé] cwi‡kva Kivi wb‡`©k `vb Kwi‡eb|

(2)  Dc-aviv (1) Gi Aaxb cixÿv‡šÍ hw` cÖgvwYZ nq †h, mswkøó e¨w³ ZrKZ…©K GB AvB‡bi Aaxb cÖ‡`q [g~j¨ ms‡hvRb Ki ev, †ÿÎgZ, g~j¨ ms‡hvRb Ki I m¤ú~iK ïé] A‡cÿv AwaK cwigvY [g~j¨ ms‡hvRb Ki ev, †ÿÎgZ, g~j¨ ms‡hvRb Ki I m¤ú~iK ïé] cwi‡kva Kwiqv‡Qb, Zvnv nB‡j mswkøó Kg©KZ©v D³ e¨w³‡K, Av‡`k Øviv, D³ AwaK cwigvY cwi‡kvwaZ [g~j¨ ms‡hvRb Ki ev, †ÿÎgZ, g~j¨ ms‡hvRb Ki I m¤ú~iK ïé] ZrKZ…©K cieZ©x [g~j¨ ms‡hvRb Ki‡e ev, †ÿÎgZ, g~j¨ ms‡hvRb Ki I m¤ú~iK ïé] †gqv‡` cÖ‡`q [g~j¨ ms‡hvRb Ki ev, †ÿÎgZ, g~j¨ ms‡hvRb Ki I m¤ú~iK ïé] wecix‡Z mgš^q mva‡bi my‡hvM `vb Kwi‡eb|

(3)  aviv 35 Gi Aaxb †ckK…Z `vwLjK…Z cix¶vKv‡j hw` mswkøó Kg©KZ©v †Kvb Ki‡hvM¨ c‡Y¨i h_vh_ DcKiY-Drcv` m¤úK© wba©vi‡Yi cÖ‡qvRb Av‡Q ewjqv g‡b K‡ib A_ev †Kvb mieivnK…Z Ki‡hvM¨ cY¨ ev cÖ`Ë Ki‡hvM¨ †mev Ges Dnv nB‡Z cÖvß A‡_©i cwigvY Kg †`Lv‡bv nBqv‡Q ewjqv g‡b K‡ib Zvnv nB‡j wZwb D³ c‡Y¨i h_vh_ DcKiY-Drcv` m¤úK© wba©viY A_ev, †ÿÎgZ, D³ cY¨ ev †mevi cwigvY I Dnv nB‡Z cÖvß A‡_©i cwigvY wba©vi‡Yi D‡Ï‡k¨ cÖ‡qvRbxq mgxÿvi e¨e¯’v Kwi‡Z cvwi‡eb|

(4)  †h †ÿ‡Î †Kvb wbewÜZ e¨w³ aviv 35 Gi Aaxb `vwLjcÎ †ck Kwi‡Z e¨_© nb A_ev D³ aviv Aaxb †ckK…Z `vwLjc‡Î †Kvb fzj ev fzj mieivn K‡ib hvnvi d‡j cwi‡kvwaZ [g~j¨ ms‡hvRb K‡ii ev †ÿÎgZ, g~j¨ ms‡hvRb Ki I m¤ú~iK ï‡éi] cwigvY Kg nq, ev ißvwbi †ÿ‡Î, h_vh_ cwigv‡Yi †P‡q AwaK cwigvY A_© cÖZ¨c©Y‡hvM¨ ewjqv `vex K‡ib, †m‡ÿ‡Î mswkøó Kg©KZ©v GB AvBb ev wewai Aaxb †Kvb `‡Ûi weavb ÿzYœv bv Kwiqv, D³ e¨w³‡K hyw³msMZ ïbvwbi my‡hvM `vb Kivi ci, †Kvb g~j¨ ms‡hvRb [g~j¨ ms‡hvRb Ki ev, †ÿÎgZ, g~j¨ ms‡hvRb Ki I m¤ú~iK ïé] Kg©KZ©v KZ…©K msM„nxZ Z‡_¨i ev Dc-aviv (3) Gi Aax‡b K…Z mgxÿvi wfwˇZ cÖ‡`q mwVK g~j¨ ms‡hvRb [g~j¨ ms‡hvRb Ki ev, †ÿÎgZ, g~j¨ ms‡hvRb Ki I m¤ú~iK ïé] ev cÖZ¨c©Y‡hvM¨ A‡_©i cwigvY wba©viY Kwi‡Z cvwi‡eb Ges D³iƒc wba©vwiZ Ki cÖ`vb ev wbY©xZ cÖZ¨c©Y D³ e¨w³i Rb¨ eva¨Zvg~jK nB‡e|

aviv 55|-(1) †h †ÿ‡Î †Kvb e¨w³ cY¨ mieivn ev cÖ`Ë †mevi Dci cÖ‡`q g~j¨ ms‡hvRb Ki ev, †ÿÎgZ, g~j¨ ms‡hvRb Ki I m¤ú~iK ïé †Kvb KviYekZt avh© ev cwi‡kva Kiv nq bvB ev Kg avh© ev Kg cwi‡kva Kiv nBqv‡Q A_ev fzjekZ †diZ cÖ`vb Kiv nBqv‡Q ev aviv 13 Gi Aaxb g~j¨ ms‡hvRb Ki, m¤ú~iK ïé, Avg`vwb ïé, AveMvix ïé, Ab¨vb¨ ïé I Ki (AvMvg AvqKi e¨ZxZ), fzjekZ cÖZ¨c©Y Kiv nBqv‡Q ev evsjv‡`‡k mieivnK…Z †Kvb cY¨ ev †mevi Dci cÖ‡`q Ki ev ï‡éi wecix‡Z fzjekZ ev fzj e¨vL¨vi Kvi‡Y mgš^q Kiv nBqv‡Q, †mB †ÿ‡Î D³ e¨w³‡K Zvnvi Dci †h Zvwi‡L D³ ïé I g~j¨ ms‡hvRb Kiv cÖ‡`q nBqvwQj ev Kg cwi‡kvwaZ nBqvwQj ev †diZ cÖ`vb Kiv nBqvwQj ev cÖZ¨c©Y Kiv nBqvwQj ev mgš^q Kiv nBqvwQj †mB ZvwiL nB‡Z wZb erm‡ii g‡a¨ mswkøó g~j¨ ms‡hvRb Ki Kg©KZ©v †bvwUk Øviv †bvwU‡k DwjøwLZ ïé ev [g~j¨ ms‡hvRb Ki `vex Kwiqv Dnv‡Z DwjøwLZ mgqmxgvi g‡a¨ D³ ïé ev g~j¨ ms‡hvRb Ki cwi‡kv‡ai Rb¨ KviY `k©v‡bv] †bvwUk Rvix Kwi‡eb|] (Emphasis supplied log us)

7.   From the above provisions of law, it is evident that section 36 of the VAT Act dealt with examination of price declaration by the VAT authority and section 55(1) prescribed limitation period for issuance of demand notice within 3(three) years and the language of section 55(1) is mandatory in nature.

8.   Though the learned Assistant Attorney General tried to impress us that the period of limitation shall not be applicable in this case because fraud has been committed by the petitioner. To Bolden his submission, learned Assistant Attorney-General emphasised on the proviso of section 55(1) wherein it is stated that:

Z‡e kZ© _v‡K †h, hw` †Kvb e¨w³ aviv 37 Gi Dc-aviv (2) Gi `dv (K), (M), (P), (R), (S), (U) I (V) Gi Aaxb Aciva msNUb K‡ib, Zvnv nB‡j g~j¨ ms‡hvRb Ki Kg©KZ©v, ev †ÿÎgZ, mswkøó e¨w³i †ÿ‡Î GB Dc-avivq DwjøwLZ cuvP (5) ermi mgqmxgv cÖ‡hvR¨ nB‡e bv|

9.   Unfortunately it appears that learned Assistant Attorney-General relied on the amended provision of section 55(1) which came into force in the year 2013. Apart from that learned Assistant Attorney-General failed to show any evidence to substantiate his submission that fraud has been committed by the petitioner. Rather learned Assistant Attorney-General candidly admits that declarations submitted by the petitioner were duly approved by the concern VAT authority and the petitioner marketed it's products with the price approved by the VAT authority on payment of applicable VAT regularly to the relevant VAT circle.

10.It is very much apparent that the VAT authority without identifying or taking action against the person/persons who approved the price declarations submitted by the petitioner issued the impugned demand notice upon the petitioner after expiry of the prescribed period of limitation only to save the scrupulous persons of the VAT authority. We have noticed that in the price declaration there is a column of 'supplementary duty (Annexure-'A(2)', 'A(3) to the writ petition) but the concern VAT authority approved the price declaration without imposing supplementary duty prevailing at the relevant period.

11.Rule 3 of the VAT Rules provides declaration of value to impose VAT and where applicable VAT and supplementary duty to achieve the purposes of sections 5 and 7 of the VAT Act to the Divisional Officer of the concern jurisdiction of the VAT authority in form 'Mushak-1' by the registered persons.

12.Rule 3(3) categorically stated that:

"If it is subsequently evident, regarding value declared under sub-rule (1) or (2) or 3B, on the basis of information received from investigation or market survey conducted by the Divisional Officer or Circle Superintendent or any other VAT Officer authorized by the Commissioner in this behalf, or from investigation or survey conducted on the basis of information and data, relating to the quantity or value addition and apportionment thereof, actual expenditure of the firm, declared value, approved value, or market value of identical or similar or congeneric goods, kept in the Circle Office, Divisional Office or Office of the Commissioner, that:

a)   The declared base value is inconsistent with section 5 of the Act; or

b)   The declared base value is remarkably low than the base value of the similar goods or goods of same nature and quality of same jurisdiction or of any other jurisdiction; or

c)   The extent of value addition shown in form" Mushak-1" is remarkably low; or

d)   Because of any relationship existing between the supplier and the purchaser or for gaining reciprocal interest or for the benefit of any party.

The declared base value is significantly low, and if, for that reason, the VAT or, where applicable, VAT and Supplementary Duty has been paid or may be paid less, the Divisional Officer may, after giving the registered person reasonable opportunity of being heard, determine the appropriate base-value on the basis of information so received, or collected and from the date of such declaration all payable VAT for relevant tax periods shall be assessed and payable according to the such base value.

Explanation—The effectiveness of any provision relating to the punishment of any offence committed under the Act or of the rules shall not be prejudiced because of the