PRESENT:

(From the judgment and order dated 17.08.2004 passe High Court Division in Writ Petition No.4132 of 200

The Chairman, National Board of Revenue, Dhaka and others.

- Versus -

Rahim  Steels  Mills  Co.(Pvt)  Ltd.  and another.

d by the

2).

:         .... Appellants.

:         ....Respondent s.  

For the Appellants.  : Mr.  A.  M.  Amin  Uddin,  Attorney

General  (with  Ms.  Tahmina  Polly, Assistant  Attorney  General) instructed  by  Mr.  Haridas  Paul, Advocate-on-Record.

For Respondent Nos.1-2. : Mr.  Probir  Neogi,  Senior  Advocate

(with  Mr.  Munshi  Moniruzzaman) instructed  by  Mr.  M.  Ashrafuzzaman Khan, Advocate-on-Record.

Date of Hearing. : The 07th March, 03 rd May & 23 rd May, 2023.

Date of Judgment. : The 06 th June ,202 3.

This  civil  appeal  by  leave  is  directed

against the judgment and order dated 17.08.2004 pas sed by the High Court Division in Writ Petition No.4132 of 2002 making the Rule absolute.

Relevant facts for disposal of the civil appeal ar e that the respondents herein as petitioners preferre d Writ Petition No.4132 of 2002 before the High Court Divi sion invoking Article 102 of the Constitution impugning  Memo No. 4/G(26)f¨vU/Ave/91/Ask-3/99/942 dated 15.07.2002 issued by the writ-respondent no.4 The Superintendent, Customs, E xcise and  VAT,  Sonargaon  Circle,  Narayangonj  directing  th e petitioner  no.1  to  pay  the  unpaid  VAT  and  Memo

No. 4/G(26)f¨vU/Ave/91/Ask-4/02/1003 dated 29.07.2002 issued by the writ-respondent  no.4  directing  to  cancel  the  rebate

availed by the petitioner no.1, otherwise threatene d to take action under Section 56 of the Value Added Tax Act, 1991 (hereinafter stated as ‘the VAT Act, 1991’); C ase of the petitioners is that the petitioner no.1 is a pr ivate limited company incorporated under the Companies La w and also  registered  with  the  VAT  Authority;  The  petitio ner company is engaged in the business of manufacturing alloy steel  casting,  specialized  steel,  high  strength  def orm bars; In course of its business, the petitioner com pany supplied  construction  materials  to  local  purchasers  in foreign  currencies  as  per  instructions  of  the  tende r

schedule  floated  locally;  The  petitioners  supplied

2,211.50  metric  tons  of  construction  materials  and

received foreign currencies of US$ 8,19,013.50 from  the purchasers  against  aforesaid  supplies  as  per  tender

instructions;  Banks  situated  locally  issued  encashm ent certificates  infavour  of  the  petitioners  and  formal ly informed the Bangladesh Bank regarding encashment o f the foreign currencies by the petitioner company.

Petitioners’ contention is that as per Section 3 o f the VAT Act, 1991 read with Rule 31 of the Value Ad ded Tax  Rules,  1991  (hereinafter  stated  as  ‘the  VAT  Rul es, 1991’) the aforesaid supplies in foreign currencies  are ‘deemed  export’  on  which  VAT  is  not  payable  and

accordingly  the  petitioners  did  not  pay  VAT  against

aforesaid ‘deemed export’. It may be mentioned here that the  petitioners  in  their  previous  ‘deemed  export’  g ot drawback  of  the  VAT  paid  by  them  on  the  supplied  ra w materials but in the instant case as per the direct ion of the  authority  concerned  the  petitioners  instead  of

getting drawback of VAT availed rebate on the VAT p aid by

the petitioners on the raw materials used for produ ction of the construction materials.

After availing the rebate, the petitioners receive d a letter dated 27.01.2002 from the writ-respondent no .4 to deposit  VAT  on  the  sale  price  against  the  aforesaid

‘deemed  export’  and  also  received  another  letter  da ted 20.03.2002  from  the  writ-respondent  no.5  the  Inspec tor (Sadar),  Office  of  the  Superintendent,  Customs,  Exc ise and  VAT,  Sonargaon  Circle,  Narayangonj  to  deposit  t he unpaid VAT of Tk. 47,14,325.00 (Forty Seven Lac Fou rteen Thousand Three Hundred and Twenty Five only) agains t the aforesaid  ‘deemed  export’  alleging  that  the  foreign

currencies  received  by  the  petitioners  against  the

aforesaid  ‘deemed  export’  were  not  repatriated  thro ugh Bangladesh  Bank;  The  petitioners  replied  the  letter s through his lawyer on 02.04.2002 stating that the f oreign currencies against the aforesaid supply were receiv ed by the  petitioners  through  (i)  American  Express  Bank

Limited,  (ii)  Standard  Chartered  Bank  Limited,  (iii ) Dhaka Bank Limited, (iv) IFIC Bank Limited and (v)  Uttara Bank  Limited  who  are  the  authorised  dealers  under  t he

license  from  Bangladesh  Bank  to  deal  with  foreign

currencies and those Banks issued encashment certif icates infavour of the petitioners filing necessary return s to the  Bangladesh  Bank;  As  such  the  foreign  currencies

received  by  the  petitioners  through  Authorised  Deal ers (Schedule  Banks)  is  a  remittance/repatriation  for  t he purpose of Rule 31(1) of the VAT Rules, 1991.

In  response  of  the  said  reply,  the  writ-respondent

no.5 directed the petitioners to furnish the docume ntary evidence that the foreign currencies against the ‘d eemed export’  in  question  was  repatriated  through  Banglad esh Bank  by  letter  dated  11.04.2002;  Accordingly,  the

petitioners  submitted  encashment  certificates  to  th e respondent no.5 vide letter dated 15.04.2002; There after, the  writ-respondent  no.4  it’s  letter  dated  22.05.20 02 directed  the  petitioners  to  cancel  the  rebate  of  Tk . 39,96,763.00 (Thirty Nine Lac Ninety Six Thousand S even Hundred and Sixty Three only) availed on the duties paid by  the  petitioners  on  the  raw  materials  used  for

production  of  the  construction  materials  regarding  said ‘deemed export’ and to make necessary adjustment in the current account register; The petitioners in reply  dated 05.06.2002 stated that the cancellation is illegal  being in  violation  of  the  VAT  Rules,  1991;  Thereafter  the

impugned  letters  dated  15.07.2002  and  29.07.2002  we re issued by the writ-respondents; Under the situation  the petitioners preferred writ petition.

Upon hearing the petitioners, a Division Bench of  the High  Court  Division  issued  a  Rule  Nisi  upon  the  wri t- respondents to show cause.

The  writ-respondent  no.2  The  Commissioner,  Customs , Excise  and  VAT,  Dhaka  South,  Segunbagicha,  Dhaka

contested  the  Rule  by  filing  affidavit-in-oppositio n, contending  interalia,  that  the  writ-petitioners  hav e miserably failed to fulfil the requirements that ha s laid down in Section 3(2) of the VAT Act, 1991 and Rule  31 of the VAT Rules, 1991. The petitioners failed to subm it any export  proceed  realization  certificates  which  are  t he most vital documents to show that the payment recei ved by the  petitioners  in  foreign  currencies  are  repatriat ed through  Bangladesh  Bank  and  in  absence  of  any  expor t proceed  realization  certificate,  the  petitioners  ar e disentitled to claim any rebate or exemption of VAT  on the supply in question on account of ‘deemed export ’.

Upon hearing the parties and perusing the annexure s annexed  to  the  writ-petition,  a  Division  Bench  of  t he High Court Division made the Rule absolute declarin g that the memo dated 15.07.2002 and 29.07.2002 have been  issued illegally  and  without  any  lawful  authority  and  as  s uch are  of  no  legal  effect  vide  judgement  and  order  dat ed 17.08.2004, which is impugned herein.

Being aggrieved, the writ-respondents as petitione rs preferred  Civil  Petition  for  Leave  to  Appeal  No.966  of 2005  before  this  Division  under  Article  103  of  the

Constitution  and  obtained  leave  granting  order  on

21.04.2008.

Consequently, instant civil appeal arose.

Mr. A. M. Amin Uddin, learned Attorney General wit h Ms.  Tahmina  Polly,  learned  Assistant  Attorney  Gener al, appearing for the appellants submits that the High  Court Division committed an error of law based on facts i n not considering that the aforesaid transaction as state d by the writ-petitioners cannot be brought within the a mbit of  ‘deemed  export’  inasmuch  as  the  foreign  currenci es received from the purchasers against the supply hav e not been  repatriated  through  Bangladesh  Bank  as  require d under Rule 31 of the VAT Rules, 1991 and therefore  the demands  were  made  legally  and  lawfully  as  such  the

impugned judgment and order is liable to be set-asi de. He also submits that the High Court Division erred in  law in interpreting Section 3(2) of the VAT Act, 1991 and  Rule 31  of  the  VAT  Rules,  1991  in  the  context  of  ‘deemed

export’ as claimed by the respondents herein as suc h the impugned judgment and order is liable to be set-asi de.

On the other hand Mr. Probir Neogi with Mr. Munshi

Moniruzzaman,  learned  Advocates,  appearing  for  the

respondents  submits  that  Section  3(2)  of  the  VAT  Ac t, 1991 provides that  ‘notwithstanding anything contained in

Sub-Section  1  of  Section  3  of  the  VAT  Act,  1991,  VA T shall  be  rebated  at  zero  rate  on  the  goods  and  the

service  exported  or  deemed  to  have  been  exported  fr om Bangladesh’ and since the words  ‘ißvbxK…Z ewjqv MY¨’ as mentioned

in Section 3(2) of the VAT Act, 1991 includes the g oods

supplied by the respondents to international contra ctors for implementation of mega projects in Bangladesh a gainst foreign currency and consequently, the concern VAT  circle received Musak-11 with zero percent VAT, and thus n o VAT is payable against the said supply as per Section 3 (2) of the VAT Act, 1991 as such the High Court Division r ightly passed the impugned judgment and order. He also sub mits that the respondents being successful bidders in an open tender supplied the goods to the purchasers on rece iving foreign  currency  as  per  the  tender  instructions  and

encashed  the  foreign  currency  from  authorised  deale rs (Local Banks) of the Bangladesh Bank and thus the s upply of goods comes within the purview of Section 3(2) o f the VAT Act, 1991 read with the Rule 31(1) of the VAT R ules, 1991 and as such there is nothing to interfere with the impugned judgment and order.

Heard the learned Attorney General for the appella nts and  learned  Advocate  for  the  respondents.  Perused  t he papers/documents contained in the paper book.

Admittedly, the respondents participated in an ope n tender floated locally and being successful supplie d the goods to the purchasers and received foreign curren cy as per the tender instructions. The respondents encash ed the foreign  currency  in  the  local  Banks  and  annexed

encashment  certificates.  In  this  regard  claim  of  th e respondents-writ petitioners is that since they sup plied the  goods  as  per  instructions  of  the  locally  floate d tender  against  which  foreign  currencies  were  encash ed through  the  authorised  dealers  of  the  Bangladesh  Ba nk i.e. local Banks, as such, the aforesaid supply sha ll be treated as ‘deemed export’ under Section 3(2) of th e VAT Act, 1991 read with Rule 31 of the VAT Rules, 1991.

Let us see the provisions of Section 3(2) of the VA T Act, 1991 and Rule 31 of the VAT Rules, 1991.

Section 3 of the VAT Act, 1991 runs as follows:

Ò3|  g~j¨ ms‡hvRb Ki Av‡ivc|-

1.              cÖ_g Zdwm‡j DwjøwLZ cY¨mg~n e¨ZxZ evsjv‡`‡k Avg`vwbK…Z mKj cY¨ I D³ Zdwm‡j DwjøwLZ cY¨mg~n e¨ZxZ mKj c‡Y¨i mieiv‡ni Dci Ges [wØZxq Zdwm‡j DwjøwLZ †mevmg~n e¨ZxZ] [evsjv‡`‡k cÖ`Ë] mKj †mevi Dci aviv 5 G ewY©Z g~‡j¨i wfwˇZ c‡bi kZvsk nv‡i g~j¨ ms‡hvRb Ki avh© I cÖ‡`q nB‡e|
2.              Dc-aviv (1) G hvnv wKQzB _vKzK bv †Kb, wb¤œewY©Z cY¨ ev †mevi Dci ïb¨ nv‡i Ki Av‡ivwcZ nB‡e, h_vt-

11. evsjv‡`k nB‡Z ißvwbK…Z ev ewjqv MY¨ †Kvb cY¨ ev †mev;
12.   ---------------------------------------------------------------------------

(A) ------------------------------------------------------------------- (Av) ------------------------------------------------------------------

3.            -------------------------------------------------------------------------------

11. --------------------------------------------------------------------------
12.   --------------------------------------------------------------------------
13. --------------------------------------------------------------------------
14. ------------------------------------------------------------------------- -

4.              -------------------------------------------------------------------------------
5.              -------------------------------------------------------------------------------

11. --------------------------------------------------------------------------
12.   --------------------------------------------------------------------------Ó

Again, the provision of Rule 31 of the VAT Rules, 1991 are as follows:

Ò31| ¯’vbxq ev AvšÍR©vwZK `ic‡Îi wecix‡Z ˆe‡`wkK gy`ªvq cY¨ mieivn ev †mev cÖ`vb|-

1.              †Kvb evsjv‡`kx wbewÜZ e¨w³ KZ…©K ¯’vbxq ev AvšÍR©vwZK `ic‡Îi wecix‡Z ˆe‡`wkK gy`ªvi wewbg‡q †Kvb cY¨ mieivn ev †Kvb ‡mev cÖ`Ë nB‡j D³ cY¨ ev †mevi wewbg‡q cÖvß ˆe‡`wkK gy`ªv ißvbxi mvaviY bxwZ Abyhvqx evsjv‡`k e¨vs‡Ki gva¨‡g cÖZ¨vewmZ nB‡j AvB‡bi aviv 3 Gi Dc-wewa (2) Abyhvqx ißvbxK…Z ewjqv M n Y¨B‡e|
2.              ‡h wbewÜZ e¨w³i [AvB‡bi] aviv 35 Abyhvqx `vwLjcÎ cÖ`v‡bi eva¨evaKZv iwnqv‡Q wZwb ZrKZ…©K ¯’vbxq ev AvšÍR©vwZK `ic‡Îi wecix‡Z ˆe‡`wkK gy`ªvi w wbg‡q mieivK…Z cY¨ ev cÖ`Ë †mevq e¨eüZ DcKi‡Yi †ÿ‡Î Ki cÖZ¨c©Y MÖnY Kwi‡Z Pvwn‡j Zvnvi †ÿ‡Î wewa 29 Gi mswkøó weavbvejx cÖ‡hv¨ R nB‡e|
3.              †h wbewÜZ e¨w³i †ÿ‡Î Dc-wewa (2) G ewY©Z eva¨evaKZv cÖ‡h R¨ b‡n wZwb ZrKZ…©K ¯’vbxq ev AvšÍR©vwZK `ic‡Îi wecix‡Z ˆe‡`wkK gy`ªvi wewbg‡q mieivnK…Z cY¨ ev cÖ`Ë †mevq e¨enZ DcKi‡Yi †ÿ‡Î Ki cÖZ¨c©Y MÖnY Kwi‡Z Pvwn‡j Zvnvi †ÿ‡Î wewa 30 Gi mswkøó weavbvejx cÖ‡hvR¨ nB‡e|
4.              Dc-wewa (2) I (3) G ewY©Z †ÿ‡Î h_vµ‡g `vwLjcÎ I Av‡e`bc‡Îi mwnZ mswkøó `ic‡Îi Abywjwc, `icÎ MÖn‡Yi cÖgvYcÎ, Kvh© m¤úv`‡bi wb‡`©kbvgv Ges ˆe‡`wkK gy`ªvq g~j¨ cÖvwßi cÖgvYcÎ mshy³ Kwi‡Z nB‡e|  Ó

No doubt that the respondent-writ petitioners

supplied the goods to the contactors and received f oreign currencies as per tender instructions. Now the only

question is whether the foreign currencies received by the supplier-respondents repatriated through the

Bangladesh  Bank  or  not  because  Rule  31 (1)  of  the  VAT Rules , 1991  clearly states that:

ÒD³  cY¨  ev  †mevi  wewbg‡q cÖvß  ˆe‡`wkK  gy`ªv  ißvbxi  mvaviY bxwZ  Abyhvqx evsjv‡`k e¨vs‡Ki gva¨‡g cÖZ¨vewmZ nB‡j AvB‡bi aviv 3 Gi Dc-wewa (2) Abyhvqx ißvbxK…Z ewjqv MY¨ nB‡e|Ó                      

(Emphasis supplied)

On  perusal  of  the  annexures  annexed  to  the  writ - petition it appears that the respondent - writ petitioners annexed some encashment certificate s  to show that it has complied  with  Rule  31  of  the  VAT  Rules,  1991  i.e.  the

foreign  currencies  are  repatriated  through  Banglade sh Bank.  T wo  of  the  annexed  encashment  certificate s  are reproduce d below:

Standard Chartered Bank

Standard Chartered Grindla ys  Bank Ltd.

2, Dilkusha Commercial Area

G.P.O. Box 502, Dhaka -1000, Bangladesh

Tel  : (880 -2) 955 0181

Fax  : (880 -2) 956 2332

Telex :  Dhaka 642597, 642841&  632654 GBLD

ENCASHMENT CERTIFICAT

We  certify  that  having  encashed  Foreign

Demand  Draft  for  an  amount  of  Bangladesh Tk.3183117.00  ( Tk.  Thirty  One  Lac  Eighty Three  Thousan d  One  Hundred  and  Seventeen only)  @ BDT57.40 b elo w favouring M/S. RAHIM STEEL  CO.  (PVT.)  LIMITED,  29/10  K.M.  Das Lane,  Tikatuly, Dhaka -1205, Bangladesh.

t

h d m

. JV

For Standard Chartered Grindlays Bank Ltd.

(Signed)

Pro. Manager

2, Dilkusha C/A, Dhaka. Authorised Signature

UTTARA BANK LIMITED  Phone : 9666255,9568186 CORPORATE BRANCH Cable : CORPBANIJYA

Motijheel C/A, Dhaka-1000, Bangladesh. Telex : 632438 UBL CB BJ

CORP/FEX/2002/ April 8, 2002

Encashment Certificate

We  certify  that  the  Cheque/Payment  order No.3285846  dated  06.02.2002  for Tk.14,67,555.00  (Taka  Fourteen  Lac  Sixty Seven Thousand Five Hundred Fifty Five) only

Eqv.  US$=25,560.00  @  57.42  (less  our  P.O. Commission  Tk.100.00)  has  been  issued  on 06.02.2002  in  favour  of  Rahim  Steel  Mills

Co. (Pvt.) Ltd. by debit to account No.FCAD-

165 maintained by us in the name of M/s. Mir Akhter Hossain Ltd. The transaction has been reported to Bangladesh Bank in Schedule J-

1/O-3 for the month of March, 2002.

For Uttara Bank Ltd. Corporate Branch (Signed)

Authorised Signature

The learned Advocate for the respondents argued tha t this  encashment  certificates  proves  that  the  foreig n currencies repatriated through Bangladesh Bank.

On perusal of the encashment certificates we do not

find  any  basis  of  such  argument  inasmuch  as  the

encashment certificates only shows that the transac tions regarding  encashment  of  foreign  currencies  have  bee n reported to Bangladesh Bank which in our opinion ca nnot be  treated  as  repatriation  through  Bangladesh  Bank.  It may be mentioned here that the writ-respondent no.5 vide memo  dated  11.04.2002  asked  the  petitioners  to  furn ish the  documentary  evidence  that  the  foreign  currencie s against the ‘deemed export’ in question was repatri ated through  Bangladesh  Bank.  But  the  petitioners  only

submitted encashment certificates to the respondent no.5 vide  letter  dated  15.04.2002.  There  are  no  proceed

realization  certificates  in  support  of  said  ‘deemed

export’  which  amply  proves  that  the  claimed  ‘deemed

export’ do not come within the ambit of Section 3(2 ) of the VAT Act, 1991 and Rule 31 of the VAT Rules, 199 1. In the  aforesaid  transactions  the  respondent-writ

petitioners as a local supplier supplied the constr uction materials to the local contractors on receipt of fo reign currencies  locally  as  per  instructions  of  the  local ly floated tender. The goods were not shipped abroad a gainst master Letter of Credit or any internationally acce pted export documents. Consequently, the respondents fai led to submit  any  proceed  realization  certificates  against  the claimed  ‘deemed  export’.  Mere  encashment  certificat e cannot be treated as proceed realization certificat e.

Following observation of the High Court Division:

“We  have  already  indicated  that  ‘deemed export’ is not an actual export. There is no

L/C  nor  the  goods  go  out  of  the  country. Therefore, in case of ‘deemed export’ there cannot  be  export  proceeds  realisation certificate  and  they  would  be  replaced  by encashment  certificate  and  that  has  been furnished  in  the  instant  case  both  to  the respondents  before  filing  of  the  writ petition  and  also  before  this  Court  as annexures.

It,  therefore,  appears  to  us  that  the transactions  in  question  qualifies  as ‘deemed export’ and they have fulfilled the requirements  of  repatriation  of  the  sale proceeds through Bangladesh Bank.”

Based on purely misconception of law and ignorance of transaction  in  international  business.  High  Court

Division misdirected itself in making the Rule abso lute with wrong findings beyond the scope of law.

Accordingly, the civil appeal is allowed.

The judgment and order dated 17.08.2004 passed by t he High Court Division in Writ Petition No.4132 of 200 2 is hereby set-aside.

The appellants VAT authority can make demand for th e evaded VAT amount and cancel the rebate illegally a vailed by the writ-petitioners.

However, there is no order as to costs.

J.

J. J.

The 06 th  June, 2023 . Jamal/B.R./Words-*2804*