IN THE SUPREME COURT OF BANGLADESH HIGH COURT DIVISION
(SPECIAL ORIGINAL JURISDICTION)
WRIT PETITION NO. 9989 OF 2015
IN THE MATTER OF:
An application under Article 102(2)(a)(i) and (ii) of the Constitution of the People’s Republic of Bangladesh.
And
IN THE MATTER OF:
Great Wall Ceramic Industries Ltd.
.... Petitioner
-Vs-
National Board of Revenue Represented by its Chairman, NBR Bhaban, Segunbagicha, Dhaka and others
....Respondents.
Mr. Munshi Moniruzzaman with
Mr. Sakib Rezwan Kabir and
Mr. S.M. Shamsur Rahman, Advocates
......... For the Petitioner
Ms. Nasima K. Hakim, Deputy Attorney General, Ms. Tahmina Polly, with Mr. Elin Imon Saha, and Mr. Ziaul Hakim and Md Hafizur Rahman, Assistant Attorney Generals
........For the Respondents-government
Heard on 21.11.2023, 28.11.2023 & 06.12.2023 Judgment on 08.01.2024
Present:
Mr. Justice Md. Iqbal Kabir
and
Mr. Justice S.M. Maniruzzaman
S.M. Maniruzzaman, J:
In this Rule Nisi, issued under Article 102 of the
Constitution of the People’s Republic of Bangladesh, the respondents have been called upon to show cause as to why the
1
proceeding initiated under e¢b ew- 4/j§pL/8(12) ®NËV Ju¡m ¢pl¡¢jLp/ A¢euj/¢hQ¡l/2013/1788 dated 06.08.2014 by the respondent No. 2
for alleged evasion of Value Added Tax (VAT) and supplementary
duty (SD) by the petitioner during the period of 2011-2012 (Annexure-G) should not be declared to have been passed without
lawful authority and is of no legal effect and/or such other or
further order of orders passed as to this Court may deem fit and
proper.
At the time of issuance of the Rule the operation of the impugned
order dated 06.08.2014 (Annexure-G) was stayed by this Court for a prescribed period.
Facts, in brief, for disposal of the Rule, are that the petitioner is a
private limited company incorporated under the Company Act, 1994 and
is engaged in the business of manufacturing “Ceramic Wares” by using imported raw materials and sells the same in the local market. In course
of business, the petitioner obtained VAT registration bearing No. 5141027541 from the concerned VAT office under the Value Added Tax
Act, 1991 (in short, the Act, 1991) and since then it has been paying
VAT regularly.
Suddenly an audit team of the respondent No. 5, Central Intelligence Cell (CIC) visited the petitioner’s Head Office on 29.01.2013 and seized its commercial and business documents. After
audit, the said team started an Oniom Case bearing No. 06/Musak/2013
dated 08.06.2013. Pursuant to the said oniom case, the respondent No. 2 [Commissioner, Customs, Excise and VAT (Dhaka North) Commissionerate, Dhaka] issued a show cause notice upon the petitioner on 08.07.2013 contending inter alia that as per audit report of the CIC the petitioner evaded VAT and SD to the tune of Tk. 3,75,00,000/-, but such amount was already paid by the petitioner. By the said notice it was further asked to the petitioner as to why penalty should not be imposed under Section 37(2) of the Act, 1991. Thereafter the respondent No. 2 further issued another show cause notice pursuant to the same allegation and Oniom Case bearing No. 08/Musak/2013 dated 27.06.2013 asking the petitioner show cause as to why penalty should not be imposed for evading VAT to the tune of Tk. 1,25,00,000/- but which amount was also paid by the petitioner before issuance of the show cause notice (Annexure-D).
On receipt both the notices, the petitioner replied thereof on 21.07.2013 contending inter alia that the different amount which has/had been detected between the market price and the declared price of the petitioner and those contexts no VAT and SD were alleged to have been evaded by the petitioner but which was paid by the petitioner. Pursuant to the audit of the CIC the petitioner did not committed any offence as penalized under Section 37(2) of the Act, 1991 (Annexure-E). Further on 02.01.2014 the petitioner made a representation to the respondent No. 5 stating that the alleged VAT and SD to the tune of Tk. 9,19,53,317/- which was paid by the petitioner through several pay orders. However, amount of Tk. 3,33,114/- was left such amount was also paid by the petitioner. By the said representation the petitioner requested the concerned VAT Authority to take necessary steps to resolve the matter.
However, the respondent No. 2 issued another show cause notice on 06.08.2014 upon the petitioner pursuant to the said Oniom Case No. 06/Shulko-Kor/2014 stating inter alia that since the petitioner paid entire amount of SD to the tune of Tk. 9,22,86,431/- within the time and as such the petitioner should be penalized under Section 37(2) of the Act, 1991.
On received thereto the petitioner replied to the show cause notice on 19.08.2014 further contending that the amount was fixed by the authority on the basis of the market price and the declared price for the reason the VAT and SD were alleged to have been evaded by the petitioner which was paid by the petitioner and never had any intention to evade any VAT and SD. In view of the above, the petitioner prayed for exonerate it from the allegations so made in the show cause notice and the respondent concerned did pay any head.
Feeling aggrieved by and dissatisfied with the impugned proceeding dated 06.08.2014 the petitioner moved this application before this Court and obtained the Rule along with the interim order of stay.
Mr. Munshi Maniruzzaman, learned Advocate appearing for the petitioner submits that the petitioner paid off the entire claim of VAT as per the demand but the VAT authority in spite of receiving the payment has imposed penalty upon the petitioner which is absolutely illegal and liable to be declared to have been passed without lawful authority. Mr. Munshi next submits that the petitioner has already paid off the entire amount of unpaid VAT which was determined by the VAT authority vide notice issued under Section 55(1) of the Act, 1991, but in the present case the respondent adjudicated that matter by imposing penalty under Section 37 (2) of the Act, 1991 without applying any judicial mind and as such the impugned proceedings is absolutely illegal and without jurisdiction. Mr. Munshi further submits that for imposing of penalty under Section 37(2) of the Act, 1991, it is required under Section 37(2)(Kha) of the Act, 1991 to issue two notices and after receiving those notices, if the person concerned fails to pay the amount demanded in the notices only in that case action may be taken under Section 37(2) of the Act, 1991 but in the present case without making any demand straightway the notice for imposition of penalty has been issued upon the petitioner which is absolutely illegal and contrary to the provision of Section 37(2)(kha) which is liable to be declared to have been passed without lawful authority. Mr. Munshi goes to submit that the respondent No. 2 has failed to appreciate the provisions of Section 36(5) of the Act, 1991 in the proceeding against the petitioner under Section 37 (2) of the Act, 1991 as it authorizes the respondent No. 2 to proceed under Section 37 (2) of the Act, 1991 only when there is failure on the part of the petitioner to comply Sub-section (1) and (4) of Section 36. In the instant case, there is no such allegation against the petitioner and as such imposition of penalty is illegal and excess of jurisdiction of the respondent and thus the impugned proceeding is liable to be declared to have been passed without lawful authority.
In view of the above submissions the learned Advocate relies on the decision. In the case of British American Tobacco Bangladesh Ltd.- Vs-National Board of Revenue and others reported in 25BLC (AD)49, Government of Bangladesh and others-Vs-Md. Tajul Islam reported in 49DLR(AD)177, Commissioner of Income Tax, Karachi-Vs-Mst. Khatija Begum, Partner, Shakil Impex, Karachi reported in 17 DLR (SC)415, United Mineral Water and PET Industries Ltd.-Vs- Commissioner, Customs, Excise and VAT Commissionerate and others reported in 61 DLR(HCD)734 and RAK Ceramics Bangladesh Ltd.-Vs- Bangladesh represented by Secretary, Ministry of Internal Resources Division and others reported in 59 DLR (HCD)274.
On the other hand Ms. Tahmina Polly, learned Assistant Attorney General by filing affidavit-in-opposition on behalf of the respondent No. 2 submits that the impugned notice is merely a show cause notice issued under Section 37(2) of the Act, 1991 and the petitioner replied to the said notice accordingly, but before finalization of the notice by the VAT Authority the petitioner has filed the instant writ petition and obtained the present Rule and as such the Rule is liable to be discharged as being premature. The learned Assistant Attorney General by referring Section 37(2) and (Tha) submits that any person commits any offence as stated under Clause- KA-TA that act shall be treated as an offence. In this regard, the learned Assistant Attorney General submits that the legislature has chosen to use the term “Eš² L¡S qC−h HL¢V Afl¡d” as opposed to the term “Eš² L¡S Afl¡d qC−R h−m NeÉ qC−a f¡−l”. In view of the such words, the legislature the part of the executive as to whether the act can or cannot be treated as an offence once the commission of tax and contemplated in Section 37(2) (KA)-(TA) and as such there is no illegality in the impugned order. The learned Assistant Attorney General next submits that the petitioner has failed to show that he had/have no intention to avoid payment of VAT and SD and pursuant to the audit report the petitioner paid entire amount of evaded VAT and SD. In view of the above the learned Assistant General submits that the respondent VAT Authority has not committed any illegality by initiation proceeding against the petitioner for imposition of penalty under Section 37(2) of the Act, 1991. In the stated circumstances, the learned Assistant Attorney General prays for discharging Rule with costs.
We have considered the submissions so advanced by the learned Advocate for the petitioner and the learned Assistant Attorney General for the respondent No. 2, gone through the writ petition, relevant materials on record so appended thereto and consulted of the provisions of law.
The moot issue requires to be addressed in the instant Rule is that whether after payment of unpaid or evaded VAT and other taxes as per audit/inquiry conducted by the VAT Authority and such authority can initiate any proceeding for imposition of penalty under Section 37(2) of the Act, 1991.
In order to appreciate the said issue, let us first have a look at the provision of Sections 35 and 36 of the Act, 1991 and which is quoted below for cursory glance:
“
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Thus, from the quoted Sub-section (5) of Section 36 provides that
if any registered person fails to take action as per Sub-section (1) (4) or abstain himself for taking action willfully then it will be considered that he has committed offence under this Act, and the concerned officer might have undertaken legal proceedings will be taken against him under Section 37 of the Act, 1991.
Admittedly in the instant case the petitioner pursuant to the audit so conducted by the CIC was paid entire amount of claimed of VAT and SD to the tune of Tk. 9,22,86,431/- by separate pay orders. The said amount was duly received by the concerned VAT Authority which has
been stated in the impugned show cause notice contending inter alia;
“Ef¢l¢õ¢Ma abÉ Ae¤k¡u£ ®jp¡pÑ ®NËVJu¡m ¢pl¡¢jLp Cä¡¢ØVÊS ¢mx (L¡lM¡e¡-¢Nm¡lQ¡m¡, nË£f¤l, N¡S£f¤l, A¢gp- 13/1, fl£h¡N, h£l Ešj ¢p
Bl cš ®l¡X, Y¡L¡-1000) LaѪL fËL«a ¢hH²u abÉ ®N¡fe L−l jeNs¡ ¢hH²−ul abÉ EfpÙÛ¡f−el j¡dÉ−j j§pL $4,93,62,509/- J pÇf§lL öó $ 4,29,23,922/- pq phÑ−j¡V $ 9,22,86,431/- (eu ®L¡¢V h¡Cn mr ¢Ru¡¢n q¡S¡l Q¡lna HL¢œn) V¡L¡ j§mÉ pw−k¡Se Ll (j§pL) f¢lq¡l L−l−Rez k¡ ¢pBC¢p La«Ñf−rl Q¡−f ¢a¢e L−uL d¡−f f¢l−n¡d L−l−Rez ¢pBC¢p La«Ñfr kb¡pj−u fc−rf e¡ ¢e−m HC AbÑ Bc¡u ®q¡a e¡ Hhw plL¡−ll ¢hf¤m f¢lj¡e l¡Sü q¡¢e OVaz g−m ®cM¡ k¡−µR ®k, Eš² f¢lq¡lL«a öó Ll¡¢c f¢l−n¡d Ll¡ q−mJ a¡ kb¡pj−u f¢l−n¡d Ll¡ qu¢ez”
From the quoted context of the show cause notice, it, however,
appears that pursuant to the audit report of the CIC, the petitioner paid entire amount of unpaid or less paid or evaded VAT and SD, but despite of such payment the concerned VAT Authority has initiated proceeding against the petitioner under Section 37(2) of the Act, 1991.
The provision of the Section 37 is quoted below for ready reference;
37z Afl¡d J cä pj§q-
1z ...........................................................
( ) -
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,
( ) ৎকত ক , , , ,
,
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(ঘ)
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,
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( ) , Point of Sales (POS) Software
, POS Software
, POS Software
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Thus, from Clause- (b) of Sub-section (2) provides that if any
person assist to do or does any activity as described in Clause-(KA)- (TA), such then, his activity will be an offence and due to such offence, if tax evasion take place, then, he will be liable to monetary penalty of minimum ½ of the evaded amount or maximum of equal amount of tax payable on supply of concerned goods or providing of services relation to the offence of tax evasion and other then of the evaded VAT the person will liable to pay minimum 10,000.00 or maximum 50,000.00.
However, in the impugned notice dated 06.08.2014 (Annexure-G) it appears that wherein the respondent No. 2 without mentioning any or more offence(s) as described in Clause-(KA)-(TA) of Sub-section 2 of Section 37 which are violated by the petitioner, but only by mechanical
way has issued the notice stating inter alia;
“Ef¢l¢õ¢Ma abÉ Ae¤k¡u£ ®jp¡pÑ ®NËVJu¡m ¢pl¡¢jLp Cä¡¢ØVÊS ¢mx (L¡lM¡e¡-¢Nm¡lQ¡m¡, nË£f¤l, N¡S£f¤l, A¢gp- 13/1, fl£h¡N, h£l Ešj ¢p
Bl cš ®l¡X, Y¡L¡-1000) LaѪL fËL«a ¢hH²u abÉ ®N¡fe L−l jeNs¡ ¢hH²−ul abÉ EfpÙÛ¡f−el j¡dÉ−j j§pL $4,93,62,509/- J pÇf§lL öó $ 4,29,23,922/- pq phÑ−j¡V $ 9,22,86,431/- (eu ®L¡¢V h¡Cn mr ¢Ru¡¢n
q¡S¡l Q¡lna HL¢œn) V¡L¡ j§mÉ pw−k¡Se Ll (j§pL) f¢lq¡l L−l−Rez k¡ ¢pBC¢p La«Ñf−rl Q¡−f ¢a¢e L−uL d¡−f f¢l−n¡d L−l−Rez ¢pBC¢p La«Ñfr kb¡pj−u fc−rf e¡ ¢e−m HC AbÑ Bc¡u ®q¡a e¡ Hhw plL¡−ll ¢hf¤m f¢lj¡e l¡Sü q¡¢e OVaz g−m ®cM¡ k¡−µR ®k, Eš² f¢lq¡lL«a öó Ll¡¢c f¢l−n¡d Ll¡ q−mJ a¡ kb¡pj−u f¢l−n¡d Ll¡ qu¢ez
Ef−l h¢ZÑa H dl−el L¡kÑfm¡−f p¤Øføi¡−h fËj¡e£a qu ®k, Bf¢e/fË¢aù¡e La«ÑL j§pL f¢lq¡−ll Af−Qø¡ Ll¡ q−u¢Rm, k¡ j§mÉ pw−k¡Se Ll BCe, 1991 Hl d¡l¡ 3, 6, 7, 31, 32 J 35 Hl mwOe J HLC BC−el Ad£−e fËZ£a ¢h¢dj¡m¡l ¢h¢d 16, 22, 23 J 24 Hl Øfø mwOez a¡C ¡ j§mÉ pw−k¡Se Ll BCe, 1991 Hl d¡l¡ 37(2) ®j¡a¡−hL Bfe¡l fË¢aù¡e La«Ñf−rl Efl ®Le AbÑcä B−l¡f Ll¡ q−h e¡ a¡l L¡lZ pð¢ma ¢m¢Ma Sh¡h BN¡j£ 20/08/2014¢MËx a¡¢l−Ml j−dÉ H cç−l c¡¢Mm Ll¡l SeÉ Ae¤−l¡d Ll¡ q'mz”
In view of the stated context, it is quite surprising that the
concerned VAT authority without mentioning any clause of offence as described under Sub-section (2) of the Section 37 only by mechanical way has initiated proceeding by issuing the impugned notice.
In the case of Government of Bangladesh and others-Vs-Md. Tajul Islam reported in 49DLR (AD) 177, wherein it has been observed;
It is well settled that a show cause notice is not a technical requirement or an idle ceremony. The notice must not be vague or in bare language merely repeating the language of the statute (See Amaresh Chandra vs. Bangladesh 31 DLR (AD) 240, Nasir Ahmed vs. Assistant Custodian AIR 1980 (SC) 1157). This Division in the case of Bangladesh Telecom vs, T&T 48 DLR (AD) 20 in a case of revocation of licence observed that a licence is a privilege created in favour of a licensee and unless the statute excludes the operation of the principle of natural justice a show cause notice is a must before revocation of the licence and it is not enough to issue a show cause notice; in order to be valid it must be a
meaningful one. The learned Advocate verbally
submitted some facts in support of the notice but it
was observed “we are unable to entertain them as the
facts which constitute the valid basis of cancellation
have to be alleged in the show cause notice itself and
cannot be supplemented by fresh facts in affidavit”. In the instant case, the moot contention of learned Assistant
Attorney General is that the impugned notice is a purely show cause notice and before finalization of the said notice by the Authority concern, the petitioner filed the instant writ petition, hence, the present Rule is premature one.
In this regard, the learned Advocate for the petitioner relying on the decision in the case of British American Tobacco Bangladesh Ltd.- Vs-National Board of Revenue and others (Supra) submits that when the entire action of the VAT Authority appears to be illegal, malafide and arbitrary on the face of record, the any aggrieved person invokes jurisdiction under Article 102 of the Constitution without preferring statutory appeal.
Considering both the submission, it is apparent from the judgment in the case of British American Tobacco Bangladesh (Supra) that wherein the appellant as petitioner filed writ petition challenging the final demand notice issued under Section 55(3) of the Act, 1991 and considering the submissions of the contending parties, the Appellate Division observed inter alia;
“From the above facts and circumstances it is clear that the entire action of the VAT authority shows that the VAT authority dealt with the appellants in an
arbitrary manner and with an intention to penalize the appellants without following the procedure of law. The appeal preferred before the appellate authority also shows that these aspects have not been considered even by the appellate authority. When the entire action of the VAT authority appears to be illegal, mala fide and arbitrary on the face of the record, invoking article 102 of the Constitution, under such circumstances, without preferring statutory appeal, is no bar. Thus we are view that the High Court Division correctly held that the writ petition was maintainable and accordingly disposed of the matter. But the disposal in respect of asking the appellant to pay VAT and supplementary duty for the period from February, 2012-2013 to October, 2013- 2014 is not in accordance with law.”
In the case of United Mineral Water and PET Industries Ltd.-Vs-
Commissioner, Customs, Excise and VAT Commissionerate and others (Supra) wherein a writ petition was filed challenging the show cause notice issued under Section 55 and 37 of the Act, 1991. Considering the
fact of the said case, the High Court Division held;
There is no dearth of authority to say when an authority is created to exercise certain authority and a procedure laid down to follow in the exercise of such authority by a statute, the authority concerned shall exercise the authority in accordance with the procedure otherwise its action shall become unauthorised. Any demand therefore made by an authority concerned for VAT or other tax, which was not made in accordance with the procedure laid down in the VAT Act, such demand must be held to be not a demand in the eye of law and this Division cannot
deny or refuse to exercise its jurisdiction under
Article 102 of the Constitution to strike down such
unauthorised exercise of statutory power. Considering the stated circumstances and the cited judgments, we
are of the view that any action has been taken by the VAT Authority for payment of any tax by issuance of a notice and it appears on face of the notice that which is not made in accordance with the procedure contemplated in the Value Added Tax Act, 1991 and Rules framed there under. Said notice is not a notice in the eye of law which has been issued by the authority an arbitrary manner and only an intention to penalise the person by illegal way. In that event the aggrieved person can come before this Court invoking writ jurisdiction under Article 102 of the Constitution.
In the case in hand the present petitioner paid entire amount of alleged evaded/unpaid VAT and SD pursuant to the audit report of the CIC which was duly received by the VAT Authority. Upon receipt of the entire amount of VAT and SD, the authority has initiated proceeding against the petitioner by the impugned notice only for penalization it under Section 37(2) of the Act, 1991 by an arbitrary and illegal manner.
Moreover, Clause (Kha) of Sub-section (2) of the Section 37 clearly provides;
“........37( )( ) , ,
- ( )
;
।”
However, in the instant case before issuing of the impugned notice by the VAT Authority, the petitioner paid entire amount of outstanding VAT and SD and as such the proceeding so have been initiated under Section 37(2) of the Act, 1991 in violation of the provision of Clause- (Kha) of Sub-section (2) of Section 37.
Moreover, Sub-section (5) of the Section 36 clearly provides that pursuant to any audit or scrutiny of the return any person failed to take any steps for payment of tax, the VAT Authority is authorised to take step under Section 37 of the Act, 1991 but in the instant case after audit conducted by the CIC the petitioner paid entire amount of outstanding VAT and SD and that score the proceeding has been initiated under Section 37 of the Act, 1991 is also barred under the said provision.
In this regard, in the case of RAK Ceramics Bangladesh Ltd.-Vs- Bangladesh represented by Secretary, Ministry of Internal Resources Division and others (Supra) reported in 59 DLR (HCD)274, wherein this Division has held inter alia;
We also could not find any offence under Section 37 of the VAT Act for which the petitioner could be held responsible for evasion of tax even after deposit and receipt of the supplementary duty as was demanded in the notice. We failed to understand how the Deputy Commissioner could claim that the petitioner evaded any tax, say supplementary duty, even after receipt of more than the money demanded in the notice. In the absence of clear finding on commission of any offence under the VAT AT, no one could be punished by way of imposing fine.
It is unfortunate that imposition of fine of such huge amount for no offence committed under Sub- section 2 of Section 37 escaped the notice of the statutory appellate authorities.
For the aforesaid reasons, impugned order imposing fine on supposed evasion of tax for no
offence committed cannot be sustained in law. Furthermore, in a unreported judgment passed by this Division on
07.08.2008 in Writ Petition No. 6512 of 2003 along with a branch of writ petitions wherein this Division categorically observed;
Lastly it appears from the entire facts and circumstances of the present cases that the petitioners in all or most of the cases either paid off the entire claim or part of the claim but the authority inspite of the fact of payment of entire claim, has imposed penalties and additional taxes upon the petitioner which is illegal and without lawful authority. From the facts stated earlier it is clear that the petitioners in some of the cases specifically in Writ Petition No. 2319 of 2004, 6182 of 2003, 6831 of 2003 and 3577 of 2005 have already paid off the entire amount of unpaid VAT which was determined by the respondent authority vide notice under Section 55 of the VAT Act. But Even then the respondents adjudicated the case and made a final demand imposing penalties and additional taxes under Section 37(2) and (3) of the Act without applying any judicial mind and as such the said order are declared to be of without lawful authority.
Having considered the stated fact and circumstances of the case,
findings and observation and the judgment so referred hereinabove we
find substance in the submissions so advance by the learned Advocate for the petitioner and thus merit in the Rule.
Accordingly, the Rule is made absolute, however, without any order as to costs.
The impugned proceeding initiated under e¢b ew- 4/j§pL/8(12) ®NËV Ju¡m ¢pl¡¢jLp/ A¢euj/¢hQ¡l/2013/1788d ated 06.08.2014 by the respondent No. 2 for alleged evasion of Value Added Tax (VAT) and supplementary duty by the petitioner during the period of 2011-2012 (Annexure-G) is hereby declared to have been issued without lawful authority and is of no legal effect.
Communicate the copy of this judgment and order forthwith.
Md. Iqbal Kabir, J:
I agree.
M.A.Hossain-B.O