Section 55 Of The VAT Act
Audit Directorate Not To Peep Into Authority
High Court Division :
(Special Original Jurisdiction)
Farah Mahbub J
SM Maniruzzaman J
BRAC Bank Limited ... .................
National Board of Revenue and othersâ€¦â€¦.â€¦â€¦â€¦Respondents
November 7th, 2018
Constitution of Bangladesh, 1972
Articles 128 and 132
The cardinal duties and functions of the office of the Comptroller and Auditor-General are to maintaining, competing and checking the accounts of the Republic and such other public offices, as may be prescribed by an Act of Parliamentâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦. (20)
Value Added Tax Act (XXll of 1991)
Section 55(1) (3)
Within the frame work of VAT Act and the Rules so framed thereunder the Local and Revenue Audit Directorate has no authority to give direction upon the VAT authority to make direct demand of VAT, or to supply documents for any particular assessment year or to issue notice under the Act of 1991 for making demand pursuant to its objectionâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦(25)
Singer Bangladesh Ltd. Vs National Board of Revenue, 67 DLR 73 and Sekandar Spinning Mills Ltd. Vs Commissioner, Customs Excise and VAT,63 DLR 272 ref.
A M Aminuddin, Senior Advocate with Munshi Moniruzzaman Advocate-For the Petitioner.
Samarendra Nath Biswas DAG with Khairunnesa AAG with Shamsuddoha Talukder AAG with Abul Kalam Khan Daud AAG-For the Respondents-Government.
Farah Mahbub J : In this Rule, 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 impugned order under Nothi No. à§®/à¦–à¦žà¦Ÿ/( à¦®à§‚à¦¸à¦•) à§§à§ªà§¨/Â¯'à¦¾à¦¨à§€à§Ÿ à¦“ à¦°à¦¾à¦œà¦¸à§à¦¬ à¦…à¦¡à¦¿à¦Ÿ/à§¨à§¦à§¦à§¬-à§¨à§¦à§¦à§/à¦¬à§à¦°à¦¾à¦• à¦¬à§à¦¯à¦¾à¦‚à¦• à¦²à¦¿à¦ƒ/à¦¸à¦¾à¦°à§à¦•à§‡à¦²-3/09/3642 dated 13-7-2010 and order under Nothi No.à§®/à¦–à¦žà¦Ÿ/(à¦®à§‚à¦¸à¦•)à§§à§ªà§¨/Â¯'à¦¾à¦¨à§€à§Ÿ à¦“ à¦°à¦¾à¦œà¦¸à§à¦¬ à¦…à¦¡à¦¿à¦Ÿ/à§¨à§¦à§¦à§¬-à§¨à§¦à§¦à§/à¦¬à§à¦°à¦¾à¦• à¦¬à§à¦¯à¦¾à¦‚à¦• à¦²à¦¿à¦ƒ/à¦¸à¦¾à¦°à§à¦•à§‡à¦²-3/09/3838 dated 26-7-2010 (Annexure-C and C-1 respectively) passed by the respondent No.3 demanding Taka 3,78,99,240 (Taka three crore seventy eight lac ninety nine thousand two hundred and forty) only and Taka 1,72,65,838 (Taka one crore seventy two lac sixty five thousand eight hundred and thirty eight) only respectively from the petitioner in violation of Article 128 of the Constitution of the People's Republic of Bangladesh should not be declared to have been passed without lawful authority and hence, of no legal effect.
2. At the time of issuance of the Rule operation of the respective impugned orders dated 13-7-2010 and 26-7-2010 (Annexure-C and C-1 respectively) were stayed by this Court for a prescribed period.
3. Facts, in brief, are that the petitioner is a public limited company incorporated under the Companies Act, 1994. In order to do banking business it obtained license from Bangladesh Bank in compliance of all necessary formalities, as required by law. Accordingly, it started its banking business in the year, 2001.
Since then it has extended its respective services to the customers/clients throughout the country which includes different types of services namely merchant banking, syndication of loans, issuance of bank guarantees, investment in business and industries and other activities, as permitted by Bangladesh Bank.
4. The petitioner company has registered its name with the VAT Authority for the purpose of payment of VAT and that it is running its business on regular payment of VAT as required under the Value Added Tax Act, 1991 (in short, the Act) and the Value Added Tax Rules,1991 (in short, the Rules).
5. It has been stated that the Local and Revenue Audit Directorate (in short, the Directorate), the respondent No.5 audited the business activities of the petitioner for the financial year 2006-2007 and accordingly, it was detected that the petitioner alleged to have evaded VAT to the tune of Taka 3,78,99, 240.00 and 1,72,65,838 respectively. Accordingly, vide office letter dated 7-1-2009 the respondent No.2 was asked to realise the said amount from the petitioner.
6. Pursuant thereto the Deputy Commissioner, Large Tax Payer Unit (VAT), Dhaka, respondent No.3 issued 2 (two) separate notices upon the petitioner both dated 19-4-2009 (Annexure-A and A-I respectively) stating, inter alia,
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Accordingly, the respondent No.3 posed request to the petitioner to give reply thereto; in default, to deposit the said amount in the government treasury within 15 (fifteen) days of receipt thereof. The petitioner duly gave reply thereto on 2-8-2009 (Annexure-B and B-1 respectively) controverting the assertions so made therein.
7. Without considering the contentions of the petitioner the said respondent passed the impugned orders on 13-7-2010 and 26-7-2010 demanding a sum of Taka 3,78,99,240 and Taka 1,72,65,838 respectively under Section 55 of the VAT Act, 1991 with direction to deposit the said amount in the government treasury through chalan or to adjust the same from its current account register (Annexure-C - and C-l respectively).
8. Later, vide two office letters both dated 22-12-2010 the Divisional Officer, Large Tax Payer Unit (VAT) again requested the petitioner to deposit the said amount within 10 (ten) days of receipt thereof (Annexure-D and D-1 respectively). In response thereto the, petitioner filed an application on 10-5-2011 before the respondent No.4 with request to submit 2(two) copies of demand notice against commission income and expense, as raised by the Directorate concern (Annexure-E).
9. Subsequently, the respondent No.3 issued the respective notices on 2-1-2012, also on 11-1-2012 (Annexure-F, F-1 and G, G-1 respectively) upon the petitioner under Section 56 of the Act, 1991 read with Rule 43 of the Rules, 1991 towards realisation of the amount in question.
10. Being aggrieved by and dissatisfied with the petitioner has preferred the instant application and obtained the present Rule Nisi along with an order of stay.
11. Mr AM Aminuddin, the learned Senior Advocate appearing with Mr Munshi Monir-uz-zaman, the learned Advocate for the petitioner submits that Article 128 of the Constitution of the People's Republic of Bangladesh has authorized the Local and Revenue Audit Directorate to conduct audit of the public accounts of the Republic, all courts of law, all authorities and offices of the Government, but it does not appear to have authorized them to audit the activities of any private individual or institution like the petitioner. Moreover, he goes to argue that within the frame work of the said Act, 1991 or the Rules so made there under there is no provision whatsoever authorising any authority including the said Directorate to audit the activities of the Petitioner. Accordingly, he submits that since there is no provision for audit by the Directorate, as has been done in the present case as such, making demand under Section 55 of the Act, 1991 by the respondent No.3 pursuant to the objection being raised by the Local and Revenue Audit Directorate is absolutely without jurisdiction. In that view of the matter the alternative remedy as provided under the said Act, 1991 cannot be a bar in invoking jurisdiction as provided under Article 102 of the Constitution. In support he has referred the decision of the case of Singer Bangladesh Ltd. vs National Board of Revenue reported in 67 DLR 73.
12. Countering the said submission of the petitioner, Most. Khairunnesa, the learned Assistant Attorney General appearing on behalf of the respondent government referring to the observations and findings so given by the Appellate Division in CPLA Nos. 3397-3422 of 2015 and 708 of 2016 in the case of National Board of Revenue vs Otobi Ltd. along with 20 other civil petitions submits that the Comptroller and Auditor-General has power to examine the records of the importer and other business house despite payment of duties and VAT and that it shall ask the National Board of Revenue to look into the alleged evasion of VAT. The Board of Revenue may initiate process to that effect exercising its independent discretion and power as provided under the said Act and the Rules so framed thereunder. In other words, she submits there has to be a check and balance between the respective institutions in order to ensure that no one can evade payment of VAT, which it is required to pay within the fold of law; hence, raising objection thereto and giving direction upon the respondent No.2 to take necessary steps to that effect cannot be declared unlawful. She lastly submits that this Rule must fail, for, the petitioner had alternative forum as provided under the VAT Act to agitate its grievances and as such, it is liable to be discharged.
13. Admittedly, raising objection on making less payment of VAT by the petitioner company to the tune of Taka 3,78,99,240 for the year 2006-2007 the Local and Revenue Audit Directorate sent a report to the authority concern of Large, Tax Payer Unit (VAT) to take necessary steps to that effect-
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Pursuant thereto the petitioner was asked to give reply with supporting documents under Nothi No. 8/LTU/(g~mK)61/Â¯'vbxq I ivRÂ¯^ AwWU/2006-2007/08/2807 dated 13-7-2008 and Nothi No. 941 dated 8-2-2009. Its reply being not satisfactory it was given show cause notice as to why a demand should not be made over the said amount under Nothi No. 8/à¦–à¦žà¦Ÿ/(à¦®à§‚à¦¸à¦•)à§¬à§§/Â¯'à¦¾à¦¨à§€à§Ÿ à¦“ à¦°à¦¾à¦œà¦¸à§à¦¬ à¦…à¦¡à¦¿à¦Ÿ/à§¨à§¦à§¦à§¬-à§¨à§¦à§¦à§/à¦¬à§à¦°à¦¾à¦• à¦¬à§à¦¯à¦¾à¦‚à¦•/mvs-3/09/2078 dated 19-4-2009 (Annexure-A to the writ petition).
14. Again, on the objection being raised by the said Directorate on the count of not adjusting VAT at source for the year 2006-2007 to the tune of Taka 1,72,65,838 the petitioner was asked to give reply. The reply submitted by the petitioner being not satisfactory another show cause notice was served upon it under Nothi No. 8/LTU/(g~mK) 61/Â¯'à¦¾à¦¨à§€à§Ÿ à¦“ à¦°à¦¾à¦œà¦¸à§à¦¬ à¦…à¦¡à¦¿à¦Ÿ/2006-2007/08/2077 dated 19-4-2009 (Annexure-A-1). Ultimately, vide separate orders both dated 13-7-2010 final demand was made by the respondent No.3 under Section 55(3) of the Act of 1991(Annexure-C and C (1) respectively).
15. The moot contention of the petitioner is that whether the respondent No. 3 can initiate process for making demand under Section 55(1) of the Act and ultimately, make a final demand under Section 55(3) of the Act 1991 pursuant to the objection being raised by the Local and Revenue Audit Directorate.
16. No doubt, the functions of the Comptroller and Auditor General pertains to audit of the public accounts of the Republic and of all courts of law and all authorities and offices of the government.
17. In this regard, Article 128 of the Constitution is relevant to look at, which runs thus:
"128. (1) The public accounts of the Republic and of all courts of law and all authorities and officers of the Government shall be audited and reported on by the Auditor-General and for that purpose he or any person authorised by him in that behalf shall have access to all records, books, vouchers, documents, cash, stamps, securities, stores or other government property in the possession of any person in the service of the Republic.
(2) Without prejudice to the provisions of clause (I), if it is prescribed by law in the case of anybody corporate directly established by law, the accounts of that body corporate shall be audited and reported on by such person as may be so prescribed.
(3) Parliament may by law require the Auditor-General to exercise such functions, in addition to those specified in clause (I), as such law may prescribe, and until provision is made by law under this clause the President may, by order, make such provision.
(4) The Auditor-General, in exercise of his functions under Clause (I), shall not be subject to the direction or control of any other person or authority."
18. However, vide Article 131 of the Constitution with the approval of the President of the Republic he is to prescribe the form and manner in which the public accounts shall be kept. Article 131 provides as under-
"131. The public accounts of the Republic shall be kept in such form and in such manner as the Auditor-General may, with the approval of the President, prescribe.
19. In addition to that; he is required to prepare annual report relating to the public accounts of the Republic in order to submit before the President, who in turn shall cause them to be laid before the Parliament. Article 132 of the Constitution is quoted below-
"132. The reports of the Auditor General relating to the public accounts of the Republic shall be submitted to the President, who shall cause them to be laid before Parliament.
20. As appears from the above, the cardinal duties and functions of the office of the Comptroller and Auditor-General are to maintaining, competing and checking the accounts of the Republic and such other public offices, as may be prescribed by an Act of Parliament. However, while discharging the said functions said office has the authority to have access to all records/documents lying in possession of any person in the service of the Republic or body corporate established by law in order to find out that matters relating to accounts are being dealt with in accordance with law. To that effect, said office is also empowered to make report on the loopholes, if any. In that case, the respective public office, in the present case the National Board of Revenue, exercising its own independent discretionary power as provided in the statute shall look into the matter and take necessary steps in compliance of the provisions as provided under the respective statute to mend the said irregularities or illegalities, as the case may be In addition, it also has the duty to prescribe the form and manner in which those public accounts shall be kept but obviously with the approval of the President. However, within the four comers of the VAT Act and or the Rules so framed thereunder the legislature does not appear to have empowered the said office to direct the VAT authority to make a direct demand of VAT or demand of supply of documents and papers or issue notice of demand under Section 55(1) of the Act, in connection with the objection being raised by it, as has also been observed by one of the Benches of this Division in Singer Bangladesh Ltd. vs National Board of Revenue reported in 67 DLR 73.
(To be continued)