Section 55 Of The VAT Act
Audit Directorate Not To Peep Into Authority
(From previous issue) :
21. In Sekandar Spinning Mills Ltd. Vs Commissioner, Customs Excise and VAT reported in 63 DLR 272 while resolving the issue as to issuing demand notice without initiating process under Section 55 of the Act but pursuant to the request of the Local and Revenue Audit Directorate, it was observed, inter-alia, by one of the Benches of this Division:
"-----The law provides that the VAT authority ought to have issued notice under Section 55(1) of the Act on account of any discrepancy for paying VAT by any company or person who is registered under VAT authority. Without complying with the procedure as laid down under Section 55 of the VAT Act issued the demand notice is not sustainable in law-- The law does not provide that the respondent VAT authority can issue any demand notice on the request of the audit team but it is their absolute power in case of any discrepancy found, it may initiate proceeding under Section 55 of the Act. But in the instant case the VAT authority did not follow the said procedure--
22. Similar observations have been followed in Bombay Sweets and Co. Ltd. Vs National Board of Revenue in writ petition No. 9441 of 2007. However, in Singer Bangladesh Ltd. Vs National Board of Revenue and others (supra) while resolving the issue based on three categories of notices; firstly the notices in which direct demand of revenue was made from the petitioner by the VAT authority at the instance of the Local and Revenue Audit Directorate; secondly, the notices in which the demand of documents and papers was made from the petitioner by the VAT authority as directed by the said Directorate and thirdly, the notices so issued by the respondent VAT authority under Section 55(1) of the VAT, Act, 1991 under the direction of the said Directorate, it has been observed, inter alia,-
"----------------Local and Revenue Audit Directorate (Â¯'à¦¾à¦¨à§€à§Ÿ à¦“ à¦°à¦¾à¦œà¦¸à§à¦¬ à¦…à¦¡à¦¿à¦Ÿ à¦…à¦§à¦¿à¦¦à¦ªà§à¦¤à¦°) is internally set up by and under the authority of Comptroller -and Auditor General for the Purpose of conducting audit as required under Article 128 of the Constitution and any other law, if so prescribed. As already discussed that the Local Audit Directorate can authoritatively look into the papers and documents of the NBR and do the needful to ascertain whether the things are in the right direction or not. Deviation of any kind if could be ascertained-by the audit department in the process, the statutory public body (like NBR) would certainly account for that. On the other, hand the respondent VAT authority pursuant to the Memo issued by the Audit Office issued the impugned Memos. But as it has been stated above, no provision of the said Act of 1991 empowers the VAT authority to direct the petitioner as a VAT registered person to deliver any documents or records directly to any third party authority, i.e. Local and Revenue Audit Directorate. Neither a notice can be issued either directing and deposit of revenue or under Section. 55(1) of VAT Act on that count -
The VAT authority cannot issue any notice of a kind making a demand on behalf or at the behest of the Local Audit Directorate. The notices shall have to be issued independently following the provisions laid down in the VAT Act, 1991. In all the cases where there is a direct demand for depositing the amount or asking for documents or even merely a notice served under Section 55(1) of the VAT Act if found to be tainted being done under express direction of Local Audit Directorate, or so to say issued under the flagrant direction of Local Audit Directorate, cannot legally sustain having curtailing effect on the provisions of Constitution and the VAT Act of 1991."
23. The issue in question has now been put to rest by giving observations and findings by the Appellate Division in the case of National Board of Revenue Vs Otobi Limited along with 20 other Civil Petitions in Civil Petition for Leave to Appeal Nos. 3397-3422 of 2015 and Civil Petition for Leave to Appeal No. 703 of 2016 while resolving the contention raised by the petitioner as to whether the Comptroller and Auditor-General has power to examine the records of the importers and other business house despite payment of duties and VAT. Said observations are quoted herein below:-
"-----if the audit department finds irregularities in the assessment of VAT and other duties, it shall ask the Board of Revenue to supply the relevant documents of the VAT payers and the Board of Revenue shall hand over the documents to the audit department. The assesses are not under obligation to furnish documents directly to the Comptroller and Auditor General. The documents shall be furnished through the Board of Revenue. The accounts department cannot ask any business organisations or persons to submit documents for the purpose of accounting for ascertaining as to whether they paid VAT in accordance with lawâ€™
24. However, while making the said observations the Appellate Division has expunged the following lines of observations so made by the High Court Division in Singer Bangladesh Ltd. Vs National Board of Revenue and others (supra):
"-----The irresistible conclusion is that for any practical purpose whatsoever, the office of Comptrollers and Auditor General so to say Local Audit Directorate in particular shall not peep into the domain of the VAT authority in such manner as it has happened in the cases in hand----------"
25. In agreement with the above observations the indisputable conclusion is that 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 objection. Rather, keeping in view of the report, if any, submitted by the said Directorate the VAT authority exercising its own independent discretionary power is empowered to ask the incumbent concern to supply records/documents in connection with the respective assessment year(s) or to issue notice making demand under the Act following the procedures as enumerated therein. However, it has no jurisdiction whatsoever to ask for supply of documents or to issue notice for making demand under the said Act of 1991 pursuant to the objection being raised by the Local and Revenue Audit Directorate.
26. In view of the above observations and findings making a demand by the respondent concern to the petitioner bank, vide the respective orders dated 13-7-2010 (Annexure-C) and dated 26-7-2010 (Annexure-C-1) respectively on the alleged evasion of payment of VAT as well as for not adjusting VAT at source, pursuant to the objection raised by the Local and Revenue Audit Directorate, is without jurisdiction. In that view of the matter, the alternative forum as provided under Section 42 of the Act of 1991 is not a bar in invoking forum as provided under Article 102 of the Constitution of the People's Republic of Bangladesh.
27. In the result, the Rule is made absolute.
28. The impugned order under Nothi No. 8/LTU/(g~mK)142/Â¯'vbxq I ivRÂ¯^ AwWU/2006-2007/ eÂªvK eÂ¨vsK wjt/mvâ€¡KÂ©j-3/09/3642 dated 13-7-2010 and order under Nothi No. 8/LTU/(g~mK)142/Â¯'vbxq I ivRÂ¯^ AwWU/ 2006-2007/eÂªvK eÂ¨vsK wjt/mvâ€¡KÂ©j-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) respectively from the petitioner, are hereby declared to have been passed without lawful authority and hence, of no legal effect.
29. However, in view of the report of the Directorate concern the respondents concern are at liberty to initiate process against the petitioner exercising its own independent discretion, but in accordance with law.
30. Office is directed to communicate the judgment and order to the Chairman, National Board of Revenue, Director General, Local and Revenue Audit Directorate and the Commissioner, Customs, Excise and VAT, Large Tax Payer Unit (VAT) for taking necessary steps in view of the observations and findings given hereinabove.
There will be no order as to costs.