ORAM LIMITED Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) This Rule Nisi was issued calling upon the respondent to show cause as to why the impugned decisions and demand contained in letter dated 7-7-97 and 14-7-1997 (Annexures-C and C-1) and also in letter dated 11- 4-2000 (Annexure-H) should not be declared to have been made without lawful authority and is of no legal effect and/or pass such other or further order or orders as to this court may seem fit and proper.

(2.) In the writ application it has been stated, inter alia, that the petitioner a private Limited Company is engaged in the business of Manufacturing Mosquito Coil under the contracts of manufacture signed between the petitioner and the brand owners of the products namely Reckitt and Colman Bangladesh Limited, as well as for it self. The petitioner is also registered as manufacturer under the relevant provision of the Value Added Tax (VAT) Act, 1991 and is doing business on regular payment of VAT as required under and in compliance with the provisions of VAT Act 1991 and the VAT Rules 1991, both of which were enacted in the year 1991. For the purpose of assessing and paying VAT the petitioner in 1991 submitted declaration on the basis of price as required by Rule 3(1) of the VAT rules 1991 in respect of 2 (Two) brands of the Mosquito Coils manufactured by it under the contract of manufacture signed with the respective brand owners namely Mortein Mosquito Coil of Reckitt and Colman BD Ltd. and Flyban Mosquito Coil of Flyban Insecticides Ltd. as well as, in respect of its own brand namely Sunflower Mosquito Coil and had been regularly assessing and paying VAT on the basis of the price thus declared by the petitioner in 1991 as per Rule 3(1) of the VAT Rules, 1991. Rule 3(2) of the VAT Rules, 1991 permits the registered person in this case the petitioner to submit a new declaration on the basis of the price if the registered person (not the authority) considers it necessary to change the basis of the price declared by it as per rule 3(1) of the VAT Rules 1991 and to pay VAT on the basis of the price newly declared by the registered person. Rule 3(2) does neither authorise the VAT authority to revise the price declared nor require any approval of the VAT authority in respect of the price declared or amended by the registered person as per Sub-rule (2) of Rule 3, but the said Rule 3(2) only casts upon the VAT authority a clear duty to immediately communicate the newly declared price to the circle superintendent and the computer cell of the Commissioners office. As permitted by Rule 3(2) of the VAT Rules, 1991, the petitioner considered it necessary to submit new declaration on the basis of the price of aforesaid 3(three) brands of Mosquito Coils, and accordingly submitted new declaration on the basis of price in Form Mushak 1 on 11-4-1994 along with cost analysis, and have been regularly assessing and paying VAT on basis of the price thus declared on 11-4-1994. There was no need to change the basis of the price declared on 11-4-1994 until June 1997, hence the petitioner has been regularly paying VAT and the authority was also accepting VAT on account of aforesaid 3(three) brands of mosquito coils since 11-4-1994 to 30th June 1997 on the basis of the price declared on 11-4-1994 as per Rule 3(2) of the VAT Rules, 1991. The VAT authority makes inspection and audit from time to time through their own audit team and they also raised no objection about the basis of the price declared and maintained since 11-4-1994 to June 1997. The petitioner needed to declare a new basis of price and accordingly stated new price in form Mushak-1 on 9-6-1997 as per provisions of Rules 3(2) of the VAT Rules, in respect of the aforesaid 3(three) brands of Mosquito Coils namely, Mortein, Flyban and Sunflower and submitted the same on 1-7-1997 along with separate cost analysis for each product enclosed with their letter under Ref Oli/Ka/Mushak/97(1) dated 29-6-1997 addressed to the Assistant Commissioner, Customs Excise and VAT Division, Mymensingh. The price declared on 11-4-1994 and the new prices submitted on 1-7-1997 were as follows: Name of the brands (per carton of 600 pieces) Price declared on 14-4-1994 New price declared as per Rule 3(2) and submitted on 1-7-1997.

(3.) Sunflower Taka 417.39 Taka 417.39 VAT is to be paid by the petitioner as per the price declared by it as provided in Rule 3(2). After receiving the declaration of price on 1-7-1997 the Respondent No.3 by his letter under Ref Nathi No.4-A(218) VAT/Misc/94/p-1 3632 dated 7-7-97 refixed the price at Taka 678.00 in place of the price declared at Taka 547.83 on account of Mortein Taka 869.00 in place of the price declared at Takas 573.91 on account of Flyban and Taka 540.0 place of the price declared at Taka 417.39 on account of Sunflower and given effect to the price thus refixed by him from August 1995 on the alleged basis of the price approved in August 1995 for ARS and Cock brand Mosquito Coil of the other manufacturer of Gazipur area in purported exercise of power under Rule 3(2) of the VAT Rules 1991. The respondent No.3 again issued another letter under Ref 4-A(1)22 Mosquito Coil/VAT/93/3719 dated 14-7-1997 alleging that the price per carton (600 pieces) Taka 442.10 of Mortein, Taka 469.56 Flyban and Taka 417.39 as declared by the petitioner and approved on 11-4-1994 by the VAT authority were inconsistent compared to the price of Globe and Cock brand Mosquito Coils manufactured within Gazipur Jurisdiction and that the basis of price of the Mosquito Coils of the petitioner should be the price as fixed in respect of ARS and Cock brand mosquito Coils with effect from August 1995 and accordingly directed the petitioner to pay VAT amounting Taka 1,14,688.70 alleged to be paid less due to the price fixed by it with effect from August, 1995 to May, 1997. In fixing a price higher than that declared on 1-7-1997 retrospectively from August 1995 by issuing the letter dated 7-7-1997 and 14-7-1997 (Annexure C) and C (1) the respondents No. 3 has exercised a jurisdiction not vested in him by Rule 3(3) of the VAT Rules 1991 which does not authorise fixing basis of price from a date previous to the date of declaration. By issuing aforesaid two letters dated 7-7-1997 and 14-7-1997 fixing price basis with effect from August, 1995 the Respondent No.3 has clearly exceeded the authority vested in him under Rule 3(3) of the VAT Rules, 1991 which permits to fix the price basis only from the date of declaration of price, which was 1-7-1997 in this case, but not retrospectively. In issuing his letters dated 7-7-1997 and 14-7-1997 the respondent No.3 has disregarded the fact that admittedly he received declaration of price on 1-7-1997 and that he has no legal authority to fix price prior to the date of declaration i.e. 1-7-1997 and that the direction dated 14-7-1997 given after 10(Ten) working days from the date of declaration of price given on 11-4-1994 and also from the date of declaration of price given on 1-7-1997 was in clear violation of the proviso to Rule 3(3) as incorporated by SRO No.133- Ain/95/150/VAT dated 12-6-1997 and that no declaration being given by the petitioner on August 1995, the Respondent No.3 had no authority to fix any basis of price with effect from August 1995 in purported exercise of power under Rule 3(3) of the VAT Rule. The Respondent No. 3 has also disregarded the cost analysis dated 29-6-1997 submitted on 1-7-1997 as well as he could not assign any reason as to why he should not agree with the cost analysis submitted on 1-7-1997. The Respondent issued the impugned letters without hearing the petitioner as required by Rule 3(3) of the VAT Rules, 1991. The decision of the Respondent No.3 as communicated in his letter dated 7-7-1997 and 14-7-1997 in fixing price from August 1995 is a colourable exercise of power, unreasonable, for collateral purpose, malice in law, based on extraneous consideration. Against the aforesaid decision dated 7-7-1997 of the Respondent No.3 the petitioner filed an application to the Commissioner on 10-7-1997 stating that fixation of price by the Respondent No.3 above the rate at which the commodities are sold by the petitioner its buyer was baseless.