Judgement on Finance Act, 2014

IN THE SUPREME COURT OF BANGLADESH

HIGH COURT DIVISION

(SPECIAL STATUTORY JURISDICTION)

VALUE ADDED TAX APPEAL NO. 76 OF 2015

IN THE MATTER OF:

An appeal under section 42(1)(Ga) of the Value

Added Tax Act, 1991

And

IN THE MATTER OF:

Kaniz Fatema

.......... Appellant

-Vs-

Customs, Excise and VAT Appellate Tribunal,

Dhaka and others

....... Respondents

Mr. Abu Md. Ziaul Haque, Advocate

........For the Appellant

Mr. Akhtar Farhad Zaman, D.A.G. with

Ms. Shadia Afrin Shapla, D.A.G with

Mr. Arif Khan, D.A.G. with

Mr. Sovan Mahmud, A.A.G. with

Mr. Md. Faridul Islam, A.A.G. with

Mr. Md. Nazmul Haque, A.A.G and

Mr. Md. Sarwar Alam Chowdhury, A.A.Gs

........ For the Respondents-Government.

Heard on 13.05.2026, 20.05.2026 &

Judgment on 08.06.2026

Present:

Mr. Justice S.M. Maniruzzaman

&

Mr. Justice Dihider Masum Kabir

Dihider Masum Kabir, J:

This Appeal, preferred under section 42(1)(Ga) of the Value Added

Tax Act, 1991 (in short, the Act, 1991), is directed against the order dated

25.05.2015 passed by respondent No. 1, the Customs, Excise and VAT

Appellate Tribunal, Dhaka (in short, the Tribunal), in Nathi No.

2

CEVT/Case(VAT)-126/2014/1332 dated 01.06.2015 dismissing the appeal

and thereby affirming the order passed by respondent No. 2, the

Commissioner, Customs, Excise & VAT (Appeal) Commissionerate,

Dhaka-1, Dhaka [in short, the Commissioner (Appeal)], in First Appeal

Order No. 16/MUSAK/Appeal/Dhaka-1/2014 dated 03.09.2014, which had

been preferred against the adjudication order dated 19.09.2013 passed by

respondent No. 4, the Assistant Commissioner, Customs, Excise & VAT,

Demra Division, Dhaka (in short, the AC).

Facts, relevant for the disposal of the instant appeal, in brief, are that

the appellant is the owner of a pick-up van bearing registration No. Dhaka

Metro Da-14-0318 which was rented out to one Mr. Anwar Hossain, a

member of the Dhaka District Truck Labour Union. The appellant has been

engaged solely in the business of renting out the pick-up van, without

involving herself in any other commercial activity.

In the course of business, on 11.09.2013, the appellant’s pick-up van

was transporting goods (S.M. flat bars) when it was intercepted by a

preventive team of the Demra Division. The driver of the vehicle was

asked to produce the MUSAK-11 challan (delivery invoice) for the loaded

goods. Upon inspection, the preventive team found the produced MUSAK-

11 to be deceptive and forged. Consequently, exercising powers under

section 26 of the Act, 1991, the preventive team seized the loaded goods

belonging to Bikrampur Satata Steel Corporation (in short, BSS

Corporation) valued of Tk.5,336/- along with the appellant’s pick-up van

under a MUSAK-5 seizure list.

3

Thereafter, the AC passed an adjudication order on 19.09.2013

against BSS Corporation, alleging that the goods were being transported

without the issuance of a MUSAK-11, in violation of sections 6, 31, and 32

of the Act, 1991, read with Rules 16, 22, and 23 of the Value Added Tax

Rules, 1991 (in short, the Rules, 1991). The AC determined the evaded

VAT to be Tk. 800/- on the goods valued at Tk. 5,336/-, imposed a penalty

of Tk. 800/- under section 37(2)(_)(A) of the Act, 1991 and confiscated the

goods in favor of the State. Furthermore, in a summary proceeding for the

release of the vehicle, the AC imposed a redemption fine (we‡gvPb Rwigvbv) of

Tk. 5,00,000/- in lieu of confiscation under section 41 of the Act, 1991 and

directed BSS Corporation to pay the said amount. However, while BSS

Corporation paid the evaded VAT of Tk. 800/- and the penalty of Tk. 800/,

it refrained from paying the redemption fine of Tk.5,00,000/-.

The appellant Kaniz Fatema as the owner of the pick-up van,

subsequently secured the release of her vehicle under protest by furnishing

Bank Guarantee No. 01/2013 dated 05.12.2013, issued by Uttara Bank

Limited, Johnson Road Branch, Dhaka, and preferred an appeal before the

Commissioner (Appeal) who dismissed the same by an order dated

03.09.2014.

Challenging the said appellate order, the appellant preferred a second

appeal before the Tribunal which was registered as CEVT/Case(VAT)-26/

2014. The Tribunal dismissed the appeal and thereby affirmed the order

dated 03.09.2014 passed by respondent No. 2, the Commissioner (Appeal).

4

Being aggrieved by and dissatisfied with the order passed by the

Tribunal, the appellant preferred the instant appeal before this Court under

section 42(1)(Ga) of the Act, 1991.

Mr. Abu Md. Ziaul Haque, the learned Advocate appearing on behalf

of the appellant submits that under section 40 of the Act, 1991, the AC is

empowered to adjudicate matters where the value of the goods or services

exceeds Tk.2,00,000/- but is less than Tk.5,00,000/-. However, in the

instant case, the total value of the goods (S.M. flat bars) is only Tk.5,336/-

which falls within the exclusive adjudicatory jurisdiction of a Revenue

Officer whose statutory limit is less than Tk.2,00,000/-. He contends that

the Tribunal erred in law by failing to consider that the matter was

adjudicated by the AC, an authority lacking jurisdiction, rendering the

original adjudication order is illegal and liable to be set aside.

Mr. Haque next submits that the provisions of section 37 of the Act,

1991 cannot be resorted to before a final demand is made under section

55(3) of the said Act. In the present case, the order was passed under

section 37(2) of the Act, 1991 without exhausting the mandatory procedure

laid down in section 55. The Tribunal, without considering this legal

aspect, erroneously dismissed the appeal; hence, the impugned order is

illegal and liable to be set aside.

The learned Advocate further submits that the Tribunal failed to

appreciate that the appellant is merely engaged in the rental business of her

pick-up van through a rental company. As such, the imposition of a penalty

upon the appellant is not backed by law, and consequently, the same is

illegal and liable to be set aside.

5

Mr. Haque finally argues that the action taken against the appellant

does not fall within the purview of section 38 of the Act, 1991, which deals

with circumstances attracting a redemption fine. In the instant case, a

redemption fine was imposed in lieu of the confiscation of both the goods

and the pick-up van, completely ignoring the provisions of section 41 of

the Act, 1991, which establish that a pick-up van is not "goods" upon

which VAT is applicable. Moreover, BSS Corporation is not the owner of

the pick-up van; the vehicle was merely hired. He emphasizes that sections

6, 31, and 32 of the Act, 1991, read with Rules 16, 22, and 23 of the Rules,

1991, apply exclusively to BSS Corporation and not to a rented pick-up

van transporting goods. Therefore, no question of violating the

aforementioned provisions arises on the part of the appellant.

Consequently, the confiscation of the vehicle and the subsequent

imposition of a redemption fine of Tk.5,00,000/- are completely

unauthorized by law. As such, respondent No. 1 erred in law in dismissing

the appeal, and the impugned order is illegal and liable to be set aside.

On the other hand, Mr. Akhtar Farhad Zaman, the learned Deputy

Attorney General appearing on behalf of the respondents (the Customs

Authority) submits that the pick-up van was confiscated on 11.09.2013

under section 39(2) of the Act, 1991, as the vehicle directly facilitated the

commission of the offense by transporting VAT evaded goods. He states

that on 19.09.2013, one Mr. Harun, appearing on behalf of BSS

Corporation, admitted to the offense and prayed for a summary proceeding

to release both the goods and the pick-up van. Thereafter, on the same date,

the AC adjudicated the matter, determining the evaded VAT to be Tk.800/-

6

and imposing a penalty of Tk. 800/- under section 37(2)(_)(A) of the Act,

1991. In the same order, the AC released the pick-up van by imposing a

redemption fine (we‡gvPb Rwigvbv) of Tk.5,00,000/- in lieu of confiscation

under section 41 of the Act, 1991, and directed BSS Corporation to pay the

said amount.

The learned Deputy Attorney General further submits that the

redemption fine of Tk.5,00,000/- was imposed upon BSS Corporation, and

not upon the owner of the pick-up van. He contends that at the time of the

adjudication, there was no hard and fast statutory rule governing the ratio

or cap for imposing a redemption fine. Consequently, he submits that there

is no illegality or procedural error in the impugned order and the appeal is

liable to be dismissed.

We have heard the learned Advocate for the appellant and the

learned Deputy Attorney General for the respondent-Government. We have

also perused the memo of appeal, the relevant materials on record

appended thereto, and carefully considered the applicable provisions of

law.

The cardinal issue requiring determination in the instant appeal is

whether, upon confiscating VAT-evaded goods (S.M. flat bars) as well as

the vehicle carrying them under section 26 of the Act, 1991 (under a

MUSAK-5 seizure list), the VAT authority is legally empowered to

confiscate the pick-up van and subsequently impose a redemption fine of

Tk.5,00,000/- while completely ignoring the fact that the vehicle was a

rented one owned by a third party, namely Kaniz Fatema, in view of the

provisions contained in sections 38, 39, and 41 of the Act, 1991.

7

Before delving into the core issue, it is apposite to examine section

38 of the Act, 1991, which is reproduced below for ready reference:

38| ev‡RqvßKiY- hw`-

(1) †Kvb wbeÜb‡hvM¨ e¨w³ wbewÜZ nIqvi c~‡e© †Kvb Ki‡hvM¨ cY¨ cÖ¯‘Z ev Drcv`b

K‡ib ev Ki‡hvM¨ c‡Y¨i e¨emv‡q wb‡qvwRZ nb, Zvnv nB‡j D³ cY¨

ev‡Rqv߇hvM¨ nB‡e; A_ev

(2) †Kvb wbewÜZ e¨w³-

(K) †Kvb Ki‡hvM¨ cY¨ PvjvbcÎ e¨wZ‡i‡K e¨emvq A½b nB‡Z AcmviY

K‡ib, ev

(KK) Pvjvbc‡Î cÖ`wk©Z Ki A_ev mswkó cY¨ ev †mevi Dci cÖ‡hvR¨ Ki

cwi‡kva e¨ZxZ cY¨ mieivn ev †mev c«`vb K‡ib; ev

(L) Ki‡hvM¨ GBiƒc †Kvb cY¨ PvjvbcÎ mn e¨emvq A½b nB‡Z AcmviY

K‡ib hvnvi MšÍe¨ ¯’vb ch©šÍ D³ PvjvbcÎ Dnvi mwnZ bv _v‡K, ev

(M) aviv 6 Gi Dc-aviv (4K) G ewY©Z weavb cÖwZcvj‡b e¨_© nb,

Zvnv nB‡j D³ cY¨ ev‡Rqv߇hvM¨ nB‡e Ges D³ wbewÜZ e¨w³, Zvnvi cÖwZwbwa ev

D³iƒc Kg©Kv‡Û mwnZ RwoZ †h †Kvb e¨w³‡K D³ c‡Y¨i Dci cÖ‡`q g~j¨ ms‡hvRb Ki

ev, †¶ÎgZ, g~j¨ ms‡hvRb Ki I m¤ú~iK ï‡éi Ab¨~b A‡a©K Ges Ab~aŸ© mgcwigvY A_©

cÖ`vb Kwi‡Z nB‡e|

On a plain reading of the configurations above, a vehicle

transporting goods does not fall within the direct penal criteria of section

38 of the Act, 1991. At best, the vehicle might be implicated collaterally

under the general mechanics of transportation tracking. However, in the

instant case, the driver of the pick-up van performed his duties by carrying

and producing the MUSAK-11 challan upon the demand of the VAT

authority, which was only subsequently found to be deceptive and forged.

A commercial driver is neither capable of verifying the genuineness of a

MUSAK-11 challan, nor does such verification fall within the scope of his

duties. His responsibility is limited to carrying the document during transit

and producing it before the VAT authority when intercepted. Furthermore,

8

section 38 provides that only the person actively involved in the evasion of

VAT and supplementary duty shall be personally liable to a monetary

penalty ranging from 50% to 100% of the evaded tax, as amended by the

Finance Act, 2012. Consequently, since the driver was not penalized, the

pick-up van itself cannot be independently confiscated by invoking section

38 of the Act, 1991.

We now turn our attention to section 39 of the Act, 1991, which

reads as follows:

39| ev‡Rqvwßi mxgv|-

(1) GB AvB‡bi Aaxb †Kvb cY¨ ev‡RqvßKiY ewj‡Z D³ cY¨ †h †gvo‡K cvIqv hvq

†mB †gvoK Ges Dnv‡Z c«vß mKj e¯‘I AšÍf©y³ nB‡e|

(2) GB AvB‡bi Aax‡b ev‡Rqv߇hvM¨ cY¨ cwien‡b e¨eüZ †h †Kvb c«Kvi hvbevnbI

ev‡Rqv߇hvM¨ nB‡e:

Z‡e kZ© _v‡K †h, GB Dc-avivi Aaxb ev‡Rqv߇hvM¨ hvbevnb AvUK Kiv nB‡j wewa‡Z

DwjøwLZ Kg©KZ©v Dnvi Ges Dnv‡Z cwienbK…Z c‡Y¨i b¨vq wbY©qb Awb®úbœ _vKv Ae¯’vq

(Pending adjudication), wewaØviv wba©vwiZ c×wZ‡Z AšÍeZ©xKvjxb Qvo c«`vb

Kwi‡Z cvwi‡eb|

(3) †h †Kvb Rjhv‡bi ev‡RqvßKiY ewj‡Z Dnvi U¨vKj, mvRm¾v I AvmevecÎI

AšÍf©y³ nB‡e|

A close examination of section 39 reveals two primary legislative

schemes: firstly, under sub-section (1), goods and their packaging are

legally treated as a single unit since packaging is essential for the transport

and preservation of commodities; secondly, under sub-section (2), any

transport used for carrying goods liable to confiscation shall also be liable

to confiscation. Under general legal jurisprudence, an active instrument

that facilitates an offense is held vulnerable to state action alongside the

principal offender. However, to prevent economic stagnation or severe

financial loss to innocent transport owners while the formal adjudication is

9

pending, the proviso to sub-section (2) explicitly allows for the interim

release of the vehicle. In the instant case, the confiscated pick-up van was

released to the appellant under protest duly fulfilling the requirements

including documents regarding ownership of the pick-up van and upon

furnishing Bank Guarantee No. 01/2013 dated 05.12.2013. From these

provisions, we find that the VAT authority does possess the initial statutory

power to seize the transporting vehicle alongside the tax-evaded goods.

However, the core controversy arises from section 41 of the Act,

1991 under which the AC imposed the excessive redemption fine of

Tk.5,00,000/-. The section is reproduced below for ready reference;

41| ev‡Rqvwßi cwie‡Z© Rwigvbv Av‡ivc|

hLb GB AvBb ev wewa Abyhvqx †Kvb cY¨ ev‡Rqvwßi wm×všÍ M«nY Kiv nq, ZLb

b¨vq-wbY©qbKvix Kg©KZ©v c‡Y¨i gvwjK‡K ev‡Rqvwßi weKí wnmv‡e D³ c‡Y¨i Dci

cÖ‡q Ki, Ab¨vb¨ miKvix cvIbv, A_©Û Ges D³ Kg©KZ©vi we‡ePbvq Dchy³ Rwigvbv

cÖvbc~e©K D³ cY¨ we‡gvP‡bi my‡hvM w‡Z cvwi‡eb:

Z‡e kZ© _v‡K †h, †Kvb AvBb Øviv ev Dnvi Aax‡b †h c‡Y¨i Avg`vwb wbwl×

Kiv nBqv‡Q †mB c‡Y¨i †¶‡Î GB avivi †Kvb wKQy c«‡hvR¨ nB‡e bv|

It is clear from this provision that once an offense is proved upon

adjudication, the law mandates the confiscation of the offending goods,

making them government property. Normally, the state auctions such

goods to recover revenue. However, section 41 provides an equitable

alternative: it allows the owner to reclaim the property by paying a

redemption fine in lieu of absolute forfeiture. Originally, the text granted

the adjudicating officer wide, unguided discretionary powers to impose

whatever amount they deemed "appropriate" ("Dchy³ Rwigvbv"). Adjudicating

officers typically calculated this by looking at the market value of the

10

vehicle or goods rather than the quantum of tax evaded, leading to grossly

disproportionate and inconsistent results.

The provisions and benefits of this section shall not apply to any

goods the import of which is prohibited or restricted by or under any

other law of the country.

To curb this absolute and arbitrary discretion, the Legislature

subsequently stepped in through section 63 of the Finance Act, 2014

(effective from July 2014), substituting the vague words “Dchy³ Rwigvbv

cÖ`vbc~e©K“ with the restrictive clause ‘‘dvuwKK…Z K‡ii me©wbgœ GK PZy_©vsk nB‡Z

m‡e©v”P Aa©vsk ch©šÍ Rwigvbv Av‡ivcYc~e©K’ (By imposing a fine ranging from a

minimum of one-fourth to a maximum of one-half of the evaded tax). The

redemption fine was thus statutorily pegged directly to the volume of the

evaded tax, eliminating asset-value-based profiteering by the department.

A combined reading of sections 38, 39, and 41 of the Act, 1991,

alongside the facts and circumstances of this case, reveals that the driver

committed no independent infraction, and the vehicle owner was an

innocent third-party lessor. The actual VAT evasion of Tk. 800/- was

committed exclusively by BSS corporation for the goods i.e. M.S. flat bars

which are not contraband items. The adjudicating officer widely abused his

discretionary powers under section 41 by imposing an illogical redemption

fine of Tk.5,00,000/-. He fundamentally ignored the facts that the pick-up

van was merely hired, that a transport vehicle is not an item on which VAT

is independently assessable, and that the total value of the underlying VAT

evaded goods was of Tk. 5,336/-, with an evaded VAT amount of only Tk.

800/-. The goods in question, namely S.M. flat bars, are generally

11

merchantable and industrial raw materials, which do not fall under any

list of prohibited, restricted, or contraband goods under any law for the

time being in force in the country. Since respondent No. 4 did not and

could not assess VAT upon the vehicle itself, the value of the pick-up van

could not legally be used as a measure or yardstick for calculating a

redemption fine.

The Tribunal passed its order on 25.05.2015, mechanically

dismissing the appeal and affirming the orders of the lower authorities.

Both lower appellate forums completely failed to apply their judicial

minds. While the Tribunal is the final arbiter of facts and is fully competent

to decide questions of both fact and law, it entirely ignored the patent

disproportion and the shifting legal landscape. Furthermore, the first

appellate order passed by the Commissioner (Appeal) is highly

unsatisfactory as it completely bypassed the clear legislative intent to curb

arbitrary penalties.

In view of the facts and circumstances of the case, we are of the

opinion that the redemption fine should be aligned with the rationalized

standard deemed reasonable by the Legislature and subsequently codified

in the Finance Act, 2014. Accordingly, the redemption fine is reassessed

and fixed at 50% of the actual evaded VAT amount, which computes to

Tk.400/- (four hundred) only, in place of the astronomical Tk. 5,00,000/-.

For the reasons and discussions set forth above, we hold that the

VAT authority acted in excess of its lawful scope and authority.

Consequently, we find merit in this appeal.

Accordingly, the appeal is allowed.

12

There shall be no order as to costs.

The impugned order dated 25.05.2015 passed by respondent No. 1,

the Customs, Excise and VAT Appellate Tribunal, Dhaka, in Nathi No.

CEVT/Case(VAT)-126/2014/1332, affirming the order dated 03.09.2014

passed by respondent No. 2, the Commissioner, Customs, Excise & VAT

(Appeal Commissionerate), Dhaka-1, is hereby set aside. The original

adjudication order dated 19.09.2013 passed by respondent No. 4, the

Assistant Commissioner, Customs, Excise & VAT, Demra Division,

Dhaka, stands modified to the extent indicated above.

The concerned respondent is wrapped with a mandatory direction to

return the Bank Guarantee No. 01/2013 dated 05.12.2013 issued by Uttara

Bank Limited, Johnson Road Branch, Dhaka to the appellant within a

period of 30 (thirty) days from the date of receipt of a copy of this

judgment and order, after deducting the modified fine of Tk. 400/-, if not

already realized.

Send down the Lower Court’s Records (LCR) at once.

Let this judgment and order be communicated to the concerned

respondents immediately.

S.M. Maniruzzaman, J:

I agree.