The High Court said on Monday that S Alam Vegetable Oil Ltd and S Alam Super Edible Oil Ltd must pay unpaid Tk 3, 538 crore Value Added Tax that they evaded in three tax years between 2019 and 2022.

The bench of Justice Zafar Ahmed and Justice Sardar Md Rashed Jahangir said this when deputy attorney general Samarendra Nath Biswas told the court that the companies would not pay the unpaid VAT if their writ petition was entertained.

The court, however, issued a rule asking the National Board of Revenue to explain in 10 days why its notice on June 9 asking the firms to pay the VAT would not be declared illegal.

The court also set July 15 for a further hearing of the writ petition.

The DAG told reporters that there would be no ban on the NBR collecting the unpaid VAT from the companies as the High Court refused to stay on the realisaiton of the demand.

The companies’ lawyer, Ahsanul Karim, told the court that the revenue board demanded the VAT without exhausting the legal process relating to their objection, the appeal against the demand.

DAG Samarendra Nath Biswas told the court that the revenue board gave the companies three deadlines to submit their replies.

According to an audit carried out by the NBR’s VAT wing, S Alam Vegetable Oil Ltd and S Alam Super Edible Oil Ltd have unpaid VAT and a consequent penalty worth over Tk 7,000 crore, as they allegedly evaded VAT through various means, including by presenting lower purchase and sales data in VAT returns between 2019 and 2022.

During the period, the two companies, owned by Chattogram-based businessman Mohammed Saiful Alam, evaded Tk 3,538 crore in VAT, for which they were fined another TK 3,531 crore, said the audit report.

Of the amount, S Alam Vegetable Oil Ltd allegedly evaded Tk 1,917 crore and S Alam Super Edible Oil Ltd Tk 1,621 crore in three years from the financial years 2019-20 to 2021-22, according to the audit report submitted in October 2023 and the subsequent review  report submitted in May 2024.

NBR came up with the unpaid VAT claims after analysing the VAT returns and the financial statements audited by the two companies› CA firm as well as their written response to the VAT Commissionerate.

The audit was carried out by the field office of Customs, Excise & VAT Commissionerate, Chattogram, and was subsequently reviewed by a five-member committee headed by an additional commissioner, Chattogram VAT Commissionerate, which drew the same conclusion.

The field office audit team submitted its report on October 2, 2023.

On June 9, the Customs, VAT & Excise Commissionerate, Chattogram, in its adjudication orders asked the companies to pay the ‘evaded VAT’ worth Tk 3,538 crore along with the penalty of Tk 3,531 crore and applicable interest to the state treasury within 15 working days.

The deadline ends on July 3. The two companies have 90 days to appeal by paying 20 per cent (over Tk 700 crore) of the VAT claim.

The VAT office came up with the findings by comparing the sales data given in the VAT returns and the annual financial statements from 2019–20 to 2021–22 that the companies submitted to the income tax office in Chattogram.

The VAT Commissionerate said that the companies showed ‘deflated sales in their VAT returns’ than in their annual reports, audited by a chartered accounting firm, and submitted to the tax authorities by the companies themselves.

As per the audited reports from FY2019-20 to 2021-22, total sales of S Alam Vegetable Oil Ltd were Tk 12,725.95 crore, while the reported sales by the organisation in the VAT returns were Tk 2,401.92 crore.

The company did not present sales worth Tk 10,324 crore in the VAT returns.

Bedside, S Alam Super Edible Oil Ltd›s sales value in its audited financial statement was Tk 12,850.48 crore but in the VAT return, the figure was Tk 3,620.63 crore, which is Tk 9,229.84 crore less than that presented in the audited reports.

During its audit, the field office sought explanations from the companies and asked them to appear in a hearing on October 30, 2023, but both companies submitted a written response and sought more time to be given detailed information in writing.

The Commissionerate office accepted time extensions for both companies three times, and the companies submitted their written response on December 28, 2023, seeking withdrawal of the charges after a review.

Following the written submission of the two companies and their appeal for a review of the unpaid VAT claims, the Customs, Excise & VAT Commissionerate formed the five-member committee, which submitted its report on May 21 this year after examining the audit report.

In its letter, S Alam admitted it showed excess transactions to avail of bank loans.

‘Bank loans are needed to operate this large company. For availing bank loans, we have to show excess transactions, which is why excess sales and purchases of raw materials have been shown in the financial reports audited by the CA firm,’ said both letters of the companies.

They also said that excess sales value had been presented in the audited reports by the CA firm to get loans from banks, but VAT returns had been filed as per the actual sales, and VAT had been paid accordingly.

However, the VAT authorities› review report says that the purchases and sales data of any firm should be the same in all its commercial documents submitted to regulators, banks, income tax authorities, and VAT authorities.

It is a legal obligation on the part of the firm concerned that its purchase and sales data presented to the VAT office, income tax office, banks, and in the financial reports audited by CA firms should all be the same, said the review report.

‘They claim that to avail loans from banks, they prepared the report by incorporating inflated purchase and sales data. If this is true, they have clearly committed a criminal offence.’