Two S Alam firms evaded Tk 3,500 crore in VAT, says NBR
S Alam Vegetable Oil Ltd and S Alam Super Edible Oil Ltd in Chattogram allegedly evaded Tk 3,538 crore in VAT from 2019-2022, per a Customs, Excise & VAT Commissionerate audit. The companies dispute the claims. The VAT Commissionerate demands payment by July 3, or legal action will follow. Both companies have 90 days to appeal by paying 20% of the VAT claim. The audit revealed discrepancies between sales data and VAT returns.
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.
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.
The two companies denied any wrongdoing.
The regulator 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 field office audit team submitted its report on October 2 last year. Later, the field office formed a five-member committee to review the audit findings.
The review report, submitted on May 21, said the “VAT dodging allegations have been proven beyond doubt.”
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 to the tune of Tk 3,531 crore and applicable interest to the state coffer within 15 working days.
The deadline ends on July 3 and if the companies do not appeal against the order, the regulator will “take steps to realise the evaded VAT, penalty and interest as per the law,” NBR officials said.
S Alam Group Executive Director (Finance) Subrata Kumar Bhowmik told The Daily Star on June 27 that they did not “evade even a single taka of VAT” and that they will appeal the decision.
The two sister concerns of the business conglomerate have 90 days to appeal by paying 20 percent (over Tk 700 crore) of the VAT claim.
Md Mustafizur Rahman, S Alam Group‘s company lawyer, told The Daily Star on June 29 that before they file any appeal, they are seeking an in-person hearing with the VAT authorities to present their full response and the relevant documents that the regulator had sought during the audit and review.
“If they give us a full hearing and allow us adequate time, we will be able to convince them that their unpaid VAT claims against us do not reflect the reality,” he said, adding that they applied for a full hearing on June 6, three days before the VAT authorities asked them to pay the unpaid VAT, but were not allowed the opportunity.
FIELD OFFICE AUDIT FINDINGS
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 the port city.
In its report on S Alam Vegetable Oil Ltd, the VAT Commissionerate said the company showed “deflated sales in its VAT returns” than that in its annual reports, audited by a Chartered Accountancy (CA) firm, submitted to the tax authorities by the company itself.
“As per the audited reports from the financial years 2019-20 to 2021-22, total sales of the company were Tk 12,725.95 crore. On the other hand, the reported sales by the organisation in the VAT returns during the period were Tk 2,401.92 crore,” the report says.
“This means, the company did not present sales worth Tk 10,324 crore in the VAT returns. By concealing actual sales in VAT returns, the organisation did not pay VAT amounting to Tk 1,346.61 crore during the period which is realisable,” it says, citing the 15 percent VAT rate on sales of edible oil applicable at the time.
The other company — S Alam Super Edible Oil Ltd — did the same, but only on a different scale, the audit found.
During the same period, this company’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 financial report,” the report says.
Besides, both companies “evaded” revenue by showing lower value of raw material purchase in VAT returns than that reported in their annual reports during the three financial years.
For example, S Alam Vegetable Oil Ltd in its financial statement showed “purchase value of raw materials worth Tk 11,245 crore during those three years. But the VAT returns and other related documents submitted by the company to the VAT authorities show the purchase of raw materials was worth Tk 3,145 crore.”
The amount is Tk 8,100.39 crore less than that shown in the company’s own financial statement.
“It is clear from the comparative analysis of its audited financial statements and VAT returns that in order to evade VAT, soybean and palm oil was sold after producing the item with ingredients procured from local sources or collected by any other means,” the report says.
“In the company report audited by a CA firm, there is information of sales without processing ingredients (CDSO [Crude Degummed Soybean Oil] and RBD palm olein).
“It is clear from data that Tk 8,100.39 crore worth of raw materials have been procured locally against which the company failed to submit any VAT chalan or Bill of Entry.”
During the period, 7.5 percent VAT rate was applicable on such local purchase, and as such “the total amount of unpaid VAT is Tk 607.52 crore, which is collectable from the firm.”
As for the other company — S Alam Super Edible Oil Ltd — its raw material procurement value was shown Tk 11,171.42 crore during the three years, but the VAT returns and other related documents submitted by the company to the VAT authorities put the purchase value at Tk 5,206.53 crore.
“It is clear from data that Tk 5,964.89 crore worth of raw materials have been procured locally against which the company failed to submit any VAT chalan or Bill of Entry,” the report says, adding that the total amount of unpaid VAT in this case was Tk 447.36 crore.
The Customs, VAT Commissionerate, Chattogram, also compared the procurement data of goods and services provided in the annual financial statements and VAT returns in the years from 2019-20 to 2021-22 and found that “S Alam Vegetable Oil paid lower VAT at source, known as VAT Deducted at Source (VDS), than the required amount against its purchase during the period.”
The company’s unpaid revenue against VDS on goods and services, on which 5 percent to 15 percent VAT is applicable, was Tk 5.63 crore in those three years, the report says.
During the same period, S Alam Super Edible Oil had unpaid revenue against VDS worth Tk 1.78 crore.
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