Grameen Phone Ltd. Vs. BTRC and others, 2 LNJ (2013) 150

Case No: Writ Petition No. 8904 of 2011

Judge: Sheikh Hassan Arif,

Court: High Court Division,,

Advocate: Rafique-ul-Huq,Mr. Sheikh Fazle Noor Taposh,Mr. Ajmalul Hossain QC,,

Citation: 2 LNJ (2013) 150

Case Year: 2013

Appellant: Grameen Phone Ltd.

Respondent: BTRC and others

Delivery Date: 2012-02-13

HIGH COURT DIVISION
(SPECIAL ORIGINAL JURISDICTION)

 
Farid Ahmed, J.
And
Sheikh Hassan Arif, J.

Judgment
13.02.2012
 
Grameen Phone Limited
... Petitioner.
-Versus-
Bangladesh Telecommunication Regulatory Commission. Represented by its Chairman and others.
…. Respondents
 

Constitution of Bangladesh, 1972
Article 102
Telecommunication Act (XVIII of 2001)
Sections 38, 39, 34 (N) and 55(3)
In the instant matter, the Guideline dated 11.09.2011 incorporated an additional charge as Market Competition Factor (MCF) under Clause-8.01 (ii), and the same has been applied to the spectrum of 2008 by the impugned memo thereby changing the terms and conditions of licence. This kind of change by imposing additional charge on the spectrum of 2008 may be done only after complying with the provisions of notice as mandated by sub-section (2) of Section 39. Thus, without going into the dispute as to whether the Guideline in question has been issued either under Sections  38, 39, 34 (N) or 55(3), it is held that under any circumstances when the terms and conditions of an existing license are to be amended, substituted, changed or cancelled, the same can only be done after issuing 15 days notice upon the licencee seeking written statement from it and after considering such written statement of the licnecee regarding the proposed amendments. It appears that the earlier amendment of 2006 to the terms and conditions of the licence regarding charges was done through a lengthy discussions and negotiations between the parties, and finally, the amendment order was issued under Section 39 (before amendment) as an agreed amendment order. However, in the instant case, when the said additional charge through MCF was incorporated in the Guideline seeking to amend  the terms and conditions of the licence in so far as it relates to the assignment of spectrum of 2008, there was no existence of such notice, negotiation or agreement between the parties. The MCF, as incorporated in the Guideline dated 11.09.2011, cannot lawfully be applied on the spectrum of 2008 as it would change the terms and conditions of the licence. In addition, when by specific provisions under Clause-9 of the Guideline the Government and the BTRC exempted the application of the enhanced rate of spectrum fee in respect of the spectrum of 2008, they acted arbitrarily when BTRC sought to apply the MCF through the impugned memo in respect of the same spectrum, which, in our view, suffers from unreasonableness. Thus, the impugned memo, in so far as it relates to the application of MCF in respect of the spectrum of 7.4 in 1800 MHZ assigned in 2008, is without lawful authority and is of no legal effect. Consequently, the Grameen Phone is not required to pay the same....(27 to 29).

Value Added Tax Act (of 1991)
Section 6(3)(N),(4),(4LL)
Value Added Tax Rules, 1991
Rule 18(L) to (P)
There is no illegality in the impugned memo in so far as the issue of Vat is concerned. Thus, by using the words “without any deduction”, or previously “excluding Vat and tax”, in the Guideline or in the impugned memo, there is no departure from the above mentioned provisions of law. Rather, under the new dispensation for payment of Vat at source, BTRC must write the words “without any deduction” or “excluding Vat and Tax” etc. to make it compliant with the provisions of sub-sections (3)(N), (4), (4LL) and other relevant provisions of Section 6 of the VAT Act, 1991 and Rules 18 (L) to (P) of the VAT  Rules, 1991....(39).

Constitution of Bangladesh, 1972
Article 102
After examining the arbitration clause under clause-9 of the Licence Agreement vide Revalidation order dated 24.10.2004, it appears that the arbitrators are also able to resolve the disputes regarding the interpretation of the Agreement. Be that as it may, this court has already held that writ is maintainable when the interpretation of law is required to resolve the dispute. In the instant matter, since the interpretation of law, namely interpretation of Sections 38 and 39 of the Telecom Act, Sections 3,5,6 of the VAT Act  and Rule 18(Uma) of the VAT Rules is involved, this writ petition is maintainable.   ...(40)

39 DLR (AD) 85 and Bangladesh Telecom Ltd. Vs. BTTB, 48 DLR (AD) 20 ref.

Mr. Rafiqul Haque, senior Advocate with
Mr. Sheikh Fazle Noor Taposh, Advocate with
Mr. Mehedi Hasan Chowdhury, Advocate.
…. For the petitioner.

Mr. Azmal Hossain Q.C., Advocate with
Mr. Khandaker Reza-E-Raquib with
Mr. Imranul Kabir, with
Mr. Mejbahur Rahman, Advocates
.....For the respondent No. 1-6

Writ Petition No. 8904 of 2011
 
JUDGMENT
Sheikh Hassan Arif, J:
 
Rule Nisi was issued calling upon the respondents to show cause as to why the decis-ion of the respondent No. 1 (BTRC) issued vide Memo No. BTRC/LL/Mobil /License dated 17.10.2011 (Annexure-I) (“impugned memo”) under the signature of the respondent No. 4 claiming Spectrum Assignment Fee based on the Market Competition Factor (MCF) in so far as it relates to the fee of already assigned Spectrum (7.4 MHz-1800 band) to the petitioner in 2008 and payment of license fee and spectrum fee for new assignments without any deduction should not be declared to have been issued without lawful authority and of no legal effect.
 
Short facts, relevant for the disposal of the Rule, are that the petitioner company (“Grameen Phone”), through its predecessor Grameen Phone Consortium, entered into an agreement with the Government on 11.11.1996 for installing and running digital cellular mobile radio/phone in Bangladesh. Pursuant to the said agreement and some subsequent addenda to the same, Grameen Phone was given licences for Radio Stations & Equipment and Radio System Operation on 28.11.1996 for 15 years with yearly licence fee of taka one crore. Thus, 10.11.2011 was the due date for renewal of the said licences. Subsequently, upon enactment of Bangladesh Telecommunic-ation Act, 2001 (“the Telecom Act”), the said licences were revalidated by the newly consti-tuted Bangladesh Telecommunication Regulat-ory Commission (BTRC), a statutory body, in view of the provisions under Sections 89 and 90 of the Telecom Act. Accordingly, BTRC issued Revalidation Order on 24.10.2004 declaring that the said licences along with its subsequent amendments  would continue and remain valid until 10.11.2011 as part of the said licences within the meaning  of Section 90 (3)(Ka) of the Telecom Act. Through such revalidation and amendments, licence fees and other charges were increased time to time. During above period, the Government and the BTRC assigned the following spectrums  in favour of the Grameen Phone:
  1. 5 MHz spectrum in 900 band in 1996.
  2. 2.4 MHz in 900 band initially for Dhaka in 2000 and subsequently in 2002 for the whole country.
  3. 7.2 MHz in 1800 band in 2005. 
In 2008, BTRC assigned further spectrum in favour of the Grameen Phone  totalling 7.4 MHz in 1800 band. Thereafter, when the renewal time of the licences approached, BTRC assigned more spectrums, namely 7.4 MHz in 900 band and 7.2 MHz in 1800 band both in 2011. The assignment of Spectrum in 2008 was for 18 years, and BTRC vide its Assignment Letter dated 30.10.2008 assured that if the licence was to be renewed within the said 18 years’ period, Grameen Phone would not have to pay any additional charge for the same. As the renewal time approached, BTRC issued Guideline on 11.09.2011 determining procedures and fees for renewal of licences by the mobile cellular operators like the Grameen Phone. By this Guideline, it introduced, amongst others, the Market Competition Factor (MCF), a new charge applicable to all mobile cellular operators including the Grameen Phone depending on the quantum of their market-share, and, accordingly, fixed 1.48 as MCF for the Grameen Phone. However, as the BTRC by the impugned memo dated 17.10.2011 demanded, amongst others, the said MCF on the 7.4 MHz spectrum assigned to the Grameen Phone in 2008, the dispute arose between the parties as the Grameen Phone refused to pay the same. By the impugned Memo, BTRC further demanded the renewal and new spectrum fees without any deduction, meaning without deduction of VAT, which, according  to the Grameen Phone , is against the provisions of Value Added Tax Act, 1991 and the Rules made thereunder. Being aggrieved by the above demands in the impugned memo, the Grameen Phone, as petitioner, moved this Court and obtained the aforesaid Rule.
 
The Rule Nisi is mainly contested by the BTRC by filing affidavit-in-opposition and su-pplementary affidavit-in-opposition. Grameen Phone also submitted several supplementary affidavits. Notice of the Rule Nisi was served on the National Board of Revenue (NBR), the added respondent No. 8, yet no one turns up either to represent it or to contest the Rule.

Contentious Scenario:

The main contention of the Grameen Phone is that although the BTRC may introduce MCF by the Guideline, yet the same can not be applied to its spectrum of 7.4 MHz assigned in 2008 in view of the clear terms & conditions of the said assignment that at the time of renewal of the licence no additional charge would be applicable for the same. According to them the application of 1.48 MCF in respect of the said assignment of 2008 not only breaches the contract between the parties but is also contrary to the provisions of law applicable thereto. Their further contention in respect of the words—“without any deduction”—as used in the impugned memo is that by those words the BTRC illegally claimed  the amount mentioned in the impugned memo without any deduction of VAT therefrom, which is contrary to the provisions of VAT Act, 1991 and Rules made thereunder. According to them, the VAT amount at the rate of 15% is to be deducted from the amount mentioned in the impugned memo (except for the MCF for 2008 assignment) as this is the mandate of Rule 18(P) of the VAT Rules, 1991.
 
BTRC, on the other hand, contends that the Guidelines having been issued in exercise of the statutory powers conferred on it and the Government under the provisions of the Telecom Act, it has legal force and as such it will prevail even if it is in conflict with any terms of the contract between the parties. In respect of VAT, BTRC’s contention is that the issue and arguments raised by the Grameen Phone in respect of the deduction of VAT at source goes against the basic concept of VAT as introduced by the VAT Act, 1991. According to them, it is the mandate of the law that the Value Added Tax is always added to the total consideration amount and it is never deducted form the same like advance income tax or other taxes.
 
Submissions and Arguments:

Mr. Rafiqul Haq, Mr. Sheikh Fazle Noor Taposh and Mr. Md. Mehedi Hasan Chowdhury, learned advocates, appear for the petitioner Grameen Phone. On the other hand, Mr. Azmal Hossain Q.C, Mr. Khandaker Reza-E-Raquib and Mr. Imranul Kabir, learned advocates, appear for the BTRC. None appears for the NBR.
 
Mr. Rafiqul Haq, learned senior counsel appearing for the Grameen Phone mainly argues on the vatability of the service or facility provided by the BTRC through licence. On MCF issue, however, Mr. Haq supports the submissions of Mr. Taposh and Mr. Mehedi. Mr. Haque submits that the license in question is not a service within the meaning of the Value Added Tax Act, 1991 (“VAT Act”), rather it is  permission and as such not vatable at all.  Referring to Section 2(Q) of the VAT Act and 2nd Schedule to the same, Mr. Haq submits that the licence as provided by the BTRC comes under Article-7 (O) of the said Schedule and as such it is excluded from the scope of vatability by the clear terms of Section 2(R) of the VAT Act, and accordingly, the licence or any other facility as provided by the BTRC in favour of the Grameen Phone is not vatable. Referring to Section 21(4) of the Telecom Act, 2001, Mr. Haq points out that since the amounts receivable by the BTRC are to be deposited  in the Consolidated Fund of the State, the licence fee, renewal of licence fee or spectrum fee etc. should be regarded as being excluded from the scope of Vat. Alternatively, he argues that, even if it is found that the licnece provided by the BTRC  is vatable, then, supporting the arguments of Mr. Taposh and Mr. Mehedi, he submits that  the Vat payable should be deducted from the amount claimed by the BTRC by the impugned memo and paid directly to the NBR in view of Rule-18(Uma) of the Value Added Tax Rules-1991(“VAT Rules”).
 
Both Mr. Taposh and Mr. Mehedi strenuously argue on the MCF issue. They submit that while assigning the spectrum in 2008, the BTRC, in clear terms, stipulated that their would be no additional charges for the said assignment at the time of renewal of the licence. Therefore, they argue, the application of MCF in respect of the spectrum granted in 2008 is without lawful authority. According to them Grameen Phone has no objection to pay Tk. 150 Crore spectrum fee for new assignments as mentioned in the Table of the impugned memo under Columns-A and B. Grameen Phone also does not have objection to pay MCF in respect of the said new assignments of spectrum. But it should not be compelled to pay the MCF in respect of the previous assignment of 7.4 spectrum in 1800 MHz band as assigned to it in 2008. Referring to Clause-1 of the Assignment Letter dated 30.10.2008, they point out that this Clause clearly stipulates that during the 18 years period of the said assignment if the license is required to be renewed there will be no additional charges for  the said assignment.  Referring to clause-2  of the said Assignment Letter, learned advocates submit that only if the Grameen Phone wants to utilize the frequency for 3G, LTE or equivalent technology services, the terms and conditions as regards the payment of charges may be changed. Drawing our attention to Clause-9 of the Guideline, learned advocates submit that the Guideline is contradictory to itself in that while the Guideline accepted the non-application of enhanced assignment fee in respect of the spectrum assigned in 2008 and kept it Tk. 80 crores as before, by saying “other provisions of this guideline shall be applicable for respective licensees”, the Guideline sought to apply MCF in respect of the said assignment of 2008, which, according to them, is not only contrary to Clause-1 of the Assignment Letter but also is in violation of the mandatory provisions of Sections 38 and 39 of the Telecom Act  as it changes the terms and conditions of the licence. Learned advocates point out that the Grameen Phone is only liable to pay, after deduction of Vat, on the basis of the following calculations, namely [(A x B) + (C X D)] X G + (E X F) in Table of the impugned memo, and they are not lawfully required to pay (E X F) X G,  which is more than Tk. 236 crore.
 
As regards Vat, Mr. Taposh and Mr. Mehedi submit that with the introduction of the system of deduction of Vat  at source by the Finance Act, 2010 followed by the amendments in the VAT Act and VAT Rules, it has now become the responsibility of the service or facility recipient like the Grameen Phone to pay the Vat at source, and that Vat, according to them, will have to be paid after deducting the Vat amount from the amount receivable by the BTRC. Referring to Sections 3(3)(Ga), 5, 6 and Rules 18 (L-P), learned advocates argue that according to those provisions ‘deduction at source’ (Ev­p LaÑe) means deduction from the total receivable but not deduction from the receivable after adding Vat to it as contended by the BTRC.
 
Mr. Azmal Hossain Q.C., on the other hand, frankly concedes that the BTRC cannot claim MCF for the period from 2008 to 2011 as it will be amounting to giving retrospective effect to the Guideline which is not permitted by law. However, according to him, BTRC can claim MCF for the remaining 15 years period in respect of the assignment of 2008 as the same was given for 18 years. Mr. Hossain argues that the Guideline have been issued in exercise of the statutory powers conferred on the BTRC and the Government under Sections 38 and 39 read with Section 55(3) of the Telecom Act,  and as such, to change the terms and conditions of the assignment of spectrum relating to its fees and charges, no notice is required to be served on the licencees under section 39 of the said Act. Referring to Clause-1 of the Assignment Letter dated 30.08.2008, leaned advocate points out that the additional charges mentioned therein relate to the spectrum fee of Tk. 80 crore and it does not have any nexus with the MCF. He argues that since the spectrum fee of Tk. 80 crore for the said 2008 spectrum has not been increased, BTRC has not even violated any terms of the said Assignment Letter.
 
As regards Vat, Mr. Hossain, submits that the Vat scheme under the VAT Act made different persons liable for collection and deposit of vat at different stages of transactions.  Therefore, liability to pay Vat and responsibility to collect and deposit the same may be required to be done by different reasons.  Referring to the definition of  ‘Ll­k¡NÉ ®ph¡’ (taxable service)  and ‘Ll’  (tax) as defined by Sections 2 (Chhaa)) and 2 (Gha Gha Gha) respectively, he submits that there is no scope to hold otherwise than that the service (­ph¡) or facility |(p¤¢hd¡) as provided by the BTRC though licences in exchange for licence fees and other charges is not included in the 2nd Schedule to the VAT Act. Therefore, the service or p¤¢hd¡ as provided by the BTRC through license or permit are vatable.  Drawing our attention to the provisions of Section 3(5) and definition of ‘fZ’ (consideration) as given by Section 2 (Z Z),  Mr. Hossain submits that the basic scheme of the VAT Act  is that the Vat is calculated at the rate of 15% on the total value receivable. Therefore, according to him, Vat is always added to the total value receivable, and, under no circumstances, it can be deducted or subtracted from the total value as suggested by the learned advocates for the petitioner. Therefore, he argues, to comply with the basic scheme of the VAT Act and VAT Rules made thereunder, BTRC lawfully motioned the words ‘without any deduction’ in the impugned memo, which means the demanded money has to be paid as it is, and, while calculating Vat to pay the same at source, the petitioner will have to add to it 15% of the total demanded amount as Vat, withhold  the same and deposit it in the exchequer directly, otherwise it will go against the basic concept of Vat.
 
In addition to the above submissions, Mr. Hossain raises the issue of maintainability of the writ petition itself on the ground that since there is an Arbitration Clause in the revalidated licence agreement of 2004 and even in the original agreement of 1996, the writ petition is not maintainable as the petitioner has come before this court without availing of the alternative remedy as agreed by the parties and provided by the law, namely the Arbitration Act, 2001.  He submits that even the Arbitration Tribunal or Arbitrators may give interpretation of law if they are required to do so in disposing of the disputes between the parties. Mr. Hossain further argues that the contract between the BTRC and Grameen Phone is an ordinary commercial contract, and as such, in view of the law as decided by our Apex Court in Sharping Fishery case reported in 39 DLR (AD)-85, writ should be held to be not maintainable.     
 
Heard the submissions of the learned advocates, perused the writ petition, supplementary affidavits and affidavit-in-opposition submitted by the respective parties. Since the disputes between the parties revolve around two main issues, namely Market Competition Factor (MCF) and VAT, they are addressed below separately. In addition, the maintainability of the writ petition will also be dealt with in due course.

Dispute relating to MCF :

The admitted position is that pursuant to the agreement of 1996 and several subsequent amendments thereto, the Government and the BTRC have so far assigned different spectrums in favour of the Grameen Phone at several stages, namely:-
  1. In 1996- 5 MHz spectrum in 900 band;
  2. In 2000- 2.4 MHz in 900 band initially for Dhaka City and in 2002- permission for using the same in the entire country;
  3. In 2005-7.2 MHz in 1800 band;
  4. In 2008-7.4 MHz in 1800 band; and two new assignments in 2011, namely
  5. 7.4 MHz in 900 band;
  6. 7.2 MHz in 1800 band;
According to the said agreement, the Grameen Phone is required to get the licences renewed after 15 years, namely at the end of 2011, when last two assignments of spectrums were given.
 
After granting of licenses in 1996, several amendments to the said licences were made, the major being the ones done in 2004 upon enactment of the Bangladesh Tele Communication Act, 2001. As the licences were originally issued by the Government under the provisions of the Telegraph Act, 1885, with the establishment of the BTRC, a statutory body, under the Telecom Act, BTRC issued a Revalidation Order on 24.10.2004 (Annexure-D to the writ petition). By the said Revalidation Order, the licences previously issued were revalidated as being licences issued under the Telecom Act  in view of its Section 90 (3) (L). The Revalidation Order further confirmed that the licences issued in 1996 would remain valid till 10.11.2011 and all subsequent  amendments would be deemed to be part of those licences. Accordingly, new Licence Agreement was executed between the parties, which became part of the original licence. Some new fees and charges were introduced and additional spectrums were allotted. By Clause-14 of the new Licence Agreement, optimal use of frequency was ensured, whereas Clause-9 incorporated Arbitration clause. In 2006, another major amendment to the licence took place vide memo dated 16.04.2006 (Annexure-E), and terms and conditions of the license were amended by the BTRC under Section 39 of the Telecom Act. By such amendments, annual licence fee was increased to Tk. five crore with effect from 01.07.2005, 5.5% revenue sharing was introduced on all collected rents and call charges etc. to be payable on quarterly basis. In 2006, namely on 27.04.2006, further Revalidation Order was issued revalidating the radio system operating licence vide annexures-F and F1 to the writ petition.
 
In 2008, BTRC granted the disputed spectrum of 7.4 band in 1800 MHz vide Assignment Letter dated 30.10.02008 (Annexure-G). Prior to this assignment, there were correspondences between the parties, and terms and conditions of the said assignment were determined through such correspondences and negotiations. One of such correspondences is a letter written by one Anamika Vakto, Senior Assistant Director of Spectrum Management of the BTRC, who by letter dated 30.09.2008 confirmed the terms and conditions of the said assignment. The parties having agreed to such terms and conditions, BTRC issued Assignm-ent Letter dated 30.10.2008. The reference to the said letter of Anamika Vakto has been made by the petitioner in paragraph 12 of the writ petition, but the BTRC did not deny the same, rather in paragraph-7 of the Affidavit-in-Opposition merely mentioned that they ware matters of record. Therefore, although the said letter dated 30.09.2008 is not annexed to the writ petition, we may safely hold that the background negotiations leading to the issuance of the said Assignment Letter dated 30.10.2008 is an admitted fact and the said assignment in 2008 was not granted unilaterally. Rather, it was granted on the basis of prior negotiations between the parties. 
 
Since several terms of the said Assignment Letter dated 30.10.2008 are disputed and interpreted by the parties according to their own convenience, a decision on the same is needed. The relevant terms and conditions mentioned in the said Assignment Letter are quoted below:-
“Terms and Conditions:
  1. The assignment will be for 18 years from the date of assignment subject to the renewal of the license. Within 18 years if the licence is renewed there will not be any additional charge for this particular assignment for current technology (GSM, GPRS and EDGE).
  2. The licencees will be allowed to provide services with this spectrum according to the conditions of the cellular mobile license. However, to utilize the frequency for 3G, LTE or equivalent technology based services the licensee will be required to take permission from the Commission. In such cases conditions and terms may be varied as deemed necessary by the Commission.
  3. …………………………………………………………….
  4. …………………………………………………………….
  5. The Commission reserves the right to make any change in the charges or levies from time to time and the Licencee shall abide by the decision of the Commission.”
(Underlines supplied)     
 
Thus, it appears that the assignment of spectrum in 2008 was given for 18 years. Clause-1 of the Assignment Letter stipulates that if the licence is required to be renewed during this 18 years’ period, no additional charge will be applicable for this particular assignment “for current technology (GSM, GPRS and EDGE)”. It is no bodies case that Grameen Phone is not using the current technology. Clause-2 of the said Terms and Conditions further stipulates that if the Grameen Phone wants to utilize the frequency of 3G, LTE or equivalent technology, then the terms and conditions of this assignment may be varied. However, Clause-5 has conferred a general power on the BTRC. According to this Clause, BTRC reserves the right to make any change in the charges or levies from time to time and that the Grameen Phone shall abide by such decision of the BTRC. It appears from the above reading that there is an apparent tension between Clause-1 and Clause-5, which needs decision of this court in so far as the MCF-dispute is concerned.
 
The Assignment Letter dated 30.10.2008 starts with the words “BTRC has been pleased to assign you the following frequency for providing service under your Cellular Mobile Operator Licence with the following terms and conditions”. Therefore, it is clear that the assignment of the spectrum in 2008 was given under the original licence of 1996 and as such there is no doubt that any change in the terms and conditions of this assignment will affect the terms and conditions of the licence itself. In other words, any change in the terms and conditions of the said assignment tantamounts to the change in the terms and conditions of the licence itself.
 
By Clause-1 of the said Assignment Letter, the parties agreed that the assignment was given for 18 years and that if the original licence was required to be renewed during this 18 years’ period (parties already knew that the renewal of license would be required in 2011), there would be no additional charge for this particular assignment. Clause-2 further clarifies that the terms and conditions of the said assignment may be varied only when the Grameen Phone wants to utilize frequency for 3G, LTE or equivalent technology services. Therefore, we are of the view that the terms and conditions relating to the enhancement of charges applicable to this particular assignment have been fixed by the parties in clear terms. The problem arose when BTRC issued Guideline on 11.09.2011 (Annexure-H) under the title “Cellular Mobile Phone Operator Regulatory and Licencing Guideline, 2011”, (“the Guideline”), after the same having been approved by the Government on 07.09.2011. By the said Guideline, new fees have been introduced as license renewal fee, new assignment fee etc. By Clause-8.01 (ii), new spectrum assignment fee of Tk. 150 crore per MHz has been fixed. By the same Clause, new fee or charges named ‘Market Competition   Factors (MCF)’ based on market share of the operators has been introduced and Grameen Phone’s MCF has been fixed as 1.48.  Clause-9, however, made a distinction in respect of the applicability of the new charges and fees in respect of the said assignment of 2008. Clause-9.01 is quoted below:
“9.01 The spectrum assignment fees shall be applicable for all of the access frequencies assigned to the licensees except for the 7.4 MHz, 2 MHZ and 2.6 MHz spectrum assigned in the year 2008 in favour of Grameen Phone, AXIATA and Orascom respectively with a value of Tk. 80 (eighty) crore per MHz uplink and downlink for 18(eighteen) Years from the date of assignment subject to the renewal of the license. However, other provisions of these guidelines shall be applicable for the respective licensee(s).”
(Underlines supplied)
 
It appears from the above Clause that while increasing the spectrum assignment fee to Tk. 150 crore, the spectrum fee of 2008 assignment was not increased. However, by mentioning “other provisions of this guidelines shall be applicable for the respective licencee (s)”, this Clause has sought to make MCF of 1.48 applicable to the said assignment of 2008. As we have stated hereinabove that the terms and conditions of the said Assignment Letter dated 30.10.2008 have become parts of the licence, we are of the view that any change to the said terms and conditions will amount to a change in the terms and conditions of the original licence itself. Let us now examine to what extent and how the said terms and conditions of licence may be changed under the provisions of the applicable law.
 
The Telecom Act has undergone major changes through the amendments in 2010 vide Act No. 41 of 2010. Some powers of the BTRC have been transferred to the Government in addition to the other existing powers of the Government. Before the above amendments, the power to issue Guideline regarding different charges was vested in the BTRC under section 31(2) (R). But after amendments, only the Government can issue such Guideline under section 34 (Ga). In addition, under the amended provisions of Section 38, the Government may determine procedure and fees for renewal of licence in absence of Rules and Regulations in this regard. This section has confined the power of the Government  only in respect of the determination of procedure for renewal and renewal fees. However, while approving the Guideline in question vide Memo dated 07.09.2011 (Annexure-W to the Supplementary Affidavit dated 29.11.2011 filed by the petitioner), the Government gave coverage of the same under Section 38 by giving a direction upon the BTRC to implement the said Guideline.
 
Be that as it may, so far as the amendments to the terms and conditions of the licence are concerned, the amended provisions of Section 39 of the Telecom Act contains specific procedure. For ready reference, Sections 38 and 39, as amended, are quoted below:-
৩৮। লাইসেন্স নবায়ন- এই অধ্যায়ের অধীন ইস্যুকৃত লাইসেন্স বিধি বা প্রবিধান দ্বারা নির্ধারিত পদ্ধতিতে ও ফিস প্রদান সাপেক্ষে নবায়নযোগ্য হইবে, এবং বিধি বা প্রবিধানের অবর্তমানে সরকার সাধারন বা বিশেষ  আদেশ দ্বারা ঐ সকল বিষয় নির্ধারণ করিতে পারিবে।
৩৯। লাইসেন্সের শর্তাবলী সংশোধন- (১) কমিশন, সরকারের পূর্বানুমোদনক্রমে, এই আইনের উদ্দেশ্য   পূরণকল্পে, তদধীন ইস্যুকৃত লাইসেন্সের যে কোন শর্ত এই আইন বা বিধি অনুসারে সংশোধন, সংযোজন, প্রতিসহাপন, বা বাতিল করিতে পারিবে।
(২) সরকার, লাইসেন্সের কোন শর্ত সংশোধনের প্রয়োজন মনে করিলে, কমিশনকে উক্ত সংশোধন করিবার জন্য নির্দেশ প্রদান করিতে পারিবে এবং কমিশন সরকারের নির্দেশ মোতাবেক, উক্তরুপ সংশোধনের কারণ উল্লেখপূর্বক লাইসেন্সেধারীকে উক্তরুপ সংশোধনের বিষয়ে অনধিক ১৫ (পনের) দিনের মধ্যে লিখিতভাবে বক্তব্য উপসহাপনের সুযোগ প্রদানক্রমে একটি নোটিশ প্রদান করিবে; প্রস্তাবিত সংশোধনী সম্পর্কে লাইসেন্সধারীর কোন লিখিত বক্তব্য থাকিলে উহা কমিশনের মাধ্যমে সরকারের নিকট পেশ করিতে হইবে এবং সরকার উহা বিবেচনাএ্রমে অনধিক ৩০ (এিশ) দিনের মধ্যে সিদ্ধান্ত প্রদান করিবে।
(৩) লাইসেন্সধারীর  কোন আবেদনের পরিপ্রেক্ষিতে যুও্রসংগত মনে করিলে সরকার কমিশনকে লাইসেন্সের কোন শর্ত সংশোধন করিবার নির্দেশ প্রদান করিতে পারিবে এবং কমিশন তদনুযায়ী প্রয়োজনীয় ব্যবসহা গ্রহন করিবে।"
(Underlines supplied)
 
It appears from the above provisions that under Section 38, the Government may determine procedure and fees for renewal of licnence in the absence of any Rules or Regulations in this regard. On the other hand, under Section 39(1), the BTRC may amend or cancel the terms and conditions of Lincence in accordance with the provisions of the Telecom Act or Rules made thereunder. Admittedly no Rules or Regulations in this regard have been framed/issued by the concerned authority. Sub-section (2) of Section 39, however, provides that if the Government is of the view that any conditions of the licence has to be amended, it may direct the BTRC to do such amendment, whereupon the BTRC shall issue 15 (fifteen) days notice upon the licencee seeking its written statement regarding the proposed amendments. Thereafter, BTRC will forward the said written statement, if any, to the Government, whereupon the Government will give its decision within 30 days. Again, under Section 39(3), the conditions of license may also be amended at the instance of the licensee on the basis of its application to the Government followed by a direction of the Government to the BTRC. Therefore, the combined reading of sub-sections (1), (2) & (3) of Section-39 reveal that, in the absence of any Rules or Regulations in this regard, any conditions of licence may be amended, changed or cancelled only in accordance with the procedure of sub-section (2) of Section-39. This means, the Government may do amendments to the conditions of licence through the BTRC and such amendments may be brought about only after seeking written statement from the Licencee and after consideration of such written statement, if any.
 
In the instant matter, the Guideline dated 11.09.2011 incorporated an additional charge as Market Competition Factor (MCF) under Clause-8.01 (ii), and the same has been applied to the spectrum of 2008 by the impugned memo thereby changing the terms and conditions of licence.  We are of the view that this kind of change by imposing additional charge on the spectrum of 2008 may be done only after complying with the provisions of notice as mandated by sub-section (2) of Section 39. Thus, without going into the dispute as to whether the Guideline in question has been issued either under Sections  38, 39, 34 (N) or 55(3), we hold that under any circumstances when the terms and conditions of an existing license are to be amended, substituted, changed or cancelled, the same can only be done after issuing 15 days notice upon the licencee seeking written statement from it and after considering such written statement of the licnecee regarding the proposed amendments. It is evident from record that the BTRC followed the same procedure in the past while increasing different charges in 2006 by amendment dated 16.04.2006 (Annexure-E), which starts with the following words:
“Whereas, in view of the submission representation made by the cellular mobile operators that payment of Royalty and licence fees on handsets was not a workable proposition/arrangement and the consequent discussion of the BTRC with the cellular mobile operators over a period of time it was agreed that the fees and charges as are fixed in this amendment will have to be paid by each of the cellular mobile operators ...............”  
(Underlines supplied)
 
It appears from the above quoted statement that the earlier amendment of 2006 to the terms and conditions of the licence regarding charges was done through a lengthy discussions and negotiations between the parties, and finally, the amendment order was issued under Section 39 (before amendment) as an agreed amendm-ent order. However, in the instant case, when the said additional charge through MCF was incorporated in the Guideline seeking to amend  the terms and conditions of the licence in so far as it relates to the assignment of spectrum of 2008, there was no existence of such notice, negotiation or agreement between the parties. When the  learned advocate for the BTRC was confronted with this point, they also confirmed that no such specific negotiation took place in respect of the application of MCF on the spectrum of 2008 and no notice as such was issued seeking written statement from the Grameen Phone. This being the particular facts and circumstances of the case, we are of the view that the MCF, as incorporated in the Guideline dated 11.09.2011, cannot lawfully be applied on the spectrum of 2008 as it would change the terms and conditions of the licence.
 
In addition, when by specific provisions under Clause-9 of the Guideline the Government and the BTRC exempted the application of the enhanced rate of spectrum fee in respect of the spectrum of 2008, they acted arbitrarily when BTRC sought to apply the MCF through the impugned memo in respect of the same spectrum, which, in our view, suffers from unreasonableness. Thus, we find substance in the submissions of Mr. Taposh and Mr. Mehedi. This being so, we hold that the impugned memo, in so far as it relates to the application of MCF in respect of the spectrum of 7.4 in 1800 MHZ assigned in 2008, is without lawful authority and is of no legal effect. Consequently, the Grameen Phone is not required to pay the same.
 
Dispute relating to VAT deduction:

Since the issue of vatablity of services or facility provided by the BTRC through licence, spectrum etc. is not covered by the terms of the issued by this court, the National Board of Revenue (NBR), the main stakeholder on this issue, was not asked to give reply on the same. Considering this aspect,  we are of the view that the issue of vatability as raised by Mr. Haq may be examined in a proper case upon a proper Rule Nisi in this regard. Since the Grameen Phone challenged the impugned memo only for the reason that the BTRC demanded the amount ‘without any deduction’, meaning without deduction of Vat therefrom, we will confine ourselves to the terms of the Rule.
 
The dispute involving Vat goes to the very root of the scheme of VAT. According to the Grameen Phone, on the total receivable claim of Tk. 100, they will deduct Tk. 15 as VAT and give BTRC Tk. 85, and after such deduction, will pay the said Tk. 15 directly to the Government exchequer as VAT at source in view of Rule 18 (Uma) of the VAT Rules, 1991.
 
Value added tax has not been defined in the VAT Act, 1991 or Rules made thereunder. Section 3 of the VAT Act provides, amongst other,  that 15% Vat will be payable on all services in Bangladesh on the basis of the value mentioned in Section 5. Section 5 (4) provides that in case of proving service, the value added tax will be charged on the total receivables ("phÑ­j¡V fË¡¢çl Efl"). If we read these two provisions together along with the definition of the term ‘fZ’ (consideration) as defined by Section 2 (Z Z) (which defines ‘fZ’ as the total money or value received or receivable as against the services provided), we may conclude that VAT is always assessed or calculated on the basis of the total value receivable or received. This means, if a person sells something for Tk. 100, the Vat amount in view of Section 3 will be 15%, and that 15% Vat, in view of Section 5, has to be calculated on Tk. 100 and be added to the said Tk. 100 making the purchaser to pay in total Tk. 115 to the seller. The seller then deposit the Vat of Tk. 15 in the exchequer. Upon reading of the relevant provisions, namely Sections 3, 4 and 5 of the VAT Act, 1991, there cannot be any other concept of value added tax.
 
There are several methods of calculation of value added tax. As for examples, Section 5(2) provides for ‘direct subtraction method’ and Section 5(4) provides for ‘indirect subtraction method’. In practice, to avoid the complicacies involving the calculation and to avoid evasion of payment of Vat, the ‘indirect subtraction method’ is the most used one. Under this method, at every stage of transaction 15% vat is added and paid by the purchaser of goods or recipient of services. When the purchaser again sells the said goods or service either as whole-seller or retailer to another purchaser or consumer, the first purchaser gets credit for the said 15% vat already paid from the vat to be paid by the 2nd purchaser and 2nd purchaser gets credit for the Vat he paid from the 3rd purchaser in the chain. Ultimately, the vat is paid by the consumer or final recipient of the service. This is why the value added tax is called ‘consumer tax’, as it is the consumer who ultimately pays the Vat. The people or person in the middle like the whole-seller or retailer, although pay Vat, but get the same credited or adjusted from the final vat paid by the consumer. Thus, the ultimate burden is on the consumer.
 
Generally, the vat is collected and deposited by the seller or service provider or facility provider upon collecting the same from the purchaser or service recipient or facility recipient. This is the general mandate under sub-section (3) (N) of Section 3 of the VAT Act. But the general system has undergone major change through the Finance Act, 2010 by which  payment of vat at source has been introduced through the amended provisions of  sub-section (4), (4 L L),  (4 L  L  L), (4 M),  (4 M) and  (4 P) etc of Section 6.  To facilitate this new system, the concerned VAT Rules have also been amended by incorporation of Rules 18 (L) to (P). Rule 18 (P), in clear terms, made provisions for deduction and payment of Vat at source by the companies like Grameen Phone at the time of renewal of its licence or payment of revenue sharing and other charges. In the normal course, it is the service or facility provider who pays Vat upon collecting the same from the service or facility recipient. Under the new dispensation, the Vat has to be paid by the recipient of  service or facility like Grameen Phone at source after deduction. The dispute arose because of the words ‘Ev­p LaÑe’ (deduction at source) as used in the VAT Act and Rules made thereunder. In Bengali, the word ‘LaÑe’ (deduction) generally connotes that some small thing is to be deducted or cut off from a bigger thing. Thus, there may be an understating that the Vat has to be deducted from the consideration (fZ) or total receivable.
 
We have examined the relevant provisions of VAT Act, in particular the basic provisions on which the entire scheme of Vat stands, namely, Sections  3, 5 and the definition of the word  ‘fZ’ (consideration).  We are of the view that by the amendment though Finance Act, 2010, only a method or system of paying Vat has been changed. Generally, it is the service or facility provider who is supposed to deposit Vat after collecting the same from the service or facility recipient. Now, still it is the service or facility recipient who pays the Vat, but pays the same directly to the exchequer after withholding the same at source. Thus, the basic concept or scheme of Vat has not been changed. Rule 18(Uma) and the clarifications of NBR (Annexures M and M1 to the writ petition) have reinforced  this position. But upon reading the clarifications of NBR, we have frustratingly noticed that the NBR has just quoted the provisions of Rule 18 (P) and did not even try to resolve dispute between the parties on Vat issue. By referring to Section 6 and Rule 18 (P), NBR just said that the recipient of the facility would have to pay the Vat at source directly to the Government exchequer after deduction. This was not the dispute between the parties. The dispute was as to wherefrom such deduction of Vat would be made. During hearing also, we do not find any assistance from the NBR. This dispute could in fact be resolved even before coming to this court through a proper clarification from the NBR. Nevertheless, since the matter is before us, we have no hesitation to confirm the basic principle of VAT as enunciated by Sections 3 and 5 of the Vat Act, 1991, which is that the Vat is always added to the total consideration value. It is never deducted like advanced income tax or income tax from the income. Therefore, at whatever stage you deduct and pay Vat, you have to deduct it after addition of Vat and not before addition. Thus, it is in fact ‘withholding’ of Vat at source and paying the same directly to the exchequer. On this issue, we find substance in the submissions of Mr. Hossain. 
 
When Grameen phone or any recipient of service or facility is required to deduct Vat at source, it is supposed to withhold it after calculating the same on the total ‘FZ’ (consideration), the value of the service, and pay it directly to the exchequer. Under the scheme, the Licencee like the Grameen Phone will get credit for the said amount from the Vat to be paid ultimately by the millions of subscribers of this country. Grameen phone is required to add the Vat to the total receivable or consideration (in the instant case the demanded money except the MCF for 2008 spectrum) and deduct or withhold it at source and pay the same directly to the exchequer. When Grameen Phone will provide cellular service to the million subscribers, it will collect Vat on the service value or receivables from each subscriber and get credit for the Vat already paid by it at source while paying for renewal or new spectrum fees or other fees or charges.
 
The following example will make the opaque glass clearer:-
Example:
Let us presume that the fees for renewal of licence, licence fee, spectrum fee or charges as fixed by BTRC is Tk. 100 and Grameen Phone provides its service to the subscribers for Tk. 400 in the following way:
 
Renewal fee, Spectrum fees and other charges
 
(Tk.)
Grameen is required to pay: (100 + 15% Vat)
 
(Tk.)
Salaries of Grameen’s employees, equipments and other expenses
(Tk.)
Profit
 
 
 
(Tk.)
Total receivable or consideration (fZ)
 
 
(Tk.)
Subscribers will pay (400 + 15% Vat) = (400 + 60)
 
 
(Tk.)
100 115 180 105 400 460
 

Now, Grameen Phone is supposed to deposit Vat twice (we are not showing Vats payable for equipments etc.):  1stly – it will withhold Tk. 15 at the time of paying the licence renewal fee etc. and deposit the same directly in the exchequer in view of Rule 18(Uma) of the VAT Rules, 1991, and 2ndly – it is supposed to pay Tk. 60 as Vat upon receipt of Tk. 460 from the subscribers. However, at the final transaction Grameen Phone will get credit for its already paid up Vat of Tk. 15 from the Vat of Tk. 60 as received from the subscribers and will in fact deposit (60 – 15) = Tk. 45 in the exchequer, making the total Vat of (45+15) = Tk. 60 ultimately paid by the subscribers. The above calculation may be followed if Vat at source is required to be calculated separately on other fees or charges.
[N.B.: The above calculation is a lump-sum one. The real calculation might be much more complicated to be done by the expert Accountants.]
 
In the circumstances and for the above reasons, we do not find any illegality in the impugned memo in so far as the issue of Vat is concerned. Thus, by using the words “without any deduction”, or previously “excluding Vat and tax”, in the Guideline or in the impugned memo, we do not see any departure from the above mentioned provisions of law. Rather, under the new dispensation for payment of Vat at source, BTRC must write the words “without any deduction” or “excluding Vat and Tax” etc. to make it compliant with the provisions of sub-sections (3)(N), (4), (4 L L) and other relevant provisions of Section 6 of the VAT Act, 1991 and Rules 18 (L) to (P) of the VAT  Rules, 1991.
 
Maintainability of the writ petition:

We have examined the arbitration Clause under Clause-9 of the Licence Agreement vide Reva-lidation Order dated 24.10.2004 (Annexure-D). It appears that the arbitrators are also able to resolve the disputes regarding the interpretation of the Agreement. Be that as it may, this court has already held that writ is maintainable when the interpretation of law is required to resolve the dispute. In the instant matter, since the interpretation of law, namely interpretation of Sections 38 and 39 of the Telecom Act, Sections 3,5,6 of the VAT Act and Rule 18 (Uma) of the VAT Rules is involved, we are of the view that this writ petition is maintainable.
 
Besides, the agreement between the parties having already merged into the licences issued by the BTRC, the agreement in question has become a sovereign contract and as such writ is maintainable. In this regard, the law settled by our Apex Court in Bangladesh Telecom Ltd. Vs. BTTB, 48 DLR (AD)-20 (para-16) may be quoted: (Para-16)
“Had there been no licence in favour of BTL the agreement, standing alone, would have been purely commercial contract, the cancellation of which could not have attracted the writ jurisdiction of the High Court Division but as the agreement merged into the licence (granted under a statutory provision) its terms and conditions no longer remained the terms and conditions of a commercial contract. It became the terms and conditions of the licence itself.” 
Therefore, in line with the above ratio, we hold that the instant Writ Petition is maintainable.   
 
CONCLUSIONS OF THE COURT:

Regard being had to the above reasons, discussions and legal position, we hold as follows:
  1. The writ petition is maintainable;
  2. The Rule is made absolute in part;
  3. The impugned memo dated 17.10.2011 (Annexure-I), in so far as the application of MCF to the assignment of spectrum in 2008 is concerned, is without lawful authority. Accordingly, the petitioner Grameen Phone is not required to pay the MCF for the 7.4 spectrum in 1800 MHz assigned in its favour in 2008;
  4.  There is no illegality in the impugned memo in so far as the issue of Vat is concerned. The Grameen phone is required to add the Vat to the demanded money (except the MCF in respect of the spectrum of 2008) and withhold it at source and then pay the same directly to the Government exchequer. However, Grameen Phone will get credit for the said paid Vat from the Vat to be paid ultimately by its subscribers in accordance with law; 
  5. In view of above, the Grameen Phone should immediately pay, if not paid already, the fees, charges and VAT to the concerned authorities in accordance with law.
Ed.