Valelevu Invests Ltd v Commissioner of Inland Revenue [2004] FJHC 80; HAA0019.2004 (31 March 2004)

IN THE HIGH COURT OF FIJI
AT SUVA
APPELLATE JURISDICTION

CRIMINAL APPEAL CASE NO. HAA0019 OF 2004

BETWEEN:

VALELEVU INVESTMENTS LIMITED
Appellant

AND:

COMMISSIONER OF INLAND REVENUE
Respondent

Hearing: 31st March, 2004
Ruling: 31st March, 2004

Counsels:

Mr. D. Sharma – for the Appellant
Ms. K. Buatoka – for the Respondent

APPEAL DECISION

This is an appeal against sentence. In the Magistrates Court at Nausori on the 8th of October 2003 the defendant company entered a guilty plea and was convicted of failing to deliver a return of income as required by the Commissioner of Inland Revenue contrary to Sections 50(1) and 96(1) of the Income Tax Act (Cap. 201.)

The company was sentenced to the maximum penalty available under sections 50 and 96 of that act and ordered to pay the sum of $40.00 per day for a default of 203 days. A total of $8, 120.00.

Particulars of the Offence

The appellant is a supermarket operating company. It failed to file a return for the year ending 31st December, 2001. After notices and extensions of time were advised the appellant still had not filed the return by the 16th of September 2003 and so was issued with the summons. The period of default running from the 20th of March 2003, which was the last date for filing the return, to the 8th of October 2003, the date of first appearance. (Some 203 days.)

In mitigation that appellant company said that its accountant had failed to file the necessary return as it had been overlooked during a period of company restructuring.

Sentencing Decision

In a short sharp sentencing decision the learned magistrate read:

You have been given opportunity by Inland Revenue to reconcile your Accounts. That had not been done to date.

Fine $40.00 per diem for 203 days = $8,120.00 plus $50.00 Cost failing which a Distress Wt. to be issued.

Appellant’s Case

The appellant’s case proceeded largely unopposed by the respondent. The essential facts were and remain agreed between the parties.

The appellant pleads that the fine in all the circumstances was excessive and unduly harsh. It is the maximum penalty available under statute and should not have been imposed as:

- the appellant is a first offender

- has a good record of filing its tax returns

- was remorseful about the mistake that had been made

- and pleaded guilty at the first opportunity.

The appellant raises a further ground of appeal and says that the Court has exceeded its jurisdiction. Counsel relies on a decision of my brother Justice Scott in Commissioner of Inland Revenue v Druavesi [1997] FJHC 81; 1997 43 FLR 150 (3 July 1997) at page 2 of that appeal the learned Justice analysed the provision in this way:

On 22 November 1993 the Respondent finally complied with the Section 50(1) notice, that is after a period of 180 days default. By Section 96 of the Act a defaulter is liable to a maximum penalty of $40 per day for each day of default. Given that the Respondent faced 3 charges he was liable if convicted, to a maximum penalty of $40 x 3 x 180 = $21,600. In view of the limitations imposed by Sections 7(b) and 12(2)(b) of the Criminal Procedure Code (Cap. 21) absent a committal to the High Court under the provisions of Section 222 the maximum penalty faced by the Respondent was a fine of $2,000.

I respectfully adopt this reasoning.

Counsel for the respondent adopts a middle ground on the issue of penalty. Apart from that difference of opinion she properly concedes the first two points of the appeal.

Counsel also helpfully provided the following tariff decisions:

1. Naranbhai Nathubhai Patel -v- State [1991]

2. CIR -v- Petero Qauqau [1992]

3. CIR -v- Armogam Pandaram s/o Munsamy Pandaram [1990]

4. Attorney-General -v- Hari Chand (14 FLR 245 at 247)

Counsel agreed that these decisions appear to indicate a global penalty in the range of $250.00 to $650.00 is appropriate for a first offender. In most cases this equates to a penalty of between $1.00 to $2.50 for each day of the offending.

Decision

The learned magistrate was wrong to impose a maximum penalty against a first offender of otherwise good tax repute that acknowledged technical offending at the earliest opportunity. In my view it would only be in the worst possible cases for belligerent and repetitive tax defaulters that a maximum penalty of $40.00 per day would be appropriate.

However, in addition having adopted the reasoning of my brother Justice Scott I must also find that the totality of the penalty exceeded the jurisdictional limit for which the Magistrates Court can impose fines of this nature.

I have considered the helpful tariff decisions provided by counsel for the Commissioner of Inland Revenue. This was offending of a technical and minor nature only. It arose out of a lax administration during a period of company restructuring rather than a belligerent avoidance of the obligation to file a return.

For these reasons I grant the appeal, quash the sentence in the lower court and substitute a penalty of $1.50 per day for each day of the default.

Conclusion

Accordingly the appeal succeeds. The appellant is fined a total of $304.50 for the 203 days of default. No costs are sought and none are ordered.

Gerard Winter
JUDGE

At Suva
31st March, 2004