Commissioner of Inland Revenue v Gurdial Singh Brothers Ltd [2005] FJHC 388; HBA0015J.2005S (16 December 2005)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL APPEAL NO. 0015 OF 2005

Between:

THE COMMISSIONER OF INLAND REVENUE
Appellant

- and -

GURDIAL SINGH BROTHERS LIMITED
Respondent

Counsel: Mr. B. Solanki for the Appellant
Mr. V. Maharaj for the Respondent

Date of Hearing: 3rd November & 1st December 2005
Date of Judgment: 16th December 2005

JUDGMENT

The question in this case can be stated simply as follows, “can the value added tax tribunal grant a stay of recovery of taxes pending its adjudication upon an appeal”.

The appellant, the Commissioner of Inland Revenue, states that the tribunal is a creature of statue. As such, its powers and jurisdiction are limited to the statute creating the tribunal. Section 51(4) of the Value Added Tax Decree 1991 states “the tribunal shall have powers and authority similar to those vested in the judge of the High Court under sections 111 and 112 of the Constitution as if the appeal under this decree were an action between the registered person and the Commissioner”.

When the word Constitution is used it refers to the 1990 Constitution of Fiji. At the time of passage of the VAT Decree that was the Constitution then in force. Those sections of that Constitution read as follows:

“111(1) The High Court shall have unlimited original jurisdiction to hear and determine any civil or criminal proceedings under any law and such other jurisdiction and powers as may be conferred on it by this Constitution or any other law.

(2) The High Court shall have jurisdiction to hear and determine appeals in both civil and criminal matters from courts subordinate to it as may be conferred on it by this Constitution or any other law.

112. The jurisdiction of the High Court shall include the jurisdiction and powers which were vested in the Supreme Court under the laws existing prior to December 5, 1987, and any reference in the laws in force prior to that day to the Supreme Court shall be construed as a reference to the High Court established by this Constitution”.
     

These sections of the old Constitution correspond to section 120 of the 1997 Constitution. Neither party took any point on the fact of the change of Constitution. It does not impinge upon the question in issue in this case.

The appellant continued that the regime for the collection of taxes is sui generis. As such, it cannot be compared with other jurisdictions in the interpretation of statues and regulations.

The appellant, the Commissioner of Inland Revenue, therefore argues that the word “similar to” does not extend to the full range of powers that vest in courts.

The Commissioner argues that the whole structure of the Value Added Tax Decree is such that it is the Commissioner who determines when and how taxes are collected. It is in his discretion whether or not to collect taxes pending any dispute about the amount owing. The provision is for the benefit of the public purse in that the Commissioner collects the taxes he thinks are correct and if there is an over payment refund is made and if there is an under payment then the balance is refunded.

In these circumstances the appellant therefore argues that when the statute refers to “similar to” it is necessarily limited by the context and ambit of the VAT Decree.

The respondent takes a different view and supports the decision of the tribunal at first instance in this case. That tribunal took the view that it did have the necessary jurisdiction under the tax decree, by virtue of the word “similar”, to suspend the collection of the assessed tax amounts by its own order pending the final determination of the case.

A number of authorities were cited from similar jurisdictions, e.g. the Land Transport Authority, and from the court’s inherent jurisdiction to say that any court or tribunal necessarily has such ancillary powers as are required to give effect to its powers and its functions. In this regard the respondent says it would be wrong for the Commissioner to continue to levy the payment of assessed taxes when the very amount of those assessed taxes is under appeal to and consideration by the tribunal.

In this particular case there is a somewhat unusual circumstance. It does not affect the question in issue nor the reasoning behind this judgment. However, it should be mentioned. The Commissioner of Inland Revenue initially assessed the tax owing at $800,000.00. That assessment was varied downwards twice and eventually at the time of hearing the Commissioner’s stance was that, in fact, a rebate of some $80,000.00 was owing from the Commission to the respondents. It was therefore necessary to determine whether or not this appeal should continue given that only declaratory relief was sought and that it would be of no effect as far as this particular respondent is concerned. This question was considered and I gave an oral ruling, having heard argument and the authorities, that this appeal should continue. However, as I made clear in that oral ruling I will consider the costs of the respondent whatever the outcome is.

I have before me the ruling of the Value Added Tax Tribunal given on the 28th of July 2005, the notice and grounds of appeal and the written submissions of the appellants and the respondents.

The appellants argue that the word similar in the Constitution relates “to the procedural and administrative components applicable to the High Court”. The appellants set out the sequence of events which occur according to the Act when an assessment of taxation is made and is disputed. An assessment is sent to the taxpayer and the taxpayer then has 28 days in which to lodge a notice of objection.

Section 50 sets out the procedure for objection to an assessment. It gives to the Commissioner the discretion whether or not to accept an objection out of time and whether or not to suspend recovery of taxes. If the objection is not accepted then a notice is sent to the taxpayer accordingly and the taxpayer then has the period of two months in which to make an appeal to the tribunal.

Section 50(7) states that “the obligation to pay and the right to receive and recover any tax chargeable under the this decree (including any interest, costs and penalties) shall not, unless the Commissioner so directs, be suspended by any objection or appeal or pending the decision of the tribunal under section 55 of this decree but, if any assessment is altered on objection or appeal or in conformity with any such decision, a due adjustment shall be made, amounts paid in excess being refunded subject to section 65 of this decree and amounts short paid being recoverable”.

The Commissioner therefore argues that there is clear statutory guidance as to what happens in these circumstances. Whatever procedures might be followed in other tribunals e.g. the Land Transport Authority, with such an explicit statement of powers then the tribunal cannot accrue to itself under its general description of jurisdiction a power to override that statutory power.

The respondents do not accept these submissions. They state that the words “similar to” in this statute creating the tribunal link its powers to those of the High Court as described in the Constitution. That decree neither poses “any qualification nor any restrictions on the powers of the VAT Tribunal”. Further, they say if the powers are made similar to those of the High Court, the High Court itself has inherent jurisdiction to regulate its own procedure and prescribe procedures and practices necessarily ancillary to the exercise of its main functions. In that regard, the ability to stay, pending the outcome of an appeal, the recovery of tax is a fair and necessary adjunct to the operation of the tribunal.

Further, the respondents say that from time to time the very existence of a company or solvency of a person might be threatened by the compulsory payment of taxes in dispute. The only way that this might be disputed is by way of judicial review. That is a separate and comparatively cumbersome procedure when the same could be achieved within the jurisdiction of the tribunal. The respondents therefore say that not only is the principle in favour of their argument, the very practicalities are as well.

It should also be mentioned in this judgment, in passing, that within the dispute between the respondents and appellants over these taxation amounts an application was made to the court for judicial review. That application came before me and it was refused at the application for leave stage and before the putting of the substantive motion. Both parties in this appeal are agreed that that refusal took place on grounds other then those being argued in this case and do not affect my hearing of the argument and making the decision herein.

There is a final appeal available under section 58 of the decree. That is done by reference to the High Court. “On any such reference, the High Court shall hear and consider such matter upon the papers and evidence referred and upon any further evidence which the appellants or the Commissioner produces under the direction of the said court”.

Section 59 continues:

“(1) no assessment shall be set aside by a court of law upon the ground that there has been an error or omission in connection with any proceedings required to be taken under this decree or any regulation thereunder, but such court, in any case that may come before it, may determine a true and proper amounts of the tax to be paid under this decree.

(2) On the hearing and determination of all objections to assessments under this decree the onus of proof shall be on the registered person objecting to the assessment.”

The decision of Mr. Justice Winter in HBJ0026 of 2004, Suncourt (Wholesalers) Limited v. The Fiji Islands Revenue and Customs Authority has been cited. That was an order he made on 8th December 2004 as a result of a judicial review application. There was an ex tempore ruling. It tends to support the appellant’s contention in these proceedings, although the point being considered here was not argued in that case.

In my judgment, the answer to this question hinges upon subsection 7 of section 50 of the VAT Decree. In the circumstances of other statutory bodies, where procedures and powers are prescribed and the tribunal’s jurisdiction is linked into that of the High Court, there might be argument for stating that those powers necessarily include the ability to stay the orders, directions or requirements of the subordinate tribunal or authority pending the outcome of the appeal. However, the taxation regime is regarded as being sui generis. The statute creates a regime which gives the Commissioner strong powers and assists him/her in other respects e.g. the onus of proof at each stage in appellate hearings.

Subsection 7, in my judgment, clearly places the decision concerning the suspension of the payment of any assessed taxes during the currency of any appeal with the Commissioner. Section 59(i) is consistent with this.

These words necessarily must take precedence over the ancillary jurisdictions given to the tribunal by section 51(4) and its words “shall have the powers and authority similar to those vested in the judge of the High Court ...”

Accordingly I allow this appeal. I set aside the decision of the VAT Tribunal dated the 28th of July 2005 in so far as there was a stay placed upon the garnishee proceedings taken by the Commissioner against the respondent. I acknowledge in this case that this order is of no practical effect within the confines of this case. However, I am informed that there are many other cases currently pending in which this point arises. For the benefit of the Commissioner and taxpayers, now and in the future, it is right that there is a clear ruling upon this issue.

Accordingly I rule:

“(a) that the Value Added Tax Tribunal erred in law in holding it had jurisdiction to grant a stay against recovery of taxes pending an appeal before it;

(b) that the Value Added Tax Tribunal erred in law in granting a stay of recovery of taxes in the matter on the 28th of July 2005”.

I will hear the parties on costs.

(R.J. Coventry)
JUDGE