Ghim Li Fashion (Fiji) Pte Ltd v Commissioner of Inland Revenue [2001] FJLawRp 72; [2001] 2 FLR 276 (16 August 2001)

	Home \| Databases \| WorldLII \| Search \| Feedback Fiji Law Reports

High Court Civil Jurisdiction
5, 11, 25 October, 2000, 15 December, 2000, 16 August, 2001 HBC 0403/98S

Value Added Tax –whether insurance proceeds received by taxpayer in the course of making taxable supplies or in furtherance of taxable activity - Value Added Tax Decree 1991 ss3(8), 4(12), 15(1), 19, 26, 44(2), 45, 46, , 89; High Court Act s3(2)

Value Added Tax – whether set-off of refunds against income tax liability lawful- whether amended assessments valid – defendant entertained out of time objection – defendant’s actions unconscionable – defendant estopped from relying on 1996 amended assessment when it failed to fulfil promise of issuing amended assessment for 1997 - Value Added Tax Decree 1991 ss48(2), 50(2),(3), 65(2), (4), (5), (6) and (7), 67(7)

Constitution - validity of amending decree – whether s3(8) Value Added Tax Decree constitutional – not passed by Parliament – principle of close scrutiny before acceptance – whether High Court has jurisdiction over tribunal to determine issues raised by Plaintiff – powers of the VAT tribunal - tribunal has not yet determined the objection - 1997 Constitution ss29(2), 120(1), Value Added Tax Decree 1991 ss3(8), 65(4), (5), (6) and (7), 51, 52, 53, 54, 55, 56 & 57

Statutory Interpretation of revenue law – what is clearly said – no room for intendment – no presumption as to a tax – nothing implied – meanings of ‘activity’, ‘goods’, ‘taxable activity’, ‘taxable supply’, ‘in the course of or furtherance of making taxable supply’, ‘in the course of carrying on a business’, ‘zero-rated supply’ - Value Added Tax Decree 1991 ss2, 3(8), 4(2), 15(1), 15(2), 16(3)(b); Tax Free Zones Decree 1991 s7(1)

The Plaintiff taxpayer in 1990 was granted Tax Free Factory status by the Fiji government for the manufacture of garments in Fiji solely for the purpose of export. The tax exemption applied to Income Tax and Value Added Tax (VAT), the latter products entered for export being zero rated under the Second Schedule of the VAT Decree. Under the VAT exemption, the taxpayer was required to pay input tax on all items purchased locally in the course of its business and to pay output tax in relation to all items sold from its business. At the end of each tax period the taxpayer filed a return and claimed back all the input tax paid on the goods and services which it purchases locally. The taxpayer received 19 notices of assessment for years 1995-1998 indicating refunds of $446,664.19 due, which the defendant sought to offset against the taxpayer’s income tax liability. The taxpayer filed this action but at the hearing withdraw its claim against 6 assessments. The defendant did not dispute that it had issued notices of assessments entitling the taxpayer to refunds in the sum of $334,355.54. The defendant issued a notice of amended assessment in May 1996 requiring VAT of $350.125.99 under section 3(8) of the Decree for insurance payments received by the taxpayer after a fire destroyed its factory, but the taxpayer denied ever receiving the amended assessment. The Court was satisfied the taxpayer never received the formal amended assessment. The Court discussed the deeming provisions of s3(8) and the application of s15 to impose a tax once s3(8) had deemed a state of affairs. The Court discussed whether insurance payments are subject to VAT by reference to taxable supplies, taxable activities of a taxpayer, and whether these were in furtherance of a course of business or to the business structure itself. The Court found that the insurance payments are not subject to VAT, in any event, would be zero-rated.

In order for a setoff to be effected two requirements must be met: (i) a tax liability is owed by a taxpayer for a taxable period (s65(4)); and (ii) the defendant has given a Notice of Intention to setoff to the taxpayer (s67(7)). The taxpayer submitted that the defendant failed to meet both criteria. The Court found the set-off unlawful as no notice of intention to set-off had been given to the taxpayer. Upon discussing the width of various sections, it became apparent to the Court that the VAT Decree, imposed as it was at a time when there was no Parliament, would need to be subject to close scrutiny to ensure justice is done for the defendant and any taxpayer. The Court commented on some of the provisions which gave wide powers, and their implications. In interpreting revenue law, the Court was mindful to read the words without adding anything to the text.

Held–(1) Extending the concept of supply to payment by way of indemnity under a contract of insurance, liability incurs where the payment relates to a loss incurred in respect of goods or services in the course of furtherance of making taxable supplies by the recipient, not in the course of furtherance of the taxable activity of the taxpayer. It matters not where the place of receipt is, s16(3)(b) operates to deem that supply to have occurred in Fiji. The payment of indemnity for loss of building, plant and equipment and motor vehicles, not being a loss ‘in respect of goods’ is not subject to VAT. Where the stock lost included raw materials, as opposed to manufactured stock ready for sale, the loss was not of goods which would otherwise have been the subject of supply in the course or furtherance of the taxable activity of the taxpayer, so the indemnity does not relate to a loss incurred in respect of goods or services in the course or furtherance of making taxable supplies. Payment referable to the loss of stock intended for export sale, where the supply of that stock is in the course of the taxpayer’s taxable activity, would have been zero-rated.

(2) The set-off of refunds due against income tax liability is unlawful as the defendant failed to give a mandatory notice in writing of its intention to set off, as required by s65(6) and (7) VAT Decree, hence it improperly and unlawfully exercised its powers. The amended assessments are immaterial as the procurement of those assessments was unlawful. The defendant’s actions in assuring the taxpayer it would issue an amended assessment in 1997 and failing to discover it are unconscionable and the defendant is estopped from resiling upon a promise made, to reject an out of time objection, or from relying on a 1996 amended assessment. Section 48(2) gave the Commissioner such wide powers that, in the circumstances of this case, it would be unfair to allow him to exercise them against the taxpayer.

(3) The Value Added Tax Decree was a law, not passed by Parliament but rather made by some non-elected person or persons who did not have to account to Parliament for his or their actions, and that was sufficient reason why its various provisions, especially 44(2), 45, 46 and 89, insofar as they deal with the duty to pay tax, must be studied most carefully so as to ensure that justice is done to both the Commissioner of Inland Revenue and the person said to be liable to pay tax. No legislature at least in a democracy would have passed such Draconian provisions. The High Court has jurisdiction to determine the matters raised in the taxpayer’s Writ of Summons. As the defendant wrongly interpreted the law the defendant had assumed an authority which he did not have. It levied the taxpayer with substantial VAT and unlawfully setoff an unlawful liability against VAT refunds lawfully due to the taxpayer. These are questions of law, which only the High Court has the power and authority to decide. The VAT tribunal determines issues relating to objections to assessments which the defendant has the authority to make in accordance with ss44, 45 and 46. These matters fall outside those sections.

(4) The VAT Decree as a tax collection measure should not be construed more expansively than is warranted by its language. One has to look merely at what is clearly said. There is not room for an intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing to be implied. One can only look fairly at the language used.

meaning of ‘taxable activity’ - in order for the supply of goods or services to constitute a taxable activity, the supply of goods or services must be involved in an activity which carried on continuously or regularly by a person. A taxable activity is something capable of being sold.
application of ss3(8) and 15 VAT Decree to ‘taxable activity’ – this can only mean the taxable activity of the person who receives the payment of indemnity focuses attention on the supply of goods in which the taxpayer is involved continuously or regularly. Once s3(8) deems the receipt of an indemnity to be a supply of goods and services in the course of or furtherance of a taxable activity, and chargeable with VAT under s15(1), s15(2) imposes VAT at the rate of zero percent on the receipt of an indemnity. Section 3(8) operates on the footing, as here, that the taxable activity of the recipient of the indemnity can be established as a matter of fact.
meaning of ‘taxable supply’- taxable supplies may occur in the course of a taxable activity, the activity being the business in the course of furtherance of which supplies occur, at the commencement or termination of the business or activity. The latter part of the phrase is necessary to avoid arguments that the commencement or termination of an activity (or business or enterprise) is not usually regarded, as a matter of ordinary language, as something done in the course or furtherance of the activity or business or enterprise, but rather as something done in relation to its establishment or dissolution.

meaning of ‘zero-rated supply’ - a supply is zero-rated”, it does not become ipso facto an “exempt supply” so as to exclude altogether the operation of s15 VAT Decree. A zero-rated supply shall be charged at the rate of zero per cent notwithstanding that s15(1) applies to the supply.

application of ss3(8) and 15 VAT Decree to ‘in the course of or furtherance of making taxable supply’ – the loss for which compensation is received must be a loss incurred in the course of furtherance of making taxable supplies. The operation of s15 is not triggered in every case but in the course or furtherance of actual transaction of supply. The purpose of s3(8) is to exact VAT in cases where there has been a loss of goods which, if they had not been lost would have been supplied by a registered person so as to have attracted VAT; and where an indemnity is received in respect of that loss, thus was not intended to subject all insurance payments in respect of the loss of buildings, plant, equipment and motor vehicles which it was not part of the taxable activity of the taxpayer to supply.

application of ss3(8) and 15 VAT Decree to ‘in the course of carrying on a business’ – losses in the conduct of the business and losses incurred in respect of the business itself. The operation of the deeming provisions of s3(8) is enlivened by the receipt of payments by way of indemnity for losses in respect of what would otherwise have been the subject of taxable supplies by the taxpayer.

Obiter dicta – (1) Section 46 VAT Decree is in direct contravention of Section 29(2) of the 1997 Constitution and deprives an individual, whether he be in possession of a fortune or not, of the right to audience in a court of law to dispute a tax assessment if he is not a registered person who has not lodged an objection in writing with the Commissioner within 28 days of service upon him.

(2) The gangantuan wideness and presumptousness of s89 VAT Decree in purporting to invalidate every other Act, Decree, law, rule, regulation, or other legal instruction, instrument or document which contravene the provisions of the Decree relating to the payment of tax in Fiji is frightening in its implications.

[Note: on appeal, the Court of Appeal reversed the High Court judgment: ABU0056 16 August 2002. On further leave to appeal to the Supreme Court, the question of the correct interpretation of s3(8) of the Value Added Tax Decree is one of significant public importance: 29 November 2002]

Isireli Fa and Ritesh Naidu for the Plaintiff
Tania Waqanika and Barbara Malimali for the Defendant

Byrne, J
It is a fact almost universally acknowledged that an ordinary individual, not in possession of a fortune, who believes he does not owe any income tax in any of its many and varied forms to the Government must think long and hard before deciding to put his belief to the test in a court of law. This is because, if not since time immemorial, then certainly since Biblical days, the rights and powers of the tax gatherer have been far greater than those of the person from whom it is sought to recover tax.

The justification for this is said by those responsible for collecting tax to be that only by having such rights does the machinery of the State run smoothly. This is not quite the same as saying “Any means to an end” but in my view runs perilously close to it. Evidence to support my proposition is to be found in various taxation laws including the one now before me for any consideration, the Value Added Tax Decree of 1991.

By its very title it will be noted that this law was not passed by Parliament but rather made by some non-elected person or persons who did not have to account to Parliament for his or their actions. That of itself is sufficient reason why its various provisions, insofar as they deal with the duty to pay tax, must be studied most carefully so as to ensure that justice is done to both the Commissioner of Inland Revenue and the person said to be liable to pay tax.

As Shameem J. said in her unreported judgment of 30^th July 2001 HAM 007 of 2001S State v Audie Pickering at p.22:

“The judiciary has a traditional deference to Parliament. It is for Parliament to pass laws, and for the judiciary to give effect to them. Most legislation will have a valid constitutional purpose because it would have been passed after much research, discussion and debate.”

It is my considered opinion having read the VAT Decree for the purposes of this judgment that it could only have been passed into law after very little, if any, research, discussion and debate. By virtue of numerous provisions, of which I shall mention only some, I am satisfied that there could not have been any, or at best only a bare minimum, of debate, and certainly not in Parliament because there was none. If there had been proper debate in Parliament I venture to suggest that no legislature at least in a democracy would have passed such Draconian provisions as Section 44(2), Section 45 and Section 46 and Section 89, to name but four. Section 44(2) reads thus:
“Subject to Section 48 of this Decree, the Commissioner may from time to time and at any time make all such alterations in or addition to an assessment made under this Section as he thinks necessary to ensure the correctness thereof, notwithstanding that tax or further tax may have been paid.”

This sub-section gives the Commissioner a blanket power to make at any time any alterations to an assessment, which he thinks necessary despite the fact that tax or even further tax may have been paid.

“The validity of an assessment shall not be affected by reason that any of the provisions of this Decree have not been compiled with.”

This section authorises the Commissioner to disobey any of the provisions of the Decree concerning assessments if he thinks fit and gives the seal of validity to the assessment notwithstanding that the Commissioner may have disregarded the Decree in making the assessment.

Section 46 is headed: Assessment deemed correct except in proceedings on objection and then reads:

“Except in proceedings on objection to an assessment under Section 50 of this Decree, no assessment made by the Commissioner shall be disputed in any Court or in any proceedings, either on grounds that the person so assessed is not a registered person or any other ground; and except as aforesaid, every such assessment and all the particulars thereof shall be conclusively deemed and taken to be correct and the liability of the person so assessed shall be determined accordingly.”

This section is in direct contravention of Section 29(2) of the 1997 Constitution of Fiji, which says:

“Every party to a civil dispute has the right to have the matter determined by a court of law or, if appropriate, by an independent and impartial tribunal.”

Section 26 deprives the individual, whether he be in possession of a fortune or not, of the right to audience in a court of law should he be minded to dispute an assessment of tax which he has received on any ground. This right is only granted to him if he is a registered person who lodges with the Commissioner an objection in writing to the assessment within 28 days of the date upon which the Notice of Assessment was served upon him.

I venture to suggest that even members of the most despotic regime would blush at the powers purportedly given the Commissioner in these three sections.

“In measuring the content of the legislation, the courts are to look to the purpose and effect of the legislation. Dickson J in R v Big M. Drug Mat Ltd. 1985 CANLII 69; (1985) 1 SCR 295 speaking for the majority of this Court said at p.331: “In my view both purpose and effect are relevant in determining constitutionality; either an unconstitutional purpose or an unconstitutional effect can invalidate legislation.”

There is an assumption that Parliament speaks for the people and passes laws with the assent of the people. This is the essence of democracy. It is a powerful reason why the judiciary should defer to the will of Parliament. Legislation passed by Parliament reflects in principles, the will of the people.”

I wholeheartedly agree, from which it follows that a Judge considering the Value Added Tax Decree should only after much thought defer to the will of the persons responsible for it where it purports to cut down the rights of the ordinary individual, I have therefore given much consideration to the Decree when preparing this judgment for reasons which will appear later.

I shall leave until last comments, which need to be made about, section 89. With those preliminary remarks I turn to the matter before me.

The Plaintiff is a limited liability company duly incorporated under the provisions of the Companies Act and having its registered office situated at 12 Walu Street, Marine Drive, Lautoka. The Plaintiff on 30^th April 1990 was granted a Tax Free Factory status by the government of Fiji for the manufacture of garments in Fiji solely for the purpose of export of its products. Under the Tax Free Factory Status accorded it by the government, the Plaintiff is exempt from paying taxes in Fiji for the duration of its Tax Free Licence. In the Plaintiff’s case it was for a period of thirteen years from the date of issuance of its licence. The tax exemption accorded to it applied to the payment of Income Tax and V.A.T. (Value Added Tax) in the form of it being zero rated of V.A.T. purposes.

Whilst the operation of the Plaintiff’s exemption from Income Tax was reasonably straightforward, the method by which it was zero rated for VAT was indirect and a little complex. In order to allow the Plaintiff not to be subject to VAT, a system of input tax and output tax was employed. The effect of this was that the Plaintiff was required to pay input tax on all items purchased locally in the course of its business as all goods and services sold in Fiji include a VAT component. In relation to all items sold from its business the Plaintiff was required to pay output tax. Because the goods from the Plaintiff’s factory were entered for export it was zero rated for the purpose of VAT under the Second Schedule to the VAT Decree. The effect of this is and was that the Plaintiff pays output at the rate of zero percent. At the end of every tax period the Plaintiff files a return whereby it claims back all the input tax paid on the goods and services which it purchases locally. Once the VAT returns are filed the VAT Department assesses the return and issues a Notice of Assessment advising on whether a person is entitled to a refund or is required to pay more VAT to the VAT Department.

The Plaintiff received various notices or assessment from the Department since September 1995 which have indicated refunds in the sum of $446,664.19 as set out at paragraph 6 of the Statement of Claim in the manner as follows:

Year 1995
	September -	$ 9,302.36
	October -	$13,455.28
	November -	$53,083.72
	December -	$26,055.00

Year 1996	January -	$17,787.57
	February -	$65,918.85
	March -	20,021.34
	May -	$11,382.49
	June -	$29,566.81
	August -	$ 464.40
	September -	$23,767.39
	October -	$15,974.15
	November -	$30,030.99
	December -	31,575.63

Year 1997	January -	$12,024.56

Year 1998	January -	$ 9,174.93
	February -	19,401.59
	March -	$20,656.98
	June -	$34,769.71

On the 17^th of August 1998 after all attempts to settle the dispute which had arisen between the Plaintiff and the Defendant as to the Plaintiff’s liability for Income Tax failed the Plaintiff issued the Writ in this action claiming of $466,664.19 refund of VAT payment made by it. When the hearing began before me on the 5^th of October 2000 by consent the Plaintiff reduced its claim to $334,355.54. It withdrew its claim for December 1995, January, February, March, May and June 1998. The Defendant does not dispute that it had issued notices of assessments entitling the Plaintiff to refunds in the sum of $334,355.54 (three hundred and thirty-four thousand three hundred and fifty-five dollars and fifty-four cents only).

The Defendant in paragraph 6 of his Statement of Defence does not deny that the Plaintiff was entitled to VAT refunds as claimed by the Plaintiff but states that he audited the VAT affairs of the Plaintiff during 1996 and 1997, as a result of which he issued a notice of amended assessment on 20^th May 1996 requiring the Plaintiff to pay VAT of $350.125.99 on the insurance payments received by the Plaintiff in respect of taxable period December 1995. The Defendant further pleads at paragraph 6 that after further consideration of the Plaintiff’s affairs the Defendant on or about 20^th May 1997 issued a further notice of amended assessment to the Plaintiff requiring the Plaintiff to pay VAT of $341,034.68 for taxable period December 1995. It is to be noted here that the Defendant failed to provide at the trial any evidence of the said 1997 amended assessment. The Plaintiff denies ever receiving the said amended assessment. The only notice that the Plaintiff has of an Amended Assessment is the Defendant’s letter of the 9^th of May 1997 (Exhibit P.8). I am satisfied on the evidence that the Plaintiff never received any formal amended assessment.

The Defendant says that he exercised his powers under Section 65(4) and 65(6) of the VAT Decree 1991 (hereinafter referred to as “the Decree”) and set off the refunds due to the Plaintiff against the alleged liability owed by the Plaintiff.

The issue before this court is whether the Defendant had acted lawfully in proceeding to set off an alleged VAT liability in the sum of $350,125.99 (three hundred and fifty thousand one hundred and twenty-five dollars and ninety-nine cents) against VAT refunds, which were due to the Plaintiff.

The Plaintiff claims that the Defendant wrongly found the Plaintiff liable in the sum of $350,125.99 thus preventing it from receiving refunds in the sum of $334,355.54 which it claims are due to it.

The Defendant argues that the reason why he considers the Plaintiff in the sum of $350,125.99 is because Section 3(8) of the VAT Decree imposed a VAT liability of 10% on insurance proceeds that it received from its insurers for the fire which destroyed its factory at Lautoka in 1994.

The Plaintiff alleges that in so holding against the Plaintiff the Defendant has erroneously interpreted Section 3(8) and accordingly it asserts that the Defendant has no legitimate basis for withholding that refund due and payable to the Plaintiff. As a result it seeks the following orders against the Defendant:

For a setoff to be followed under the VAT Decree two requirements must be met. They are:

The Plaintiff submits that neither of these two criteria was met by the Defendant. I now consider the submissions.

Interpretation of Section 3(8) and its application to the Plaintiffs
Fundamental to determining whether a lawful liability is owed by the Plaintiff to the Commissioner of Inland Revenue is a correct interpretation of the meaning and application of Section 3(8) of the VAT Decree as the C.I.R. has used this section as his authority to levy a VAT liability in the sum of $350,129.55 on the Plaintiff. I set out below the relevant facts relating to the Plaintiff’s receipt of the Insurance proceeds and the application of Section 3(8) to the same.

The Plaintiff suffered loss in relation to its business as a result of a fire at its factory in 1994. Pursuant to its insurance policy, it recovered under policies of insurance held by it, moneys in the following manner:

Amount Received
Building $ 798,382.00
Plant & Equipment $1,457,583.60
Stock $1,685.644.40
Loss of Profits $ 100,000.00
Vehicles $ 42,801.74
$4,084.481.74

The Defendant claims that the insurance payments received by the Plaintiff are subject to VAT pursuant to the VAT Decree 1991. The Defendant assessed the Plaintiff requiring it to pay VAT on the insurance indemnity payments it received in the following manner:

VAT Payable
Building $ 72,580.18
Plant & Equipment $132,501.60
Stock $153,242.22
Loss of Profits $ 9,090.91
Vehicles $ 3,891.07
$371,311.98

The Plaintiff disputed the Defendant’s assessment and requested the Defendant to reassess the VAT returns of the Plaintiff whereby the Defendant on 20^th May 1996 issued a Notice of amended assessment to the Plaintiff requiring to pay VAT of $350,135.59. The Plaintiff again disputed the Defendant’s assessment.

Section 15 of the Decree is the operative provision of the Decree and reads as follows:

“(1) Subject to the provisions of this Decree, the tax shall be charged in accordance with the provisions of this Decree at the rate of ten percent on the supply (but not including an exempt supply) in the Fiji of goods and services on or after the 1^st day of July 1992, by a registered person in the course or furtherance of a taxable activity carried on by that person, by reference to the value of that supply. (Emphasis is mine.)

(2) Where but for this subsection, a supply of good and services would be charged with tax under subsection (1) of this Section, any such supply shall be charged at the rate of zero percent where that supply is a zero-rated supply.”

Section 16 of the Decree deals with the place of supply. It provides relevantly by s.16(3)(a) that “in relation to a supply of goods which involves their removal from Fiji, those goods shall be deemed to be supplied in Fiji”.

Section 19 of the Decree makes provision for determining the value of supply of goods and services by reference to the consideration for the supply of goods and services.

In relation to the concept of “supply”, s.3 of the Decree provides that supply includes all forms of supply within the ordinary meaning of that term, and extends the concepts of supply by s.3(8) relevantly as follows:

“Where under a contract of insurance, a registered person receives an amount by way of an indemnity payment relating to a loss incurred in respect of goods and services in the course or furtherance of making taxable supplies, that person shall, for the purposes of the application of this decree to that person but not to the person by whom the payment is made, be deemed to have made a supply of goods and services to which the payment relates in the course or furtherance of the taxable activity at the time the payment is received, and the amount of the payment shall be deemed to be the consideration of the supply.”

It maybe noted here that the extension of the concept of supply to the case of payment by way of indemnity under a contract of insurance applies where the payment relates to a loss incurred in respect of goods or services in the course of furtherance of making taxable supplies by the recipient, not in the course of furtherance of the taxable activity of the recipient.

It is also to be noted that the effect of the extension of the concept of supply in such a case is to deem the recipient of the payment to have made a supply of the goods and services to which the payment relates in the course or furtherance of the taxable activity i.e. the taxable activity of the registered person who is the recipient. The important points for present purposes are:

(a) that it is only where the loss occurs in the course or furtherance of making taxable supplies that the recipient of an indemnity for the loss is deemed to have made a supply of goods and services to which the payment relates; and

Section 3(8) thus postulates the existence of taxable activity of the recipient of the payment in the course or furtherance of which the deemed supply is to be taken to have occurred.

The term “taxable supply” means, by virtue of s.2 of the Decree, any “supply of goods and services which is charged with tax pursuant to Section 15 of this Decree”. The concept of “taxable supply” is thus quite different from the concept of “taxable activity” which is defined by s.4 of the Decree.

The term “taxable activity” is defined in s.4 of the Decree to mean relevantly:

“(a) any activity which is carried on continuously or regularly by any person... and involves or is intended to involve, in whole or in part, the supply of goods and services to another person for a consideration; and includes any such activity carried on in the form of a business...”

At this point, it is to be noted that the making of supplies is involved in a taxable activity; but in order for the supply of goods or services to constitute a taxable activity, the supply of goods or services must be involved in an activity which carried on continuously or regularly by a person.

As the definition recognizes, it is appropriate to speak of a taxable activity as being carried on in the form of a business. Thus, it is apparent that in this context the term “activity” is synonymous with the terms “business” or “enterprise”.

“The disposition of a taxable activity as a going concern shall be deemed to be a supply of goods made in the course of furtherance of the taxable activity.”

Consistently with what I have already said I consider this provision means that the draftsman of the Decree considered that a taxable activity is something capable of being sold, e.g., as upon the sale of a business as the structure in the course or furtherance of which the continuous or regular supply of goods or services occur. The point for present purposes is that, for the purposes of the Decree, a taxable activity is quite different from taxable supplies which may occur in the course of a taxable activity, the activity being the business in the course of furtherance of which supplies occur.

Further, the ordinary scope of the concept of taxable activity by s.4(2) of the Decree which provides:

“(2) Any thing done in the commencement or termination of a taxable activity shall be deemed to be carried out in the course or furtherance of the taxable activity.”

It maybe noted here that the effect of this provision is to include within the concept of “taxable activity” things done at the commencement or termination of the business which constitute that taxable activity by deeming those things to be done “in the course or furtherance” of that business. Presumably this provision was considered to be necessary to avoid arguments that the commencement or termination of an activity (or business or enterprise) is not usually regarded, as a matter of ordinary language, as something done in the course or furtherance of the activity or business or enterprise, but rather as something done in relation to its establishment or dissolution.

I note that the term “goods” is defined by s.2 of the Decree to mean: “all kinds of personal and real property; but does not include choses in action or money.”

I also note that the term “exempt supply” is defined by s.2 to mean: “a supply described in the First Schedule to this Decree.”

The term “zero-rated supply” is defined by s.2 to mean: “a supply described in the Second Schedule to this Decree.”

The Second Schedule to the Decree by clause 4 defines the concept “zero-rated supply” to include “the supply of goods where the supplier will enter the goods for export pursuant to the Customs Act 1986 in the course of, or as a condition of, making that supply”.

I turn now to consider the nature of the loss suffered by the Plaintiff, and the application of the Decree having regard to that loss and the nature of the business of the Insured.

The Plaintiff`s business is the production and sale of textiles articles. Its taxable activity involving the supply of buildings, plant and material, motor vehicles or raw materials from which its trading stock is produced.

As the bulk of its output is goods which are exported from Fiji, the Plaintiff’s factory was given a Tax Free Factory Licence under s.7(1) of the Tax Free Zones Decree 1991, the effect of which was to exempt the Plaintiff from customs duty on the importation of raw materials, components, spares and packaging materials including furniture and office equipment.

It is contended for the Inland Revenue Department (‘the IRD”) that the supply by a Tax Free Factory is “zero-rated supply only to the extent of exported goods and any supply in Fiji would be subject to VAT”. The IRD contends that because the factory and stock were destroyed in Fiji and the indemnity payment was received here, a supply was deemed to have occurred under section 3(8) so that section 15(1) applies to the receipt of the insurance proceeds. The Defendant’s contention is that, although in the course of the Plaintiff’s business it makes “zero-rated supplies”, these supplies are not exempt supplies for the purposes of s.15 of the Decree.

It is, I understand common ground that most of the output of the Insured’s business are goods entered for export pursuant to the Customs Act, and that the sales of these goods are “zero-rated supplies”.

I also understand that the IRD accepts that the insurance proceeds in respect of loss of profits is not subject to VAT because that payment does not relate to a loss incurred “in respect of goods”.

Having set these matters out, I now turn to consider the application of the material provisions of the Decree to the circumstances of this case.

It must, I think, be accepted that the Decree observes a deliberately drawn distinction between “exempt supply” and “zero-rated supply”, and that merely because a supply is zero-rated”, it does not become ipso facto an “exempt supply” so as to exclude altogether the operation of s.15 of the Decree. Indeed, s.16(3) (a) plainly deems a supply of goods involving their removal from Fiji as a supply in Fiji for the purposes of s.15 of the Decree. In other words, a supply of goods for export, though it may be zero-rated, is not for that reason an exempt supply; and an activity which involves the supply of goods for export is a taxable activity.

It does not follow, however, that s.15 applies to impose VAT upon the insurance payments received in this case. In order to determine whether, and the extent to which, s.15 of the Decree operates to subject the proceeds of insurance in the present case to VAT, it is necessary to consider:

The resolution of the first of these issues is relevant to whether a receipt of an indemnity for the loss of buildings, plant and equipment, motor vehicles, and raw materials by reason of the operation of s.3(8) extends the scope of s.15 of the Decree.

The resolution of the second of these issues is relevant to the extent to which s.15, as extended by the operation of s.3(8), subject to VAT payment of insurance in respect of the loss of stock which, if made the subject of a taxable supply, would have been subject to zero-rated VAT.

As has been seen, the deeming provisions of s.3(8) extend the concept of a supply of goods and services to cases where there has been a receipt of an indemnity for a loss incurred in respect of goods and services, where the loss occurs in the course or furtherance of making taxable supplies.

It is important to recognise that for s.3(8) to operate effectively the loss for which compensation is received must be a loss incurred in the course of furtherance of making taxable supplies. The connection required s.3(8) is between the loss (for which compensation is received) and the “course of furtherance of making taxable supplies,” not deliberately made by the provisions of s.3(8) of the Decree. The distinction made by the draftsman must be respected: s.3(8) cannot be read as if this distinction did not exist.

The effect of this distinction in s.3(8) is to ensure that the operation of s.15 of the Decree is not triggered in every case where a loss has been incurred in the course or furtherance of the “taxable activity”, but only where the loss is incurred in the “course or furtherance of making taxable supplies”. In other words, the loss which attracts the deemed application of s.15 of the Decree is a loss incurred in respect of the course or futherance of actual transaction of supply; not in respect of the structure of the activity (or business or enterprise) in the course of which those transaction of supply are effected.

The distinction upon which Section 3(8) seizes is the difference between loss incurred in the transactions which occur in the course of carrying on a business and loss incurred in respect of the business of the Plaintiff itself. The distinction is between losses in the conduct of the business and losses incurred in respect of the business itself. The operation of the deeming provisions of Section 3(8) of the Decree is thus elivened by the receipt of payments by way of indemnity for losses in respect of what would otherwise have been the subject of taxable supplies by the Plaintiff, not losses in respect of the business structure of the taxpayer.

That such distinction should be drawn is not surprising. This distinction is one which is quite familiar in the field of revenue law.

Thus in Anglo-Persian Oil Co. Ltd v Dale (1932) 1 KB 124 it was held by the Court of Appeal, agreeing with Rowlatt J., that a payment to an agency terminating the management of its business in Persia and to be made in equal instalments over 5 years was not expenditure on capital because it did not bring any asset into existence and was therefore a revenue payment which was deductible by the company in ascertaining its net profit. See also the Privy Council decision in BP Australia Ltd v Commissioner of Taxation of Commonwealth (1966) AC 244 in which the question of what constituted allowable deductions of expenditure and whether payments made to retailers of the Appellant’s motor spirit were to be classed as capital, and therefore non-deductible, or revenue and thus deductible for tax purposes, was considered.

The Decree as a tax collection measure should not be construed more expansively than is warranted by its language. In the words of Rowlatt J. who was a Judge of the King’s Bench Division for some twenty years from 1910 to 1931 and who was regarded as having an outstanding knowledge of taxation law, “In a taxing Act one has to look merely at what is clearly said. There is not room for an intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing to be implied. One can only look fairly at the language used.” (Cape Brandy Syndicate v Inland Revenue Commissioner (1921) 1 KB 64, 71).

It must be observed that those comments were made about the English Income Tax Act, 1918 and were quoted with approval by Viscount Simon L.C. in Canadian Eagle Oil Co. Ltd v The King (1946) AC 119 at 140.

In my respectful opinion they are as true today as they were when first written in 1921 and later endorsed by the House of Lords in 1945. They must apply with even greater persuasiveness in 2001 when this court has to consider not an Act of Parliament but a Decree which has now (but debatably), been the law for ten years.

Furthermore, in my Judgement to interpret Section 3(8) in this way makes good commercial sense in that it brings to tax receipts which represent the commercial substitute for goods which, if they had not been lost, would have been disposed of by way of taxable supplies in the course of furtherance of the taxable activity of the taxpayer. On the other hand, a construction of s.3(8) which treats “taxable supplies” as the equivalent of “taxable activity” would have the surprising consequence of extending the operation of the Decree so as to impose VAT on compensation for the loss of assets which would never have been the subject of taxable supply in the course of the taxable activity conducted by the registered person. The evident purpose of s.3(8) of the Decree is to exact VAT in cases where there has been a loss of goods which, if they had not been lost would have been supplied by the registered person so as to have attracted VAT; and where an indemnity is received in respect of that loss.

I do not consider that Section 3(8) shows an intention to subject to VAT all insurance payments received in respect of a loss suffered in the course of the business carried on by a person engaged in a taxable activity. In my view its scope is obviously more limited as is shown by the fact that Section 3(8) is confined to receipts by way of indemnity for loss of goods which, had they not been lost, would have been sold so as to create taxable supplies. Any statute but a fortiori a Decree should not be construed more expansively than is warranted by its language: Cape Brandy Syndicate v I.R.C. (1921) 1 KB. 64 at 71; Canadian Eagle Oil V.R. (1946) AC 119 at 140.

On both a literal and purposive approach to the operation of its provisions the Decree does not extend to catch payments received by the Insured in respect of the loss of buildings, plant, equipment and motor vehicles which it was not part of the taxable activity of the Insured to supply.

I now turn to consider the issue of the extent to which s.15 of the Decree, as extended by the Operation of s.3(8) subjects to VAT payments of insurance in respect of the loss of stock which, if the subject of taxable supply, would have been subject to zero-rated VAT. Three matters should be noted.

The first thing is the need to bear in mind the operation of s.15(2), the effect of which is to ensure that where a supply is a zero-rated supply, it shall be charged at the rate of zero per cent notwithstanding that s.15(1) applies to the supply. In other words, even though a supply is not an exempt supply, and is therefore subject to s.15(1), the rate of VAT in respect of a zero-rated supply is zero percent.

The second point to be made is that s.3(8) does not itself impose VAT on the receipt of an indemnity. It is s.15 of the Decree which does that. Section 3(8) operates, in terms, to deem the receipt of the indemnity to be “a supply of goods and services to which the payment related in the course of furtherance of the taxable activity” and to establish the time of payment and the consideration of the deemed supply. Thus s.3(8) operates to engage the taxing provisions of s.15(1) of the Decree by deeming a state of affairs to exist; and s.15(1) of the Decree operates on that deemed state of affairs.

The third matter to note is that the supply which s.3(8) deems to have occurred is not one in the course of furtherance of “a” taxable activity, but a supply in the course of furtherance of “the” taxable activity. That can only be the taxable activity of the person who receives the payment of indemnity. As I said above s.3(8) postulates the existence of an identifiable taxable activity of the recipient of the payment. Thus attention is focused upon the supply of goods in which the taxpayer is involved “continuously or regularly”.

It is submitted by the Plaintiff that s.15(2) operates where, but for its provisions, “a supply of goods and services would be charged with tax under subsection (1) of this Section.” The effect by s.3(8), is that if the deemed supply is zero-rated supply, then the supply on which s.15(1) operates shall be charged at the rate of zero percent.

It is further submitted that the supply of goods which s.3(8) deems to have occurred is a supply of goods in the course or furtherance of the taxable activity of the Insured. That taxable activity of the Insured is identified by reference to the continuous and regular supply of goods in which it is involved. In this case that is the supply of goods entered for export as a condition of that supply. Its taxable activity is, in fact, an activity which involves zero-rated supplies. It is important here to emphasise once again that s.3(8) operates on the footing that the taxable activity of the recipient of the indemnity can be established as a matter of fact. In this case I am satisfied that it can, namely the supply of goods for export.

Thus, insofar as s.3 (8) of the Decree operates to deem a supply of goods to have occurred, so as to be chargeable with VAT under s.15 (1), s.15(2) operates to charge that supply at the rate of zero percent. This, in my view, is the effect of the language of the Decree. It may also be set the result so achieved is a sensible commercial result consonant with the evident intent of the law as proclaimed.

It would be a most surprising result if a payment by way of compensation for the loss of goods should be subject to VAT at a higher rate than would be applicable to an actual supply of those goods in the curse of the taxable activity of the taxable. To produce such a surprising result would be to attribute to the persons who devised this law an intention to treat a taxpayer who has suffered a loss (albeit one which is insured) less favourable for the purpose of VAT than one who has not. I can find no basis apparent from the language of the Decree, to attribute to those people such a perverse result, given even the strictures I have so far made of those responsible for this Decree.

It is important to note here that, contrary to the approach suggested in correspondence from the IRD, s.3(8) does not deem the supply to have been made simply in the course or furtherance of a taxable activity in the abstract, It specifically deems the supply to be one which has occurred in the course or furtherance of the taxable activity of the recipient of the indemnity. Section 3(8) thus directs attention to the specific business of the recipient of the insurance so as to apply s.15 as if the deemed supply had occurred in the course or furtherance of that taxable activity.

In his submission the Defendant refers to the circumstances that the insurance payment was received in Fiji. I consider that the place of receipt of the insurance payment is not relevant for present purposes. As has been seen, s.3(8) does not itself impose VAT on the receipt of the insurance proceeds. It merely deems a supply of a particular kind to have occurred and the payment to be considered for the supply. It is s.15, which imposes VAT upon the supply which s.3(8) deems to have occurred. It may be accepted that s.16(3)(b) operates to deem that supply to have occurred in Fiji, but that does not answer the critical question which is whether that supply is a zero-rated supply. That answer is supplied by reference to the taxable activity of the taxpayer.

To summarise my conclusions on this question I hold that the payment by way of indemnity for loss of profits is not subject to VAT because that payment does not relate to a loss incurred “in respect of goods”. It is a payment relating to a loss of the opportunity of profitable trading. The payments by way of indemnity for the Insured’s loss of building, plant and equipment and motor vehicles are not properly subject to VAT. Insofar as the stock which was lost included raw materials as opposed to manufactured stock ready for sale, the loss was not of goods which would otherwise have been the subject of supply in the course or furtherance of the taxable activity of the Insured, so that the indemnity for that loss does not relate to a loss incurred in respect of goods or services in the course or furtherance of making taxable supplies. As to that part of this insurance payments referable to the loss of stock intended for export sale, I am of the opinion that, because the supply of that stock in the course of the Insured’s taxable activity would have been zero-rated, the rate of VAT charged upon the deemed supply of those goods is zero.

The second requirement essential to a setoff under the Decree is that the appropriate notice must be given.

In my view the Defendant in setting off the Plaintiff’s account acted unlawfully in that he failed to give notice in writing to the Plaintiff of his intention to setoff the Plaintiff’s account as required by Section 65(6) and (7) of the Decree. In dealing with this ground, it is proper to refer first to Section 65(4) of the Decree.

The power by the Commissioner to set off any VAT is governed by Section 67(4) of the VAT Decree 1991, Section 65(4) provides:

the Commissioner may setoff, against that unpaid tax, any amount or any part of any amount otherwise refundable to that registered person under subsection (1) of this Section or subsection (4) of Section 38 or subsection (8) of Section 39 or any amount of interest payable under Section 67 of this Decree, and treat any amount so setoff as a payment received from that registered person.” (emphasis is mine)

Section 65(7) sets out the requirement for the Commissioner to give notice in writing of his intention to setoff within the period specified by subsection (2) of Section 65.

“Where, in relation to the return furnished by any registered person, subsection (4), or subsection (5), or subsection (6) of this Section applies, the Commissioner shall give notice in writing to the registered person accordingly within the period specified in subsection (2) of this Section.” (emphasis is mine).

Subsection (2) of Section 65 specifies the period within which the Commissioner shall give notice in writing to be no later than:

In my judgement it was mandatory for the Defendant to give notice in writing to the Plaintiff of his intention to setoff the Plaintiff’s account against the alleged liability of the Plaintiff pursuant to Section 65(7) of the Decree and a failure by the Defendant to comply with such requirement renders the Defendant’s act of setoff to be unlawful. I consider that the Defendant improperly and unlawfully exercised his power to setoff the Plaintiff’s VAT refunds.

At this juncture it is necessary to address the issues relating to the conduct of the C.I.R. when dealing with Plaintiff’s claims for a refund of moneys assessed in law to be lawfully owed to it. These issues tend to distract from the real issues in dispute between the Plaintiff and the Defendant in this matter and I shall endeavour to address them and to place them in perspective. The matters in issue relate to the issuing of amended assessments and the events that arise as a result of the issuing of the assessments. In my view issuing of these assessments is of no consequence as the procurement of those assessments by the Defendant was unlawful in the first place. Before discussing the issuance of these assessments by the Defendant I think it is desirable here at the outset to first set out a chronology of events.

15^th February 96 - The Plaintiff lodged its return, claiming a refund of $118,472.80 for taxable period December 1995.

4^th March 96 - The Defendant issued a notice of assessment detailing a refund due to the Plaintiff in the sum of $118,472.80 for taxable period December 1995.

23^rd April 96 - The Inland Revenue Department (IRD) assessed the Plaintiff for VAT on Insurance proceeds paid out by the Plaintiff’s insurers in relation to the fire at the Plaintiff’s factory demanding from the Plaintiff VAT in the sum of $371,311.98. (Exhibit P2).

20^th May 96 - The Defendant issued a notice of amended assessment to the Plaintiff requiring the Plaintiff to pay VAT of $350,125.59 for taxable period December 1995. (Exhibit P3).

12^th August 96 - Messrs Coopers & Lybrand wrote to the Defendant disputing the assessment and requested the Defendant to reassess the VAT (Exhibit P4).

19^th August 96 - Further correspondence took place between the Plaintiff and the Defendant whereby the Plaintiff disputed the 1^st October 96

9^th May 97 - The Defendant advised the Plaintiff’s solicitors Fa & Company that the IRD will issue an amended assessment to deduct the assessed VAT on insurance proceeds received by the Plaintiff for loss or profits. (Exhibit P8).

29^th May 97 - Further correspondence and discussions took place 12^th June 97 between the Plaintiff and the Defendant whereby 26^th June 97 the Plaintiff disputed the Defendant’s assessment

3^rd December 97 - Messrs Fa & Company wrote to the Minister of Finance & Economic Development advising him that the Plaintiff was in the process of obtaining a legal option of a Queen’s Counsel in respect of the Plaintiff’s VAT refunds. (Exhibit P15).

4^th December 97 - The Defendant informed Messrs Fa & Company that consideration will be given to the legal opinion of the Queen’s Counsel. (Exhibit P16)

- Thereafter the Plaintiff’s solicitors provided the Defendant with a copy of the opinion from Mr Patrick Keane, Queen’s Counsel, establishing that the Plaintiff was not liable for VAT (Exhibit P17).

5^th December 97 - The Commissioner of Inland Revenue through the offices of the Ministry of Finance disallowed the Plaintiff’s objection to the VAT assessment for taxable period December 1995 on the basis that “the Plaintiff failed to lodge a formal complaint against the required notice of assessment issued by the Commissioner within 28 days.” (Exhibit P18)

18^th December 97 - The Plaintiff filed its objection to assessment (appeal) to the VAT Tribunal. (Exhibit P19).

In my opinion the Defendant cannot rely on the notice of amended assessment issued in May 1996 requiring the Plaintiff to pay VAT in the sum of $350,125.59 when in fact according to the Defendant he has issued a second amended assessment on 20^th May 1997 in respect of the same year. This is illustrated at paragraph 6 of the Statement of Defence.

“After consideration of the Plaintiff’s affairs, the Defendant on or about 20^th May 1997 issued a notice of amended assessment to the Plaintiff to pay VAT of $341,034.68 for the taxable period of December 1995.”

The Plaintiff submits that it filed a formal objection to the amended assessment issued on 20^th May 1996. Even though the objection was out of time the Defendant accepted the same (s.50(3) gives the Defendant power to extend time for objection). The Defendant entertained the Plaintiff’s objection and engaged himself into dialogue with the Plaintiff whereby he undertook to issue a further amended assessment as per the Defendant’s letter of 9^th May 1997. However, when the Defendant by letter dated 5^th December 1997 disallowed the Plaintiff’s objection, the Plaintiff filed its appeal with the VAT Tribunal on 18^th December 1997.

The Plaintiff submits that the Defendant had in fact extended time for the Plaintiff to file its objection (appeal) out of time by virtue of the powers granted to him under Section 50(2) of the Decree. This is evidenced by the correspondence between the Plaintiff and the Defendant in respect of the VAT assessment which letters the Plaintiff has adduced in evidence. More particularly the Plaintiff places emphasis on Exhibits P4, P8, P15, P16 and P18.

The Defendant’s witness, Dharmendra Naicker, during cross examination admitted that the Defendant issued a second amended assessment on 20^th May 1997 to the Plaintiff. He also admitted that the second amended assessment overrides the 1996 assessment. However, the Defendant failed to provide any evidence of the 1997 amended assessment. The Plaintiff denies receiving the 1997 amended assessment. The alleged amended assessment of the 9^th of May 1997 was not disclosed in the Defendant’s list of documents and accordingly not discovered.

The Plaintiff submits that it had relied upon the assurance made by the Defendant by his letter of 9^th May 1997 (Exhibit 8) whereby he assured it that he would issue an amended assessment and it would now be unjust or unfair to allow departure from that assurance.

In the light of the foregoing, I consider that the Defendant is now estopped from resiling from the assurance or promise he made.

The principle of promissory estoppel as stated by Denning LJ in Central London Property Trust Ltd v High Trees House Limited (1947) KB 130 and further clarified in Combe v Combe [1952] EWCA Civ 7; (1951) 2 KB 215 at p220 is that:

“The principle, as I understand it is that, where one party has, by his words or conduct made to the other party a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the one who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relationships as if no such promise or assurance had been made by him. But he must accept their legal relations subject to the qualification which he himself has so introduced, even though it is not supported in point of law by any consideration by only his word.”

In my judgement the actions of the Defendant are unconscionable. The Defendant entertained the Plaintiff’s objection, which was out of time. The Defendant then promised that he would issue a further amended assessment, which he failed to do. I therefore hold it is now inequitable for the Defendant to place any reliance on the 1996 amended assessment he now claims he can.

Notice of Amended Assessment
An important aspect of the conduct of the Commissioner that must be closely examined for its legality and unreasonableness is the fact that he issued an amended assessment requiring the Plaintiff to pay VAT in the sum of $350,125.59 after he had issued an assessment for a refund in the sum of $118,472.80. Whilst I consider that Section 48(2) appears in its terms to allow the Commissioner without cause to re-open an assessment or amend an assessment as he pleases, given the very wide terms of subjection (2), once again I remark that this is not part of an Act of Parliament but rather an edict made without any debate by the representatives of the people. I am reminded here of the words engraved on the marble floor of the entrances to the Houses of Parliament of the State of Victoria, Australia to this effect:

“Where there is no counsel the people fall but in the multitude of counsellors there is safety.”

In my judgement Section 48(2) gives the Commissioner such wide powers that in the circumstances of this case it would be unfair to allow him to exercise them against the Plaintiff.

At the risk of being unduly repetitive I observe again that this Decree was never subjected to the scrutiny of Parliament as in my judgement, bearing in mind its ambit and the vast powers it entrusts to one person, the Commissioner, it should have been.

Consequently, the Defendant not showing any cause, let alone sufficient cause to alter his original assessment, I consider he has treated the Plaintiff unfairly and prejudicially in issuing an amended assessment purporting to make the Plaintiff liable for $350, 125.59.

I accept that as a result of the amended assessment and the amendment of the amended assessment that were issued by the Defendantf on the 20^th of May 1996 and 20^th of May 1997, both the assessments in my judgement were issued contrary to the provisions of the VAT Decree. The immediate consequence of these assessments is that they raised the question whether objections were issued or not. I accept that the Plaintiff expended substantial energy and time in objection to the unlawful assessment and the levy of a very substantial tax. There is clear evidence that the objections by the Plaintiff were within time (extended by the Commissioner), who then disallowed the objection. The actions of the Commissioner are also contradictory in that by his letter of 9^th June 1997 he allows objections but in his subsequent letters he does not and particularly on the 5^th of December 1999 he purports to disallow the objection including his undertaking of the 9^th of June 1997 to allow the objection.

The effect of disallowing the objection was that this matter would proceed to a tribunal for determination. The Plaintiff lodged an application before the Tribunal but to date nothing has eventuated on that application.

Defendant’s Submissions
I finally come to the Defendantf’s submissions in opposing the Plaintiff’s claim. In his submissions the Defendantf raises 4 grounds as to why the Plaintiff’s case should fail.

By alleging that the High Court has no jurisdiction to determine the matter, the Defendant fails to correctly discern the issues raised by the Plaintiff in its Writ. The issue raised by the Plaintiff’s Writ is whether the Defendant had correctly exercised his powers under Section 65(4), (5), (6) and (7) to setoff the refunds lawfully owed to the Plaintiff against an alleged liability and whether the Defendant was lawfully entitled to impose a liability for 10% VAT against the Plaintiff under Section 3(8) of the VAT Decree. These are issues of law, which require interpretation and pronouncement, and the High Court is the only forum empowered to hear and determine these issues. Section 3(2) of the High Court Act and Section 120(1) of the Constitution confer upon the High Court jurisdiction to determine any question of law such as is raised by the Plaintiff in this matter.

The Defendant in his submissions states that this is a matter that should be determined by the VAT Tribunal. I disagree. A VAT Tribunal is established under Section 51 of the VAT Decree. Sections 52, 53, 54, 55, 56 & 57 determine the mode of observation and conduct of proceedings by the Tribunal. The jurisdiction of the Tribunal is determined by Section 50(6) of the VAT Decree in that the Tribunal is set up to deal with objections by a taxpayer to the decision of the Commissioner in either allowing or disallowing an objection by a taxpayer to an assessment made by the Commissioner.

The issues raised by the Plaintiff in these proceedings do not relate to an objection to assessment made by the Commissioner under Section 44. It is more fundamental than that. The issues relate to whether the C.I.R was empowered in law to determine and declare the Plaintiff was liable to pay VAT under Section 3(8) of the VAT Decree on the insurance proceeds it had received. Because I consider it wrongly interpreted the law the Defendant had assumed an authority which he did not have, the consequence of which was that the Plaintiff was levied with a substantial VAT Account. Further the Defendant proceeded to unlawfully setoff this unlawful liability against VAT refunds lawfully due to the Plaintiff. These are questions of law, which only this court has the power and authority to decide.

The VAT Tribunal only determines issues relating to objections to assessments which the C.I.R. has the authority to make in accordance with Sections 44, 45 and 46 of the VAT Decree. The matters before this court fall outside the ambit of Sections 44, 45 and 46.

For the above reasons I consider that the objections to lack of jurisdiction of the High Court are without merit.

In relation to the argument of the Defendant that Section 3(8) of the VAT Decree imposes a tax liability on the Plaintiff, I consider that this submission is again incorrect but more importantly wrong in law for reasons previously stated when discussing the conduct of the Commissioner.

In relation to the argument by the Defendant that the setoff was lawful, I hold that this submission is again incorrect for reasons I stated earlier when discussing the requirement of appropriate notice before a setoff can be made.

I said at the beginning of this Judgment that I would leave until last comments which I think have to be made about Section 89 of the Decree which deals with Amendments and Repeals. It is appropriate that this is the final Section of the Decree because it purports to render invalid all existing Acts, Decrees, laws, rules regulations or other related legal instructions which contravene the provisions of the Decree insofar as they relate to the payment of tax in Fiji. To put the matter beyond doubt, or, to use the words of the Section itself “for clarity”, the Decree purports to supersede every other Act, Decree, law, rule, regulation, or other legal instruction, instrument or document.

For gangantuan wideness I have never seen any such similar section in all my experience. Is presumptousness is self-evident for here we have a Decree, not an Act of Parliament, purporting to repeal and supersede legislation passed by Parliament. It is frightening in its implications.

In my Judgement it is therefore vital that where there are any doubts about the right of the Defendant to levy its proposed tax on the Plaintiff, as I find there are many, that right must be denied it.

Accordingly there will be Judgement for the Plaintiff against the Defendant in the sum of $334,355.54 together with interest at the rate of 12½ % pursuant to Section 67 of the Value Added Tax Decree from the date of the Writ was issued, 17^th August 1998 until date of Judgment. The total award is therefore $334,355.54 plus interest $125,383.32 = $459,738.86 and costs which I fix at $2,500.00. There will be judgment for the Plaintiff in the sum of $462,238.86.

Fiji Law Reports

Ghim Li Fashion (Fiji) Pte Ltd v Commissioner of Inland Revenue [2001] FJLawRp 72; [2001] 2 FLR 276 (16 August 2001)