Company G v Fiji Revenue and Customs Authority [2012] FJVATT 1; Value Added Tax Appeal 1.2006 (24 September 2012)

IN THE STATUTORY TRIBUNAL, FIJI ISLANDS
SITTING AS THE TAX TRIBUNAL

Value Added Tax Appeal No 1 of 2006

BETWEEN:

Company G
Applicant

AND:

FIJI REVENUE & CUSTOMS AUTHORITY
Respondent

Counsel: Ms R Lal, Lal Patel Bale Lawyers for the Applicant.
Ms F Gavidi, FRCA Legal Unit, for the Respondent

Date of Hearing: Monday 3 September 2012
Tuesday 4 September 2012

Date of Judgment: Monday 24 September 2012

JUDGMENT

VALUED ADDED TAX – Section 14(1) Value Added Tax Decree 1991 – Imposition of Tax on Imports; Part VI Special Class; Section 27 -Treatment as Branch or DIvision

Background

1. This an application for review against the decision of the Respondent Authority dated 29 December 2005, disallowing the objection of the Taxpayer to tax assessments issued by the Authority for the period 1998 to 2004. Those tax assessments included the imposition of a 30% penalty for the understatement of taxation returns and relate to value added taxation imposed on the taxpayer in accordance with the Value Added Tax Decree 1991.
   
2. A short history of the factual issues in dispute is as follows:
   
   • Company G at all relevant times is involved in the importation of raw kava.
   • Upon its import, the Company is involved in the wholesale and distribution of kava in its processed and unprocessed form.
   • The Applicant was issued with a Notification of Vat Registration by the Respondent Authority on 22 June 1991.[1]
   • On 30 June 1992, the Applicant applied to the Respondent for its wholesale operations (the ‘unprocessed arm’) to be treated as a produce supplier.
   • The Applicant has sought to claim input tax against the value of its unprocessed kava that it has imported for sale.
   • The Respondent has disallowed the input claim on the basis that the Applicant has charged no output tax on the sales of that produce.
   • The Applicant argues that it should be able to make the input claim, on the basis that the output tax is capable of being calculated on both the combined result of the processed and unprocessed kava sales of Company G and its producer supplier Division.
   • Alternatively, the Applicant claims that the Respondent is estopped from objecting against the manner in which the input tax has been claimed, as a result of various representations made by the Respondent to the Authority at various times. These representations are said to have influenced the course of conduct of the Applicant.
   • Finally, the Applicant seeks a review of the penalties imposed on the Respondent, by virtue of Section 76A of the Value Tax Decree 1991. The grounds for that claim are primarily on the basis that should the case of estoppel be made out, the subsequent removal of the penalties incurred, is a logical and natural outcome arising from such a determination.
     
3. I will now address these issues in turn.
   

Effect of Application by Registered Person to Treat Branch or Division as Produce Supplier

4. In my mind, the first issue that warrants resolution within this analysis is the issue of the status of the Applicant Taxpayer for the purposes of the Decree.
   
5. Specifically Section 27(2) of the Decree provides as follows:
   

The Commissioner may upon application made pursuant to subsection (1) of this Section treat any branch or division as a separate person if each branch or division maintains an independent system of accounting, solely supplies produce in a raw and unprocessed state and can be separately identified by reference to being a produce supplier or the location of the branch or division and where any such branch or division is so separately treated, any taxable activity carried on by that branch or division shall, to that extent, be deemed not to be carried on by the registered person first mentioned in subsection (1) of this Section.

6. The implication of a determination as to the status of the raw processing arm during the relevant period becomes therefore significant.
   
7. The Applicant argues that it had not been granted the status of a separate entity for the purposes of Section 27(2) until 30 September 2005 and on that basis, there should be no distinct treatment of the processed and unprocessed kava for the purposes of the Decree.
   
8. The Respondent argues on the other hand that the separate divisions operating in place cause the distinct entities to find their own obligations under the Decree. That is, the activity of the registered person (entity) that is involved in the process kava concern, must levy, collect and pay an input tax in accordance with Section 14 and a tax on supply of that good (Section 15).
   
9. In the case of the ‘Grog Taro Other Local Produce’ Division of Company G, the Respondent argues that by virtue of its status as a “produce supplier”, it is not a “registered person” for the purposes of Section 22 of the Decree, nor is it entitled to levy, collect pay or be charged an “input tax” for the purposes of either Sections 14 and 15 of the Decree.