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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
OS (JR) No. 83 OF 2022
BETWEEN
SOUTH SEAS TUNA CORPORATION LIMITED
Plaintiff
AND
SAM KOIM, in his capacity as COMMISSIONER GENERAL OF INTERNAL REVENUE COMMISSION
First Defendant
INTERNAL REVENUE COMMISSION OF PAPUA NEW GUINEA
Second Defendant
INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Defendant
Waigani: Linge AJ
2022: 16th November
JUDICIAL REVIEW – plaintiff seeks review of defendants’ decision to file garnishee notice with plaintiff’s bank – grounds of review – whether Decision maker relied on irrelevant or incorrect or assumed facts – whether decision maker failed to consider relevant facts – whether defendants decision to issue garnishee notice was unreasonable under the Wednesbury principle of unreasonableness – whether defendants decision was ultra vires – whether there were other errors of law – whether defendant made the decision for an improper purpose – defendants made the decision based on powers granted to them by law – defendants relied on correct facts – defendants decision to issue garnishee notice was reasonable and within their powers provided for by law – judicial review dismissed with costs to the defendants
Cases Cited:
Papua New Guinean Cases
John Mua Nilkare v Ombudsman Commission (1996) SC498
Kekedo v Burns Philip (PNG) Ltd & Ors [1988-89] PNGLR 122
Schram v Kekedo [2018] N7291
Ipatas v Somare [2010] N4190
Air Niugini Limited v Beverly Doiwa [2000] PNGLR 347
SCR No.1 of 1990 Re Recount of Votes [1990] PNGLR 441
Overseas Cases
Chief Constable of North Wales Police v Evans [1982] UKHL 10; [1982] 1 WLR 1155
R v Hillingdon London Borough Council [1986] UKHL 1; (1986) AC 484
Council of Civil Service Unions v Minister for Civil Service [1985] AC 374
Legislation
Section 73(2) of the GST Act 2003 (as amended)
Section 77(1) (a) of the GST Act 2003 (as amended)
Section 86(10 of the GST Act 2003 (as amended)
Section 88 of the GST Act 2003 (as amended)
Section 107(3) of the GST Act 2003 (as amended)
Section 272 of the Taxation Act 1959
Section 16 of the Internal Revenue Commission Act 2014
Counsel:
Mr. Philip Smith, for the Plaintiff
Ms. Joan John, for the Defendants
RULING
13th December, 2022
1. LINGE AJ: This is a ruling on application for judicial review filed by the plaintiff after leave to apply for judicial review was granted on the 10 August 2022. I heard the contested application on the 16 November 2022.
2. The plaintiff seeks orders in the nature of declarations and orders for Certiorari and Mandamus against the decision of the first defendant wherein he issued a written notice in the form of a Garnishee Notice number 132761349 addressed to the plaintiff but served on BSP Financial Group Limited (the BSP) pursuant to Section 88 of the Goods and Services Act 2003 (GST Act) in the sum of K460, 000 for GST based tax debt.
Facts
3. On or about the 5 May 2022, the first defendant issued and, or about the 6 May 2022 served on BSP, a Garnishee Notice addressed to the plaintiff and numbered 132671349 in a debt amount of K460, 000.00 for an alleged GST Base Tax debt and default. That Garnishee Notice was not served on or delivered to the plaintiff at any time.
4. The BSP complied with the notice and stopped all transactions on the plaintiff’s bank account and paid over K460, 000.00 held by it to the benefit of the plaintiff, to the second defendant thus reducing the plaintiff’s bank account balance to nil.
Evidence
5. The Plaintiff reads and relies on the following affidavits:
(i) Affidavit of Michael McCulley filed on the 23/08/2022.
(ii) Affidavit of Search of Rennelisah Rivona sworn on the 8 August 2022.
(iii) Affidavit of William Jackson sworn on the 8 August 2022.
(iv) Affidavit of William Jackson sworn on the 2 September 2022.
(v) Affidavits of Service of Benjamin Hila sworn on 11/08/2022. 16/08/2022, 24/08/2022, 31/08/2022 and 01/09/2022.
(vi) Affidavits of service of Narepa Hannevo sworn on the 10/08/2022. 16/08/2022, 24/08/2022 and 01/09/2022.
6. The defendants rely on:
(i) Affidavit of Trevor Lovae sworn and filed on 17th October 2022.
(ii) Affidavit of Jacqueline Doria sworn and filed on 17th October 2022.
Grounds for Judicial Review
7. The plaintiff relies on five (5) grounds for judicial review as contained in the Statement in Support filed pursuant to Order16 Rulec3 (2) (a) of the National Court Rules. The decision to which this judicial review application relates is the issue of the Garnishee Notice by the first defendant on the
5 May 2022. The Grounds are:
(i) Decision maker relied on irrelevant or incorrect or assumed facts
(ii) Decision maker failed to consider relevant facts.
(iii) Unreasonable under the Wednesbury principle of unreasonableness.
(iv) Ultra Vires/Other errors of law.
(v) Improper Purpose.
Submissions by Counsels
1. The decision was made on irrelevant or incorrect or assumed facts.
8. Mr. Smith of Counsel for the plaintiff submits that the first and second defendants (the Decision Makers) in the exercise of their discretion under Section 88 of the GST Act (or any other Act), had relied on incorrect conclusions of fact to issue the Garnishee Notice. He submits in particular that their finding of a GST Base Tax debt owed by the plaintiff capable of collection by Garnishee was not true, based on the following:
(i) The Decision Makers own GST records and GST assessments of the plaintiff’s tax affairs showed that no debt existed.
(ii) The plaintiff was not indebted in the sum of K460, 000.00 for GST Base Tax or in any sum.
(iii) At or about the date of the Decision, by its own records, the second defendant was indebted to the plaintiff in:
(a) a sum of K13, 375, 405.84 for GST Base Tax which was then immediately due to the plaintiff as refundable input credits; and
(b) a sum of PGK 29,240,669.61 on all tax accounts combined which was then immediately due to the plaintiff.
9. He submits that the Decision Makers purported to exercise a statutory discretion to issue Garnishee Notice when there was no legal or factual basis to do so in that no debt existed in the plaintiff as recited in the Garnishee Notice and, therefore, no default could or did exist as required by Section 88 of the GST Act.
10. Ms. John of Counsel for the defendant submits that the first and second defendant decision of 5 May 2022 to issue garnishee notice in the amount of K460, 000.00 for outstanding GST was based on true and correct factual records for the plaintiff maintained by the tax office.
11. She submits that the second defendant does not owe a GST refund to the plaintiff. Instead, it was the plaintiff that was issued with 3 separate GST assessments by the first and second defendants:
(i) On the 27 June 2016, which resulted in the plaintiff owing the State outstanding GST tax debt of K64, 543, 072.47.
(ii) On the 16 February 2022 the plaintiff issued garnishee notice for outstanding GST in the amount of K54, 078,233.74 due and owing to the State after reconciliation of the plaintiff’s GST tax account and established that the plaintiff had now an outstanding tax debt of K54, 078, 233.74 due to the GST tax credit in transfers.
(iii) On the 5 May 2022 the first defendant revoked the garnishee notice of 16 February 2022 and issued the Garnishee Notice of 5 May 2022 for the amount K460, 000.00.
12. She submits that the first defendant issued the Garnishee Notice on the 5 May 2022 in the exercise of the power granted him by Section 272 of the Taxation Act 1959 and Section 88 of Goods and Services Tax Act 2003.
2. The decision makers failed to consider relevant facts.
13. Mr. Smith for the plaintiff submits that the Decision Makers, failed, to consider relevant facts and matters either adequately or
at all which weighed against the decision to issue a Garnishee Notice. He lists the following as the relevant facts that were not
considered nor given any or proper weight by the decision makers:
(i) That a decision to issue the Garnishee Notice could and should not have been made whilst the internal statutory appeal processes were current and not exhausted and the assessment actively disputed, particularly when that process directly challenged the validity and legality of the assessment.
(ii) The first and second defendant’s own GST Account records for the plaintiff show no GST Base Tax debt owed by the plaintiff but rather that the plaintiff maintained a credit balance of GST Base Tax immediately refundable by the second defendant.
(iii) The first and second defendant’s own GST Account records for the plaintiff showed no debt in a sum of K460, 000.00 or any debt at all.
(iv) The first and second defendant’s own Combined Accounts Statement dated the 1 April 2022 which records all tax balance of the plaintiff shows a credit balance owed by the second defendant to the plaintiff.
(v) The effect of additional GST Base Tax Returns by the plaintiff for the period February 2019 to April 2022 (inclusive) which, at the date of the decision, were unprocessed and not enter into the IRC ledgers and which would result in further credit in favour of the plaintiff in a sum of K7,098,451.88. This would increase the tax credits due to the plaintiff of approximately K29, 240,669.61 on all tax accounts and K13,375,405.84 refundable for GST Base Tax Credits.
(vi) Those GST Base Tax Returns were in the possession of and known to the Decision Makers at the date of the decision but were not considered in the exercise of its discretion.
(vii) The fact that all records and accounts of the plaintiff’s tax affairs maintained by the first and second defendants and relied on to make the decision to issue a Garnishee Notice were not made or maintained accurately or updated in a timely manner and provide no basis of fact upon which the Decision Makers can exercise their discretion.
14. Mr. Smith submits that the failure to consider relevant issues and facts renders the decision incompetent, void and of no effect in that the necessary pre-conditions for the exercise of a discretion under Section 88 of the GST Act (or any other Act) to issue a Garnishee Notice, namely that there is a debt capable of collection and a default, did not exist.
15. Ms. John for the defendants submits that the first and second defendants considered all relevant facts and the record of the plaintiff kept at the tax office before issuing its garnishee notice of 5 May 2022. In particular the following facts were considered prior to the issuing of the Garnishee Notice:
(i) On the 29 June 2016, the defendant objected in writing to the amended GST assessments of 27 June 2016 in the amount of K64, 543, 072.47.
(ii) On 18 April 2019, the defendants advised the plaintiff that its Objection dated 29 June 2016 was invalid. As a result of this decision, by the defendants, the plaintiff filed OS (JR) No. 108/2021 in 2021.
(iii) Proceeding OS (JR) No. 108/2021 challenged the defendant’s decision in declaring the plaintiff’s Objection invalid for reason of failing to meet the requirements under Section 74 (Objection to assessment) of the GST Act 2003 (as amended).
(iv) On 16 February 2022 the plaintiff issued garnishee notice for outstanding GST in the amount of K54, 078,233.74 due and owing to the State.
16. Counsel urged the Court to take judicial notice of the ruling by Her Honour Wurr, AJ, in OS (JR) No. 108 of 2021 on the 19 October 2022 in which she refused the plaintiff’s application for leave to seek judicial review following a hearing in June 2022.
3. Unreasonableness of action under the Wednesbury Principle of unreasonableness
17. Mr. Smith for the plaintiff relies on the principle of unreasonableness as espoused in the Wednesbury principle summarized in
R v Hillingdon London Borough Council [1986] UKHL 1; (1986) AC 484 which denote the rule as ...” unreasonableness verging on absurdity”...justifying intervention by a Court when...’ It is obvious that the
public body, consciously or unconsciously, are acting perversely”.
18. He submits that the decision-making process which resulted in the issue of a Garnishee Notice to collect a non-existent debt based on a non-existent default, satisfies either or both of those tests. That is, the decision and the administrative action of issuing a Garnishee Notice is, considering all the relevant circumstances, so arbitrary, unjustified, unreasonable and unfair under the Wednesbury principle that no reasonable Decision Maker apprised of the true facts could or would have made that decision, and justifies intervention by the Court:
19. He also submits that the decision to issue a Garnishee Notice to collect a non-existent debt on no factual basis, applying incorrect factual assumptions, having no regard to the true facts and making no attempt to ascertain them and giving no consideration of the effect of the decision on the plaintiff, its employees, the national interest or the reputation of the first and second defendants is beyond the scale of reasonableness and justifies Court intervention.
20. Ms. John for the defendants submits that the first and second defendant acted fairly and reasonably at all times in exercising the powers under the provisions of the GST Act.
21. Counsel submits that the plaintiff had failed to comply with the requirements of Section 74 GST Act 2003 (as amended) and Section 107(3) of the GST Act 2003 (as amended) has resulted in the issuance of garnishee notices of 16 February 2022 and 5 May 2022.
22. She submits that at the date of the decision, the first and second defendants considered:
(i). The plaintiff did not make arrangements to come and pay the first and second defendants of its outstanding GST of K64, 543, 072.47 after the decision of proceeding entitled SCA 176/2017.
(ii). The plaintiff’s objection to the assessment of 29 June 2016, was invalid.
(iii). The plaintiff had failed to furnish to the first and second defendants when it requested source documents of suppliers listing to verify input tax credits claimed in its GST Returns.
(iv). The reconciliation of the plaintiff’s GST tax account which established that it had outstanding GST of K54,078,233.74.
23. She submits that the first and second defendant’s actions, were not unreasonable and this argument by the plaintiff is flawed and without merit.
4. Ultra vires/other errors of law
24. Counsel for the plaintiff submits that the decision is ultra vires the GST Act and the power and/or discretion of the Decision
Makers in that:
(a) Section 88(2) of the GST Act empowers the Decision Makers to issue written notices requiring payment to the second defendant by persons who, inter alia, hold money on account of a “defaulter” who is a registered taxpayer which has defaulted in payment of ”...any tax payable”...– S88(1) of the GST Act.
(b) The discretion to issue a Garnishee Notice to the defaulting taxpayer itself under Section 88(2) (a) – (d) of the GST Act was not available to the Decision Makers. The written notice permitted by Section 88 (2) can only be issued to a party holding or owing money for the defaulter. The decision is void and of no effect as being ultra vires Section 88 of the GST Act.
(c) The decision and the terms of the Garnishee Notice issued by the Decision Makers are a breach of Section 82 of the GST Act in that only 50% of GST assessed as owed is collectible or payable to the second defendant when the assessment is the subject of objection, which is the case. If the debt owed was K460, 000.00 the Garnishee Notice could only lawfully issue in half that sum.
The consequent receipt and retention of money by the second defendant from the BSP is unlawful as being ultra vires Section 88 of the GST Act.
25. Mr. Smith submits that the decision not to deliver or serve written notice of the decision the Garnishee Notice to the plaintiff as required by Section 88 and/or 73(2) of the GST Act deprived the plaintiff of access to the statutory scheme of review and/or appeal prescribed by the GST Act.
26. Ms. John for the first and second defendants submits that the defendants correctly applied Section 88 of the GST Act (as amended) when it issued garnishee notice of 5 May 2022.
27. That since the Supreme Court decision in proceedings entitled SCA 176/2017, the plaintiff has not made any arrangements in paying its GST tax liabilities of K64,543,072.47.
28. Further she submits that within the meaning of Section 88(1) of the GST Act 2003 (as amended) the plaintiff has so defaulted and as such the first and second defendants caused reconciliation into the GST tax account of the plaintiff and established that the plaintiff had defaulted and has outstanding GST of K54,078,233.74.
29. The first and second defendants considered that the GST Base tax of more than K8 million kina was unverified GST tax credits, meaning not genuine tax credits.
30. While conceding that the defendants did not issue a copy of the garnishee notice to the plaintiff, Counsel submits that this has very little or no bearing at all to this case as there existed a tax debt which was due and owing to the State by which the plaintiff’s inaction in failing to comply with Section 74 GST Act 2003 (as amended) and Section 107(3) of the GST Act 2003 (as amended) has resulted in the garnishee notices being issued on the plaintiff’s bank account kept at BSP.
31. Ms. John submits that the issued garnishee notices accord with Section 88 of the GST Act 2003 (as amended).
5. Improper Purpose
32. Mr. Smith submits the decision to issue Garnishee Notice No.132671349 was made to improper purposes in that the decision:
(a) Impedes and obstructs the plaintiff’s ability to continue extant litigation – particularly OS (JR) No. 108 of 2021 which seeks review of the assessment relied on by the Decision Makers.
(b) Removes and obstructs the plaintiff’s ability to access and exercise rights of dispute resolution under the GST Act.
(c) Impedes the Plaintiffs right to expect a lawful decision-making process and impartial treatment based on correct facts and records of the first and second defendants.
(d) Was made with no regard or willful disregard to the effect on the plaintiff’s commercial operations, its employees and the national interest and reputation and with the improper purpose of depriving the plaintiff of operating capital.
(e) Was made to avoid payment to the plaintiff of accrued GST Base Tax credits lawfully owed by the second defendant and the State.
33. The decision not to deliver or serve written notice of the decision to issue a Garnishee Notice to the plaintiff deprived the plaintiff of access to the statutory scheme of review and/or appeal prescribed by the GST Act.
34. Mr. Smith submits that the “improper purpose” head of review can be tested by asking what would the “proper purpose” have been for the decision? The only proper purpose is the collection of an existing debt by a defaulting registered taxpayer. He submits that no such debt existed and no default could have existed. Therefore, the issue of a Garnishee notice to collect a non-existent debt and a non-existent default must be an improper purpose.
35. Ms. John for the defendants submits that they do not have any ill will or malicious intention against the plaintiff when issuing the garnishee notice dated 5 May 2022. The first defendant was exercising his right to collect the outstanding GST owing by the plaintiff. He acted in all fairness, took reasonable steps and established that the GST amount of K460, 000.00 was outstanding.
36. The exercise of the power is within the ambit of law under Section 88 of the GST Act 2003 (as amended) in issuing garnishee notice dated 5 May 2022 as the plaintiff has outstanding GST of K31,336,222.16 that remains unpaid to the first and second defendants.
Applicable principles
37. The law on judicial review is settled. The Supreme Court in, Kekedo v Burns Philip (PNG) Ltd & Others [1988-89] PNGLR 122 at stated:
“...the circumstances under which judicial review may be available are where the decision making authority exceeds its power, commits an error of law, commits a breach of natural justice, reaches a decision which no reasonable tribunal could have reach or abuses its powers.
The purpose of judicial review is not to examine the reasoning of the subordinate authority with the view to substituting its own opinion. Judicial review is concerned not with the decision, but with the decision-making process.”
38. The National Court derives its jurisdiction to hear applications for judicial review from Sections 155 (3) and (4) of the Constitution. The judicial review process is regulated by Order 16 Rule 3 of the National Court Rules. See for example, Schram v Kekedo [2018] N7291 at para.15.
39. The procedure for judicial review is concerned with review by the National Court of decisions that are administrative or quasi-judicial in character. The power is vested in the National Court and is discretionary. It is available to correct errors in the decision-making process, see Rose Kekedo v Burns Philip (PNG) Ltd (supra).
40. Courts in this jurisdiction have settled on the underlying principles in considering whether to grant judicial review over an
administrative decision. For example, in John Mua Nilkare v Ombudsman Commission (1996) SC498 the Supreme Court held that established grounds upon which administrative decisions can be made are:
(a) want or excess of jurisdiction;
(b) error of law on the face of the record;
(c) failure to comply with rules of natural justice; and
(d) where administrative power is exercised in an unreasonable manner-the Wednesbury principle.
41. In considering the decision about the review application, the Court may have regard to any of the following:
(a) ignore relevant considerations;
(b) operated on the basis of bad faith or dishonesty;
(c) direct its mind to the pertinent law;
(d) act as any reasonable person would act.
42. The judicial review process is special, exclusive and a restrictive process. It must not be open for busy bodies and persons with misguided or trivial complaints pertaining to administrative or quasi-judicial decisions or errors to air their grievances.
43. The ruling of Her Honour Davani J in Ipatas v Somare [2010] N4190 at para. 14 in which she considered the English case of Chief Constable of North Wales Police v Evans [1982] UKHL 10; [1982] 1 WLR 1155, aptly provide the context for judicial review: -
“14. Judicial Review process is “intended to protect the individual against the abuse of power by a wide range of authorities, judicial, quasi-judicial and administrative ... That, it is not intended to take away from those authorities the power s and discretions properly vested in them by law and to substitute the Courts as the bodies making the decision...”
Consideration
44. The administrative decision the subject of this judicial review is the Garnishee Notice issued by the Commissioner General of the Internal Revenue Commission on the 5 May 2022 for K460, 000.00 as outstanding GST due and owing to the State.
45. On the 16 February 2022 the first defendant using the statutory powers vested on him had issued garnishee notice after reconciliation for an amount of K54, 078,233.74 for outstanding GST for tax periods January 2004 to December 2013. On the 5 May 2022 the first defendant revoked its garnishee notice of 16 February 2022 and issued the subject Garnishee Notice in its place.
46. The first defendant is the Commissioner General of Internal Revenue, an office established by Section 16 of the Internal Revenue Commission Act 2014 (hereinafter “the Tax Act”) who is also responsible over the tax administration of the plaintiff.
47. The second defendant is a statutory body established by the Tax Act 2014. Further to its powers under Section 6 of the Tax Act it has power also under the Goods and Services Tax Act 2003 to impose and collect Tax on goods and services.
48. I have considered the detailed submissions of counsels especially the plaintiff’s and it seems to me that the issue can be resolved in short and concise factual and legal grounds.
49. The five (5) grounds for the judicial review are pleaded in the Statement in support of the application made pursuant to Order 16 Rule 3 (2) (a) of the National Court Rules. As such, I will consider the five (5) grounds as submitted by the plaintiff in seriatim.
(i) Decision was based on irrelevant or incorrect or assumed facts
50. The power of the Commissioner to make assessment is very wide. Section 67 of the GST Act gives the Commissioner wide powers to assess from time to time from returns furnished under the Act and from any other information in the Commissioners possession, to make assessment of the amount that in the Commissioner’s judgment is tax pay able under the GST Act. By definition “Tax” means the Goods and Services Tax.
51. The plaintiff’s reliance on this ground must be weighed against the wide statutory discretionary powers the first and second defendants are permitted to perform. It requires the plaintiff to adduce evidence to prove irrelevant facts or evidence in support of the ground pleaded in the Statement.
52. The plaintiff makes assertions including:
(i) the finding of a GST Base Tax debt owed by the plaintiff capable of collection by Garnishee was not true;
(ii) the Decision Makers own GST records and GST assessments of the plaintiff’s tax affairs showed that no debt existed;
(iii) it was not indebted in the sum of K460, 000.00 for GST Base Tax or in any sum;
(iv) that at the date of the Decision, by its own records, the second defendant was indebted to the plaintiff in a sum of K13, 375, 405.84 for GST Base Tax which was then immediately due to the plaintiff as refundable input credits; and a sum of PGK 29,240,669.61 on all tax accounts combined which was then immediately due to the plaintiff.
53. The plaintiff has not referred me to any independent affidavit evidence except to use the evidence of the defendants. For example, in the affidavit of one Michael McCulley, the plaintiff witness, he deposes and relies on the records of the second defendant. The evidence annexure marked as “MMC8” shows that as at 30 May 2022 the total GST owed to the defendants was K 29,642,846.16 (K31,336,222.16 incl. tax), after payment of K 460,000.00 pursuant to Garnishee Notice of 5 May 2022. Also in the same Michael McCulley affidavit is a copy of an affidavit by Dollarcruise Augustine filed on the 21 June 2022 (in relation to OS (JR) No.63 of 2022, deposing that “The sum of K 31,336 million in Goods and Services Tax still remains unpaid and owing by the plaintiff”.
54. Relying on the same defendants’ evidence the plaintiff asserts as alluded to above for example that at or about the date of the Decision, by its own records, the second defendant was indebted to the plaintiff in a sum of K13, 375, 405.84 for GST Base Tax which was then immediately due to the plaintiff as refundable input credits. In my view this is a misrepresentation of the content, record and information, which is the evidence of the defendants to favour the plaintiff. The evidence by the defendants is for one purpose and that is to use as facts and record to justify the decision made and is admissible, whereas the plaintiff attempt to use the same evidence must be treated with caution as it is inadmissible as a matter of discretion, see R v Georgiev (2001) 119 A Crim Rev 363 at [54].
55. The Garnishee Notice was issued to the BSP pursuant to Section 88 (2) (b). It was issued after assessment of “returns furnished from time to time” and on “any other information in the Commissioners possession” pursuant to Section 67 of the GST Act. In my view the intention of the Act is clear and there is a presumption that the information and facts relied on for assessment are true and correct factual records for the plaintiff maintained at the Taxation Office.
56. There is no independent evidence by the plaintiff to dispel the presumption that the original reconciliation to reduce assess amount of K64, 543, 072.47 on the 27 June 2016 to K54, 078,233.74 on the 16 February 2022 was correct. What is in evidence is that the plaintiff objected to the assessment and the defendants undertook further reconciliation resulting in the issue of the subject Garnishee Notice for outstanding GST in the amount of K460, 000.00 due and owing to the State on the 5 May 2022 based on facts and information kept at the Taxation Office.
57. In my view the Decision Maker properly exercised his statutory discretion to issue the Garnishee Notice of 5 May 2022 in respect of an existing debt by the plaintiff as a “registered person” and was in default or may become a defaulter after properly assessing all relevant information which they are empowered to do under Section 67 of the GST Act, and in the exercise of further powers pursuant to Section 272 of the Taxation Act 1959 and Section 88 of Goods and Services Tax Act 2003.
58. In the end I find that the information on the account about the outstanding GST tax in the GST Statement of Account are not irrelevant facts to consider prior to the issue of the Garnishee Notice. In Air Niugini Limited v Beverly Doiwa [2000] PNGLR 347 at p.355 the tribunal took into account principles of International Labour Organizations Committee on the Freedom of Association in making its decision the Court ruled that “reference to those principles is not irrelevant”.
(ii) Failure to consider relevant facts.
59. The plaintiff lists what it considers as the relevant facts not considered nor given any or proper weight by the first and second defendants prior to the issuing of the Garnishee Notice of 5 May 2022. The Commissioner is empowered primarily by Section 88 of the GST Act. The GST Act makes no specific provisions on what relevant facts are to be considered prior to issuing of the Garnishee Notice or to be followed or any set criteria except as provided under the GST Act.
60. The relevant facts are those the decision maker considers as relevant in so far as is sufficient to enable him to make the decision.
The plaintiff is a “registered person” or taxpayer for tax purposes under the GST Act and it is within the right of the first and second defendants to make any assessment it considers necessary to facilitate its
duty. Section 5 (1) of the GST Act allows the Commissioner and officers authorized including Commissioner for Customs are not prevented from disclosing to each other
information for revenue gathering purposes which is required to be disclosed by persons authorized by this subsection for the same
purpose to give effect to the provisions of the Income Tax Act, the Customs Act or this Act.
61. The decision to issue the Garnishee Notice has been vindicated by the National Court ruling in OS (JR) No. 108/2021 on the 19 October 2022 that refused the application for leave to seek judicial review by the plaintiff following hearing in June 2022.
That was an application seeking leave to review the garnishee notice of K54, 078,233.74 on the 16 February 2022.
62. The affidavit of William Jackson, tax agent for the plaintiff deposes that the first and second defendant’s own GST Account records for the plaintiff show no GST Base Tax debt owed by the plaintiff but rather that the plaintiff maintained a credit balance of K22, 152, 266.17 GST Base Tax. The date of that GST Account entry was clearly the 1 April 2020 which is 24 months earlier. It is not an accurate and reliable evidence and goes to the credibility of the plaintiff witness.
63. The affidavit of Trevor Lovai filed on the 17 October 2022, for the defendants in which he annexed a copy of the GST Statement of Account, Annexure “G” showing that as of 30 May 2022 the amount owed by the plaintiff in GST was K29,642, 846.16 (K31,336,222.16 incl. tax) after payment of Garnishee Payment (GST Base Tax) of K460,000.00 must be accepted as the accurate position of GST owed by the plaintiff. Moreover, the entry as at the 30 May 2022 shows outstanding GST owing to the State in the amount of K31, 333, 222.16. This compares favorably with the evidence annexed to Michael McCulley’s affidavit referred to earlier, the copy of an affidavit by Dollarcruise Augustine filed on the 21 June 2022 deposing that “The sum of K 31,336 million in Goods and Services Tax still remains unpaid and owing by the plaintiff.”
64. In the absence of other credible evidence, I must accept the GST Statement of Account as the accurate information, statistics, and the facts were the relevant facts considered by the defendants prior to the issuing of the Garnishee Notice. The remaining GST debt of the plaintiff would be at least K 31,336 million.
65. The defendants have not failed to consider relevant issues and facts. What is a relevant fact is subjective to the decision maker at the time of the decision. In my view, the first and second defendants considered all relevant facts, information and the record of the plaintiff kept at the tax office before issuing its garnishee notice of 16 February 2022 and of 5 May 2022. There are no other relevant information and facts and since the plaintiff had failed to furnish to the defendants when they requested source documents of suppliers listing to verify input tax credits claimed in its GST Returns.
(iii) Unreasonable under the Wednesbury principle of unreasonableness.
66. The principle of unreasonableness referred to as the Wednesbury principle arose from a ruling in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1947] EWCA Civ 1; [1948] 1 KB 223 which enunciated the principle of reasonableness per Lord Greene as:
“The exercise of discretion must be real, matters which ought to be considered must be conversely irrelevant collateral matters must be disregarded. Where the discretion is exercised within the ambit of considering what is relevant the court cannot intervene, except where the conclusion nevertheless reached is so unreasonable, ...in the sense that the court considers it to be a decision that no reasonable body could have come to. It is not what the court considers unreasonable, a different thing altogether”
67. In subsequent years the common law courts have expounded on the principle. For example in Council of Civil Service Unions v Minister for Civil Service [1985] AC374, Lord Diplock equate unreasonableness to irrationality when he said that a decision would be irrational if it is “ so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question could have arrived at it” The principle is further amplified in R v Hillingdon London Borough Council [1986] UKHL 1; [1986] AC 484 which denote the rule as ...” unreasonableness verging on absurdity”...justifying intervention by a Court when...’ It is obvious that the public body, consciously or unconsciously, are acting perversely”.
68. The test is whether the decision and the administrative action of issuing a Garnishee Notice is, considering all the relevant circumstances, so arbitrary, unjustified, unreasonable and unfair under the Wednesbury principle that no reasonable Decision Maker apprised of the true facts could or would have made that decision, and justifies intervention by the Court. In Air Niugini Limited v Beverly Doiwa (supra) considered this ground and concluded that “the determination arrived at by the tribunal cannot be said to be so unreasonable or outrages that it defies logic or accepted moral standards that no sensible person who applied his mind to the same issues could not have arrived at”.
69. In this case the issue is not the effect of the decision on the plaintiff, its employees, the national interest or the reputation of the first and second defendants to be beyond the scale of reasonableness to justify the Court intervention. It is whether the decision to issue the garnishee notice is so unreasonable, irrational or absurd in the Wednesbury principle that no reasonable decision maker could have arrived at it. I do not think so. In my view, the assessment and the issuing of GST by the defendants is a normal function to undertake on the GST of a “registered person” or taxpayer for tax purposes under the GST Act.
70. In the process of undertaking their functions I think the first and second defendant acted fairly and reasonably at all material times in exercising the powers under Section 74 GST Act 2003 (as amended) and Section 107(3) of the GST Act 2003 (as amended). The issuing of the Garnishee Notice to the BSP is a normal exercise of the statutory duty and function and cannot be deemed unreasonable.
71. The defendants relied on its data and information to revoke its garnishee notice No.132668528 for debt of K54,078,233.74.7 and
issued Garnishee Notice No.132671349 to BSP Financial Group Limited for South Seas Tuna Corporation Limited for K 460,000.00 for unpaid GST, was an action
undertaken under Section 272 of the Income Tax Act 1959 as amended and Section 88 of the GST Act.
(iv) Ultra Vires/Other errors of law
72. On whether the decision makers ultra vires the GST Act and the power and/or discretion of the Decision Makers in issuing the Garnishee Notice, the Garnishee Notice 132671349 of 5 May 2022 for K 460,000.00 clearly sets out the legal basis for it. I set out the full text of the Garnishee Notice:
“Notice pursuant to Section 272 of the Income Tax Act 1959 as amended and /or Section 88 of the Goods & Services Tax Act 2003 as amended under /or Section 8 of the Stamp Duties Act Chapter 117
Take notice that in exercise of the powers conferred to me by legislation referred to above, I HEREBY REQUIRE YOU, being a person:
a) by whom any money is due or accruing or may become due to the taxpayer named above; or
b) who holds or may subsequently hold money for or on account of the taxpayer named above; or
c) who holds or may subsequently hold money on account of some other person for payment to the tax payer named above;
or having authority from some other person to pay money to the tax payer named above; to pay to the Internal Revenue Commission forthwith, or at such time as an amount comes under your control, so much of the money as is sufficient to pay the amount specified above as the tax due to the taxpayer, or the whole of the money when it is equal to or less than that amount.
The specified amount and tax types are mentioned above, being an amount (s) of tax owing to the Commissioner General.
AND TAKE FURTHER NOTICE that if you fail to comply with this notice, YOU will be liable to pay
a) the amounts specified above; or
b) the amount due or held on behalf of the defaulter, whichever is the lesser amount and any amount collected shall be applied against the tax owing by the taxpayer named above.
In addition to any amount you become liable to pay as a result of failing to comply with this notice, you will be guilty of an offence punishable upon conviction by a fine of not less than:
a) K500.00 and not more than K5,000.00 under Section 272 of the Income Tax Act 1959 as amended or Section 88 of the Goods & Services Tax Act 2003 as amended; and
b) K650.00 and not more than K6,500.00 under Section 8 of the Stamp Duties Act Chapter 117.
[signed]
As Delegated Authority
For Sam Koim
Commissioner General
Internal Revenue Commission”
73. There is no dispute that the Commissioner General issued the Garnishee Notice through delegated authority. The authority under Section 88(2) of the GST Act is properly used. It empowers the Decision Makers to issue written notices requiring payment to the second defendant by persons who, inter alia, hold money or may subsequently hold money for or on account of a “defaulter”. A defaulter means a “registered person” who has made default in the payment to the Commissioner of any tax payable by the registered person under this Act” see S. 88(1) of the GST Act.
74. To be able to sustain the Ultra Vires test it must be established that a public authority purports to assume jurisdiction and makes a decision when in fact he lacks it. In simple terms the public body acts beyond the limits of or has no power.
75. There is plethora of case law in this jurisdiction and in this instance, I refer to SCR No.1 of 1990 Re Recount of Votes, [1990] PNGLR441 Sheehan J expressed the following: “Where the authority acts without proper jurisdiction, either by embarking on matters which are not within its delegated authority or exceeds the powers which have been granted to it, remedies under judicial review are available”
76. The decision maker had acted within the ambit of his power. It recited these powers in the Garnishee Notice. It had determined that the plaintiff as a registered person for GST tax purposes as a taxpayer had defaulted, based on the GST Statement of Account, showing a debt of K 30, 102, 846.16. The GST Statement of Account which is tendered in evidence shows that after the payment of K460,000.00 the GST balance still due was K29,642,846.16.
77. In my view the decision maker did not have to exercise any discretion to issue a Garnishee Notice to the defaulting taxpayer under Section 88(2) (a). He was compelled by the provision of the GST Act and the Income Tax act to issue the garnishee notice. It would have been a dereliction of duty given under the GST Act and the Income Tax Act otherwise. The garnishee notice was properly given to the BSP Financial Group Limited (BSP) as permitted by Section 88 (2) as being the party holding or may subsequently hold money for or on account of a defaulter.
78. I have noted that the defendants did not serve a copy of the Garnishee Notice on the plaintiff as required by Section 88 and/or 73(2) of the GST Act. The plaintiff became aware of it in early July 2022 when they were informed of the revocation of the Garnishee Notice of 18 February 2022 for K 54, 078, 233.74 and replaced by Garnishee Notice 132671349 for K 460,000.00. It is in evidence that the actual transfer of funds from BSP was made on the 30 May 2022.
79. In my view, the plaintiff is not materially disadvantaged and prejudiced. The new assessed amount is less for which the Garnishee Notice was issued, and amount of GST actually settled as a result thereof. The plaintiff still has about K8 million kina as unverified GST tax credits, meaning not genuine tax credits and existing a GST tax debt due and owing to the State.
80. The 1-month delay had not affected access to the statutory scheme of review and/or appeal prescribed by the GST Act. In my view
no further, legal consequence can flow from the lack of service of the notice to the plaintiff and the fact that the plaintiff is
able to file this proceeding is a testimony that the legal options available to the plaintiff have not lapsed.
(v) Improper Purpose.
81. The exercise of the power by the first defendant to issue the Garnishee Notice is a creature of statute under Section 88 of the GST Act. The powers given to the Commissioner defined to mean the Commissioner General of Internal Revenue Commission is not subject to any limitation.
82. The power of the Commissioner to make assessment is wide. Section 67 of the GST Act gives the Commissioner wide powers to assess from time to time from returns furnished under the Act and from any other information in the Commissioners possession, to make assessment of the amount that in the Commissioner’s judgment is tax pay able under the GST Act. By definition “Tax” means the Goods and Services Tax.
83. Section 88 (2) of the GST Act permits the Commissioner to give notice requiring a person by whom any money is due or may become due to the defaulter or a person who hold or may subsequently hold money to pay to the Commissioner. The Commissioner invoked this provision of the GST Act to issue the Garnishee Notice to the BSP.
84. The ground of “improper purpose” in this review can be tested by asking what would the “proper purpose” have been for the decision? The proper purpose would be the collection of an existing debt by a defaulting registered taxpayer. The registered taxpayer is South Seas Tuna Corporation Limited and at that time the debt existing was K 30, 102, 846.16. The Garnishee Notice 132671349 pertains to a portion of the GST debt by the plaintiff.
85. In my view the issuing of the Garnishee Notice dated 5 May 2022 was not prompted by ill will or malicious intention against the plaintiff. The first defendant was exercising his right to collect the outstanding GST owing by the plaintiff. He acted in all fairness, took reasonable steps and established that the GST amount of K460, 000.00 was outstanding against the plaintiff outstanding GST of K31,336,222.16 that remains unpaid to the first and second defendants.
86. In the end after my consideration of all the grounds for judicial review I reach the conclusion that the application by the plaintiff is unmeritorious and will rule accordingly.
Order
Ordered Accordingly
__________________________________________________________________
O’Briens Lawyers: Lawyers for the Plaintiff
IRC Inhouse Lawyers: Lawyers for the Defendants
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