N10586

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 63 OF 2023

BETWEEN:
KWIK MIT LIMITED
-Plaintiff-

AND
DAVID TOWE in his capacity as the Chief Customs Commissioner
- First Defendant-

AND
PAPUA NEW GUINEA CUSTOMS SERVICES
-Second Defendant-

Lae:    Dowa J
2023:   10th & 17th November

PRACTICE AND PROCEDURE –tax disputes- application for compliance of statutory duties under Part XIV and XV of the Customs Act 1951-the tax policy on “pay first litigate later” discussed-the policy be reciprocated with meaningful and timely disposal of reviews and appeals-Court has jurisdiction to intervene where there is lapse in procedural compliance resulting in injustice to taxpayer-application granted.

Cases Cited:
In a matter of an Appeal pursuant to Section 247(B) of the Income Tax Act 1959 & Order 18, Division 2 – Taxation Appeals of the National Court Rules; Fu Gui Village Limited v Betty Palaso in her capacity as Commissioner General of Internal Revenue Commission and Internal Revenue Commission (2019) N7781
Puma Energy PNG Ltd v Paul [2018] PGNC 52; N711
Chief Collector of Taxes v Bougainville Copper Limited and SCA No 56 of 2005; Bougainville Copper Limited v Chief Collector of Taxes (2007) SC853
Sanu v Tuke [2020] PGNC 15; N8187

Counsel:
L. Wangi, for the Plaintiff
No appearance by the Defendants

INTERLOCUTORY RULING

17th November 2023
            
1.	DOWA J:  	This is a ruling on the Plaintiff’s application.

2.      By Notice of Motion, the Plaintiff seeks the following orders:

1.	Pursuant to Order 12 Rule 1 of the National Court Rules, Section 155(4) of the Constitution and section 178 (1) & (2) of the Customs Act 1951 the First Defendant shall review the Plaintiff’s letters of appeal (Appeals) since April 2020 within 21 days from the date of this court order: 

a.	letter dated 8 April 2020; 
b.	Plaintiff’s previous lawyer letter dated 21 November 2021;
c.	letter dated 10 February 2023; 
d.	letter dated 17 February 2023; and 
e.	letter dated 14 April 2023

2.	Alternatively, pursuant to Order 12 Rule 1 of the National Court Rules, Section 155(4) of the Constitution and section 178 (1) & (2) of the Customs Act 1951, the First Defendant shall review the Second Defendant’s decisions (Decisions) within 21 days from the date of this court order as contained in the: 

a.	Tariff Classification Advice 002/2020 dated 23 March 2020, which revoked the Tariff Classification 001/2020 dated 3 March 2020 and say that Pork Jowls or edible offal of swine frozen HS classification code is considered to be in subheading 0203.29.00 attracting 20 % import duty rate. 

b.	Tariff Instruction dated 10 November 2021, based on the audit re-assessment done pursuant to Sections 131A-131D of the Customs Act, 1951 reclassifying Pork Sternum from Tariff Item code 0206.49.00 to Tariff Item code 0203.29.00 as meat of swine and attracting an import duty rate of 20%; 

c.	the Result of Post Clearance Audit with Kwikmit Limited dated 17 January 2023 pursuant to section 102 of the Customs Act, 1951 which was served on the Plaintiff via email on 17 January 2023 demanding, amongst others, payment of K2,804,653.81 for import duty plus GST short paid. 

(collectively, Decisions) 

3.	Pursuant to Order 12 Rule 1 of the National Court Rules, Section 155(4) of the Constitution and section 178 (6) of the Customs Act 1951 that the First Defendant shall serve on the Plaintiff its Written Decision within 14 calendar days after the lapse of the 21-day period referred to in paragraphs one (1) and two (2) above. 

4.	Pursuant to Order 12 Rule 1 of the National Court Rules, Section 155(4) of the Constitution and section 177B (1) of the Customs Act 1951, the Minister responsible shall appoint three persons to constitute the Customs Review Tribunal within 30 days from the date of this court order. 

5.	The First and Second Defendants shall bear the costs of this application.”

3.	 The Plaintiff relies on the following affidavits:

1)	Affidavit of Luke Wangi sworn on 10 October 2023 and filed on 12 October 2023 [doc#22] (Luke affidavit); 

2) 	Supplementary Affidavit of Luke Wangi sworn on 1 November and filed on 6 November 2023 [doc#25] (Supplementary affidavit) 

2)	Affidavit of Andrew Macpherson sworn on 26 April and filed on 27 April 2023 [doc#10] (Andrew affidavit); and 

3)	Affidavit of Craig Nancarrow sworn on 31 March 2023 and filed on 3 April 2023 [doc#3] (Craig affidavit). 

4.	The Defendants filed no affidavits in response.

Background Facts 

5.	The Plaintiff is involved in the business of importation and distribution of pork and poultry products in Papua New Guinea. It is a registered taxpayer and pays import duties to the second Defendant under the Customs Act 1951.

6.	On 3 March 2020, the Second Defendant in a Tariff Classification Advice 001/2020 (Tariff Classification 001) in relation to the classification of frozen Pork Jowls (Jowls), advised that Jowls or edible offal of swine frozen HS classification import code is considered to be in subheading 0206.49.00 of the Tariff and is free of duty. 

7.	On 23rd March 2020, the second Defendant in a Tariff Classification Advice 002/2020 revoked the Tariff Classification 001/2020 dated 3 March 2020 and that Pork Jowls or edible offal of swine frozen HS classification code is considered to be in subheading 0203.29.00 of the Tarriff attracting 20 % import duty rate. 

8.	On 7th April 2021, the second Defendant issued a demand Notice for payment of duty. The Plaintiff disputed the reclassification by letter dated 8th April 2021.Without considering the Plaintiff’s letter of 8th April 2021, the Defendants issued a letter of demand for payment, which was again disputed by the Plaintiff’s lawyers in a letter dated 25th November 2021.

9.	On 10th November 2021, the second Defendant in a Tariff Instruction dated 10 November 2021, based on the audit re-assessment done pursuant to Sections 131A-131D of the Customs Act 1951 reclassifying Pork Sternum from Tariff Item code 0206.49.00 to Tariff Item code 0203.29.00 as meat of swine and attracting an import duty rate of 20%.

10.	Without considering the Plaintiff’s letter of 8th April 2021, the second Defendant issued a letter of demand for payment dated 19th November 2021, which was again disputed by the Plaintiff’s lawyers in a letter dated 25th November 2021.

11.	Pending settlement of its dispute, the Plaintiff paid K3,633,866.12 in compliance with the “pay first litigate later” policy pursuant to section 176 of the Customs Act.

12.	On 17th January 2023, the second Defendant released the Result of Post Clearance Audit with Kwikmit Limited dated 17 January 2023 pursuant to section 102 of the Customs Act 1951 which was served on the Plaintiff via email on 17 January 2023 demanding, amongst others, payment of K2,804,653.81 for import duty plus GST short paid.
 
13.	The Plaintiff disputed the post clearance audit findings and the notice for payment by the Defendants and sought further clarification and review in its letters of 10th, 15th and 17th February 2023 and 14th April 2023. 

14.	On 28th March 2023 the second Defendant proceeded to issue a statutory garnishee pursuant to section 191AA of the Customs Act 1951 without responding to the matters of dispute raised by the Plaintiff and its lawyers.

The Proceedings

15.	Aggrieved by the various decisions of the second Defendant the Plaintiff filed the current proceedings. Despite being served the relevant copies of the Court process and being notified of the matter, the Defendants filed no documents in response apart from filing their Notice of Intention to Defend.

16.	On 12th April 2023, the Court granted interim ex parte restraining orders against the Defendants from exercising their statutory garnishee powers pursuant to section 191AA of the Customs Act 1951 pending inter party hearing. After several adjournments, the interim orders were varied or affirmed to continue until final determination of the proceedings. 

17.	On 21st August 2023 the Plaintiff filed an Amended Originating Summons which was duly served on the Defendants.

18.	The Plaintiff’s current Notice of Motion was filed on 12th October 2023 and served on the Defendants on 23rd October 2023.The matter was specifically fixed for hearing on 10th November 2023. Despite being served notice of hearing; the Defendants did not appear in Court to oppose the application.

Issues 

19.	The main issue for consideration is whether the Plaintiff is entitled to the reliefs sought in the Notice of Motion.

Consideration of the Issues

20.	From the evidence and submission of counsel, the Plaintiff has disputed liability on the import duty imposed and have requested the Defendants for review of their decisions which has not been attended to. Instead, the Defendants proceeded to take administrative actions to enforce their statutory demands without dealing with the Plaintiffs pleas and appeals.

21.	Imposition of import duty is governed by Customs Act 1951 (as amended to date).  Where a dispute arises as to the rates, the amount for duty or reclassification of taxable items, there is a set procedure to follow under Part XIV and XV (sections 176-178) of the Customs Act. The process begins with the taxpayer paying under protest, and then appeals to the Commissioner General for a review. The Commissioner General considers the dispute and makes a ruling. If a party is dissatisfied with the decision of the Commissioner General, he may apply for a review to the Customs Review Tribunal. If a party is dissatisfied with the decision of the Review Tribunal, he may appeal to the National Court. 

22.	The application of Part XIV and XV of the Customs Act has been discussed in several cases in this jurisdiction which, counsel for the Plaintiff has aptly referred to, and applied in this decision. 

23.	In the case, In a matter of an Appeal pursuant to Section 247(B) of the Income Tax Act 1959 & Order 18, Division 2 – Taxation Appeals of the National Court Rules; Fu Gui Village Limited v Betty Palaso in her capacity as Commissioner General of Internal Revenue Commission and Internal Revenue Commission (2019) N7781 the Court held at paragraph 10:  

10. 	The Supreme Court in the case of Internal Revenue Commission v. Dr Pirouz Hamindian-Rad (2002) SC692 held that tax legislation must be given their plain and ordinary meaning. There must be a clear and unambiguous intention demonstrated in the Statute, otherwise an interpretation favourable to the taxpayer is preferred.

24.	In Puma Energy PNG Ltd v Paul [2018] PGNC 52; N711, the National Court emphasized taxpayer rights pursuant to Part XV of the Customs Act, 1997 and held at paragraph 16 that: 

16.Consequently, applying that principle, Puma Energy as a taxpayer is entitled to its rights as conferred by the Customs Act. It is entitled to exercise its rights conferred under Part XV to approach the Customs Review Tribunal and further, it is entitled to file a notice of appeal to this court pursuant to s. 178B Customs Act if it is dissatisfied with a decision of the Customs Review Tribunal.
25.	In the case of Chief Collector of Taxes v Bougainville Copper Limited and SCA No 56 of 2005; Bougainville Copper Limited v Chief Collector of Taxes (2007) SC853, the Supreme Court addressed the tax policy of “pay first argue later” at paragraphs 73 and 74: 
73. ……. His Honour was thus correct when he had regard to the relevant Australian taxation cases as well as the relevant and applicable provisions under the PNG ITA and held that the tax policy in PNG is to “pay up now and litigate later”. This is the end result of the combined effects of s. 257 with ss. 239 (1), 259, 262 (3), 263 and 264.
74. If one were to consider the ITA as setting out a complete statutory code for the imposition, assessment and the collection of taxes due and payable, there would be no jurisdiction in the Court to hear and determine applications to stay or restrain enforcement of assessed taxes. Taxpayers would only have the right of appeal but with the obligation to “pay now and “litigate later.”

26.	In the present case, the Plaintiff disputed the notification of demand for payment and the reclassification of the rates and sought assistance for the review of the decisions with the Chief Customs Commissioner, the first Defendant, as provided for under section Part XIV and XV of the Customs Act. The Plaintiff on its part paid K3,633,866.12 in compliance with the “pay first litigate later” policy pursuant to section 176 of the Customs Act.

27.	The evidence shows the Defendants did not offer any satisfactory assistance nor allowed for the first Defendant to review the decisions in the first instance, and thereafter to be followed on with a Customs Review Tribunal hearing. Instead, the Defendants proceeded to issue garnishee proceedings pursuant to section 191AA of the Customs Act. The Defendants have not demonstrated that they are willing to comply with or assist the Plaintiff in the appeal and or review process under Part XIV and XV of the Customs Act. 

28.	The Plaintiff has now turned to the Court seeking redress. Does the Court have jurisdiction to intervene where there is an administrative procedure for settling the dispute provided by Statute. The Plaintiff submits that the Court has jurisdiction to grant the orders under section 155(4) of the National Constitution and Order 12 Rule 1 of the National Court Rules.

29.	In Sanu v Tuke [2020] PGNC 15; N8187 the National Court held at paragraph 39 that:
39. Section 155 (4) of the Constitution vests in the Supreme and National Courts inherent powers to make such orders as are necessary to do justice in the circumstances of a particular case. It is available to fill in a gap in the law or to fashion a new remedy. It is used in aid of a primary right conferred by law and it cannot confer a new primary right and it does not give the "Court the power to do anything contrary to what the law says": SCR No 2 of 1981 [1982] PNGLR 15, 154; Uma More v UPNG [1985] PNGLR 401, 424.

30.	Clearly, the Defendants approach towards resolving the dispute prior to and their conduct in the current proceedings has left the Plaintiff with no option but to seek appropriate redress from this Court. The Defendants have benefited from the tax policy of “pay first litigate later”, however, failed to resolve the disputes in a timely manner. The Defendants have a statutory obligation to reciprocate a taxpayer’s request for reviews in a meaningful and timely manner once the later has complied with the tax policy of “pay first litigate later,” otherwise the tax law becomes oppressive on the taxpayer.

31.	In these circumstances, it is an appropriate case for the Court to invoke its powers under section 155(4) of the Constitution to make such orders as are necessary to do justice in the circumstances of this case. The Plaintiff must be given an opportunity to exercise its rights conferred under Part XIV and XV of the Customs Act.  The first Defendant must make a ruling on the Plaintiff’s appeal letters and thereafter depending on the ruling of the Commissioner, approach the Customs Review Tribunal for review if need be and eventually file a notice of appeal to this Court pursuant to s. 178B Act if it is dissatisfied with a decision of the Customs Review Tribunal. If there is no Customs Review Tribunal in place, the Minister responsible for financial matters shall appoint one to deal with the review. 

32.	In conclusion, I am satisfied that the Plaintiff is entitled to the reliefs sought in the application for the reasons given in my judgment.

ORDERS

33.      The Court orders that:

1.	Pursuant to Order 12 Rule 1 of the National Court Rules, Section 155(4) of the Constitution, and section 178 (1) & (2) of the Customs Act 1951 the First Defendant shall review the Plaintiff’s letters of appeal (Appeals) since April 2020 within 30 days from the date of this order; 

A. letter dated 8 April 2021. 
B. Plaintiff’s previous lawyer letter dated 21 November 2021.
C.letter dated 10 February 2023. 
D. letter dated 17 February 2023; and 
E. letter dated 14 April 2023

in respect of the following Decisions:

i.	Tariff Classification Advice 002/2020 dated 23 March 2020, which revoked the Tariff Classification 001/2020 dated 3 March 2020 and say that Pork Jowls or edible offal of swine frozen HS classification code is considered to be in subheading 0203.29.00 attracting 20 % import duty rate. 

ii.	Tariff Instruction dated 10 November 2021, based on the audit re-assessment done pursuant to Sections 131A-131D of the Customs Act, 1951 reclassifying Pork Sternum from Tariff Item code 0206.49.00 to Tariff Item code 0203.29.00 as meat of swine and attracting an import duty rate of 20%. 

iii.	the Result of Post Clearance Audit with Kwikmit Limited dated 17 January 2023 pursuant to section 102 of the Customs Act, 1951 which was served on the Plaintiff via email on 17 January 2023 demanding, amongst others, payment of K2,804,653.81 for import duty plus GST short paid. 

               	 within 30 days from the date of this order. 

2.	Pursuant to Order 12 Rule 1 of the National Court Rules, Section 155(4) of the Constitution, and section 178 (6) of the Customs Act 1951 that the First Defendant shall serve on the Plaintiff its Written Decision within 14 calendar days after the lapse of the 30-day period referred to in paragraphs one (1)) above. 

3.	If the Plaintiff is dissatisfied with the decision of the first defendant, the Minister responsible shall pursuant to section 177B (1) of the Customs Act 1951, appoint three persons to constitute the Customs Review Tribunal within 30 days from the date of the first Defendant’s ruling. 
4.	The restraining orders issued on 12th April 2023 and confirmed on 4th July 2023 shall continue until pending determination of matters referred to in orders 1,2 and 3 above or earlier discharge on application by the parties. 
5.	The First and Second Defendants shall bear the costs of this application.
6.	Time of entry of these Orders is abridged to take place forthwith upon the Court signing of the Orders.

_________________________________________________________________
Leahy Lewin Lowing Sullivan Lawyers: Lawyers for the Plaintiff
Fred Katu, in-house lawyer:   Lawyer for the First and Second Defendants