South Seas Tuna Corporation Ltd v Koim [2023] PGNC 450; N10596 (1 December 2023)

N10596

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (JR) NO. 108 OF 2021 (IECMS)

BETWEEN:
SOUTH SEAS TUNA CORPORATION LIMITED
Plaintiff

AND:
SAM KOIM in his capacity as COMMISSIONER GENERAL, INTERNAL REVENUE COMMISSION
First Defendant

AND:
INTERNAL REVENUE COMMISSION OF PAPUA NEW GUINEA
Second Respondent

Waigani: Dingake J
2023: 10 October, 1^st December

JUDICIAL REVIEW – plaintiff’s application for judicial review is based on the First Defendant’s failure to make a determination on the Plaintiffs objections to an assessment made by the First Defendant pursuant to the Goods and Services Act (“GST ACT”) - Plaintiff contends that it does not owe any amount for GST in these proceedings, and in fact asserts that it is owed GST refunds by the Defendants which are continuing to increase monthly -the Defendants’ refusal to deal with the Plaintiff’s objections to GST assessments made on or about the 16^th of June 2016 were contrary to law - Plaintiff has established the ground of error of law it relies upon to impugn the decision sought to be reviewed – judicial review granted

Cases Cited:

Mairi v Tololo [1976] PNGLR 125; PGSC 9; SC94

Counsel:

Mr. Ian Molly & Mr. J Kakaraya, for the Plaintiff
No Appearance, for the 1^st Defendant
No Appearance, for the 2^nd Defendant

JUDGMENT

01^st December 2023

1. DINGAKE J: INTRODUCTION: This is my decision with respect to the substantive application for judicial review, filed by the Plaintiff on the 7^th of September, 2023.
   
2. On the 9^th of October 2023, this Court adjourned this matter to the 6^th of November for a hearing at 9.30am and the Plaintiff was directed to inform the Defendants of the hearing date.
   
3. On the 6^th of November 2023 when this matter was called for a hearing, the Defendants, despite being duly informed, did not appear. The Court being satisfied that the Defendants were duly notified of the date of hearing proceeded to hear the matter in the absence of the Defendants.
   
4. The Plaintiff seeks to review several decisions of the First Defendant, particularised in the Notice of Motion filed in terms of Order 16 Rule 5 (1) of the National Court Rules, made on various occasions, in which the Plaintiff alleges that the First Defendant failed to make a determination on the Plaintiffs objections to an assessment made by the First Defendant pursuant to the Goods and Services Act (“GST ACT”).
   
5. Essentially the Plaintiff seeks an order in the nature of a Declaration that the decision of the First Defendant of the 18^th April 2019 and/or 1^st April 2021 to declare invalid the Plaintiff’s GST objection dated 29^th of June 2016 or alternatively further amended objection filed on the 19^th of August 2019 served on the Defendants pursuant to section 73 or 74 of the Goods and Services Tax Act 2003, is unlawful, invalid, void and of no force and effect, in that the decision maker(s) actions or conduct offends Part X1 of the Act, particularly section 75 (1) and done in breach of section 115(6) of the Constitution; unreasonable and unfair under the Wednesbury principles; unfair and unjust and in breach of section 59 of the Constitution and is ultra vires their powers.
   
6. The relief sought by the Plaintiff is set out in full in the Notice of Motion filed in terms of Order 16 Rule 5 (1) National Court Rules and there is no value addition in repeating it in this judgment.
   
7. The determination of this dispute turns on the proper interpretation of the relevant sections of the Goods and Services Act of 2003, as shall become apparent in my discussion of those sections in due course.
   
8. The Plaintiff is a registered taxpayer for tax purposes. It operates a fish processing facility at Wewak. The First Defendant is the Commissioner General of Internal Revenue, who is responsible for tax matters, including with respect to the Plaintiff’s operations.
   
9. The Second Defendant is a statutory body established by the Internal Revenue Commission of 2014.
   
10. In this Judgment I refer to the First Defendant as such and or as the Commissioner.
    
11. To put the issues in contention in sharp perspective, I state hereunder the background facts, albeit briefly.
    
12. In January 2021 the Commissioner issued a zero-rated ruling under the then Value Added Tax Act, now the Goods and Services Act 2003 (GST Act), in respect of the Plaintiff’s enterprise.
    
13. At all material times hereto, the Plaintiff was in the business of receiving fish caught offshore and exporting the processed product. The reason for the zero rating was because GST is a domestic consumption tax.
    
14. Between 2004 and 2015 the Plaintiff filed monthly returns under the GST Act, which were accepted and assessed by the Commissioner. The Plaintiff’s operations were such that it incurred and paid GST (in respect supplies consumed by the Plaintiff within PNG, for which it was entitled to refunds of GST (“input credits”). These appeared as credits in favour of the Plaintiff in the Defendant’s accounts.
    
15. Sometime in 2017 the Plaintiff became aware that the Defendants had overtime adjusted its records with the result that the Defendants’ records showed the Plaintiff as being indebted to the Second Defendant in the amount of more than K15 million under the GST Act. Being unhappy with these developments the Plaintiff filed a Notice of Objection with the Commissioner on 24^th March 2016.
    
16. On 27^th June 2016, the Commissioner wrote to the Plaintiff’s lawyers, with respect to the amended GST assessments in the amount of K64,543,072.47 which the Plaintiff was unhappy about, resulting in the Plaintiff’s letter of objection dated 29^th of June 2016, written to the Commissioner. The letter also specifically objected to the June Final Assessment.
    
17. On the 18^th of April 2019 the Defendants advised the Plaintiff that its objection dated the 29^th of June 2016 was invalid for failure to comply with the requirements under Section 74(2) of the GST of 2003.
    
18. On the 1^st of July 2019 the Plaintiff requested for an extension of time from the First Defendant to lodge an amended GST objection out of time, which request the Commissioner granted on the 2^nd of July 2019.
    
19. On the 5^th of August 2019 the Commissioner revoked its letter of the 2^nd of July 2019 and advised the Plaintiff accordingly.
    
20. On the 19^th of August 2019, the Plaintiff lodged amended GST objections covering the periods 1^st of November 2004 – 31 December 2013 and requested the Defendants to either determine the objections, or alternatively requested the Defendants to treat the objections as request for credit amendments.
    
21. On the 1^st of April2021, the Defendants advised the plaintiff that its request in its letter of the 19^th of August 2019, was refused.
    
22. At the leave stage the Defendants submitted that the provisions of the GST Act for objections under section 72 of the GST Act does not provide for objections that are out of time to be treated as request for credits amendments.
    
23. An issue has now arisen as to the validity of the objection dated the 29^th of June 2019 ostensibly for failure to comply with the requirements of s.74(2) contained in Part 11 of the GST Act.
    
24. The Plaintiff argues that the nature and basis of the Defendant’s decisions on the 18^th of April 2019 and 1^st April 2019 declaring the Plaintiff’s Amended GST objection and its alternate request for assessment are invalid, is uncertain or without proper basis.
    
25. The Plaintiff contends that it does not owe any amount for GST in these proceedings, and in fact asserts that it is owed GST refunds by the Defendants which are continuing to increase monthly.
    
26. To assess the validity of the above objection it is important to set out, in a nutshell, the governing legal framework.
    

The Legal framework

27. Section 74(2) of the GST Act provides that:

(2) Where an assessment is an amended assessment, the person so assessed shall have no further right of objection than that person would have had if the amendment had not been made, except to the extent to which by reason of the amendment a fresh liability in respect of any is imposed on that person or an existing liability in respect of any is increased.

28. According to the Commissioner’s ruling, in 2001, and maintained until 2015/16, the Plaintiff’s operations were zero-rated for GST, apparently because the GST is a domestic consumption tax. The June 2016 assessment created a fresh liability, and certainly an increased liability, as it seems that previously there was no liability.

29. Significantly, Section 74(1) of the GST Act, states:

(1) Subject to Subsection (2), a person who has been assessed for tax payable may object to that assessment by delivering or posting to the Commissioner a written notice of objection stating shortly the grounds of that person’s objection, within such time as may be specified in that behalf in the notice of assessment, not being less than two months after the date on which that notice of assessment is given, or within such extended time as the Commissioner may allow on the application of the person made before the expiry of –

(a) the time for objection specified in the notice of assessment;

or

(b) any extended time for objection previously allowed by the Commissioner in respect of the assessment.

30. On or about the 18^thApril 2019 a letter was issued on behalf of the Commissioner, to the Plaintiff advising that the Plaintiff’s objection of 29^th June 2016, failed to demonstrate the tax liabilities against each Notice of Assessment for each of the months of the amended assessments issued; and that instead, the grounds of the Plaintiff’s objection relate to GST Ledger Account Transactions.

31. The letter explained that a ledger is an internal document to keep track of a taxpayers GST transactions for compliance purposes, and that it cannot be construed to mean a Notice of Assessment.

32. The Plaintiff on the contrary contends that it did, on 29^th June 2016, expressly object to the June 2016 assessments, as is clear from “AUK2” a letter from its lawyers.

33. The Plaintiff argues that it specifically objected to “The Commissioner’s June Final Assessment document sent on 27^th June 2016” purporting to be an assessment. The Plaintiff contended that the June assessment was “beyond power”, but that in the event it is wrong, then it amends its objections, as per its “Amended GST Objection”.

Fresh Objections/Extension of Time

34. To have the Commissioner deal with its objections, the Plaintiff, through another firm of lawyers, successfully sought an extension of time by letter dated 24^th June 2019 to lodge objections in conformity with what it was understood were the Defendants’ requirements.

35. On the 5^th of August 2019, despite having allowed the Plaintiff to seek extension, the Commissioner wrote to the Plaintiff, advising that he didn’t have any discretion under the provisions of the Goods and Services Tax Act 2003, to allow the Plaintiff to lodge an amended objection outside the prescribed time limit. In consequence, the Commissioner revoked any allowance communicated in his letter of 2^nd July 2019.

36. The Plaintiff contends that based on the provisions of Section 74 of the GST Act the Commissioner’s decision and reasons were wrong.

37. In any event the Plaintiff contends that the fresh objections were not out of time, as the time for lodging a notice of objection under GST Act had not expired.

38. Section 74 (1) of the GST Act, provides that a person who receives an assessment may object by written notice, as indicated earlier.

39. Having regard to the above, it is clear to me that the Defendants misconstrued the provisions of the law, that under s 74(1) of the GST Act the time for lodging an objection, is expressed as being;

“within such time as may be specified in that behalf in the notice of assessment, not being less than two months after the date on which that notice of assessment is given, or within such extended time as the Commissioner may allow on the application of the person made before the expiry”

(a) the time for objection specified in the notice of assessment;

0. 
   

(b) any extended time for objection previously allowed by the Commissioner in respect of the assessment.

40. Based on the above section and the facts and circumstances of this case, I do not understand how it could be said that the Plaintiff was out of time as its situation seems to be covered by the above quoted section.

41. I have read the Supreme Court case of Mairi v Tololo [1976] PNGLR 125; PGSC 9; SC94, in which the Court instructively held that in a taxing Act one has to look at what the law states in precise terms and that there is no room for intendment and that nothing is to be read in, nothing is to be implied, one can only look fairly at the language used.

42. I therefore agree with the contention of the Plaintiff that if there is no time for objecting specified in the notices/assessments, the Plaintiff’s notices of objection lodged on or about 19^th August 2019 cannot be out of time.

43. It follows from the above that:
    
    • (a) the Defendants’ decision not to deal with the objections lodged on about 19 August 2019, on the basis that the Commissioner had no discretion to extend time, involved a mistake of law, specifically, an erroneous understanding of (or failure to consider) the Commissioner’s discretion under s 74(3).
      
    • (b) further or alternatively, the objections lodged on or about 19^th August 2019 were not out of time according to the legislation. To treat them as out of time constituted another error of law by the Commissioner. He could and should have simply dealt with the objections, as the law permitted him or her to do so.
      
44. I have considered the submissions of the Plaintiff, and I am satisfied that the Defendants committed an error of law when they held that the Plaintiff failed to comply with several sections of the GST Act, such as Section 74(2) as this has not been demonstrated.
    
45. The Defendants also fell into error in contending that the Commissioner had no discretion to accept an objection after the time specified in the notice of assessment has expired.
    
46. Section 75 (1) of the GST Act obliges the Commissioner to consider all objections under Section 74, and he or she has the authority, if so minded, to alter the assessment pursuant thereto.
    
47. In all the circumstances of this case, based on the evidence as summarized and the law as discussed herein, the Defendants’ refusal to deal with the Plaintiff’s objections to GST assessments made on or about the 16^th of June 2016 were contrary to the law. The Plaintiff has therefore established the ground of error of law it relies upon to impugn the decision sought to be reviewed.
    
48. I am of the considered view that the Plaintiff is entitled to the relief sought in its Notice of Motion filed in terms of Order 16 Rule 5 (1) of the National Court Rules save for Term 6 of that Notice of Motion, which speaks of matters not sufficiently canvassed before me and with respect of which I cannot say a case has been made for that relief.
    
49. In the result this Court orders that:

1. An Order in the nature of a Declaration that the decision of the First Defendant of 18 April 2019 and /or 1 April 2021 to declare invalid the Plaintiff’s GST objection dated 29^th June 2016 or alternatively further amended objection filed on the 19 August 2019 served on the Defendants pursuant to section 73 or 74 of the Goods and Services Act 2003 is unlawful, invalid, void and of no force and effect in that the decision maker(s) actions and/or conduct is:

(a) In breach of sections 74, particularly section 75 (1) of the GST Act, 2003.

(b) Unreasonable and unfair under the Wednesbury principles.

(c) Unfair and Unjust and in breach of Section 59 of the Constitution.

(d) Ultra vires their powers.

2. An order in the nature of certiorari that the decision of the First Defendant of:

(a) 18^th April 2019 to declare invalid the Plaintiffs GST objection dated 29 June 2016 is squashed and void of no effect; and

(b) further or alternatively, 1 April 2021 to refuse to determine or to reject out of hand the Plaintiff’s amended GST objection dated 19 August 2019 is squashed and void and of no effect.

3. An order in the nature of mandamus against the First Defendant requiring him to determine within 30 days whether the Plaintiff’s GST Objection dated 29 June 2016 including further as supplemented by the 19 August 2019 amended Objection is wholly allowed, allowed in part, or wholly disallowed.
   
4. Where the First Defendant determines the Plaintiff’s amended GST objection dated 29 June 2016 is allowed in part, or wholly disallowed, an Order in the nature of mandamus against the First Defendant requiring him to state a case for the National Court in pursuant to Section 77(2)(a) and/or 77(3)(a), and Section 77(9) of the Good and Services Tax Act 2003, within three months of receiving the Plaintiff’s points of objection under section 77(5).
   

5. Further or alternatively, order in the nature of mandamus against the First Defendant requiring him within 30 days to raise a credit assessment under s.67 of the Goods and Services Act 2003 in respect to the accessible amounts the subject of 19 August 2019 objections.

6. An Order that the Plaintiff’s costs be paid by the Defendants.

7. The time for entry of these Orders be abridged to the time of settlement by the Registrar which shall occur forthwith.
_______________________________________________________________
O’Briens: Lawyer for the Plaintiff
No Appearance: Lawyer for the First Respondent
No Appearance: Lawyer for the Second Respondent