Chief Commissioner of Inland Revenue v Lafi Motors [2005] TOLawRp 2; [2005] Tonga LR 131 (21 January 2005)

IN THE SUPREME COURT OF TONGA

Chief Commissioner of Inland Revenue

v

Lafi Motors anors

Supreme Court, Nuku'alofa
Webster CJ
CV 407/2003

20 January 2005; 21 January 2005

Customs and excise – short levy on customs duties – understatement of value of cars – judgment for plaintiff

The claim was for customs import duty and ports and services tax (under the Ports and Services Tax Act (Cap 71)) which was short-levied on 32 Japanese used motor vehicles imported by the first defendant in August 2002. The short-levy arose because the values of the vehicles had been considerably understated on the customs entry forms. The lawyer was unable to obtain instructions as the first defendant appeared not to be operating any longer in Tonga and the second and third defendants were in New Zealand and contact addresses were unable to be obtained. The Court heard the trial in the absence of the defendants.

Held:

1. The first defendant considerably understated the CIF values on the customs entry forms for 32 Japanese used motor vehicles which it imported to Tonga in August 2002. This was discovered in routine auditing by the Compliance Improvement Division. When the CIF values were fairly reassessed by comparison with the values of similar vehicles imported by other importers, the resultant reassessment produced a balance of customs import duty and ports and services tax of $43,727.87 due by the first defendant to the plaintiff.

2. The defendants were indebted to the plaintiff for the outstanding amount of $34,118.95 ($43,727.87 -$9,608.92) in respect of the short-levied customs import duty and ports and services tax. The defendants had earlier accepted that that debt was due, particularly as they had made one earlier payment (of $9,608.92) towards their indebtedness.

3. Judgment was entered for the plaintiff against the defendants jointly and severally to pay to the plaintiff the sum of $34,118.95; with interest at 10% per annum from 20 January 2005 until paid.

Statutes considered:

Customs and Excise Act (Cap 67)

Ports and Services Tax Act (Cap 71)

Counsel for plaintiff: Ms Simiki
Defendants: Not present nor represented

Reasons for Decision

This is a claim by the Chief Commissioner of Revenue, who is authorised by the Customs and Excise Act (Cap 67) to collect and recover the customs duties imposed by that Act.

The 1st Defendant Lafi Motors ran a business at Tofoa, Taufa'ahau Road, Nuku'alofa importing and selling motor vehicles in Tonga. At the relevant times the 2nd and 3rd Defendants, Mr Lafitani Pouanga and Mr Machindar Singh, were partners in the 1st Defendant.

The claim was for customs import duty and ports and services tax (under the Ports and Services Tax Act (Cap 71)) which was short-levied on 32 Japanese used motor vehicles imported by the 1st Defendant in August 2002. The short-levy arose because the values of the vehicles had been considerably understated on the customs entry forms.

Initially Mr Tu'utafaiva appeared for the Defendants, for whom he had been acting since the claim had been lodged in July 2003, but I granted him leave to withdraw as he had not been able to obtain instructions for at least the last year, as he said that the 1st Defendant appears not to be operating any longer in Tonga and the 2nd and 3rd Defendants are in New Zealand and he has been unable to obtain contact addresses. I therefore proceeded to hear the trial in the absence of the Defendants in terms of Order 23 Rule 4(1)(ii).

The Plaintiff led evidence from Mr Kelemete Vahe, now Principal Revenue Officer, and Mr Sione Houpi Tu'ipulotu, Revenue Officer Grade 1, both in the Compliance Improvement Division of the Revenue & Services Departments. They both spoke to the discovery of the understated values and how these were reassessed by comparison with the values of similar vehicles. The Plaintiff also led evidence from Mr Makisi Finau, Revenue Officer at the Technical Division of the Revenue & Services Departments, who spoke to the correspondence with the Defendants following the reassessment. I accepted these witnesses as credible and reliable. The Plaintiff also produced relevant documents.

On the evidence before me, I found on the balance of probabilities that:

The 1st Defendant considerably understated the CIF values on the customs entry forms for 32 Japanese used motor vehicles which it imported to Tonga in August 2002. This was discovered in routine auditing by the Compliance Improvement Division. When the CIF values were fairly reassessed by comparison with the values of similar vehicles imported by other importers, the resultant reassessment produced a balance of customs import duty and ports and services tax of $43,727.87 due by the 1st Defendant to the Plaintiff.

Prior to that figure being finalised, the Plaintiff had given the Defendants several opportunities between 11 November and 17 December 2002 to submit documents which would have clarified the position, but despite some correspondence the Defendants had not submitted any such documents.

The Plaintiff then on 19 December 2002 advised the Defendants of the amount due and gave them until 3 January 2003 to make payment. Along with that letter the Plaintiff sent full details of the reassessment.

On 28 January 2003 the 2nd Defendant Mr Pouanga wrote to the Minister of Finance offering to make a payment of $8,159.77, which he said was all he could afford to pay, and he sought the Minister's indulgence to be allowed to pay the balance before 30 April 2003. In doing so the 2nd Defendant impliedly admitted the Defendants' debt. That application for part payment was accepted on 30 January by the Minister as Chief Commissioner of Revenue and the 2nd Defendant made payment of $9,608.92 (which included sales tax).

No further payment was made by the Defendants and on 20 May 2003 the Plaintiff wrote to the 2nd Defendant pointing out that he had not honoured his earlier undertaking and giving the Defendants a final period until 26 May to pay the balance.

In response to that, Mr Nalesoni Tupou, Barrister, Auckland, wrote to the Plaintiff on behalf of the 1st and 2nd Defendants by fax on 26 May. He did not, on behalf of the Defendants, dispute that the balance due was outstanding, but asked for an extension of time due to financial difficulties. He also offered on behalf of the 1st and 2nd Defendants that they would continue payments of $8,159.77 every 2 months starting on 26 June 2003, with a final payment in January 2004. With reference to that letter, on 5 June 2003 the Plaintiff advised Mr Tupou that his instructions were to proceed with recovery.

I accordingly found that the Defendants were indebted to the Plaintiff for the outstanding amount of $34,118.95 ($43,727.87 -$9,608.92) in respect of the short-levied customs import duty and ports and services tax. The Defendants had earlier accepted that that debt was due, particularly as they had made one earlier payment towards their indebtedness.

The final result is thus that judgment is entered for the Plaintiff against the Defendants jointly and severally to pay to the Plaintiff the sum of $34,118.95; with interest at 10% per annum from 20 January 2005 until paid.

I also awarded costs as agreed or taxed to the Plaintiff against the Defendants jointly and severally.