This article was written by Datuk D P Naban and S Saravana Kumar.
This article was first published in the July 2015 issue of Tax Guardian, a publication of the Chartered Tax Institute of Malaysia and LHAG’s May 2016 issue of Legal Herald.
 |
| https://www.itrtoday.com/appeal-review-revision-under-goods-service-tax-gst/ |
The
much-anticipated goods and services tax (“GST”) replaced Malaysia’s sales and
service tax in April this year. Under the new regime, all goods and services
supplied in the country (unless they are zero-rated, exempt supply or out of
scope) are subject to GST at the rate of 6% at every stage of the supply chain.
Although GST is conceptually a simple consumption tax, confusion and
uncertainty arising from the existing legislation (especially the wide
zero-rated and exempt supply list) have made it a fairly complex tax in
Malaysia.[1]
This is
coupled with technical issues that will arise due to differing standpoints
adopted by the Royal Malaysian Customs Department (“Customs Department”) and
GST practitioners. The Goods and Services Tax Act 2014[2] (“the GST Act”) also contains a
comprehensive penalty regime which, from its drafting and intent, may be read
to be punitive in nature. During its roadshows nationwide, the Customs
Department appeared to have assured businesses and GST practitioners that it
would adopt an educational approach, at least in the first year of GST
implementation, and, as such, the penalty provisions under the GST Act would be
applied sparingly. This assurance is not legally binding and, in any event, the
Customs Department is not estopped from applying the full
strength of the law if it wishes to impose a penalty.[3]
This
article will cover two major avenues of appeal available to taxpayers: the GST
Appeal Tribunal and the judicial review application.
GST Appeal Tribunal
If a
taxpayer is aggrieved by a Customs decision in respect of GST matters, the
ordinary route envisaged by Parliament
is for him to appeal to the GST Appeal Tribunal (“the Tribunal”). The
establishment of the Tribunal is provided under
s 125 of the GST Act. The Tribunal has the jurisdiction to determine appeals in
respect of GST matters except on the matters specified in the Fourth Schedule.[4] Parliament has not provided a reason for making this
exception and neither does the GST Act provide any alternative appeal remedy to
taxpayers who may be
aggrieved by a decision of the Customs Department (including the
Director-General of Customs).
It is
unfortunate that the GST Act is silent on this. The author submits that
Parliament should have either provided an
appeal process for such matters, or at least acknowledged that such matters
could be appealed by way of
judicial review application. It is the author’s opinion that taxpayers who are
aggrieved by decisions in respect of matters specified in the Fourth Schedule
may seek legal recourse by way of judicial review application, which is
discussed below.
The salient
features of the Tribunal are:
Membership
The
membership of the Tribunal is rather wide and appointment is determined by the
Minister of Finance.[5]
The chairman and deputy chairman of the Tribunal will be
appointed from among the officers attached to the Judicial and Legal Service.[6] The
minister is required to appoint no fewer than five members whom in his opinion have
wide knowledge or extensive experience in any field of activities relating to
GST, customs or taxation.[7]
As at the time of
writing, the author is unaware of any appointment being made by the Minister to
the Tribunal. Tribunal members shall
hold office for a term not exceeding three years and are eligible for
reappointment up to three consecutive terms.[8] The
Minister shall also determine the remuneration and other terms and conditions
of the members of the Tribunal, including the chairman.[9] In the
following circumstances, the appointment of a member of the Tribunal under s 128(1)(b)
of the GST Act may be revoked by the Minister:[10]
(a) His conduct,
whether in connection with his duties as a member of the Tribunal or otherwise,
has been such as to bring discredit to the Tribunal;
(b) He has
become incapable of properly carrying out his duties as a member of the Tribunal;
(c) There has
been proved against him, or he has been convicted of, a charge or charges in respect of:
(i) An offence involving fraud, dishonesty or moral
turpitude;
(ii) An offence under any law relating to corruption;
(iii) An offence under this Act, the Customs Act 1967
or the Excise Act 1976; or
(iv) Any other offence punishable with imprisonment
for more than two years;
(d) His conduct, whether in connection with his duties as a member of the Tribunal or otherwise, has been such as to bring discredit to the Tribunal;
(e) He is
adjudicated a bankrupt;
(f) He has
been found or declared to be of unsound mind or has otherwise become incapable
of managing his affairs; or
(g) He absents
himself from three consecutive sittings of the Tribunal without leave of the
chairman.
A member appointed by
the Minister may also resign from his office by giving a three-month notice.[11]
Section 133 of the GST
Act provides for the appointment of a secretary and an assistant secretary to
the Tribunal to ensure the functions
of the Tribunal are discharged accordingly.[12] The
officials will report to the chairman of the Tribunal.[13] Like
any other tribunal, no action or suit could be instituted or maintained in any
court against the Members of the
Tribunal.[14]
Hearing
of appeals
Any taxpayer aggrieved
by the decision of the Director-General of Customs in respect of a GST matter,
except for the matters specified in the Fourth Schedule, may appeal to the
Tribunal within 30 days[15] from
the date when the disputed decision was made known to the taxpayer. The appeal
is to be made using the prescribed form[16] together
with the prescribed fee.[17] The
taxpayer is required to provide his particulars and state the grounds of
appeal, along with the remedy sought, in the notice of appeal.
If a taxpayer has
missed the 30-day deadline, he may make an application in writing[18] to the
Tribunal for an extension,[19] which
will be granted if it is satisfied that it is reasonable in all circumstances
to do so. The Tribunal is required to grant the Customs Department the right to
be heard before making its decision.[20]
An appeal is heard by a
panel of three members[21] and
each appeal is presided by the chairman or the deputy Chairman.[22] The
taxpayer may conduct his case himself or be represented by any person whom he
may appoint for that purpose, including a tax agent[23] or an
advocate or solicitor.[24] Meanwhile,
the Director-General of Customs may be represented by an authorised officer.[25]
Although it is stated
that any proceedings before the Tribunal shall be conducted without regard to
formality and technicality, the
Tribunal may have the authority to exercise the following:[26]
(a) Procure
and receive evidence on oath or affirmation, whether written or oral, and
examine any person as a witness, as the Tribunal thinks necessary to procure,
receive or examine;
(b) Require
the production before it of books, papers, documents, records and things;
(c) Administer
the oath, affirmation or statutory declaration, as the case may require;
(d) Seek and
receive such other evidence and make such other inquiries as it thinks fit;
(e) Summon
the parties to the proceedings or any other person to attend before it to give
evidence or to produce any document, record or other thing in his possession or
otherwise to assist the Tribunal in its deliberations;
(f) Receive
expert evidence; and(g) Generally
direct and do all such things as may be necessary or expedient for the
expeditious determination of the claims.
The author welcomes the
insertion of s 150 of the GST Act, which states that no proceedings, award or
other document of the Tribunal
shall be set aside or quashed for want of form. The Tribunal is also empowered
to award costs against the taxpayer and the Director-General of Customs in the
circumstances prescribed under s 151 of the GST Act.
The Tribunal is
required to pronounce its decision without delay and, where practicable, within
60 days from the first day the hearing before the Tribunal commences.[27] The Tribunal
has the power to affirm, vary or set aside the Director-General of
Customs’ decision[28] and is
required to give reasons for its decision.[29]
Further
appeal
A party aggrieved by
the decision of the Tribunal has the right to appeal to the High Court on a
question of law or of mixed fact and law.[30] It must
be noted that ordinarily in an appeal, no new or further evidence could be
adduced on appeal. Further, the Tribunal members would be the judges of fact
and upon examining all the evidence admitted to them, the Tribunal would form
an opinion and draw conclusions from those facts. Although any error of law
committed by the Tribunal could be set aside on appeal, it must be appreciated
that an appellate court is usually reluctant to disturb the finding of facts
unless it could be established that the facts found by the Tribunal are not
supported by evidence or another reasonable Tribunal in the same circumstances
would not have found the same.
The final court in
respect of GST appeals originating from the Tribunal would be the Court of
Appeal. A party dissatisfied with the decision of the High Court may lodge an
appeal to the Court of Appeal within 30 days upon the pronouncement of the said
decision. As GST appeals do not originate from the High Court, it is the
author’s view that it may not satisfy s 96(a) of the Courts of Judicature Act
1964 [Act 91] and thus, an appeal
from the Court of Appeal to the Federal Court in respect of a GST matter
determined by the Tribunal will not be possible.[31]
Negotiation
It is encouraging to
observe that the mere fact that an appeal had been lodged before the Tribunal
does not bar taxpayers and the Director-General of Customs from engaging in
discussions and negotiations with the view of resolving the dispute amicably
out of court.
In fact, s 140(1) of
the GST Act expressly provides that in appropriate circumstances, the Tribunal
may assist parties to the proceedings in negotiating an agreed settlement in
relation to the appeal. Where the parties reach an agreed settlement, the
Tribunal shall approve and record the settlement and the settlement shall take
effect as if it were a decision of the Tribunal.[32] However,
in circumstances where it appears to the Tribunal that it would not be
appropriate for it to assist the parties to negotiate an agreed settlement in
relation to the appeal, or the parties are unable to reach an agreed settlement
in relation to the appeal, the Tribunal shall proceed to determine the appeal.[33]
Judicial review
The Federal
Court has recognised that judicial review provides a means by which judicial control
of administrative actions is exercised.[34]The
Malaysian Civil Procedure 2013, among others, succinctly explains that judicial
review refers to the process of supervisory jurisdiction exercised by the High
Court over decisions of persons who carry out quasi-judicial functions or who
are charged with the performance of public acts and duties.
In respect
of GST matters, the author foresees judicial review applications taking place
when a taxpayer intends to bypass the Tribunal or is aggrieved by a matter
which falls under the Fourth Schedule of the GST Act. A decision susceptible to
judicial review is not only open to challenge on the ground of procedural
impropriety, but also on the grounds of illegality, irrationality and
proportionality.[35]
Unlike the
Tribunal where no leave is required to lodge an appeal, in order to commence
judicial review proceedings, the taxpayer must first obtain leave from the High
Court. As held by the Federal Court,[36] the sole question at the leave stage
in a judicial review application is whether the application is frivolous. If
leave is granted, the taxpayer may then commence his judicial review
application and, if successful, the taxpayer may pray for the High Court to
exercise its jurisdiction to grant various remedies including an order of
certiorari to quash the impugned decision, grant declaratory relief and award
damages including interest.
As
explained earlier, the Tribunal is precluded from hearing matters specified in
the Fourth Schedule and the GST Act
does not provide any appeal remedy in respect of such matters. It is worth
noting that the following matters are specified in the Fourth Schedule:
(a) Any matter
which is inherent of a statutory restriction under the GST Act;
(b) Any direction
to treat persons as a single taxable person under s 23 of the Act;
(c) Any refusal
of voluntary registration under s 24 of the Act;
(d) Any refusal
of group registration under s 27 of the Act;
(e) Any matter
relating to reassignment of the taxable period under s 40(4) of the Act;
(f) Offsetting
tax against refund under s 45 of the Act;
(g) Any seizure
and selling of any goods for recovery of any amount under s 47(2) of the Act;
(h) Any refusal
of payment by instalment under s 51 of the Act;
(i) Any decision
to reduce or disallow any refund under s 57(2) of the Act;
(j) Any
refusal to refund an amount paid by any person under s 57(5) of the Act;
(k) Any refusal
to remit any penalty or surcharge under s 62(2) of the Act;
(l) Any refusal
to approve any application for any scheme under Part VIII of the Act;
(m) Any advance
ruling made under s 77 of the Act;
(n) The exercising
of powers under Part X of the Act;
(o) The compounding
of offences under s 121 of the Act;
(p) Any matter
relating to approval of reward by the Director-General of Customs under s 171
of the Act; and
(q) Any matter
relating to special refund under ss 190, 191 and 192 of the Act.
In such circumstances,
a taxpayer aggrieved by the decision of the Customs Department in respect of
any one or more of the matters specified in the Fourth Schedule may seek legal
recourse by applying for judicial review. In Goh
Eng Hwa,[37] the
taxpayer was issued a travel restriction notice under s 104 of the Income Tax
Act 1967 [Act 53] by the Director-General
of Inland Revenue. Such notice was not appealable to the Special Commissioners of
Income Tax as it was not an assessment; neither was there a remedy provided
under the Income Tax Act 1967. The taxpayer sought a declaratory relief from
the High Court, inter alia, to declare
that he did not owe any outstanding tax and thus, the travel restriction notice
was not sustainable.
He commenced proceedings
by way of an originating summons, and not by way of judicial review. The taxpayer’s
case was dismissed on the premise that his approach in commencing the action by
way of an originating summons was an abuse of process.
There are two points to
note from Goh Eng Hwa:
(a) If a
taxpayer intends to challenge a public authority like the Director-General of
Inland Revenue, the appropriate legal recourse is to apply for judicial review;
and
(b) In
instances where the domestic remedy provided under the governing legislation
has no jurisdiction to hear a decision made by a public authority under the
same legislation and the said governing legislation does not provide for an
alternative legal remedy or is silent, then a taxpayer aggrieved by such a
decision may seek legal recourse by way of judicial review.
In this regard, the
author is of the opinion that a taxpayer aggrieved by the decision of the
Customs Department in respect of matters precluded from being heard by the
Tribunal may seek legal recourse by way of judicial review.
Meanwhile, in
exceptional circumstances, matters which are appealable to the Tribunal could
be pursued at the High Court by way of
judicial review. The exceptional circumstances are clear lack of jurisdiction,
failure to perform a statutory duty and breach of natural justice. The
existence of the Tribunal does not prevent taxpayers from commencing judicial
review proceedings in exceptional circumstances as held by a number of
decisions such as Sungai Gelugor[38] and Metacorp
Development.[39] It is
notable that the decision of the High Court in Metacorp was
unanimously affirmed by the Court of Appeal and the Director-General of Inland
Revenue’s leave application was dismissed unanimously by the Federal Court.
In Sungai
Gelugor, the Federal Court examined the alternative remedy argument in detail
after studying various local and English authorities on this point. It
concluded that where genuine grounds for judicial review are alleged, it is the
refusal rather than the grant of relief that is the exceptional course. It
further stated that:[40]
“The reason for this is that whilst
in theory the courts there frequently recite the incantation that
alternative remedies must be exhausted before recourse may be had to judicial
review, in practice, the courts are often much kinder to the applicant with a good
case on the merits, who is faced with this hurdle to clear and will most
probably entertain his application as an exception.”
The above clearly
establishes that if taxpayers choose not to exercise the statutory appeal
remedy, namely the Tribunal, the courts’
jurisdiction to hear such applications is not excluded. In fact, as a matter of
practice, the courts are often inclined to grant judicial review to
applications that have merit.
This approach is also
consistent with the position observed in R v Chief
Immigration Officer Gatwick Airport, ex
parte Kharrazi,[41] where
it was stated that “on countless occasions that the availability of appeal does
not debar the court from quashing an order by certiorari and that everything
depends upon the facts of the case”.
This observation was
unanimously endorsed in Sungai Gelugor. The
judicial pronouncements cited above illustrate that it is the refusal to grant
judicial review which is an exception rather than the granting of judicial
review in cases where there is an alternative remedy.
The author submits that
if an appeal is necessitated on the premise that the Director-General of
Customs had abused his authority by applying the law erroneously and acted
beyond the powers conferred to him, then judicial review appears to be a better
legal remedy to the taxpayers. This is because unlike the Tribunal, the High Court has the
jurisdiction to stay the enforcement of the decision. Further, the authority of
the Director-General of Customs is not absolute
and is open to judicial review.
In Kim
Thye Co,[42] despite
the existence of the Special Commissioners of Income Tax, the Director-General
of Inland Revenue accepted
as “a matter of law that he is not immune from the process of judicial review
and made no procedural objection” to the taxpayer’s application in that case.
Conclusion
It is
essential that taxpayers and GST practitioners are aware of their legal rights
and the legal recourses available to them. Once they have determined the
suitable legal recourse that they wish to pursue, that is, appeal before the
Tribunal or judicial review application, then they must ensure that they comply
with the necessary procedural requirements. Meanwhile, the Customs Department
as the public authority entrusted with the implementation of the GST Act must
ensure that it exercises its powers and discretion equitably and judiciously.
Decisions should neither be made arbitrarily nor influenced by a publicly
declared target.[43]
The author
respectfully concludes this article by highlighting the reminder issued in Jasanusa;[44] that is, the courts need to balance the
government’s need to realise taxes with that of the taxpayer to be protected
against arbitrary or incorrect assessments. The courts are ever vigilant
against taxpayers who may use procedures like applying for a stay of execution to
defer or postpone payment of just dues or to abscond by migration or to dissipate
the assets to defeat the judgment. The courts should also bear in mind the
possibility of arbitrary or incorrect assessments, brought about by fallible
officers who have to fulfil the collection of a certain publicly declared targeted
amount of taxes and whose assessments, as a result, may be influenced by the
target to be achieved rather than the correctness of the assessment.
© 2016.
LEE HISHAMMUDDIN ALLEN & GLEDHILL. ALL RIGHTS RESERVED
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KDN PP
12853/07/2012 (030901)
[1]
Boo Su-Lyn, ‘Putrajaya’s complex GST system paving way for
confusion, say tax experts’, <http://www.
themalaymailonline.com/malaysia/article/putrajayas-complex-gst-system-paving-way-for-confusion-say-taxexperts>
[2] [Act 762]. All section references herein shall be to this Act, unless
otherwise stated.
[3] Teruntum Theatre Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [2006] CLJ 123 (CA)
[4] Supra n 2, s 127(1)
[5] Ibid, s 128
[6] Section 128(1)(a)
[7] Section 128(1)(b)
[8] Section 128(2)
[9] Section 128(3)
[10] Section 130
[11] Section 131
[12] Section 133(1)
[13] Section 133(2)
[14] Section 153
[15] Section 126
[16] Form B: see Goods and Services Tax (Review and Appeal)
Regulations 2014 (“the Regulations”), reg 3(1)
[17] RM200. See reg 3(2).
[18] Using Form C
[19] reg 5(1) of the Regulations
[20] reg 5(3) of the Regulations
[21] Supra n 2, s 135(1)
[22] Section 135(2)
[23] Section 170
[24] Section 141(a)
[25] Section 141(b)
[26] Section 142(1)
[27] Section 144(1)
[28] Section 144(2)
[29] Section 144(3)
[30] Section 148
[31] Terengganu Forest Products Sdn Bhd v Cosco Container Lines Co
Ltd & Anor and other applications [2011] 1 MLJ 25
(FC)
[32] Section 140(3)
[33] Section 140(4)
[34] Ahmad Jefri bin Mohd Jahri @ Md Johari v Pengarah Kebudayaan
& Kesenian Johor & Ors [2010] 3 MLJ
145 (FC)
[35] R Rama Chandran v The Industrial Court of Malaysia & Anor [1997] 1 CLJ 147 (FC)
[36] Mohd Nordin Johan v The Attorney-General, Malaysia [1983] 1 CLJ 130 (FC)
[37] Goh Eng Hwa v Ketua Pengarah Lembaga Hasil Dalam Negeri &
Anor [2008] 8 CLJ 777 (HC)
[38] Majlis Perbandaran Pulau Pinang v Syarikat Bekerjasama Serbaguna
Sungai Gelugor dengan Tanggungan [1999] 3 MLJ 1
(FC)
[39] Metacorp Development v Ketua Pengarah Hasil Dalam Negeri [2011] 5 MLJ 447 (HC)
[40] Supra n 38 at p 37I-38A, per Edgar Joseph
Jr FCJ
[41] [1980] 3 All ER 373
[42] Kim Thye Co v Ketua Pengarah Jabatan Hasil Dalam Negeri, Kuala
Lumpur [1991] 3 CLJ 2507 (HC)
[43]
‘Sabah Customs aims to collect RM1.2 billion under GST’, <http://www.theborneopost.com/2015/03/03/sabah-customs-aims-to-collect-rm1-2-billionunder-gst/>
[44] Government of Malaysia v Jasanusa Sdn Bhd [1995] 2 CLJ 701 (FC)
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