Premium Investments Ltd and Town and Country Resorts Ltd v Commissioner of General Consumption Tax
| Jurisdiction | Jamaica |
| Judge | CORAM: ORRJ. |
| Judgment Date | 04 February 2000 |
| Judgment citation (vLex) | [2000] 2 JJC 0402 |
| Court | Supreme Court (Jamaica) |
| Date | 04 February 2000 |
IN THE SUPREME COURT OF JUDICATURE OF JAMAICA
IN MISCELLANEOUS
REVENUE LAW - General Consumption Tax - Application for court determination as to which entity is liable to pay tax chargeable pursuant to General Consumption Tax Act, s. 23A
INTRODUCTION
This application is by way of originating summons in which the applicants seek the determination of the court on the following questions:
1. Whether on a proper construction of Section 23 A of the General Consumption Tax Act the entity liable for the collection and payment to the Commissioner of the tax chargeable on a taxable activity is the operator of the Resort known as The Enchanted Garden.
2. Whether on a proper construction of the Management Agreement by and Between Premium Investments Limited (formerly Consulting Services Limited) and DHC OCHO RIOS HOSPITALITY CORPORATION, the 2 nd Applicant Town and Country Resorts Limited can be deemed to be the operator of the resort known as "The Enchanted Garden" within the meaning of Section 23A of the General Consumption Tax Act.
3. Whether on a proper construction of the said Management Agreement DHC OCHO RIOS HOSPITALITY CORPORATION is the entity responsible to collect the tax chargeable in respect of the taxable activities supplied by The Enchanted Garden and the entity responsible to pay the tax to the Commissioner in accordance with the provisions of Section 33 (1) of the General Consumption Tax Act."
Affidavits were filed by each side but there was no conflict of fact on the affidavits. What separated the parties was the question of the nature of the inferences which should be drawn from the facts; and whether certain representations were representation of fact or of law.
At this point it is appropriate to say something briefly about the nature of General Consumption Tax (G.C.T.).
THE NATURE OF G.C.T.
General Consumption Tax is a value added tax which was introduced in Jamaica in 1991. It is a broadly based consumption tax imposed under the Act, on the supply of goods and services in Jamaica, and on goods imported on or after 22 nd October, 1991. All commodities except those such as money and real property which are exempted by virtue of the definitions of goods and services, are governed by the Act; either as taxable, zero rated (section 24 and Part 11 of the First Schedule) or exempt (Section 25 and the third Schedule).
General Consumption Tax is not a tax on business profits or turnover. It is a tax on consumption. The thinking behind the tax is that ultimately the tax is borne by the end user or consumer. Tax is paid at each step along the chain of ownership, until the goods or services reach the end user. In this way the registered taxpayer who makes the supply, "collects" the tax and makes returns to the Revenue.
This explains why a business that is insolvent may yet be required to pay General Consumption Tax.
PRIMARY FACTS FOUND
The following facts were admitted or proved.
Both the First Applicant Premiun Investments Limited ("Premium") and the Second Applicant, Town and Country Resorts Limited ("Town and Country") are companies incorporated under the Companies Act.
The Right Honourable Edward Seaga P.C. is a company director and the Chairman of both companies. Premium was at first incorporated with the name Consulting Services Limited but a change of name was effected after 1993.
Town and Country is a wholly owned subsidiary of Premium, which is "the registered proprietor and/or lessee of the Apartment Complex and Gardens known as The Enchanted Garden," and Town and Country held sub-leases in respect of The Enchanted Garden.
Premium holds an incentive under the Hotels (Incentives) Act pursuant to an Order entitled "The Approved Hotel Enterprise (Enchanted Garden Hotel Enterprise) Order, 1992 signed by the Minister of Tourism on the 29 th day of January, 1992.
In its application for registration under the General Consumption Tax Act, Town and Country gave its trade name as "The Enchanted Garden;" and its taxable activity as "Tourist Resort." Town and Country was registered on January 11, 1992.
The tax registration number of Town and Country in respect of The Enchanted Garden is 1022768. That number appears on General Consumption Tax returns filed by Town and Country.
On December 12, 1991 a Tourist Board licence was granted to Town and Country in respect of The Enchanted Garden.
D.H.C. Ocho Rios Hospitality Corporation is neither a registered taxpayer nor a company registered under the Company's Act.
The Enchanted Garden is in arrears regarding payments of General Consumption Tax to the Commissioner.
In correspondence on the letterhead of The Enchanted Garden, Winston Tomlinson, Financial Controller of the Enchanted Garden wrote to the Deputy Commissioner of General Consumption Tax under the caption "Re Town And Country Resort T/A The Enchanted Gardens, Reg # 1022768.
Mr. Hugh Hart attorney-at-law on behalf of Town and Country wrote a letter to the Commissioner on March 24, 1999 under the caption "Re: Town and Country Resorts Limited"
He wrote:
"Further to our discussions the lender who is raising funds for the Enchanted Garden (Town and Country Resorts Limited) has given an undertaking...." (emphasis supplied)
On a letterhead of Town and Country, The Right Hon. Edward Seaga, Chairman of Town and Country wrote to the Commissioner:
"Re: Town and Country Resorts Limited/The Enchanted Garden
Please find enclosed cheque for $4,000,000 for Town and Country Resorts Limited ( Operator of The Enchanted Garden ) in favour of The Collector of Taxes — G.C.T. that we confirmed we would make available today." (emphasis mine)
Town and Country has filed returns and paid General Consumption Tax in respect of The Enchanted Garden for several years.
On 18 th March, 1999 Andrew Holness Company Secretary wrote to the Commissioner, thus:
Enclcosed is the requested form designating the responsible officer for Town and Country Resorts T/A The Enchanted Garden".
In that form signed by Mr Holness was the following information:
"Name of Company Town and Country Resorts T/A The Enchanted Garden.
Taxpayer Registration Number: 1022768.
Name of Responsible Officer:
Frederick Marsh.
Title: General Manager"
Two informations were laid against Town and Country on 16 th April, 1999 for failure to pay General Consumption Tax for $12,822,800.07 and $27,288,677.14 respectively.
There were discussions between representatives of Town and Country and the General Consumption Tax Commissioner on a number of occasions from 1997. In all those discussions there was-no challenge to the liability of Town and Country for the tax due from the Enchanted Garden. On the contrary liability was admitted and various promises of payments were made; for example on May 6, 1997 on the letter head of the Enchanted Garden, Frederick Marsh who signed as "Managing Director" wrote in part to the Commissioner as follows:
"We refer to discussions held with the Right Honourable Edward Seaga on the arrears of General Consumption Tax payments. It is our intention to effect the following payment plan with total liquidation by 28 th of November, 1997."
The Commissioner relied on the various representations made by representatives of Town and Country that Town and Country was willing to pay the General Consumption Tax owed by The Enchanted Garden.
On 28 th June 1999, Mr Raymond Clough, Attorney-at-Law gave an undertaking to the Resident Magistrates Court in Saint Ann that the full tax liability of The Enchanted Garden would be liquidated by the next court date.
On that date Mr Clough told the court that because of the harsh economic conditions in the country, the Company, along with others like it, was forced to use General Consumption Tax collected to finance its business, and that the company needed more time to negotiate a loan to liquidate the tax debt.
On the 26 th July 1999 Mr A. Dabdoub, Attorney-at-Law told the Court that the firm of Dunn Cox Orrett and Ashenheim had been appointed escrow agents for a loan which would be used to pay the tax owed.
On or about the 3 rd of August, 1999 Mr Dabdoub for the first time raised the issue that another company might be liable for the tax.
In 1997 in discussions with Mr Gladstone Turner, Director of Compliance of the General Consumption Tax Department, Mr Frederick Marsh represented himself as General Manager of Town and Country Resorts.
There was tendered in evidence an agreement made between Consulting Services Limited (now Premium) and DHC Ocho Rios Hospitality Corp (D.H.C.) making DHC the exclusive operators of Enchanted Gardens. The agreement bears a date subsequent to the registration of Town and Country.
An affidavit of Daniel Ambrose has been filed by the applicants, in which the affiant states that DHC did manage and operate The Enchanted Garden, that only DHC collected General Consumption Tax for The Enchanted Garden and that DHC used Town and Country to make returns of General Consumption Tax.
THE SUBMISSIONS ON BEHALF OF THE APPLICANT
Mr. George made the following submissions:
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