Sangster Bookstore Ltd v Commissioner of General Consumption Tax


Revenue Court

Orr, J.

Revenue Court Appeal No. 1 of 1993

Sangster Bookstore Limited
Commissioner of General Consumption Tax

Mrs. Angella Hudson Phillips Q.C. and Richard Ashenhelm for the appellant, instructed by Milholland Ashenhelm and Stone.

William Alder instructed by Sonia Mitchell for the respondent.

Revenue law - Stock-in — trade credit — Respondent ordered that appellant's claim to a stock-in — trade credit be disallowed — Appellant sought order that respondent allow a claim for a credit of $302,390.36 in regard to unused goods included in the appellant's stock-in — trade — Respondent sought to have appellant's claim struck out — Proper interpretation of section 66(1) of General Consumption Tax Act — Whether appellant had satisfied all conditions laid down by the Act — Decision of respondent reversed — Assessment discharged — Appellant's claim for stock-in — trade credit granted.

Orr, J.

During the hearing of this matter I was experiencing great exhaustion; and this continued for the rest of the year, insomuch that I found it increasingly difficult to cope with my work load. As you know I became very ill suddenly in March last year, and as a result I had to be hospitalised twice.


I resumed duties on a reduced basis in the Michaelmas Term, but it soon became apparent that this was premature. So I was compelled to go on leave again in November last, and I could not return to work until March this year. I am not yet fully recovered. This explains why this judgment is only now being delivered.


I wish to thank counsel on both sides for your prayers and concern during my crisis. I also appreciate very much your patience and understanding in waiting until now for this judgment.


This case raises an interesting point of construction, namely what is the proper interpretation of section 66(1) of the General Consumption Tax Act. But before considering that issue, it is useful to place it in the context of the matrix in which it developed.


The starting point of this appeal is a decision of the respondent in which it was ordered that the appellant's claim to a stock-in-trade credit be disallowed.


The appellant seeks an order that the respondent allow a claim for a credit of $302,390.36 in regard to unused goods that were included in the appellant's stock-in-trade on the appointed day, that is, the 22nd day of October, 1991.


The appellant argued two grounds namely:

    “That the General Consumption. Tax Act does not make a reduction in the price of the inventory a condition for obtaining the stock credit and accordingly the respondent erred in law in disallowing the appellant's claim on the ground that the appellant had failed to pass on to consumers the amount of the credit claimed by the appellant through reduction in prices.” 2. “That in view of the fact that: (a) the appellant was, on the appointed day registered as a registered taxpayer under the General Consumption Tax Act, 1991; (b) the appellant had on the said day unused goods that were its stock-in-trade; (c) that the said goods were those in respect of which one or more of the specified duties were payable. (d) that the said goods were included in the inventory of the appellant as at the appointed day: (e) that the said goods were not such as were zero rated or exempt for the purposes of the General Consumption Tax Act, 1991; (f) that the said goods were not used goods; (g) that the said goods had not been written off for income tax purposes;

The respondent should, as a matter of law, have allowed the appellant's claim.


A third ground filed was not pursued. It reads as follows:

3. “That the appellant had in fact passed on the benefits of the stock credit to consumers in taking into account the said stock credit in costing the items in times of rising prices and frequent devaluation's which affected the ultimate cost of the goods.”


The facts as set out in ground 2 are admitted in the respondent's statement of case and the affidavit of Veleta Maureen Pryce filed on behalf of the respondent.


The Statement of Case provides more details of the facts surrounding the decision from which the appeal arises.


The following facts which are not in dispute are stated in paragraph 2 thereof.

  • (a) “That the, appellant is a Registered Taxpayer under and by virtue of the General Consumption Tax Act (the “Act”)

  • (b) That the appellant claimed a credit of stock-in-trade at October 22, 1991, being the appointed day contained in section 66 of the Act, by Application for stock-in-trade credit dated January 31, 1991 and received by the respondent on the 4th day of February, 1992.

  • (c) That the claim was in the sum of $303,067.93 and was based on an inventory as at October 22, 1991 valued at $2,755,163.00 comprising goods in respect of which one or more of the specified duties under section 66 of the Act was payable.

  • (d) That in accordance with the practice employed by the respondent, the appellant was authorised to credit $227,300.95, being 75% of the sum claimed, against its General Consumption Tax liability and was advised that this sum was subject to change depending on the decision reached with regard to the claim after an audit was conducted by the respondent's officers.

  • (e) That the audit was conducted on or about the 12th day of June, 1992 as a result of which the decision was made to disallow the entire claim on the basis that:

    • (i) The credit had not been passed on to the consumer with regard to goods valued at $2,749,003.25, for which the credit claimed was $302,390.36;

    • (ii) Goods valued at $6,159.75, for which the credit claimed was $667.57, was not eligible for credit being zero-rated goods.

  • (f) That the decision to disallow the stock-in-trade credit was contained in letter dated December 9, 1992, and simultaneously a Notice of Assessment dated December 9, 1992, for $227,300.95 was served on the appellant.

  • (g) That by letter dated January 18, 1993, the appellant, through its Accountants, KMPG Peat Marwick objected to the decision to disallow the said sum of $302,390.36 on the grounds that it believed that a benefit had been passed on to the consumer in costing the items and further, that a reduction in price was not a condition for obtaining the said credit. The appellant did not object with regard to the disallowance of $667.57.

  • (h) That by letter dated May 27, 1993, the respondent advised the appellant, inter alia, that if it could provide proof that the credit had been passed on to the consumer through costing of the items, then he could revise the adjustment accordingly.

  • (i) That in respect of the letter referred to in subparagraph, (h) the appellant has appealed to this Honourable Court.”


The respondent's prayer asked that the Appeal be struck out and that the appellant's claim for a stock-in-trade credit be disallowed on two grounds, namely:

  • (i) “No final decision has been made upon which to ground an Appeal; and/or

  • (ii) The decision, if final, should be confirmed by this Honourable Court, far the following inter alia reasons:

  • (a) That the letter dated May 27, 1993, did not contain a final decision and therefore this Appeal is misconceived and not properly before this Honourable Court.

  • (b) That necessarily implicit in section 66 of the General Consumption Tax Act is a discretion in the Commissioner to determine the bases on which a stock-in-trade credit may be allowed, such discretion to be exercised once the taxpayer has satisfied the conditions stipulated for eligibility to claim.

  • (c) That the respondent properly exercised his discretion in disallowing the appellant's stock-in-trade credit claim on the basis that the benefit was not passed on to the consumer.

  • (d) That the appellant provided no evidence to support its claim that it had passed on the credit to the consumer.”


GROUND (1) above was not argued.


As noted earlier, the General Consumption Tax Act; Act 16 of 1991 hereafter called the Act, came into operation on the 22nd day of October, 1991 — the appointed day. That Act was amended by the General Consumption (Amendment) Act 1991, which also came into operation on the 22nd day of October 1991.


Section 66(1) of the Act so far as is, relevant reads as follows:


  • 66(1) Where on the appointed day a person is registered as a registered taxpayer and has any unused goods that are stack-in-trade, that taxpayer shall, subject to...

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