Stewarts Hardware v Commissioner of General Consumption Tax ; Dominion House Ltd v Commissioner of General Consumption Tax [Consolidated Suits]
| Jurisdiction | Jamaica |
| Judge | ANDERSON J. |
| Judgment Date | 30 June 2005 |
| Judgment citation (vLex) | [2005] 6 JJC 3001 |
| Date | 30 June 2005 |
| Court | Supreme Court (Jamaica) |
IN THE SUPREME COURT OF JUDICATURE OF JAMAICA
IN THE REVENUE COURT
REVENUE LAW - Assessment - Appeal against
In both of these cases, the taxpayer appeals against decisions of the Commissioner of General Consumption Tax and seeks to overturn them, while the Respondent Commissioner seeks to uphold those decisions As can he seen from the respectve nouces mcluding Grounds of Appeaj, the issues raised in both cases are substantially the same and it was for that reason that it was decided that the cases be consolidated and heard together. For ease of Reference. I set out below the respective Grounds of Appeal being argued by the Appellants in Appeals No. 1 and No 2 of 1999.
Appeal No: 1 of 1999
That the Assessment as varied by the Respondent's decision is invalid because-
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(a) the Respondent failed to hand down her decision within the statutory time limit mandated by Section 40(4)(b) of the General Consumption Tax Act (GCT).
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(b) the Respondent had no power to alter and/or make a new assessment as she purportedly did in making her decision.
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(c) the Respondent failed to elect the sub-section of the Act under which the assessment was made.
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(d) the Respondent failed to raise assessments in respect of each taxable period.
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(e) the Respondent failed to compute and relate penalties, surcharge and interest allegedly due, to specific taxable periods.
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(f) the use of "Industry Standard Ratios" to compute the tax assessed, and the refusal to disclose the basis on which the ratios were compiled.
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(g) it did not accord with the facts before the Respondent: in particular the Respondent refused to consider the Schedules, computations and detailed critique of the audit findings made by the Appellant's accountants.
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(h) It failed to take into account the sum of $1.l m paid as disclosed in paragraph 6(k) above
Appeal No:2 of 1999
That the Assessment as varied by Respondent's decision is invalid because -
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(a) the Respondent had no power to alter and/or make a new assessment as she purportedly did in making her decision.
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(b) the Respondent failed to elect the sub-section of the Act under which the assessment was made.
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(c) the Respondent failed to raise assessments in respect of each taxable period
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(d) the Respondent failed to compute and relate penalties, surcharge and interest allegedly due, to specific taxable periods.
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(e) the use of "Industry Standard Ratios" to compute the tax assessed, and the refusal to disclose the basis on which the ratios were compiled.
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(f) it did not accord with the facts before the Respondent: in particular, there was no explicit recognition by the Respondent that she considered the schedules. computations and detailed critique of the audit findings made by the Appellant's accountants.
Further, it should be noted that while each side has included a statement of facts upon which it intends to rely in support of its position, the basic facts are not substantially in dispute. Where the parties have a dispute is in the interpretation of, and the inferences to be drawn from, the facts as alleged. Thus in the Stewarts Appeal, the Appellant slates.
The facts upon which the Appellant will rely at the hearing of this Appeal are:
(a) The Appellant is a company incorporated and carrying on business in Jamaica and with registered office at 75 Manchester Road, May Pen in the parish of Clarendon.
(b) The Appellant carried on business of hardware merchants during the relevant period of assessment.
(c) During 1998 the Respondent commenced a comprehensive audit of the Appellant's accounts for the period September 1 1994 to December 1997 by using auditors from the Revenue Board. Dunng the conduct of the audit the Revenue Board Auditors were replaced by investigators from the General Consumption Tax Department who, armed with a warrant, removed and confiscated all the records and documents of the Appellant to which, prior to this intervention, they had full and free access. The Appellant's staff was given no opportunity to check or record the documents being removed and this posed a problem when seeking to review the findings of the Respondent's audit.
(d) The Appellant has always been scrupulous in submitting its return and meeting its tax liabilities so that the Respondent's conduct in seizing its records came as a complete surprise: in fact officers from the General Consumption Tax Department had audited the Appellant's accounts in June 1994 and given it a clean bill of health
(e) As a result of the audit of the Appellant's accounts the Respondent on the 4th day of March 1999 raised an assessment in an additional amount of tax amounting to $12.440.248 02 for the period September 1994 to December 1997 The audit found, inter alia, that the Appellant's input tax was overstated by $11.087.795.00 while output tax was understated by $1,352.452.96.
(f) The Appellant immediately engaged the services of Deloitte and Touche a firm of Chartered Accountants (the Accountants) to review the findings of the Respondent and restore, if necessary, the integrity of its accounting system.
(g) By letter dated 5th day of March 1999 the Appellant's Accountants delivered an objection to the aforesaid assessment made by the Respondent for the period September 1994 to December 1997 on the grounds that it was excessive and not in keeping with the Returns submitted.
(h) Based on a preliminary examination of the Appellant's accounting system, the Accountants found that errors had been made because of flaws in the computerised accounting system being used and that a great deal of double counting was included in the computerised figures for sales which had to be adjusted manually. They set about making the corrections and invited the Respondent to convene a meeting so that the necessary revision of the Returns could be made.
(i) The Respondent's investigators did in fact revisit the office and appear to have accepted the fact that a great deal of double counting had taken place because of the computerised accounting system in place.
(j) By letter dated 19th day of July 1999 the Appellant's Managing Director wrote to the Respondent enclosing revised schedules and computations in support of its contention that the assessment was excessive: in particular, the point was made that while the output tax which had been revised on the basis of actual monthly schedules was the same as the output tax audited, the final figure has been altered on the basis of a review of the entire sales return; and that having regard to the nature of the business, consideration be given for an allowance for pilferage.
(k) By letter dated the 4 th day of August 1999 the Appellant again wrote to the Respondent inviting her to review the schedules and computations which had been submitted since they showed a substantial reduction in the tax assessed and as an earnest of its good faith and desire to settle the matter made a payment of $1,100,000.00 towards any additional liability which might be due
(l) By Notice of Decision received on the 6 th day of September 1999 the Respondent without considering the schedules and revised computations submitted to her on the 19 th day of July 1999 arbitrarily reduced the aforesaid assessment to the sum of $11,915,869.00 subject to interest and penalty.
(m) By letter dated the 8th day of September 1999 the Accountants on behalf of the Appellant wrote to the Respondent requesting that she provide reasons for her decision in writing. The reasons which were not supplied by the Respondent until the 15th day of September 1999 confirmed that her decision was based upon the use of "Industry Ratios"
(n) By letter dated the 17th day of September 1999 the Appellant's Accountants requested that the Respondent provide the sources from which the Hardware industry ratios used to compute the tax were derived. The Appellant was advised that these had been compiled in-house and the sources were confidential and could not be disclosed.
The Respondent, in its Reply, sets out the following as constituting the facts.
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(a) The Appellant is a registered taxpayer under and by virtue of the General Consumption Tax Act (hereinafter referred to as "the Act").
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(b) The Appellant is required pursuant to s. 33 of the Act, and Regulation 6 of the General Consumption Tax Regulations (hereinafter referred to as "the Regulations") to file returns and pay tax every calendar month.
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(c) The Appellant filed returns for the period September, 1994 to December, 1997 inclusive, and upon an examination of the said returns and other records of the Appellant by auditors employed to the then Revenue Board it appeared that the returns were incomplete or incorrect and/or otherwise not in accordance with the requirements of the Act. Consequently, the said auditors reported the matter to the Investigations Branch of the General Consumption Tax Department. As a result of this, the Respondent, through her authorized officers, conducted an investigation of the Appellant's operations and records for the said period.
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(d) That several discrepancies were discovered on the input tax working papers, which appeared to the Respondent's officers to be as a result of alterations made to those documents.
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(e) On the basis of the investigations, the Respondent was of the opinion that the Appellant's records should be further examined as it was suspected that an offence under the Act had been committed. The Appellant's Director refused...
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