IN THE COURT OF APPEAL BETWEEN AND A-Z SUPPLIES LIMITED

Transcription

1 REPUBLIC OF TRINIDAD AND TOBAGO IN THE COURT OF APPEAL Cv.A No. 126 of 2002 BETWEEN THE BOARD OF INLAND REVENUE APPELLANT AND RESPONDENT A-Z SUPPLIES LIMITED CORAM: Warner J.A. Nelson J.A. Kangaloo J.A. APPEARANCES: Mr. Nassim Mohammed appeared on behalf of the Appellant Dr. F. Ramsahoye, S.C. and Mr. W. Seenath appeared on behalf of the Respondent. Date of Delivery: 10 th October, 2003.

2 REASONS FOR DECISION I have read in draft the reasons delivered by Nelson, J.A., I agree with them and have nothing to add. M. Warner, Justice of Appeal. Nelson, J.A. 1. On July 16, 2003 we dismissed this appeal with costs fit for counsel because the Revenue admitted that it was unable to dislodge the Tax Appeal Board s finding that the determination of an objection to a Value Added Tax assessment took place outside the six-months period contrary to section 40(3) of the Value Added Tax Act 1989 ( the Act ). If the court accepted the Revenue s contention that the determination was complete when the Board of Inland Revenue took a decision on the objection before notice was sent, then the Revenue would still have to show that such decision took place within the sixmonths `period. The Revenue admitted it could advance no evidence of the actual date of determination of the objection within the six-months period. We therefore dismissed the appeal. Reasons for the dismissal now follow.

3 2. This is an appeal by way of case stated pursuant to section 9(1) of the Tax Appeal Board Act, Chap 4:50 against the ruling of the Tax Appeal Board delivered on July 4, The ruling was delivered in the course of an appeal under the Act against an assessment to Value Added Tax ("VAT") for the first tax period of 1992 in the sum of $22, The respondent (hereinafter referred to as "the taxpayer") filed before the Tax Appeal Board a Notice of Appeal dated July 8, 1997 for which was substituted an Amended Notice of Appeal which stated as one of its grounds: "iv. The appellant objected and paid the VAT assessed and the respondent failed to determine the objection within the six months from the date of the payment of the VAT (sic). See Section 40(2) & (3) of the Value Added Tax Act 1989." 5. At the hearing before the Tax Appeal Board on April 4, 2001 the parties agreed to argue as a preliminary point the limitation point raised by the ground of appeal set out above since, if the taxpayer was successful, that would dispose of the entire appeal. In the result the taxpayer was successful on the preliminary point and the Revenue indicated to the Tax Appeal Board that it was dissatisfied with its ruling and invited it to state and sign a case for the opinion of the Court of Appeal. 6. The Tax Appeal Board in its case stated identified the point of law for the decision of this court as "whether we were correct in holding that as a matter of law, the Value Added Tax Act, 1989 required the Board of Inland Revenue to

4 notify the Appellant company of the determination of its objection to the Board of Inland Revenue's assessment to the subject Value Added Tax within the period of six months prescribed for the determination of the said objection". The preliminary point of law 7. Limitation is almost always a mixed question of fact and law. The untimely basis of the action or appeal must be established by facts before the relevant law as to limitation can be applied. 8. On the other hand a preliminary point of law is either based on agreed facts or on the assumption that all the allegations in the pleading or the evidence of the party against whom the point is taken are true: see Anderson v Midland Railway Company [1902] 1 Ch 369, 374 per Buckley J. 9. In the instant case there is a stark conflict between the taxpayer and the Revenue as to the date on which the taxpayer's objection was determined. The last date for determination of the objection was March 19, A letter of notification of the determination was dated March 19, 1997 but was postmarked March 27, The taxpayer contends that the actual date of the determination was in fact March 27, whereas the Revenue contends it was March 19, No record of the actual determination of the objection by the Commissioner of the Board of Inland Revenue responsible for VAT is present in the case stated or, it seems, the statutory bundles of documents filed by the Revenue on January 29, 1998 and March 27, Accordingly, in my view, the point of law should have been dealt with after hearing all the evidence in the case, unless the parties agreed the facts. The

5 Tax Appeal Board recognized there was no formal evidence before it but proceeded on the basis of those documents in the statutory bundles filed by the Revenue that appeared to be common ground. No objection was taken to that approach, and we have proceeded on the same basis and on an admission at the Bar, to which I shall later refer. The context of the appeal 11. The charge to the Value Added Tax arises from section 6 of the Act, in much the same way as the charge to income tax arises from section 5 of the Income Tax Act, Chap. 75:01. Liability to pay VAT does not normally depend on an assessment by the Board of Inland Revenue. 12. Based on the charge to tax, the taxpayer assesses himself for the relevant period and files a VAT return, which the Revenue initially only checks for obvious mistakes such as mathematical errors and in some cases omitted documents. Liability to pay according to self-assessment is not based on any notice by the Revenue. However, this process of self-assessment is monitored by the Revenue, who may randomly select a return for audit. In some cases this audit may result in a formal assessment to VAT and service of a notice of assessment demanding tax. Against this demand a taxpayer may object and if the assessment is maintained or increased, since 1998 pursuant to section 86(5A) (2) of the Income Tax Act, the taxpayer may appeal to the Tax Appeal Board, and, if necessary, to the Court of Appeal. The relevant legislation 13. Section 40 of the Act provides as follows:

6 "40. (1) A person disputing an assessment, or the amendment of an assessment, under section 39 may apply to the Board by notice of objection in writing delivered to the Board to review and to revise the assessment and - (a) sections 86 and 97 of the Income Tax Act apply with such modifications as are necessary and subject to subsections (2) and (3), for the purpose of enabling the application to be dealt with and the objection to be determined; and (b) section 87 of the Income Tax Act and the provisions of the Tax Appeal Board Act apply, with such modifications as are necessary, for the purpose of enabling the making of, and the hearing and determination of, appeals from decisions of the Board upon objections under this section. (2) Except with the leave of the Board an application under subsection (1) to review and to revise an assessment shall not be made unless any amount required by the assessment to be paid has been paid to the Board or such security has been given for the payment of that amount as is acceptable to the Board. (3) Where, within six months after an application is made in accordance with subsection (2), the Board fails to

7 determine the objection, the objection shall be deemed to have been determined in favour of the person disputing his assessment and the assessment shall be amended accordingly." 14. Section 40 (1) (a) of the Act incorporates into the Act mutatis mutandis sections 86 and 97 of the Income Tax Act. Section 97 is not here relevant and I set out hereunder section 86 of the Income Tax Act so far as relevant: "86 (1) The Board shall cause to be served on each person whose name appears on the assessment lists a notice addressed to him at his usual place of abode or business stating the amount of his chargeable income and the amount of tax payable by him, and informing him of his rights under subsection (2). (2) If any person disputes the assessment he may apply to the Board by notice of objection in writing delivered to the Board to review and to revise the assessment made upon him. Such application shall state precisely the grounds of his objections to the assessment and shall be made within fifteen days from the date of the service of the Notice of Assessment. (3) An application under subsection (2) may be made out of time if the Board is satisfied that there was a reasonable

8 excuse for not making the application within the time limited and that the application was made thereafter without unreasonable delay. (4) Where the Board disallows an objection for the reason that it is not satisfied under subsection (3), an appeal shall lie to the Appeal Board from such a decision in accordance with section 87. (5) On receipt of a notice of objection duly made, the Board shall reconsider the assessment and may vacate or vary the assessment, or confirm the assessment and disallow the objection. (6) The Board shall serve on the objector notice of its decision under subsection (5). (7) In the event of any person assessed, who has objected to an assessment made upon him, agreeing with the Board as to the amount at which he is liable to be assessed the amount so agreed shall be the amount at which such person shall stand assessed, and the assessment shall be confirmed or amended accordingly; but in the event of any person who under subsection (2) has applied to the Board for a revision of the assessment made upon him failing to agree with the Board as to the amount at which he is liable to be assessed, his right of appeal to the

9 Appeal Board under this Act, against the assessment made upon him shall remain unimpaired. (8) Where, within twenty-four months after the service of the notice of objection, the Board fails to determine the objection, the objection shall be deemed to have been determined in favour of the person who has disputed his assessment and the assessment shall be amended accordingly. (9) Where, upon the expiration of twelve months after the service of the notice of objection the Board fails to determine the objection, the person who has disputed his assessment may, notwithstanding section 7(2) of the Tax Appeal Board Act appeal to the Appeal Board within twelve months of such expiration. 15. It is readily apparent that section 86 (6) of the Income Tax Act, as a result of its incorporation into the Act, requires notice of the Tax Appeal Board s determination of the objection to be served on the objector. 16. Further section 40 (3), the limitation subsection of the Act is virtually identical to section 86 (8) of the Income Tax Act. Section 40 (3) of the Act describes the limitation period as six months after an application is made in accordance with subsection (2).

10 The positions taken as to limitation 17. The Tax Appeal Board in its Ruling, which formed part of the case stated, held that the determination of the taxpayer s objection for the purposes of the instant case includes notifying the taxpayer of the said decision within the sixmonth time limit specified in section 40 (3) of the Act, and that, in this case, the Revenue failed to comply with its statutory obligation, that time having expired on 20 th March It is thought that the reference to March 20, 1997 should be to March 19, 1997 having regard to what the Tax Appeal Board regarded as common ground between the parties. 18. The taxpayer contended that the date of determination of the objection should be the date of the postmark (March 27, 1997) and not the date of the actual letter (March 19, 1997). I reproduce the actual letter below to emphasize that the letter is not the determination of the objection, but rather the notification of the determination. 19th March 1997 VAT Registration No Period No to AZ Supplies Limited, 9, Watts Trace, Curepe.

11 Dear Sir/Madam I refer to your notice of objection dated 30 th March 1995 applying to me to review and revise the above assessment. Your application satisfied the provisions of section 40(2) of the Value Added Tax Act, 1989 on 20th September, I have reviewed the assessment but wish to inform you of my refusal to amend it as desired by you. X X X X X X X Yours faithfully, Sgd Commissioner, Board of Inland Revenue VAT Administration Centre 19. Finally, the Revenue s position was that (1) service of the letter of March 19, 1997 was not a stage in the determination of the objection, but rather was a step in the collection process. (2) the determination of the objection was properly done within the statutory time limit, and that the Revenue had effected proper service of the so-called letter of determination although it was postmarked March 27, (3) the Act did not outline any time limit for service of the notice, and a time limit was only prescribed for the determination of the objection.

12 20. On this appeal, therefore, in order to succeed the Revenue had to show that the Tax Appeal Board failed to heed evidence that the determination took place on or before March 19, It was not enough to point to the date of the letter of notification. That was disputed. The date of the actual determination of the objection went to the jurisdiction of the Revenue to review and revise the assessment after March 19, Therefore, there had to be some evidence of the date of actual determination. None existed in the case stated. 21. Counsel for the Revenue sought to meet this difficulty by reliance on the presumption of regularity concerning the acts of public officers. 22. The presumption of regularity (omnia praesumuntur rite et solemniter esse acta donec probetur in contrarium) refers not to the appointment of the public officials in this case but to their acts. Just as in the case of an accused the presumption of regularity cannot be relied on to prove the lawfulness of an arrest or of custody (see Dillon v R [1982] AC 484 (P.C.)), so in civil cases the presumption cannot establish the lawfulness or vires of the acts of a public official where that is the central issue between the parties. Thus, whether the determination was effected on or before March 19 had to be proved by direct or documentary evidence of the actual determination, and not by a presumption imposing an evidential burden of proof on the taxpayer to prove facts which were wholly within the knowledge of the Revenue. 23. Such evidence of a determination might consist of an objections book and a certificate signed by the delegated Commissioner that he or she had

13 determined the objection in a particular way on the date specified. The evidence would be similar to that referred to by Fox LJ in Honig v. Sarsfield [1986] STC 246, 248D. 24. However, counsel for the Revenue frankly admitted that the Revenue had no evidence to prove the actual determination and its date. In those circumstances it was manifest that the Revenue was unable to dislodge the decision of the Tax Appeal Board that the determination of the objection was out of time. It would therefore have served no useful purpose to remit the matter to the Tax Appeal Board for an appropriate finding to be made. We therefore dismissed the appeal. 25. That conclusion is sufficient to dispose of this appeal, but it might be of some assistance for me to state my views on the Tax Appeal Board s conclusion that the determination of the objection included notification of the determination and that both must take place within the six-month time limit. Determination and notification 26. Section 40(1) (a) of the Act incorporates section 86 of the Income Tax Act, and we must marry the two sections, both of which deal with the objection and assessment stages. 27. Section 86(5) of the Income Tax Act requires the Board, on receipt of an objection duly made, to reconsider the assessment and either to vacate or vary the assessment or confirm and disallow the objection.

14 28. Section 86(6) of the Income Tax Act provides for service of notice of the Board s decision or notice of the determination of the objection on the taxpayer. 29. Determination of the objection and notification of that determination are therefore on the express words of the legislation separate steps both with regard to a simple assessment and an objection to an assessment. 30. It must also be noted that after determination of an objection the Board of Inland Revenue must revert to an assessment either varied or vacated (a nil assessment) or the original assessment (now confirmed). 31. Therefore it is difficult to accept in the light of section 86(6) of the Income Tax Act that a notice of assessment is separate and apart from an assessment but that an assessment confirmed or otherwise on the determination of an objection is not a distinct step separate an apart from notification of the determination. 32. Nor it is useful to classify the assessment or notice of it as an administrative step and notice of the determination of an objection as a quasijudicial step. Wade and Forsyth on Administrative Law (8 th edn. p. 475) says this: The term quasi-judicial accordingly came into vogue, as an epithet for powers which, though administrative, were required to be exercised as if they were judicial i.e. in accordance with natural justice. That at least was less of a misnomer than judicial and made it easier for the courts to continue the work of developing their system of fair administrative procedure.

15 33. Such distinctions are no longer necessary, and it is widely accepted that administrative acts are subject to the general requirement of fairness. 34. The imported section 86(6) of the Income Tax Act does not require service of a notice of determination of objection within any specified time limit. Does fairness require a time limit to be implied? 35. In the first place in the process of self-assessment liability to tax arises regardless of notification. Indeed, if there is no audit, there will never be a notification, although there will be a clear liability. 36. All that is required is fairness of the hearing on the documents, which statute has prescribed to be ex parte. The present case is one of a preliminary hearing ex parte, as occurred in Pearlberg v Varty [1972] 1 WLR 534 (H.L.) where leave was given to raise late assessments without reference to the taxpayer because the scheme of the statute prescribed that leave was to be obtained ex parte. 37. Further, the legal position of the taxpayer is not altered to his disadvantage by notification outside the six-month limit in section 40 (2) of the Act. Whenever notification is served on the taxpayer, his or her right of appeal arises within twenty-eight days of the notification : see section 7 (2) of the Tax Appeal Board Act, Chap. 4: Accordingly, I am of the view that fairness does not require the implication of a time limit for service of notice of the determination of the objection. Of course, there will always be some gap between making the determination and

16 giving notice of it. In the normal case where there is no time limit it is usual to imply a duty to give notice within a reasonable time. 39. There is in this case no question of any abuse of the open-ended nature of the duty to notify or of any deliberate policy by the Revenue not to comply or to comply belatedly with such duty I would therefore hold that all that fairness requires is that notification of the determination of the objection take place within a reasonable time after determination. 40. As regards the issue whether determination and notification are composite I have already indicated that the distinction between administrative and quasijudicial functions does not provide much assistance and that the end result in each case is an assessment. 41. Again, it is not clear why an assessment is completed before service of the notice of it to the taxpayer, but an assessment after objection is not complete until notice of it is served on the taxpayer. The only apparent difference arises not from the nature of the respective assessments or the process of arriving at them, but from the consequences of the notices. In the case of a notice of assessment the right to object springs from it; in the case of the notice of determination of the objection the right to appeal to the Tax Appeal Board ensues. The assessment original, confirmed or varied retains the character of separateness from the notice thereof. 42. In Airline Caterers Ltd v BIR (unreported, Appeals Nos. I 110 I 113 of 1988), at page 11 the Tax Appeal Board applied a dictum of Lord Dunedin in Whitney v IRC [1926] AC 37, 52:

17 Now, there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay. 43. In Montano v BIR (unreported, Appeal No. I 58 of 1998) counsel for the taxpayer argued that not only did service of the notice form part of the assessment process, but that it was contemplated that service was to be effected expeditiously. He referred to section 114(2) of the Income Tax Act, which provided that a notice sent by post was deemed to be served on a resident not later than fifteen days from the day of posting. 44. Counsel for the taxpayer in Montano cited dicta of Persaud J.A. in Ramlakhan v CIR (1974) 21 WIR 305, 209: I am of the view that service of the notice of assessment is a separate step apart from the assessment itself, which is complete as soon as the mathematical calculations are complete and the Commissioner has fixed the quantum of the taxpayer s liability. If, perchance, the Commissioner decides for some reason not to inform the taxpayer of such liability under s. 78(1) of the statute, he may not take any further step to collect the tax.so that the service of the notice is an important step in the whole process of tax collection, and is no part of the actual assessment.

18 45. The Tax Appeal Board rejected the submissions of counsel for the taxpayer in Montano (supra). The Appeal Board held that Ramlakhan v CIR (supra) clearly established that the assessment is an administrative step in respect of which there is a limitation period, separate and apart from the other two steps in respect of which there is no statutory limitation, and which form part of the collection process. 46. The Tax Appeal Board had in the earlier case of Peter Moy v BIR (unreported, Appeal Nos. I17 and I18 of 1986) applied Ramlakhan v CIR (supra). In the English case of Honig v Sarsfield [1986] STC 246 on similar but not identical legislation FOX LJ and the Court of Appeal accepted that the legislation imposed a time limit on the making of an additional assessment on the estate of a deceased person but there was no time limit on the service of assessments on the estate of the deceased. 47. On the basis of the authorities cited above and on the wording of the legislation I would hold if it were necessary to do so, that: (a) the determination of the objection is a separate and independent procedure from the service of notice of the determination of the objection. (b) the statutory six-month limit in respect of section 40(3) of the Act applies only to the determination of the objection.

19 48. I would also like to make some observations on certain new points made by the taxpayer in its skeleton arguments: (1) that notification was implicit in the concept of determination. (2) that section 5(e) of the Constitution was engaged because a fair hearing and determination require communication of the decision. (3) that general principles of constitutional law involving legality and access to justice supported the principle that a determination involved communication of the decision. 49. While I question whether there is any merit in these points on the facts of this case and the particular statutory regime, in my judgment the following dicta of the Tax Appeal Board in Peter Moy v BIR (supra) apply equally to a tax appeal at the Court of Appeal stage: It is clear that this Court is called upon to adjudicate matters that have been the subject of an objection and it is not the assessment itself that is to be disputed before the Court. The objection stage is not to be by-passed so as to give rise to an investigation at large. 50. We would probably have given leave to argue the first point since that was the contention of the Revenue as well. As regards, the other two points, a refusal to entertain them would not have prevented the taxpayer from raising them in appropriate constitutional proceedings.

20 Conclusion 51. For the reasons which I indicated earlier in this judgment we dismissed this appeal with costs fit for counsel on July 16, I would draw to the attention of the Tax Appeal Board and the parties to the appeal my opinion on the other matters by way of general guidance. R. Nelson, Justice of Appeal. I also agree W. Kangaloo, Justice of Appeal.