South Seas Tuna Corporation Limited v Betty Palaso as Commissioner General, Internal Revenue Commission and Internal Revenue Commission of Papua New Guinea (2019) SC1761

• Jurisdiction: Papua New Guinea
• Judge: Collier, Nablu and Neill JJ
• Judgment Date: 14 February 2019
• Citation: (2019) SC1761
• Docket Number: SCA NO. 176 of 2017
• Judgement Number: SC1761

Full Title: SCA NO. 176 of 2017; South Seas Tuna Corporation Limited v Betty Palaso as Commissioner General, Internal Revenue Commission and Internal Revenue Commission of Papua New Guinea (2019) SC1761

Supreme Court: Collier, Nablu and Neill JJ

Judgment Delivered: 14 February 2019

SC1761

PAPUA NEW GUINEA

[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 176 of 2017

BETWEEN:

SOUTH SEAS TUNA CORPORATION LIMITED

Appellant

AND:

BETTY PALASO as COMMISSIONER GENERAL, INTERNAL REVENUE COMMISSION

First Respondent

AND:

INTERNAL REVENUE COMMISSION OF
PAPUA NEW GUINEA

Second Respondent

Waigani: Collier, Nablu and Neill JJ

2018: 29th October

2019: 14th February

TAXATION – interpretation of Goods and Services Tax Act 2003 – meaning of “assessment” for the purposes of the Goods and Services Tax Act – effect of s 32 of the Interpretation Act – whether journal entries constituted an “assessment” – whether the first respondent was functus officio

ADMINISTRATIVE LAW – whether common law principles of functus officio apply to administrative bodies in Papua New Guinea

Cases Cited:

Papua New Guinea Cases

Yagama v Uguro [2018] SC1682

Overseas Cases

Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243

British Columbia (Workers’ Compensation Appeal Tribunal) v. Fraser Health Authority, 2016 SCC 25, [2016] 1 S.C.R. 587

Chandler v Alberta Association of Architects [1989] 2 SCR 848

Chopra v Canada (Attorney General) 2013 FC 644

Commissioner of Inland Revenue v Canterbury Frozen Meat Co Ltd [1994] 2 NZLR 681

Commissioner of Taxation v Ryan [2000] HCA 4; (2000) 201 CLR 109

Cooper Brooks (Wollongong) Pty Ltd v Commissioner of Taxation (1980) 147 CLR 297

Demetrio, R. (on the application of) v Independent Police Complaints Commission (IPCC) [2015] EWHC 593

Federal Commissioner of Taxation v Prestige Motors Pty Ltd [1994] HCA 39

Federal Commissioner of Taxation v S Hoffnung & Co Ltd (1928) 1 ATD 310

Ika v Nauru Phosphate Royalties Trust [2011] NRSC 6

In re 56 Denton Road, Twickenham [1953] Ch 51

In re St. Nazaire Co. (1879) 12 ChD, 88

Kabourakis v The Medical Practitioners Board of Victoria [2006] VSCA 301

Minister for Immigration and Border Protection v CLV16 [2018] FCAFC 80

Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; (2002) 209 CLR 597

Minister for Indigenous Affairs v MJD Foundation Limited [2017] FCAFC 37

Mordue v Palmer (1870) 6 Ch App 22

Mwelo v Xiang Lin Timber (SI) Ltd [2018] SBHC 8

Paul Finance Ltd v Commissioner of Inland Revenue [1995] 3 NZLR 521

R v Deputy Federal Commissioner of Taxation; ex parte Hooper [1926] ALR 101

Re VGM Holdings Ltd [1941] 3 All ER 417

Ridge v Baldwin [1964] AC 40

Rootkin v Kent County Council [1981] 1 WLR 1186

Sunbeam Transport Ltd v Pacific Transport Ltd [1995] FJCA 19

WT Ramsey Ltd v Inland Revenue Commissioners [1982] AC 300

Legislation Cited:

Goods and Services Tax Act 2003

Income Tax Act 1959

Interpretation Act

Acts Interpretation Act (Cth) (Aust)

Architects Act (Canada)

Migration Act 1958 (Cth) (Aust)

Nauru Lands Committee Act 1956-1963 (Nauru)

Traffic Act (Cap 176) (Fiji)

War Damage Act 1943 (UK)

Counsel

M Goodwin with T Ivano, for the Appellant

S Sinen, for the First and Second Respondents

REASONS FOR JUDGMENT

14th February, 2019

1. COLLIER J: This is an appeal from an interlocutory decision of a National Court Judge in which his Honour found that it was unnecessary in the circumstances of the case to determine whether the respondents had made an assessment of tax payable under the Goods and Services Tax Act 2003 (GST Act), and that the doctrine of functus officio did not apply in respect of an administrative decision of the Internal Revenue Commission (IRC) under the GST Act. Leave to appeal was granted on 23 November 2017, with costs of that application being costs in the appeal. Before turning to the grounds of appeal it is helpful to examine relevant background facts and the decision of the primary Judge the subject of this appeal.

BACKGROUND

2. Uncontested background facts are set out in the affidavit of Mr Michael McCulley, the managing director of the appellant, sworn on 23 June 2016 in the primary proceedings.

3. The appellant was an incorporated joint venture of three companies, one of which was a Taiwanese entity FCF Fishery Company Ltd (FCF). The purpose of the incorporated joint venture was to enable ongoing compliance with multilateral and bi-lateral requirements, established by Papua New Guinea and other Pacific countries to enable access to fishing for tuna in the waters of those countries and access to the United States market for processed fish. At the time of the commencement of proceedings in the National Court the only remaining joint venturer was FCF, which had effectively become the parent company of the appellant.

4. On or about 5 July 2000 the appellant entered into a project agreement with the State and the East Sepik Provincial Government to develop a tuna processing facility in Wewak. The facility became operational in 2004. The project agreement provided economic incentives to the appellant to come to Papua New Guinea and avail itself of the opportunity to develop Papua New Guinea’s participation in the Western Pacific tuna fishery. In particular, Mr McCulley deposed that:

· Clause 7.2 provided for an exemption from import duty for items required for the construction and operation of the processing facility and the appellant’s vessels

· Clause 7.2 provided that the State acknowledged that, for the purposes of Div III.1A of the Income Tax Act 1959 (Tax Act), all products of the processing facility for a relevant term were included in the class of goods specified in the Tax Act as “canned, loined and smoked fish” such that all such products were prescribed qualifying goods for the purposes of tax exemption related to export sales under s 45B of the Tax Act;

· Schedule 1(c) provided for all exported product of the processing facility and south seas vessels from time to time to be charged with tax under s 18 of the GST Act at the rate of zero percent, and that all excess input tax paid by the appellant under the GST Act in its operations would be refunded to the appellant by the Commissioner in timely fashion;

· Clause 7.12 provided for a taxation indemnity from the State.

5. Pursuant to the agreement, the appellant constructed a processing facility at Wewak. Mr McCulley deposed that the arrangements for the operation of the facility included that it was fenced off from the rest of the port of Wewak, that its customers are external to Papua New Guinea, and that it was treated at all times as under the control of Papua New Guinea Customs. The appellant submits, in forceful terms, that this remains the case.

6. Between 2004 and 2015 the appellant filed a monthly return under the GST Act for each month of the calendar year, each time accepted and assessed by the Commissioner. Further, it appears that the respondents each year sent a team of auditors and inspectors to the premises of the appellant and examined the appellant’s books and records, including GST records, and each year the auditors left the premises satisfied with the appellant’s taxation compliance. Materially, Mr McCulley further deposed:

19. In transacting its business as an exporter, the appellant always treated its provision of services to FCF as GST zero rated. These services to FCF (who is not in Papua New Guinea, nor registered for GST) change the nature of the goods owned by FCF whilst those goods under the control of customs in the Tuna Processing Facility at Wewak. That treatment of services as GST zero rated, is consistent with the project agreement, the physical and regulatory treatment of the fish by PNG Customs under the Customs Act, the provisions of the Goods and Services Tax Act and the zero rating letter. It is also consistent with the philosophy of a goods and services tax which is a domestic consumption tax and not designed to add to the cost of exported goods and services and damage the export competitiveness of the country.

7. The appellant contended that, because it had few Papua New Guinea domestic sales, it accumulated nil or very little GST output debits from GST chargeable on its goods and services outputs. However because it was required to pay GST on all goods and services it had consumed each month it accumulated GST input credits. The appellant also submitted that it had claimed a refund of the excess amounts of GST input credits, that the respondents had been routinely late since 2004 in making those refunds, and that the appellant had been required to take legal action against the respondents to recover that...