Cash World Gold Buyers Pty Ltd (Taxation)
[2017] AATA 736
•17 May 2017
Cash World Gold Buyers Pty Ltd (Taxation) [2017] AATA 736 (17 May 2017)
Division:TAXATION & COMMERCIAL DIVISION
File Number(s):2016/0273
Re:Cash World Gold Buyers Pty Ltd
APPLICANT
AndCommissioner of Taxation
RESPONDENT
DECISION
Tribunal:Ms G Lazanas, Senior Member
Date:17 May 2017
Place:Sydney
The Tribunal declines to make the direction and the order sought by the Applicant.
.............................[sgd]...........................................
Ms G Lazanas, Senior Member
CATCHWORDS
PRACTICE AND PROCEDURE – lodging of documents with the Tribunal – lodging of statement of further and better particulars – claims that documents that may be relevant to the review are in the possession of the Respondent based on schedules of documents produced by Respondent pursuant to request under the Freedom of Information Act 1982 – application for a notice to be given requiring the Respondent to lodge additional documents – application for an order requiring the Respondent to lodge additional statement containing further and better particulars – modification of s 37 of the Administrative Appeals Tribunal Act 1975 by s 14ZZF of the Taxation Administration Act 1953 – modification of s 38 of the Administrative Appeals Tribunal Act 1975 by s 14ZZG of the Taxation Administration Act 1953 – application refused
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) ss 37, 38
Taxation Administration Act 1953 (Cth) ss 14ZZF, 14ZZG
CASES
Binetter v Commissioner of Taxation [2016] FCAFC 163
Cosco Holdings Pty Ltd v Federal Commissioner of Taxation [1997] FCA 1504
Kennedy v Administrative Appeals Tribunal (2008) 168 FCR 566; [2008] FCAFC 124
Re Christie and Commissioner of Taxation [2008] AATA 320
Re EME Productions No 1 Pty Ltd and Screen Australia [2010] AATA 839
Re KLGL and QCYY and Australian Prudential Regulation Authority [2008] AATA 452Re VLKG and Commissioner of Taxation [2011] AATA 915
REASONS FOR DECISION
Ms G Lazanas, Senior Member
17 May 2017
INTRODUCTION
Cash World Gold Buyers Pty Ltd (Cash World) has applied for review of a decision deemed to have been made by the Commissioner of Taxation on 23 November 2015 disallowing an objection made by Cash World in respect of Notices of Assessment of Net Amount for the quarterly tax periods ended 31 December 2014 and 31 March 2015 and a Notice of Assessment of Shortfall Penalty for the quarterly tax period ended 31 December 2014.
The Commissioner issued the abovementioned assessments to Cash World on 21 May 2015 after an audit of its taxation affairs took place ‘without notice’ to Cash World. The audit focused upon input tax credits claimed by Cash World in respect of purchases of gold for the purposes of the A New Tax System (Goods and Services Tax) Act1999 (Cth) (GST Act). During the relevant tax periods, Cash World says that three men made taxable supplies of approximately $56 million in scrap gold to Cash World. The reference to “scrap” gold is a reference to gold that does not meet the definition of “precious metal” in the GST Act. The Commissioner says the acquisitions of gold made by Cash World were not creditable acquisitions of scrap gold by Cash World from “the middlemen”. The Commissioner says that the middlemen were acquiring non-taxable gold bullion from bullion traders as agents for Cash World. The proper characterisation of the arrangements and the classification of the gold in issue are interesting matters for another day.
The matter before me is an application by Cash World for a notice to be given under s 37(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) (as modified by s 14ZZF(1)(b)(ii) of the Taxation Administration Act1953 (Cth) (TAA Act)) to direct the Commissioner to produce certain documents in his possession or, alternatively, for an order under s 38(1) of the AAT Act (as modified by s 14ZZG of the TAA Act) requiring the Commissioner to lodge an additional statement containing further and better particulars. Cash World says that it requires these documents and the information in order to prepare its case for the substantive hearing.
I am not satisfied that it is appropriate to give the notice sought or make the order as Cash World did not persuade me that either should be made. While Cash World loosely identified various categories of documents by reference to schedules produced by the Commissioner in response to an application for access to documents under the Freedom of Information Act1982 (Cth) (FOI Act), it did not establish that those documents may be relevant to the review of the deemed objection decision. Nor did Cash World establish that the Commissioner’s Statement of Facts, Issues and Contentions was deficient such as to warrant the Tribunal issuing an order to the Commissioner to provide an additional statement containing further and better particulars.
PROCEDURAL BACKGROUND
The factual matrix to the applications is relatively straightforward and not in dispute.
As noted at [2] above, the Commissioner issued the assessments to Cash World on 21 May 2015. On the same day, the Commissioner issued a notice under s 264 of the Income Tax Assessment Act1936 (Cth) and s 353-10 of the TAA to Mr Tal Barakat, the sole director and shareholder of Cash World, for the production of various documents. Also on 21 May 2015, the Commissioner issued garnishee notices pursuant to s 260-5 of Schedule 1 to the TAA to various third parties requiring them to pay money to the Commissioner, to meet the tax debt of Cash World.
On 16 July 2015, Cash World lodged an objection with the Commissioner with respect to the assessments.
On 24 September 2015, Cash World requested the Commissioner, pursuant to s 14ZYA of the TAA, make an objection decision within 60 days.
As the Commissioner did not make an objection decision within 60 days after being given the request, the Commissioner was taken on 23 November 2015, to have made a decision disallowing the objection lodged by Cash World under s 14ZYA(3) of the TAA.
On 27 November 2015, Cash World’s accountants lodged with the Commissioner an application for access to documents under the FOI Act (FOI Request). Cash World sought access to a wide variety of documents including “all documents evidencing the review undertaken by the ATO of [Cash World’s] Objection … including drafts of any determinations or decisions on review of the Objection lodged and any documents the ATO intends to rely on”. In considering the FOI Request, the Commissioner produced a schedule of documents in his possession which relate to Cash World but refused the application for access to the documents.
On 18 January 2016, Cash World filed an Application for Review with the Tribunal seeking review of the Commissioner’s deemed objection decision referred to in [9] above.
On 24 March 2016, the Commissioner lodged the “T” documents with the Tribunal. Those documents include transcripts of interviews with each of the middlemen.
On 29 March 2016, the Commissioner filed his Statement of Facts, Issues and Contentions with the Tribunal.
On 3 May 2016, Cash World filed its Statement of Facts, Issues and Contentions with the Tribunal.
Pursuant to directions made by the Tribunal on 9 May 2016, Cash World subsequently wrote to the Commissioner requesting he lodge further “T” documents. The Commissioner replied that he would not be lodging any further “T” documents.
Cash World then applied to the Tribunal for a notice to be given under s 37(2) of the AAT Act (as modified by s 14ZZF(1)(b)(ii) of the TAA) to direct the Commissioner to produce approximately 643 documents in his possession. Cash World applied, in the alternative, for an order under s 38(1) of the AAT Act (as modified by s 14ZZG of the TAA Act) requiring the Commissioner to lodge an additional statement containing further and better particulars.
Pursuant to directions made by the Tribunal at the hearing of Cash World’s application on 21 November 2016, Cash World subsequently produced schedules setting out the documents in respect of which it requested a direction, together with its commentary. Counsel for Cash World explained that it had relied on the schedules produced by the Commissioner pursuant to its FOI Request (as set out in [10] above) in compiling the schedules and identifying the documents which it considered should be lodged with the Tribunal. It is unnecessary to set out the list of documents here. It suffices to note that the descriptions of the folders, subfolders and documents that were provided by Cash World, based on the Commissioner’s response to the FOI Request, were very vague.
The Commissioner supplemented the schedules produced by Cash World with his own commentary. The Commissioner also indicated that some documents marked by Cash World were already included in the “T” documents and, furthermore, that he would additionally be prepared to produce a few documents as supplementary “T” documents having realised that similarly described documents had already been produced. Additionally, the Commissioner provided his reasons for not producing the bulk of the documents identified by Cash World, to which I will come shortly.
Against that background, I turn now to a consideration of the principles regarding ss 37 and 38 of the AAT Act, as modified by the TAA.
SHOULD THE TRIBUNAL ISSUE A NOTICE UNDER SECTION 37 OF THE AAT ACT?
Section 37(1)(b) of the AAT Act relevantly provides as follows:
37. Lodging of material documents with Tribunal
…
Decision-maker must lodge material documents
(1) Subject to this section, a person who has made a decision that is the subject of an application for review … by the Tribunal must, within 28 days after receiving notice of the application (or within such further period as the Tribunal allows) lodge with the Tribunal a copy of:
…
(b) … every other document that is in the person’s possession or under the person’s control and is relevant to the review of the decision by the Tribunal.
Section 37(1)(b) is modified by s 14ZZF of the TAA where the primary decision is a “reviewable objection decision” within the meaning of s 14ZQ. Section 14ZZF(1)(a)(v) provides that instead of being required to lodge copies of documents as set out in s 37(1)(b), the Commissioner is required to lodge:
every other document that is in the Commissioner’s possession or under the Commissioner’s control and is considered by the Commissioner to be necessary to the review of the objection decision concerned. (emphasis added)
It is accepted that the effect of s 14ZZF(1)(a)(v) is to substitute a subjective test of what is necessary to the review for an objective test of what is relevant: Re Christie and Federal Commissioner of Taxation [2008] AATA 320 at [9]. It follows, the Commissioner is not required to produce every document relating to a taxpayer in the Commissioner’s possession, only those necessary to the ‘taxable facts’ of each assessment: Kennedy v Administrative Appeals Tribunal [2008] FCAFC 124 at [21]. There are good reasons for this, including the fact of not burdening the Tribunal with documents that are unnecessary to the review of the decision in issue in the proceedings.
Section 37(2) of the AAT Act provides “a safeguard against a decision-maker who does not lodge under s 37(1) everything that it should”: Re VLKG and Commissioner of Taxation [2011] AATA 915 at [6]. Section 37(2) provides:
Tribunal may require other documents to be lodged
(2) Where the Tribunal is of the opinion that particular other documents or that other documents included in a particular class of documents may be relevant to the review of the decision by the Tribunal, the Tribunal may cause to be given to the person a notice in writing stating that the Tribunal is of that opinion and requiring the person to lodge with the Tribunal, within a time specified in the notice, the specified number of copies of each of those other documents that is in his or her possession or under his or her control, and a person to whom such a notice is given shall comply with the notice.
Section 37(2) is also relevantly modified by s 14ZZF(1)(b)(ii) in the following way:
(b) the power of the Tribunal under subsection (2) of that section to cause a notice to be served containing a statement and imposing a requirement on a person were instead:
…
(ii) a power, by such a notice, to make such a statement and impose a requirement that the person lodge with the Tribunal, within the time specified in the notice, a copy of each of those other documents that is in the person’s possession or under the person’s control;
It follows that the modification of s 37(2) of the AAT Act by s 14ZZF(1)(b)(ii) of the TAA is not the same as the modification of s 37(1). This is because the Tribunal’s power to issue a notice to a decision-maker is only enlivened where the Tribunal forms the opinion that particular other documents or that other documents included in a particular class of documents may be relevant to the review of the decision by the Tribunal. That is, the power to cause a notice to be served on the Commissioner under s 37(2) is premised on the existence of a jurisdictional fact expressed in the form of an opinion reached by the Tribunal. That opinion must be supported by a rational process of evaluation, based on reason and reasonable inference, not speculation, as was explained by Senior Member Taylor in Re KLGL and QCYY and Australian Prudential Regulation Authority [2008] AATA 452 at [46].
It is significant to note that s 37(2) is not a general discovery provision, nor does it authorise a “fishing expedition”: Kennedy v Administrative Appeals Tribunal [2008] FCAFC 124 at [27], citing Cosco Holdings Pty Ltd v Federal Commissioner of Taxation [1997] FCA 1504. Furthermore, the words “may be relevant” in s 37(2) are to be interpreted to mean whether a document “could reasonably be expected to throw light on some of the issues in the principal proceedings” (see Cosco Holdings). The test is not satisfied where a document only bears some correlation with the subject matter of, or evidence or issues in, the review proceedings: Re EME Productions No 1 Pty Ltd and Screen Australia [2010] AATA 839 at [17]; and Re KLGL at [17]. On the other hand, the test of “may be relevant” should not be interpreted to mean “is relevant”. In other words, the Tribunal must engage in a limited forensic exercise to determine whether a document “may be relevant” to the issues in the proceedings before making a direction under s 37(2). It cannot simply accept bare and unsupported assertions about the relevance of documents.
Cash World submitted that the items marked in its schedules are, at the very least, the documents which must be produced under s 37(2). Cash World maintained that it requires the further documents to address some of the issues and contentions that the Commissioner raised for the first time in his Statement of Facts, Issues and Contentions. These issues included whether the transactions and documents involving the middlemen and Cash World were a sham; if, as Cash World asserts, there were acquisitions by Cash World from the middlemen, whether there were alterations made to the gold bullion so as to transform the gold into a form other than precious metal; and, furthermore, whether such alterations to the gold were made by Cash World or under its direction. Cash World submitted that it “is entitled to any evidence which could rationally affect the assessment of the probability of the existence of a fact in issue in the proceedings”.
More specifically, Cash World’s comments with respect to why various documents should be required to be produced under s 37(2) included the following:
(a)the references in the schedules were to documents that on their face relate to the notices of assessments and would be directly relevant to understand the Commissioner’s decision;
(b)some documents referencing “ABC refinery job items” and “Demas invoices” were included while other similarly described documents were not included;
(c)notices issued to third parties for the production of documents and the documents produced in answer to those notices must be relevant to Cash World, otherwise why would such notices have issued;
(d)documents relating to the whole period of the audit investigation must be relevant to how the ATO’s views developed;
(e)documents with references to “Nosean”, which Cash World understood to be an investigation into money laundering and tax fraud concerning the purchase and sale of gold bullion, must be relevant to the extent that these documents were before the ATO auditors involved in the investigation of Cash World;
(f)interviews with numerous persons must be relevant as the ATO saw the necessity to interview these people in relation to Cash World’s GST liability; and
(g)internal ATO communications must be relevant as they prima facie relate to Cash World.
The Commissioner submitted that Cash World had failed to demonstrate to the Tribunal how any particular document would assist the Tribunal in forming the requisite opinion under s 37(2). The Commissioner also submitted that Cash World simply failed to identify how any of the documents sought may be relevant to the review, in the forensic sense described at [26] above. The Commissioner’s counsel pointed to the fact that Cash World’s repeated assertion that it is entitled to anything “which would rationally affect the assessment of the probability of the existence of a fact in issue in the proceedings”, based on the text of s 55(1) of Evidence Act 1995 (Cth), had nothing to do with the opinion that the Tribunal was required to form under s 37(2). The Commissioner’s counsel also highlighted that some documents, for example, the garnishee notices, were irrelevant to the issues in the proceedings as they concerned debt recovery actions.
I agree with the Commissioner’s submissions. The issues in the proceedings relate to Cash World’s entitlement to claim input tax credits on acquisitions of gold that it says were scrap gold from three men, for the purposes of the GST Act. Those issues will ultimately be resolved by referring to the applicable provisions in the GST Act, including those to do with “creditable acquisitions” and the meaning of “precious metals”. Undoubtedly, the nature of the arrangements between Cash World and the three men at the centre of the transactions will be the critical factual context. The review will entail the Tribunal evaluating the strength of the evidence adduced by Cash World and the Commissioner at the hearing. The Tribunal will be focused on determining whether, amongst other things, the assessments issued to Cash World were excessive. That is the nature of a merits review conducted de novo.
I have reviewed the list of documents in the schedules and am satisfied that the documents that Cash World has identified and is seeking a direction in relation to, will not shed light on the issues before the Tribunal. I had some reservations with respect to the transcripts of interviews of approximately a dozen named persons that were referenced in the schedules but, as Cash World did not offer any explanation as to how the transcripts of the named persons may be relevant, including as to what were their roles and involvement, I am not prepared to speculate as to the utility of those documents for the review proceedings. I am content to proceed on the basis that the Commissioner has complied with s 37, especially in circumstances where the Commissioner chose to include the three transcripts of the interviews of the middlemen as part of the “T” documents. I am mindful of the fact, as would be the Commissioner, that if it later emerges that the Commissioner omitted to produce a necessary document during the process leading up to and at the hearing before the Tribunal, and that document was obviously relevant to the issues before the Tribunal, that omission may, in certain circumstances, be properly characterised as a denial of procedural fairness: Binetter v Commissioner of Taxation [2016] FCAFC 163 at [44] (per Siopis J).
I note for completeness that the Commissioner agreed to supplement the “T” documents based on having been made aware by Cash World that some documents including invoices should have been included.
SHOULD THE TRIBUNAL MAKE AN ORDER UNDER SECTION 38 OF THE AAT ACT?
Section 38 of the AAT Act relevantly provides:
(1) The Tribunal may order a person who has lodged a statement with the Tribunal in accordance with paragraph 37(1)(a) to lodge an additional statement with the Tribunal, within the time specified in the order, containing further and better particulars in relation to any one or more of the following:
(a) particulars of findings on material questions of fact;
(b) reference to the evidence or other material on which those findings were based;
(c) particulars of the reasons for the decision.
…
Section 38 is modified by s 14ZZG of the TAA in the following way:
Section 38 of the AAT Act applies in relation to an application for a review of a reviewable objection decision as if the reference to paragraph 37(1)(a) of that Act were instead a reference to subparagraph 14ZZF(1)(a)(i) of this Act.
Section 14ZZF(1)(a)(i) provides as follows:
(1) Section 37 of the AAT Act applies in relation to an application for review of a reviewable objection decision as if:
(a) the requirement in subsection (1) of that section to lodge with the Tribunal a copy of:
(i) a statement giving the reasons for the decision;…
Cash World did not make any submissions in relation to the order sought under s 38 of the AAT Act, nor can I see any basis for ordering the Commissioner to lodge an additional statement with the Tribunal for the purpose of providing further and better particulars. I have taken into account the fact that Cash World did not at any stage suggest that it does not understand the Commissioner’s position and also the fact that Cash World is likely to know more about its arrangements and tax affairs than the Commissioner.
CONCLUSION
I decline to give the notice sought by Cash World under s 37(2) of the AAT Act requiring the Commissioner to lodge supplementary “T” documents and I also decline to make the order sought by Cash World under s 38(1) of the AAT Act, requiring the Commissioner to lodge an additional statement with further and better particulars as I am not satisfied that it is appropriate to do so.
I certify that the preceding 37 (thirty-seven) paragraphs are a true copy of the reasons for the decision herein of Ms G Lazanas, Senior Member
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Associate
Dated: 17 May 2017
Date of hearing: 21 November 2016
Date of final submissions:
5 December 2016 Counsel for the Applicant: Mr B Rowe Solicitors for the Applicant: Munro Lawyers Counsel for the Respondent: Mr B Kasep Solicitors for the Respondent: Australian Government Solicitor
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