CPG Group Pty Ltd and Commissioner of Taxation (Taxation)
[2024] AATA 199
•5 January 2024
CPG Group Pty Ltd and Commissioner of Taxation (Taxation) [2024] AATA 199 (5 January 2024)
Division:TAXATION AND COMMERCIAL DIVISION
File Number: 2018/3237
Re:CPG Group Pty Ltd
APPLICANT
AndCommissioner of Taxation
RESPONDENT
DECISION
Tribunal:Deputy President F D O'Loughlin KC
Date:5 January 2024
Place:Melbourne
The decision under review is set aside and in substitution there for:
1.The applicant is not entitled to input tax credits of claimed in respect of supplies contended to have been made by Golden Angel Pty Ltd and the shortfall penalty imposed, including the 20% increase is affirmed without remission.
2.The applicant is entitled to all remaining input tax credits in dispute and scheme penalty does not arise.
..............................[sgd]..........................................
Deputy President F D O'Loughlin KC
Catchwords
TAXATION – GST – general anti-avoidance provision – gold industry – whether it would be concluded an entity entered into scheme for sole or dominant purpose of obtaining a GST benefit – whether obtaining a GST benefit the principal effect of scheme – decision set aside
Legislation
A New Tax System (Goods and Services Tax) Act 1999 (Cth)
Income Tax Assessment Act 1936 (Cth)
Taxation Administration Act 1953 (Cth)
CasesACN 154 520 199 Pty Ltd (in liquidation) v Federal Commissioner of Taxation [2020] FCAFC 190
Bayconnection Property Developments Pty Ltd and Ors and Commissioner of Taxation [2013] AATA 40
Brownlie v Minister For Immigration, Citizenship, Migrant Services & Multicultural Affairs [2023] FCA 436 National Disability Insurance Agency v Davis [2022] FCA 1002
Buzadzic v Federal Commissioner of Taxation [2023] FCA 954
CPH Property Pty Ltd v Federal Commissioner of Taxation (1998) 88 FCR 21
Federal Commissioner of Taxation v Unit Trend Services Pty Ltd (2013) 250 CLR 523
Federal Commissioner of Taxation v Complete Success Solutions Pty Ltd ATF Complete Success Solutions Trust [2023] FCAFC 19
Federal Commissioner of Taxation v Hart (2004) 217 CLR 216
Federal Commissioner of Taxation v Ludekens (2013) 214 FCR 149
Federal Commissioner of Taxation v Mochkin (2003) 127 FCR 185
Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149
Federal Commissioner of Taxation v Spotless Services (1996) 186 CLR 404
Fletcher v Federal Commissioner of Taxation (1988) 19 FCR 442
HNMF and Commissioner of Taxation [2023] AATA 4067
Mills v Commissioner of Taxation (2012) 250 CLR 171
National Disability Insurance Agency v Davis [2022] FCA 1002
Nguyen v Commissioner of Taxation [2018] FCA 1420
Pascoe v Federal Commissioner of Taxation (1956) 30 ALJR 402, 403 (Fullagar J).
Price Street Professional Centre Pty Ltd v Federal Commissioner of Taxation [2007] FCA 345
Quick v Stoland (1998) 87 FCR 371
Saga Holidays Limited v Federal Commissioner of Taxation (2006) 156 FCR 256
Vincent v Federal Commissioner of Taxation (2002) 124 FCR 350
Secondary Materials
The Hon Kelly O’Dwyer, ‘Strengthening the integrity of GST on precious metals’ (Media Release, 20 June 2017)
REASONS FOR DECISION[1]
Deputy President F D O'Loughlin KC
BACKGROUND AND CONTEXT
The dispute
[1]The tribunal’s decision in HNMF and Commissioner of Taxation [2023] AATA 4067 was given on 30 November 2023. The events underlying that decision were of a similar nature to the events presently under review. There is a commonality in the reasoning in this decision and the HMNF decision. To avoid cluttering, the commonality is not footnoted.
These reasons[2] concern the operation of the GST Act[3] in the context of purchases and sales of gold in the different forms in which it is recognised for GST[4] purposes. More specifically, these reasons concern whether the applicant, a refiner of precious metal,[5] who contends that during Disputed Tax Periods[6] it made creditable acquisitions[7] of scrap gold[8] in a series of transactions which were taxable supplies:[9]
(a)is entitled to input tax credits[10] in respect of some of those supplies under the general GST Act rules as they apply to supplies generally and to purchases and sales of gold as a particular class of supplies;
(b)should be denied entitlements to ITCs under Division 165 having regard to the artificiality of some or all of the circumstances in which the scrap gold were supplied to it in a missing trader or carousel fraud arrangement; and
(c)is liable to penalty.[11]
[2]Annexure 1 to these reasons is a table of defined terms and acronyms used in these reasons. When used for the first time, a defined term or acronym is also footnoted.
[3]A New Tax System (Goods and Services Tax) Act 1999 (Cth). Unless otherwise indicated, all references to legislation are references to this Act.
[4]Goods and Services Tax.
[5]Section 195-1, definitions of ‘refiner of precious metal’ and ‘precious metal’.
[6]The five-monthly tax periods that ended on 31 July, 31 August, 30 September, 1 October, and 30 November 2016 respectively.
[7]As defined in ss 195-1 and 11-5.
[8]Gold metal of any fineness that is not in investment form. The terms scrap and refining materials, which are sometimes used by the parties, have the same meaning.
[9]Sections 9-5, 78-50, 84-5 and 105-5 as affected by the provisions listed beneath the definition of taxable supply in s 195-1(1).
[10]As defined in ss 195-1, 11-20 and 15-15. The term ITC has the same meaning.
[11]Paragraphs [36] to [39] below detail the Disputed ITCs and penalty.
Gold and the GST system
In the ordinary course, the GST system treats:
(a)gold in investment form[12] of at least 99.5% fineness as a precious metal;[13]
(b)a supply of precious metal as GST-free if it is the first supply after being refined by the supplier and the recipient is a dealer in precious metal;[14]
(c)subsequent domestic supplies of such precious metal as input taxed;[15] and
(d)domestic supplies of gold not in investment form, as taxable supplies, if, among others, the supplier is registered or required to be registered for GST.[16]
[12]Investment form within the meaning of that term as used in the definition of precious metal in s 195-1(1).
[13]Section 195-1(1), definition of precious metal. The terms gold bullion and bullion used by the applicant have the same meaning.
[14]Sections 9-30, 38-385; s 195-1(1) definitions of ‘precious metal’ and ‘dealer in precious metal’.
[15]Sections 9-30, 40-100.
[16]Section 9-5.
Three further features of Australia’s GST system need to be appreciated:
(a)together with some other, but not presently relevant, threshold conditions, an entitlement to an ITC is contingent on the relevant supply being a taxable supply, i.e., GST is payable on that supply – it is not necessary for the GST to have been paid;
(b)some supplies are GST-free; and
(c)the supplier of GST-free supplies is generally entitled to an ITC for the GST paid or payable by the supplier in respect of the supplies made to the GST-free supplier.
It might be observed that there is a structural collection weakness in such a system that gives a refund or credit entitlement to one taxpayer on the basis that another taxpayer has GST obligations which may or may not be satisfied. Where that other taxpayer’s obligations are not satisfied, after a GST-informed price has been paid for whatever has been supplied, the defaulting taxpayer in a sense is dipping into community financial resources indirectly without interface with community (ATO[17]) systems that are designed to detect and prevent abuses, necessarily occurring. And the community neither expects nor requires the recipient of a supply from a defaulting taxpayer to act as a GST system compliance agency to fill that gap.
[17]Australian Taxation Office.
In 2017, these features of the GST system were somewhat altered for taxable supplies of valuable metal.[18] Through a reverse charging process, the purchaser of these supplies, rather than the supplier, is now liable for GST on these supplies (and entitled to any applicable ITCs). This change was said to prevent ‘sellers of precious metals from phoenixing without remitting the GST owed’.[19]
The applicant’s business[20]
[18]GST Act, s 195-1, gold, silver or platinum; or any other substance specified for the purposes of paragraph (d) of the definition of ‘precious metal’.
[19]The Hon Kelly O’Dwyer, ‘Strengthening the integrity of GST on precious metals’ (Media Release, 20 June 2017).
[20]Further details of the trading activities that make up the applicant’s business are provided later in these reasons. The description here is to provide context.
On the applicant’s case, the applicant’s business can be simply described. That business entailed acquiring scrap gold, refining them and selling the refined gold. The scrap gold acquired were mostly of less than 95% gold content purity and were mostly acquired from unrelated parties. The applicant used the aqua regia refining process to refine that material so that it became gold in investment form, or precious metal, and referred to by the applicant as gold bullion or bullion. The applicant sold the refined gold bullion to a related party precious metal dealer, Galaxy[21] who sold the majority of that gold to unrelated parties.
[21]Galaxy Coins and Bullion Pty Ltd.
Consistent with [2(b)] above, the applicant’s sales of bullion, i.e., sales of precious metal, namely gold in investment form, to a dealer, were GST-free; and consistent with [3(c)] above, the applicant was entitled to claim and claimed ITCs on acquisitions of the scrap gold.
GST considerations aside, the applicant’s profit came from the difference between the values at which it bought scrap gold, and then after refinement sold, the gold bullion (reduced by the costs borne in the refining process and overhead costs). Excluding GST considerations, the applicant bought the scrap gold at a small discount from the prevailing spot price for gold and sold refined gold bullion at or slightly above the spot price. Adding GST considerations, the price at which the applicant bought scrap gold was that discount to spot price plus 10% and the applicant claimed an ITC for that 10% amount. Adding GST considerations, the applicant’s profit and the drivers of it were not altered. Table 1 shows the applicant’s profitability as reported before any adjustments are made to accommodate what the Commissioner says is the proper GST effect on that business.
Table 1
Applicant’s reported profitability
2017 2016 Sales income $111,752,105.91 $36,038,070.04 Other income $1,308,526.70 $109,247.65 Total income $113,060,632.61 $36,147,317.69 Profit before income tax $4,507,736.04 $1,572,031.35 Profit before income tax as a % of total income 3.99% 4.35%
THE COMMISSIONER’S AUDIT
During an audit, the Commissioner received information from the applicant and other sources and concluded that the applicant was not entitled to the ITCs it had claimed for the Disputed Tax Periods.
In summary the Commissioner’s audit conclusions were:
(a)the applicant sold almost all of the gold bullion it refined to Galaxy;
(b)Galaxy sold gold bullion to parties who can be described as forming part of one or more of 11 Supply Chains[22] that included eight Direct Suppliers[23] and 12 Indirect Suppliers[24] to the applicant;
(c)almost all of the applicant’s scrap gold purchases during the Disputed Tax Periods as shown in the applicant’s records were purchases from the Direct Suppliers who were participants in of one or more of those 11 Supply Chains;
(d)Direct Suppliers acquired gold from either Galaxy or Indirect Suppliers who had acquired gold from Galaxy;[25]
(e)somewhere in the Supply Chains to the applicant, gold bullion was adulterated and became scrap gold;[26]
(f)the prices at which the applicant sold gold to Galaxy were approximately 100.5% to 101% of the spot price for gold, and the prices at which the applicant purchased scrap gold from Direct Suppliers were usually between 95.89% and 98.18% of the spot price, before the addition of 10% GST;[27]
(g)the applicant “paid a GST-inclusive price of between 105.47% and 107.99% of spot price [and] claimed back the GST it paid to its suppliers as input tax credits in its BAS, causing it to be due a refund in each of the [Disputed Tax Periods]”;[28]
(h)in nearly every Supply Chain culminating in a supply of scrap gold to the applicant as shown in the applicant’s records, one Intermediary did not pay its GST liabilities to the ATO;[29]
(i)there was insufficient evidence that the applicant made creditable acquisitions from Golden Angel with the effect that the applicant was not entitled to any ITCs in respect of these purchases shown in the applicant’s records;[30]
(j)alternatively (in respect of Golden Angel related ITC claims) and as the primary basis for denial (in respect of ITC claims related to the remaining seven Direct Suppliers), the gold purchased had previously been refined with the effect that the applicant was not entitled to any ITCs in respect of these purchases;[31] and
(k)assessments of net amounts and penalties should be made and issued to the applicant denying ITCs claimed.
[22]Entities being bullion dealers or Intermediaries that sell gold to each other and/or the applicant. See [12] below.
[23]Entities that, on the applicant’s case, supplied gold to the applicant. See [10] below.
[24]Entities that supplied gold to Direct Suppliers, or a supplier to a Direct Supplier. See [11] below.
[25]ATO Audit Reasons, T2.2, p 27 [44].
[26]ATO Audit Reasons, T2.2, p 27 [45].
[27]ATO Audit Reasons, T2.2, p 27 [43] & [46].
[28]ATO Audit Reasons, T2.2, p 27 [46].
[29]ATO Audit Reasons, T2.2, p 27 [47].
[30]ATO Audit Reasons, T2.2, p 160 [338(a)].
[31]ATO Audit Reasons, T2.2, p 160 [338(b)].
The eight Direct Suppliers to the applicant were:
(a)Golden Angel;[32]
(b)HA Exchange;[33]
(c)Gold Dust;[34]
(d)CFGA;[35]
(e)Sell Your Gold;[36]
(f)GB Refiners;[37]
(g)GB Traders;[38] and
(h)Quality Gold.[39]
[32]Golden Angel Australia Pty Ltd.
[33]HA Exchange Pty Ltd
[34]Gold Dust Buyers and Sellers Pty Ltd
[35]Cash for Gold Australia Pty Ltd, collectively Cash For Gold Victoria, Cash For Gold Queensland and Cash For Gold NSW.
[36]Sell Your Gold Pty Ltd.
[37]GB Refiners Pty Ltd.
[38]GB Traders Pty Ltd.
[39]Quality Gold Pty Ltd.
The 12 Indirect Suppliers to the applicant were:
(a)Golden Touch; [40]
[40]Golden Touch International Pty Ltd.
(b)PH Gold;[41]
[41]PH Gold Pty Ltd.
(c)Universal Distribution Australia;[42]
(d)Cheap Bullion;[43]
(e)Cash Pal;[44]
(f)AU Scrap;[45]
(g)AX Traders;[46]
(h)R&N Metals;[47]
(i)Manila;[48]
(j)NC Jewellery;
(k)Diamond Moment;[49] and
(l)Infinity Jewellers.[50]
[42]Universal Distribution Australia Pty Ltd.
[43]Cheap Bullion Pty Ltd.
[44]Cash Pal Holdings Pty Ltd.
[45]AU Scrap Pty Ltd.
[46]AX Traders Pty Ltd.
[47]R&N Metals Pty Ltd.
[48]Manila Exchange Pty Ltd.
[49]Diamond Moment Pty Ltd.
[50]Infinity Jewellers Pty Ltd.
The 11 Supply Chains[51] have been described in both narrative and diagrammatic form in the Commissioner’s evidence. They are as follows.
[51]For some of the Supply Chains the Commissioner did not identify the ultimate source of gold during his audit, but in her forensic analysis of financial records of a wide range of entities Ms Wright was able to do that. The Supply Chain descriptions and diagrams below include Ms Wright’s ultimate supplier identification.
(a)the Golden Angel Supply Chain, with Golden Angel the relevant direct supplier to the applicant;
(b)the HA Exchange Supply Chain, with HA Exchange the relevant direct supplier to the applicant;
(c)the Gold Dust Supply Chain, with Gold Dust the relevant direct supplier to the applicant:
(d)the Cash for Gold (CFGA) Supply Chain, with CFGA the relevant direct supplier to the applicant;
(e)the Blanco Supply Chain 1, with Sell Your Gold the relevant direct supplier to the applicant;
(f)the Blanco Supply Chain 2, with Sell Your Gold the relevant direct supplier to the applicant;
(g)the Butt Supply Chain 1, with GB Refiners the relevant direct supplier to the applicant;
(h)the Butt Supply Chain 2, with GB Traders the relevant direct supplier to the applicant;
(i)the Butt Supply Chain 3, with GB Refiners the relevant direct supplier to the applicant;
(j)the Butt Supply Chain 4, with GB Refiners the relevant direct supplier to the applicant; and
(k)the Quality Gold Supply Chain, with Quality Gold the relevant direct supplier to the applicant.
The Golden Angel Supply Chain entailed sales of gold products (in various forms) by Galaxy to Golden Touch, by Golden Touch to Golden Angel, and by Golden Angel to the applicant. Diagrammatically, the Golden Angel Supply Chain was as follows:[52]
[52]This diagrammatic representation is an adaptation of the diagram at [8.1.1] of the Report of Ms Dawna Wright dated 1 June 2021 (the ‘First Wright Report’).
The HA Exchange Supply Chain entailed sales of gold products (in various forms) by Galaxy to PH Gold, by PH Gold to HA Exchange, by HA Exchange to the applicant. Diagrammatically, the HA Exchange Supply Chain was as follows:
The Gold Dust Supply Chain entailed sales of gold products (in various forms) by Galaxy to Universal Distribution Australia, by Universal Distribution Australia to Gold Dust, by Gold Dust to the applicant. Diagrammatically, the Gold Dust Supply Chain was as follows:[53]
[53]This diagrammatic representation is an adaptation of the diagram at [10.1.1] of the First Wright Report.
The Cash for Gold (CFGA) Supply Chain entailed sales of gold products (in various forms) by Galaxy to CFGA, CFGA to various suppliers[54], by various suppliers to CFGA (or PMR), and by CFGA (or PMR) to the applicant. Diagrammatically, the CFGA Supply Chain was as follows:[55]
[54]Including Mr Niyazi Candag trading as NC Jewellery, Diamond Moment and Infinity Jewellers.
[55]This diagrammatic representation is an adaptation of the diagram at [11.1.1] of the First Wright Report.
The Blanco Supply Chain 1 entailed sales of gold products (in various forms) by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap and/or AX Traders, by AU Scrap and/or AX Traders to Sell Your Gold, by Sell Your Gold to the applicant. Diagrammatically, the Blanco Supply Chain 1 was as follows:[56]
[56]This diagrammatic representation is an adaptation of the diagram at [12.1.1] of the First Wright Report.
the Blanco Supply Chain 2 entailed sales of gold products (in various forms) by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap, by AU Scrap to GB Traders, by GB Traders to Sell Your Gold, by Sell Your Gold to the applicant. Diagrammatically, the Blanco Supply Chain 2 was as follows:[57]
[57]This diagrammatic representation is an adaptation of the diagram at [13.1.1] of the First Wright Report.
The Butt Supply Chain 1 entailed sales of gold products (in various forms) by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap and/or AX Traders, by AU Scrap and/or AX Traders to GB Refiners, by GB Refiners to the applicant. Diagrammatically, the Butt Supply Chain 1 was as follows:[58]
[58]This diagrammatic representation is an adaptation of the diagram at [14.1.1] of the First Wright Report.
The Butt Supply Chain 2 which entailed sales of gold products (in various forms) by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap and/or AX Traders, by AU Scrap and/or AX Traders to GB Traders, by GB Traders to the applicant. Diagrammatically, the Butt Supply Chain 2 was as follows:[59]
[59]This diagrammatic representation is an adaptation of the diagram at [15.1.1] of the First Wright Report.
The Butt Supply Chain 3 entailed sales of gold products (in various forms) by Galaxy to GB Traders and R&N Metals, by GB Traders to R&N Metals, by R&N Metals to Manila, by Manila to GB Refiners, by GB Refiners to the applicant. Diagrammatically, the Butt Supply Chain 3 was as follows:[60]
[60]This diagrammatic representation is an adaptation of the diagram at [16.1.1] of the First Wright Report.
The Butt Supply Chain 4 entailed sales of gold products (in various forms) in two combinations. The first combination entailed sales of gold by Galaxy to GB Traders, by GB Traders to R&N Metals, by R&N Metals to Manila, by Manila to GB Traders, by GB Traders to GB Refiners, by GB Refiners to the applicant. The second combination entailed sales of gold by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap and/or AX Traders, by AU Scrap and/or AX Traders to GB Traders, by GB Traders to GB Refiners, by GB Refiners to the applicant. Diagrammatically, the Butt Supply Chain 4 was as follows:[61]
[61]This diagrammatic representation is an adaptation of the diagram at [17.1.1] of the First Wright Report.
The Quality Gold Supply Chain entailed sales of gold products (in various forms) by Galaxy to Quality Gold, by Quality Gold to the applicant. Diagrammatically, the Quality Gold Supply Chain was as follows:[62]
[62]This diagrammatic representation is an adaptation of the diagram at [18.1.1] of the First Wright Report.
THE AUDIT OUTCOME - DENIED ITCS AND PENALTY - ASSESSMENTS
At the conclusion of the audit, the Commissioner denied the applicant’s input tax credit claims to the extent of $9,457,634, as set out in Table 2, and issued assessments to give effect to that denial.
Table 2
Denied ITCs
Tax Period - 2016 Denied ITCs July $2,986,386 August $3,922,672 September $2,545,286 October $2,335 November $955 Total $9,457,634
There were two bases upon which the Commissioner contended that ITCs were not allowable.
(a)The first basis on which the Commissioner concluded that ITCs were not allowable concerned ITCs totalling $1,854,316 claimed in respect of supplies the applicant contends were acquired through what the Commissioner identified as the Golden Angel Supply Chain.[63] When the audit finished, the Commissioner concluded that there were no creditable acquisitions either because there was insufficient evidence that the contended for acquisitions had been made with the effect that s 11-5(a) did not allow any ITC,[64] or if there were acquisitions, those acquisitions were acquisitions of precious metal which were not taxable supplies, with the effect that the s 11-5(b) condition was not satisfied and an ITC entitlement did not arise.[65]
(b)The second basis on which the Commissioner contended that ITCs were not allowable concerned all of Denied ITCs: as an alternative to the first basis in respect of ITCs of $1,854,316, and as a stand-alone basis for the balance of $7,603,318. The Commissioner concluded the supplies to the applicant were supplies of adulterated precious metal that had already been the subject of a first supply as precious metal after refining and that any supplies of refined precious metal produced from these supplies were not the first supplies of that precious metal with the effect they were input taxed supplies rather than tax free supplies. That being the case, the supplies of the adulterated bullion to the applicant related to input taxed supplies and ITCs did not arise because s 11-15(2)(a) applied.[66]
[63]ATO Audit Finalisation Letter dated 5 December 2017, T2.1, p 7.
[64]ATO Audit Reasons, T2.2, p 10 [1] and p 166 [361].
[65]ATO Audit Reasons, T2.2, p 166 [362].
[66]ATO Audit Reasons, T2.2, p 178 [416] – [419].
As a consequence of the absence of input tax credits entitlements, the Commissioner said there were shortfalls for the Disputed Tax Periods, and the Commissioner imposed shortfall penalties totalling $5,371,390.40 pursuant to Subdivision 284-B of Schedule 1 to the Administration Act.[67] There were two bases on which penalty was imposed.
[67]Taxation Administration Act 1953 (Cth).
(a)For the denied $1,854,316 Golden Angel Supply Chain ITCs, the Commissioner imposed penalty at the intentional disregard of the law, 75%, rate,[68] and increased it by 20% for the second and third tax periods[69] without any remission. Table 3[70] contains details of the amounts involved.
[68]ATO Audit Reasons, T2.2, p 188 [440].
[69]ATO Audit Reasons, T2.2, p 188 [453].
[70]ATO Audit Reasons, T2.2, p 195.
Table 3
Intentional disregard penalties
(Golden Angel Supply Chain)
Tax Periods 2016 Shortfall Amount Base Penalty Amount at 75% Increase of 20% Penalty Payable July $661,020 $495,765 $495,765 August $706,140 $529,605 $105,921 $635,526 September $487,156 $365,367 $73,073.40 $438,440.40 Total $1,854,316 $1,390,737 $178,994 $1,569,731.40
(b)For all other Denied ITCs, the Commissioner imposed penalty at the recklessness, 50%, rate,[71] and increased it by 20% for the second and later tax periods[72] and then remitted that increase.[73] Table 4[74] contains details of the amounts involved ignoring the offsetting increases and remissions.
[71]ATO Audit Reasons, T2.2, p 188 [452].
[72]ATO Audit Reasons, T2.2, p 188 [453].
[73]ATO Audit Reasons, T2.2, p 188 [457] & [458].
[74]ATO Audit Reasons, T2.2, p 195.
Table 4
Recklessness penalties
Tax Periods 2016 Shortfall Amount Base Penalty Amount at 50% Penalty Payable July $2,325,366 $1,162,683 $1,162,683 August $3,216,532 $1,608,266 $1,608,266 September $2,058,130 $1,029,065 $1,029,065 October $2,335 $1,167.50 $1,167.50 November $955 $477.50 $477.50 Total $7,603,318 $3,801,659 $3,801,659
The ITCs denied are related to a significant majority of the applicant’s business and cause a significant financial impact.
For each of the July to September tax periods, and for the five months from 1 July 2016 to 30 November 2016 as a whole, the non-capital purchases[75] underlying the Denied ITCs represent almost all of the applicant’s non-capital purchases as shown in Table 5.
[75]Non-capital purchases as reported at label G11 in periodical Business Activity Statements (BAS).
Table 5 Tax period 2016 Non-capital purchases
(as shown in BAS filed)
Denied ITCs
(Table 2)
Implied purchases referrable to Denied ITCs (Denied ITCs x 11) Implied purchases referrable to Denied ITCs as a % of non-capital purchases July $34,244,080 $2,986,386 $32,850,246 95.93% August $44,810,002 $3,922,672 $43,149,392 96.29% September $29,386,198 $2,545,286 $27,998,146 95.28% October $2,067,336 $2,335 $25,685 1.24% November $650,391 $955 $10,505 1.62% Totals $111,158,007 $9,457,634 $104,033,974 93.59%
For the July to September tax periods, the Denied ITCs materially reduce or eliminate any trading margin the applicant otherwise enjoyed from its refining activities as shown in Table 6.[76]
[76]Amounts rounded.
Table 6 Tax period 2016 Amounts reported in BAS Denied ITCs Trading margins Sales[77] Non-capital purchases ITCs allowed[78] ITCs denied[79] July $31,124,035 $34,244,080 $2,986,386 -$6,947 -$2,993,333 August $43,566,824 $44,810,002 $3,922,672 $2,830,459 -$1,092,213 September $29,585,168 $29,386,198 $2,545,286 $2,870,443 $325,157 October $2,459,568 $2,067,336 $2,335 $580,172 $577,837 November $708,669 $650,391 $955 $117,404 $116,449 Totals $107,444,264 $111,158,007 $9,457,634 $6,391,530 -$3,066,104 [77]Ignoring the aggregate $13,806 GST payable reported on sales for the July to November (inclusive) tax periods which does not materially alter the differentials in the margins.
[78]Sales – (non-capital purchases *10/11).
[79]Sales – (non-capital purchases *10/11) – Denied ITCs.
POST ASSESSMENT STEPS AND EVENTS
When the assessments to give effect to the ITC denials were issued, the Commissioner was still to finalise and/or communicate his views as to Division 165 and its operation to the applicant’s circumstances.
On 22 December 2017, the applicant objected to the amended GST and penalty assessments.
On 21 February 2018, through its lawyers the applicant gave a notice pursuant to s 14ZYA of the Administration Act, and on 17 July 2018, the Commissioner informed the applicant that, pursuant to s 14ZYA of the Administration Act the Commissioner was taken, on 23 April 2018, to have disallowed the applicant’s objections and the present applications to the Tribunal were subsequently made.
The Commissioner’s consideration and/or administration of Division 165 had not altered by the time the applicant’s objections were deemed to have been disallowed by operation of s 14ZYA.
Following the deemed disallowance of the applicant’s objections the Commissioner’s consideration of the applicant’s circumstances has developed in three respects. First, the Commissioner has additional contentions that the supplies made to the applicant by Sell Your Gold were supplies of precious metal that were not taxable supplies with the effect that the s 11-5(b) condition for ITC entitlements is not satisfied.[80] Second, the Commissioner no longer presses the contention that re-refined adulterated bullion (returning it to a precious metal state) cannot be the subject of a first supply as precious metal after refining. Finally, and in relation to all of the Denied ITCs, the Commissioner contends that Division 165 applies, and the Tribunal should make the requisite direction.[81] The Division 165 basis is an alternative basis for denial of the $1,854,316 Golden Angel and $2,609,347 Sell Your Gold Supply Chain ITCs and a substitute contention for all other Denied ITCs.
[80]Commissioner’s Amended Statement of Facts, Issues and Contentions (ASOFIC) [35A].
[81]Commissioner’s ASOFIC [44] and [48].
The Commissioner now contends ITCs as set out in Table 7should be denied.
Table 7 Tax Periods
2016
Golden Angel Denied ITCs
ss 11-5(a) or 11-5(b)
Sell Your Gold Denied ITCs
s 11-5(b)
ITCs to be disallowed - Division 165 July $661,020 $965,490 $2,986,386 August $706,141 $1,088,126 $3,922,672 September $487,156 $555,731 $2,545,286 October $2,335 November $955 Totals $1,854,317 $2,609,347 $9,457,634 $4,463,664
There are two bases on which the Commissioner says the applicant is not entitled to input tax credits totalling $9,457,634.
(a)The first basis is the Commissioner’s s 11-5 case which concerns $4,463,664 of the $9,457,634. The $4,463,664 is the aggregate of ITCs claimed by the applicant in respect of supplies the applicant contends were made in the July, August and September 2016 tax periods by Golden Angel[82] (representing $1,854,317 of the Denied ITCs) and by Sell Your Gold[83] (representing $2,609,347 of the Denied ITCs). The Commissioner contends that the applicant did not acquire any gold in a transaction that was a creditable acquisition such that no input tax credit entitlements arose.
(b)The second basis is the Commissioner’s Division 165 case which concerns the whole $9,457,634 (which includes the $4,463,664 as an alternative basis for denial of entitlements to input tax credits of that amount). The Commissioner contends that having regard to the artificial circumstances in which gold was acquired by the applicant, the applicant should be denied input tax credits in respect of those acquisitions under Division 165 and as a consequence, and relying of the Fletcher decision[84] ‘ … the Tribunal should in the exercise of its powers on review make, or direct the Commissioner to make, a declaration under s 165-40 of the GST Act negating the GST benefits that applicant obtained.’
[82]Golden Angel Australia Pty Ltd.
[83]Sell Your Gold Pty Ltd.
[84]Fletcher v Federal Commissioner of Taxation (1988) 19 FCR 442, pp 452-454.
Table 8 gives more detail of the ITCs disallowed.
Table 8
Denied ITCs by Direct Supplier
Tax Period 2016 Direct Supplier – Denied ITCs**1 Total Sell Your Gold Golden Angel GB Traders GB Refiners CFGA**2 Gold Dust HA Exchange Quality Gold July $965,490 $661,020 $595,870 $533,580. $230,426 $2,986,386 August $1,088,126**3 $706,141 $1,539,253 $276,237 $183,833 $129,083 $3,922,672 September $555,731 $487,156 $796,255 $192,930 $162,416 $302,421 $48,376 $2,545,286 October $2,336 $2,336 November $955 $955 Total $2,609,347 $1,854,317 $595,870 $2,869,088 $702,884 $346,249 $431,504 $48,376 $9,457,634 **1Amounts rounded
**2See ATO Reasons, T2.2, p 179.
The $230,425.96 is comprised of ITC denial of $111,443.82 (NC Jewellery), $28,360.72 (Diamond Moment), $21,828.09 (Infinity), $21,620.59 (Mr Frangelli), $36,193.84 (Mr Wilman) and $10,978.90 (Golden Angel) In July 2016.
The $276,236.72 is comprised of ITC denial of $124,063.39 (NC Jewellery), $55,020,28 (Diamond Moment), $42,358.36 (Infinity), $10,229.58 ,Mr Frangelli), $30,101.18 (Mr Wilman) and $13,463,93 (Golden Angel) In August 2016.
The $192,929.60 is comprised of ITC denial of $91,378.43 (NC Jewellery), $43,812.72 (Diamond Moment), $52,335.36 (Infinity) and $5,403.13 (Golden Angel) In September 2016.
**3See ATO Reasons, T2.2, p 179.
The $1,088,125.89 ITC denial was for a proportion of the ITCs associated with Sell Your Gold sales to the applicant. The Commissioner contends that only 196,041.51g of the 213,086.51g of the gold the applicant acquired from Sell Your Gold in August was derived from adulterated bullion.
With the revised contentions, including adopting the Division 165 case, the Commissioner now says that penalty ought be imposed differently, again on two bases, and in some respects ought be increased.
(a)The first basis is that a shortfall penalty at the intentional disregard of the law, 75%, rate ought be imposed for ITCs claimed for supplies the applicant contends were made through the Golden Angel and Sell Your Gold Supply Chains. The Commissioner contends that for claiming creditable acquisitions of scrap gold and ITC entitlements of $4,463,664 a base penalty of $3,347,745.75 should be imposed and a 20% additional penalty of $425,572.65 ought be imposed for the ITC claims made for the August and September tax periods. The apparent means by which the latter two of these amounts has been determined is to ignore all cents in the ITC amounts claimed in respect of each Supply Chain and each month, and assuming a shortfall base of $4,463,661 as set out in Table 9.
Table 9
Intentional disregard of the law penalties
(Golden Angel and Sell Your Gold Supply Chains)
Tax Periods 2016 Shortfall Amount Base Penalty Amount at 75% Increase of 20% Penalty Payable July $1,626,510 $1,219,882.50 $1,219,882.50 August $1,794,265 $1,345,698.75 $269,139.75 $1,614,838.50 September $1,042,886 $782,164.50 $156,432.90 $938,597.40 Total $4,463,661 $3,347,745.75 $425,572.65 $3,773,318.40
(b)The second basis assumes the Commissioner succeeds on the Division 165 case and contends that a scheme penalty at the 50% rate ought be imposed for ITCs claimed for supplies made through all of the Supply Chains (including the Golden Angel and Sell Your Gold Supply Chains. The Commissioner’s contention is expressed in terms of Division 165 applying to all of the Denied ITCs, $9,457,634, and that a 50% penalty of $4,728,817 is applicable. The Commissioner could only succeed to this extent if the s 11-5 case in relation to contended for supplies through the Golden Angel and Sell Your Gold Supply Chains does not succeed. If these cases were to succeed, then to that extent there would not be a GST benefit and Division 165 could not apply. Table 10 reflects the Commissioner’s penalty contentions assuming the Tribunal rejects the primary case concerning the Golden Angel and Sell Your Gold related ITCs and accepts the Division 165 case.
Table 10
Scheme penalties
Tax Period 2016 Scheme Shortfall Amount Base Penalty Amount at 50% Penalty Liability July $2,986,386 $1,493,193 $1,493,193 August $3,922,672 $1,961,336 $1,961,336 September $2,545,286 $1,272,643 $1,272,643 October $2,335 $1,167.5 $1,167.5 November $955 $477.5 $477.5 Total $9,457,634 $4,728,817 $4,728,817
POST HEARING
After the present matter was reserved, the Full Federal Court gave its decision in Complete Success Solutions.[85] Because of the similarities between the issues raised in Complete Success Solutions and the present application as remitted, the Tribunal gave the parties an opportunity, if they wanted it, to provide further written submissions on the application of the Full Court’s judgment. Both parties did so.
[85]Federal Commissioner of Taxation v Complete Success Solutions Pty Ltd ATF Complete Success Solutions Trust [2023] FCAFC 19.
THE PRINCIPAL ISSUES TO BE DECIDED
Adopting the Commissioner’s formulation of the issues as a guide, there are two substantive liability and two penalty issues to be determined by the Tribunal.
(a)Issue one: whether the applicant can establish that it in fact made certain the creditable acquisitions of scrap gold for which it claimed input tax credits during the relevant tax periods. Issue one concerns disputed ITCs entitlements of $4,463,664 claimed in respect of supplies asserted to have been made by Golden Angel (through the Golden Angel Supply Chain) and Sell Your Gold (through the Blanko 1 and 2 Supply Chains). The Commissioner’s SFIC[86] divides the issue with contentions that;
[86]At paragraphs 34 to 35A.
(i)for Golden Angel related ITCs, the applicant has not established that acquisitions occurred at all, and in the alternative, if acquisitions were made, ‘the acquisitions were of gold that satisfied the definition of “precious metal” in s 195-1 of the GST Act, the supply of which was not a taxable supply in accordance with ss 9-5, 38-385 and 40-100 of the GST Act’; and
(ii)for Sell Your Gold related ITCs, the relevant acquisitions were ‘were acquisitions of gold that satisfied the definition of “precious metal” in s 195-1 of the GST Act’ with the same effects as the alternative case in respect of Golden Angel related ITCs noted above.
The Commissioner’s submissions[87] suggest that Sell Your Gold related ITCs are put in issue on the same dual basis as asserted for Golden Angel related ITCs. If there is a difference between the Commissioner’s case as articulated in his SFIC and in his submissions, the Tribunal is adopting the position of the case advanced in the Commissioner’s SFIC and not in the submissions filed after the evidence closed.
(b)Issue two: if there is a shortfall under issue one, whether the applicant is liable to administrative penalties under Subdivision 284-B of Schedule 1 to the Administration Act in respect of which there should be no further penalty remission.
(c)Issue three: whether, in the alternative to the disallowance of the input tax credits under ss 11-5 of the GST Act, the applicant obtained GST benefits to which s 165-5 of the GST Act applies as a result of claiming input tax credits for acquisitions of scrap gold from the Intermediaries. Issue three concerns disputed ITCs entitlements of $9,457,634 (which includes the $4,463,664 in issue 1 by way of alternative submission) for ITCs associated with the remaining six direct suppliers (and the remaining eight Supply Chains), and if the applicant succeeds in relation to (a) above, for Golden Angel and Sell Your Gold related ITCs as well, whether, taking into account the matters described in s 165-15, it is not reasonable to conclude that:
(i)an entity that entered into or carried out a scheme or part of the scheme did so with the sole or dominant purpose of the applicant getting a GST benefit - the Denied ITCs - from the scheme; or
(ii)the principal effect of the scheme, or of part of the scheme, was that the applicant got a GST benefit, being the Denied ITCs, from the scheme directly or indirectly.
(d)Issue four: whether, in the alternative to the application of administrative penalties under Subdivision 284-B of Schedule 1 to the Administration Act, the applicant is liable to an administrative penalty under Subdivision 284-C of Schedule 1 to the TAA for each of the relevant tax periods.
[87]At paragraphs 216 and 217.
THE SCHEME ALLEGED
As noted above, whether Division 165 applies is issue three. As such the scheme posited by the Commissioner provides the context for the facts found. The Commissioner has formulated the relevant scheme to which he contends Division 165 applies, as the following steps:
(a)the supply by the applicant to Galaxy, and further or alternatively by Baird & Co[88] to QN Traders,[89] of gold as bullion in precious metal form that was not subject to GST, for an amount roughly equivalent to the spot price for gold;
(b)the supply by Galaxy or QN Traders to one or more Intermediaries[90] of that gold as bullion in precious metal form that was not subject to GST;
(c)the transformation of that gold from a precious metal form that was not subject to GST, into gold in a non-precious metal form that was subject to GST;
(d)the supply by an Intermediary of that gold, if not directly to the applicant, then to a subsequent purchaser (an Intermediary);
(e)any on-sale of that gold by a subsequent purchaser (an Intermediary) to another subsequent purchaser (an Intermediary);
(f)the taxable supply of that gold by an Intermediary to the applicant, for an amount less than the spot price for gold before the addition of GST, which the applicant accounted for as an acquisition of scrap gold that was not in the form of precious metal;
(g)the transformation by the applicant of the gold it acquired from Intermediaries in non-precious metal form back into gold bullion taking the form of precious metal; and
(h)the supply by the applicant of that bullion to Galaxy as GST-free precious metal for an amount roughly equivalent to the spot price for gold.
THE PARTIES’ POSITIONS IN SUMMARY
[88]Baird & Co Pty Ltd.
[89]QN Traders Pty Ltd.
[90]Direct Suppliers and Indirect Suppliers as a group.
The Commissioner’s case
The essence of the Commissioner’s s 11-5 case concerning the Golden Angel related ITC claims is that, first, the applicant has not established that there were any acquisitions from Golden Angel at all, and second, if any gold was acquired by the applicant from Golden Angel, that gold was in precious metal form and an input taxed supply.[91] For two reasons the Commissioner says ITCs are not available:
(a)absence of any acquisitions at all means that the s 11-5(a) condition for an ITC entitlement is not satisfied; or
(b)acquisitions not being taxable supplies to the applicant means the s 11-5(b) condition for an ITC entitlement is not satisfied.
[91]GST Act, s 40-100.
The essence of the Commissioner’s ss 11-5 case concerning the Sell Your Gold related ITC claims is the second of the propositions applicable for the Golden Angel related ITCs, namely that any gold acquired was in precious metal form and an input taxed supply.
Implicit in the Commissioner’s ss 11-5 case is that the applicant’s records of its purchases, its assays of gold content of its purchases, its invoices and other documentary evidence associated with these acquisitions, and the evidence of the applicant’s director and the courier used to transport this gold (the applicant’s director’s nephew) are either all false, or not sufficient to displace contradictory evidence leaving the applicant having failed to discharge its burden in the circumstances.
The essence of the Commissioner’s Division 165 case is that gold bullion supplied to the applicant had its origins in gold bullion acquired from the applicant and other sources which was artificially and uneconomically adulterated so that it became scrap gold, and then was sold to the applicant as taxable supplies at a GST-informed price to be refined to become bullion again. Those who sold the adulterated bullion to the applicant did not meet their GST obligations to the Commissioner and retained all of the GST informed prices paid to them by the applicant for the adulterated bullion.
Viewed holistically, the Commissioner’s review of the applicant’s and others business and financial records reveals purchases and sale of gold product suggesting a direction in the movement of that product. The applicant, almost exclusively, sold the refined gold bullion it produced to its related party, Galaxy. Galaxy exclusively purchased from the applicant. Galaxy sold to three groups of purchasers: entities who sold gold to the applicant directly (the Direct Suppliers) and entities who sold gold to direct suppliers (the Indirect Suppliers) and other entities who did not sell any gold to either the applicant or Direct or Indirect Suppliers. The applicant acquired gold product from both Direct Suppliers and other suppliers. The Direct Suppliers to the applicant acquired gold from Galaxy, Indirect Suppliers and other suppliers.
Figure 1 is an adaptation of the diagrammatic presentation of the directional gold sales transactions prepared my Ms Wright.[92]
[92]Ms Dawna Wright, Senior Managing Director, Australia Leader, Forensic Accounting and Advisory Services of FTI Consulting.
The applicant’s case
The essence of the applicant’s is a denial of the Commissioner’s case and that the supplies to it were taxable supplies and Division 165 does not apply.
THE EVIDENCE AND OTHER MATERIALS BEFORE THE TRIBUNAL
The evidence and other materials before the Tribunal include the statements, affidavit and expert and/or other reports set out in Table 11 and other documents tendered as exhibits or filed as required by s 37[93] of the AAT Act.[94]
[93]Collectively these documents are referred to a “T Documents” and individual documents are referred to as ‘T(followed by a number)’ for the documents initially filed, and as ‘ST(followed by a number)’ for the supplementary filings.
[94]The Administrative Appeals Tribunal Act 1975 (Cth).
Table 11 Expert Report of Mark Ellis dated 20 November 2020 and Appendix (the ‘Ellis Report’) Statement of Michil Salib dated 24 May 2019 and Annexures (the ‘First Salib Statement’) Statement of Michil Salib dated 10 May 2021 and Annexures (the ‘Second Salib Statement’) Statement of Adam Saad dated 10 May 2021 and Annexures (the ‘Saad Statement’) The First Wright Report Supplementary Expert Report of Dawna Wright dated 26 February 2021 and Annexures (the ‘Second Wright Report’) Affidavit of Yi Deng dated 10 December 2019 (the ‘Deng Affidavit’)
Each of Messrs Salib, Saad, Ellis and Deng, and Ms Wright also gave oral evidence in cross examination and some of them in re-examination. In addition, Mr Salib had previously given evidence in an examination conducted pursuant to s 353-10 of Schedule 1 to the Administration Act. The T Documents included the transcript of that interview.
The Commissioner had also conducted s 353-10 interviews with others connected in some way with Direct and Indirect Suppliers. A small proportion of the content of those interviews is relied on by the Commissioner to support his contentions and another small proportion of that content contradicts the Commissioner’s assertions and the Commissioner seeks to discredit that content. These reasons extract such of the content of the s 353-10 interview transcripts, and the circumstances in which it was provided, as is necessary to deal with the contentions advanced. Similarly, some content of T Documents is referred to or extracted.
T Document evidence
During the audit, the Commissioner gathered information from multiple sources, including from the applicant. By a letter addressed to the applicant dated 16 December 2016[95] the Commissioner asked a series of questions concerning the applicant’s business and the suppliers to it. Questions 34 and following were directed to obtaining information concerning each Direct Supplier individually, and were answered on that basis. Mr Salib accepts that the applicant’s tax agent only partly completed the response on his instruction,[96] and that he provided factual material to the tax agent,[97] and that he checked the response before being sent.[98] The language used in the content of the responses suggests that the responses were written by Mr Salib. The responses to 16 December 2016 questions 40, 41, and 72 concerning dealings with Golden Angel, which can be attributed to Mr Salib need to be included in the body of evidence to deal with golden Angel related Disputed ITCs contentions. Those questions, together with questions 38 and 39 which give some context, and their answers are as follows.
[95]ST 109, p 4900 and following.
[96]Transcript 13 May 2021, p82, l 38.
[97]Transcript 13 May 2021, p82, l 47-48.
[98]Transcript 13 May 2021, p83, l 2.
Supplier - Golden Angel Australia Pty Ltd
…
38. How did CPG Group physically obtain the products from each supplier?
The supplier sends the metals using a courier
39. At what address were the purchases delivered?
To [the applicant’s] refinery at ….. Oakleigh South Vic 3167
40. Which person from each supplier usually delivered the purchases?
Unknown
41. How were the purchases presented and/or packaged when delivered?
In a sealed cardboard box
…
72. Why was [the applicant] confident it could sell the final gold products produced from the melted bars/scrap jewellery/scrap gold and silver purchased from each supplier via associated entity Galaxy Coins and Bullion Pty Ltd?
CPG Group's supply is contingent on Galaxy's demand. Galaxy is a well-established business and has a strong market position. As such, CPG can sell to Galaxy with the confidence that Galaxy can sell to the public. If the position changed and Galaxy was not able to sell to the public as it does now, then the demand from Galaxy would not be as great and therefore the supply from CPG would be diminished.[99]
[99]ST 281, p 8419 and following.
The questions to which the applicant responded were asked of each supplier on an individual basis. Having regard to Mr Salib’s relationship with Mr Saad, and the sett-off agreement with Golden Angel and Golden Touch, and acknowledging the possibility of inadvertent error, the answer to question 40 is plainly false and the answer to question 72 is misleading by omission. For Golden Angel, the applicant knew who the courier was, and the applicant had reservations about being capable of servicing the prospective demand and only purchased from Golden Angel in the context of having the offset agreement in place that offset purchase prices payable for supplies from Golden Angel against sale prices receivable by Galaxy from Golden Touch.
The response to question 41 may well be correct. It is, however, contrary to Mr Saad’s evidence and reflects on the findings sought concerning whether supplies were made by Golden Angel or if they were what was supplied.
Mr Candag’s s 353-10 evidence
One of the people connected to the Direct and Indirect Suppliers to the applicant who had participated in a s 353-10 interview was Mr Candag, the proprietor of the NC Jewellery manufacturing business. That business was conducted from Mr Candag’s garage, and he did not sell the jewellery he made direct to the public. The equipment used in that business included a rolling machine and mixed gas and oxygen (which is assumed to be oxy-acetylene equipment) capable of and used for (among others) melting gold.
Mr Candag’s interview was conducted by three ATO employees with the assistance of an interpreter. The interview was conducted as a joint interview of Mr Candag, Ms Candag (a husband-and-wife couple) and Ms Candag’s mother, Ms Kenan. At times multiple questioners spoke over each other.
Informed by the transcript, some observations are required.
(a)Ms Candag professed little knowledge of Mr Candag’s business, and having regard to Mr Candag’s evidence, her evidence adds in a minimal way beyond her personal activities.
(b)Ms Kenan didn’t know much, if any, more. As with Ms Candag, the evidence Ms Kenan gave adds in a minimal way beyond her personal activities.
(c)Recognising Ms Candag and Ms Kenan did not admit to much knowledge of Mr Candag’s business, with multiple interviewees present in the one interview, it is difficult, if not impossible, to know which answers to questions, or parts thereof, came from an interviewee’s knowledge as opposed to information gleaned from others being interviewed or the discussions in the interview process. The probative value of information gained in the interview cannot stand on the same platform as the value afforded to evidence given by an interviewee alone.
(d)Mr Candag created an impression that he was quite unaware of the operation of the GST system in relation to is dealings in gold, and as a consequence the liabilities that he had sustained but, as at the interview time at least, had not met. That impression was, clearly, in his interests to portray. His sales of scrap gold to CFGA were, quite clearly, taxable supplies attracting GST of 1/11th of the total sale value. He gave the impression that his understanding was that he was required to pay GST on the cash he received (presumably the margin that he received from CFGA between the price at which he purchased gold in bullion form from CFGA (at prices unaffected by GST considerations) and the price at which he sold gold in scrap form to CFGA (a GST-informed price basis).
(e)Mr Candag clearly had a vested interest in presenting his innocence and naivety. As such, Mr Candag’s answers to critical questions bear very close scrutiny.
Parts of the interview content bear upon some of the factual findings the Commissioner asserts, and the applicant denies.
ATO1 Did the girl in the shop know that you were bringing back melted bullion? Interpreter Well, I don’t know that she knew or not, but I would melt it and take it back. ATO2 Did you buy the bullion off this lady? Interpreter Yes, they would give it to me. ATO2 So you would buy it off this lady? Interpreter Yes. Buy it, melt it, take it back. ATO1 How did you pay for it? Interpreter They would give me the gold, I would melt it, take it back and they would give me a percentage by cheque. Then they would give me the gold at the same time, then I would leave. … ATO1 Did they ask you what you would be doing with the bullion? Interpreter Well, it’s obvious what I do. I melt the gold and take it back. ATO3 You said a few minutes ago you said to them, “If I melt the gold and bring it back, will you buy it?” Is that correct? Interpreter Yes, that’s right. They said they would buy it if I melted it.[100] … ATO2 Yes. In terms of your conversations with Michael, did Michael tell you what to do with the gold? Interpreter You’ve only got to melt it and take it back, it’s simple. ATO2 So is this Michael telling you this, or you telling Michael this? Interpreter I knew that I was going to melt it, and I asked him whether he would buy it off me. He knew that I was melting it, and he said he would – he would sell me the gold, one or two kilos, then I would take it back.[101] … ATO1 Okay. Is there anyone else that you bought gold from? Interpreter No, mainly that company at that time. Now it’s mainly silver. ATO1 Yes. Have you ever dealt with a firm named Gold Stackers? Interpreter Gold Stackers, yes, we ..... I have heard of them. ATO1 Have you bought from them? Interpreter I think some amount a long time ago. ATO1 Are we talking one year, two years ago? 2016 or? Interpreter No, before then. 2015. ATO1 Yes, and was that bullion? Interpreter I think so, yes. ATO1 And did you do the same for Gold Stackers as you’re doing now for Cash for Gold? Interpreter No, I did not. ATO1 So what did you do with the bullion then? Interpreter I melted them and sold it to these people. ATO1 To – so you - - - Interpreter For cash. ATO1 So you’ve melted the bullion from … Gold Stackers? Interpreter Yes. And I sold it to them .....cash. ATO1 Sold it to Cash for Gold Interpreter Cash for Gold I sold it to, and that’s how I started the business.[102] … ATO1 Okay. Have you melted gold for anyone else outside of Cash for Gold? At any time prior to starting your business? Interpreter No, just this one.[103] … ATO1 Okay. Did you tell Michael that you’re coming in for an interview? Interpreter I had an appointment a month ago ATO1 Yes. Interpreter I told him. Then I called – I asked him why are they calling me. I didn’t do anything wrong. ATO1 And what did he say? Interpreter He told me that there are lots of other people they are calling in like you. ATO1 Is that all? Interpreter Well, he told me not to tell you guys that he bought gold off you to melt and I asked him, well, what am I going to say. He said that just tell them you bought it off the streets. ATO1 Okay. Interpreter That’s ridiculous. How could I?[104] [100]Candag et al s 353-10 interview, ST4, p 18
[101]Candag et al s 353-10 interview, ST4, p 40-41
[102]Candag et al s 353-10 interview, ST 4 p 35 – 36.
[103]Candag et al s 353-10 interview, ST 4 p 36.
[104]Candag et al s 353-10 interview, ST 4 p 42. A similar passage appears at p43.
The transcript presents Mr Candag as a man who had once engaged in activities of buying gold bullion, melting it and then selling the melted product to CFGA, presumably keeping for himself the cash margin on the buying and selling ignoring the GST imposts, who did not disclose that fact until he was asked, who professed innocence and naivety generally in relation to his business affairs and the GST imposts associated with them, and was astute enough to reply to critical questions in a deflecting way without strictly answering the question. The deflections are significant. It is somewhat ironic that the Commissioner relies on Mr Candag’s evidence in relation to critical questions asked of him that was given in the way that it was, and sharply criticises Mr Salib’s evidence of a similar type. As noted above, one possibility that motivates deflective answers is a preference not to disclose the proper answer. That explanation is a stark possibility here.
Given that neither party has called Mr Candag to give evidence, the conduct of the s 353–10 interview was less than perfect, and Mr Candag displayed sufficient insight into the process of examination to be crafty in his responses to critical questions by asserting what Mr Salib knew, unlikely to constitute admissible evidence if those rules applied, the Tribunal has had neither the benefit of observing Mr Candag first hand nor the benefit of observing Mr Candag’s evidence tested by cross-examination process, the Tribunal affords the content of Mr Candag’s section 353–10 interview no weight in so far as it purports to throw light on what Mr Salib knew of Mr Candag’s activities, and of communications with Mr Salib.
Mr Candag’s evidence of what Mr Salib told Mr Candag to say in response to ATO questions suffers a different burden to any reliance on it. That evidence was directly rebutted by Mr Salib in his s 353-10 interview in quite logical testimony, and Mr Salib he was cross-examined.
Mr Candag’s evidence of his business, what he did, in buying, and then melting bullion, and selling scrap produced through that process, and his evidence of having done it before purchasing bullion from a different source, and the manner in which he did it, including accounting for the cash flow profit element to him, is accepted.
Mr Gubolov’s and Mr Blanko’s s 353-10 interview evidence.
Mr Gubolov and Mr Blanko gave evidence of delivering to and receiving adulterated gold. That is eyewitness evidence, procured under affirmation by the Commissioner using his coercive powers.
Mr Salib’s evidence
S 353-10 interview
As noted above, Mr Salib had given evidence before the hearing in a s 353-10 interview and the transcript of that interview is included in the T Documents. In that interview Counsel assisting the Commissioner with the examination asked questions which in some respects could be characterised as questions in search of evidence and information to support a thesis, particularly the thesis advanced ultimately in the Commissioner’s Division 165 case that the profitability for the applicant lay in the ITCs. During that interview Mr Salib perceived the pursuit of a thesis and in some respects these features of the interview in combination could be seen as a less than helpful game of cat and mouse between interviewer and interviewee.
Some extracts of that transcript are reproduced below as they form the basis of factual contentions to be addressed.
In his section 353-10 interview, Mr Salib was asked questions concerning courier arrangements for Golden Angel and Golden Touch dealings which became the source of robust cross examination.[105]
[105]Mr Salib s 353-10 interview, ST 1, p333 to 335
Counsel R Which courier did Golden Angel use? Salib I honestly can’t remember. There was – there was a few different couriers, a few different – every client had his own, sort of, people or couriers or staff or … … Counsel R Well, it’s just I’m only interested in your memory, but is it the case that someone from Golden Touch would come to Victoria to acquire the bullion? Salib Yes. Counsel R And they would travel from the airport, what, to your office, to get the bullion? Salib. Yes Counsel R And then what would they - - - Salib Or someone comes to the refinery, take the stock and meet him in the airport, whether a courier or – I can’t remember exactly. We don’t get involved in the arrangement of the customer for picking up or delivery because we don’t want to carry the responsibility of the stock getting stolen on the road or someone mug them and steal 10 kilos of gold or five kilos of gold or two kilos of gold, so why we don’t get – we keep ourselves away from the shipment, the delivery, the pickup, the drop off. They take it from my refinery. They drop it at our refinery. Once it’s in our refinery we take responsibility. Once it’s out the door we don’t know – we don’t want to know about it. Counsel R But this entity, Golden Touch, if the gold is being delivered at the airport or picked up at your facility, are you saying, what, they would fly back to Sydney with gold on their person? Salib Sorry? Counsel R Would they fly back to Sydney with gold on their person or in their luggage? Salib It happens, yes. Counsel R They put it in, what, carry-on luggage? Salib Yes. In your briefcase you can put 10 kilos of gold and take it with you. We usually put it in a box, package it. I don’t know how they take it through the airport, whether they take it out of the box or they leave it in the box. That’s not our business. Counsel R Well, did you ever speak to them about that? Salib It’s none of my concern, I don’t get involved in that.
This evidence was soon contradicted.[106]
[106]Mr Salib s 353-10 interview, ST 1, p 336/7
Counsel R Sir, we’ve got some information that Golden Angel in the books and records of CPG that there was a deduction of $220 for freight for Golden Angel - - - Salib Yes. Counsel R - - - from time to time. Tell us about that?
Salib They want us to pay for the freight. Counsel R And did you? Salib. We did, yes. Counsel R I thought you gave evidence a moment ago that that was something you left up to the clients – the customers. Salib Yes, yes, they ..... who does the delivery, we don’t take responsibility for it. Counsel R But isn’t this an example of you taking responsibility for freight? Salib They wanted us to pay on their behalf to the delivery guy or whatever who was there, so we paid the guy, and we charged them that money on invoice; is that illegal? Counsel R And what was the freight service that you used? Salib I didn’t use it. Counsel R Well, that your company used? Salib They appointed the driver, it was Ottoman or something like that? Counsel R Who was it? Salib Ottoman or something like that. Counsel R That’s the name of the person, Ottoman? Salib No, no, the company Counsel R Ottoman, and you say it’s a delivery or a freight service, was it? Salib It wasn’t a professional courier, it was just a buy that they knew, they sent to pick up. They trusted him. The deal was I would pay him the money from our pocket and we charge them on invoice Counsel R Well, do you – Salib They were in Sydney, that guy’s in Melbourne Counsel R Do you have any records of a payment that your company made for this freight service? Salib Yes, we do. I’m sure we do Counsel R What would be the nature of that record, sir? Salib An invoice, and it must be in your paperwork. Counsel R Did you meet anyone from Ottoman? Salib Yes, we met the guy, of course, he used to come to the factory and pickup.
And continued in a similar vein:[107]
[107]Mr Salib s 353-10 interview, ST 1, p 349
Counsel R Who put you in touch with this Ottoman outfit? Salib The guys from Sydney Counsel R Okay. We’ve got information, sir, that this Ottoman entity or outfit is a mechanics operation. Do you know anything about that? Salib Yes. Yes. Yes. Counsel R What – what is a mechanics operation doing collecting or delivering gold? Salib I – I don’t know. It’s not my business. They said, “We send you that guy. We trust him. We know him. You give him the gold.” I said, “That’s fine.” Counsel R It doesn’t strike you as curious, sir, that a mechanic is involved in collecting valuable - - - Salib It – it could be - - - Counsel R - - - gold for your operation? Salib - - - his brother, his cousin, his nephew, his[108] – whatever. I - - - Counsel R But you don’t know who it is, do you? Salib I – I basically follow customer instruction. [108]Mr Salib is adamant the transcript is in error and the word ‘his’ each time should be ‘he’s’.
On the topic of Mr Salib’s knowledge of practices in his industry, the s 353-10 interview evidence was as follows.
Counsel R Well, it’s not a question of whether it’s weird. You understand that one of the things the Commissioner is investigating in the gold trading space … - is the idea … that some participants in gold trading are acquiring bullion, affecting it, altering it, melting it, and then on selling it as scrap. . Salib Yes … Counsel R are you aware, Mr Salib, of that occurring in the industry?
Salib Yes. I am. Counsel R And who are you aware of doing it? Salib I don’t know Counsel R Well - Salib It’s not for me to determine Counsel R Well, when you Salib with that. Counsel R say you are aware of it occurring, who is involved that you know in that occurring? Salib I can think whatever I think. It’s not for me to determine or decide who’s dodging the system. Who’s doing this - Counsel R Well - Salib sort of transactions. That’s a – that’s a police work I’m not interested in. I’ve got a business to run.
I don’t care what other people do
Counsel R Mr Salib, a minute ago, you indicated you’re aware that that was going on, didn’t you? Salib Yes. I am aware Counsel R And I’m asking you - where: are you aware? Who – are you involved – who are you aware is involved in doing this? Salib I heard lots of them in industry. That’s all I hear. Counsel R You’re not prepared to say? Salib It’s not for me to say, because it’s gossip. It could be right: it could be wrong. Why should I get involved in that? Why should I take responsibility of accusing someone of doing something wrong when they’re not, or when they are? That’s not for me Counsel R You know, sir, that NC Jewellery was doing exactly that, don’t you? Salib No. Counsel R And you know it because NC Jewellery was acquiring bullion from a company you controlled; correct? Salib Yes Counsel R And you know it was altering or melting that bullion, and then selling it back to Salib That’s your opinion. I didn’t know that. If I’d known that, I would never dealt with him, and I will stop dealing with him immediately
Also in that interview Mr Salib denied allegations as to his communications with Mr Candag. Mr Salib denied he told Mr Candag to tell the ATO that he bought gold on the street.[109]
[109]Mr Salib s 353-10 interview, ST 1, p 283
Counsel R If you don’t mind, Mr Salib, I’ll finish the question and then I’ll listen to - - -
.....
[Salib] Yes. Counsel R
- - - the answer. I’m putting to you that you told Mr Candag not to tell the ATO that he was buying gold from Cash for Gold, because you were worried that that would indicate the circular flow of gold from Cash for Gold to NC Jewellery and back to - - - Salib That’s incorrect Counsel R - - - Cash for Gold. Salib Because Mr Candag, or whatever his name is, he was buying gold from Cash for Gold and selling scrap to Cash for Gold on the invoice, so no matter what he tried to imply, it’s incorrect because it’s on the invoices that were supplied to the ATO
Witness statement evidence
In the first Salib Statement, Mr Salib gave evidence:
(a)of his personal background, his directorships, and a potted history of CFGA, the Salib Family Trust, the applicant and Galaxy;
(b)that he had participated in the s 353-10 interview and that he was aware that the transcript had been included in the T Documents;
(c)of high-level features of the applicant’s business including that that during the Disputed Tax Periods:
(i)the applicant purchased gold that was not of 99.99% purity, that did not bear the hallmarks, and which had assay reports revealing the purities of gold purchased;
(ii)the applicant provided consideration for all of its acquisitions of scrap gold and that the applicant claimed input tax credits; and
(iii)the supplies of gold by the applicant to Galaxy were supplies of gold in investment form of at least 99.99% purity that were the first supply of that gold after the applicant refined it such that they were GST free supplies for which the applicant did not provide Galaxy any tax invoice.
(d)Of his filings with the ATO that were relevant to the dispute including matters that can be presumed to relate to penalty which are set out more expansively later in these reasons together with other matters concerning penalties; and
(e)of the dispute with the Commissioner leading to the present application.
Mr Salib appended a copy of a tax ruling obtained on behalf of the applicant, Galaxy and the Salib Family Trust (CFGA being the trustee). One critical part of the ruling that the applicant relies on are:
Question 7
For Transaction 7, what is the GST classification of finished products sold by [the applicant]:
(a) to traders, including Galaxy?
(b) to GST- registered entities, such as jewellers?
Answer
A supply of products that are precious metals as defined in section 195-1 of ,the GST Act will be subject to the special rules for precious· metals. That is, a supply of precious metal is GST-free, if it is the- first supply of that precious metal after refining by, or on behalf of the- supplier and the entity that refined the precious metal is a 'refiner of precious metal' and the recipient of the supply is a _'dealer in precious metal'. All other supplies of precious metal will be input taxed.
The ruling contained the usual caveat that the transactions actually entered need to conform to the arrangement ruled upon. The ruling also said it did not deal with, meaning rule out, Division 165.
In the second Salib Statement, Mr Salib gave evidence of :
(a)his understanding and awareness of the content of Mr Saad’s affidavit and its correctness;
(b)arrangements generally amongst customers for the delivery and collection of gold to and from the applicant’s premises and his recollection of who the people were who are involved in those activities;
(c)Alex Mendieta of Sell Your Gold and Rahman Butt of GB Refiners having been valued and trusted long-term clients of CFGA;
(d)the history to the offset agreement with Golden Angel and Golden Touch;
(e)the margins and spot prices sought and relied upon in the applicant’s business. In particular, the applicant relied on KITCO informed spot prices and sought a margin on its purchase price for scrap gold of 4.5% but noted that that was not always achievable;
(f)the applicant’s invoicing and accounting systems;
(g)the applicant’s business premises and how it was a fit for purpose property to secure valuable commodities and why it was sensible for the applicant and Galaxy to trade from the same premises;
(h)the tight margins in the gold business with participants not revealing what and or how they did what they did in that industry; and
(i)his absence of awareness of Galaxy customers on selling gold purchased from Galaxy to the applicant it was unaware of the operations of suppliers and purchases from Galaxy into the applicant.
Cross examination
Mr Salib was also extensively cross-examined addressing topics that included the evidence her gave in his s 353-10 interview.
In a lengthy cross examination of this evidence at the hearing Mr Salib maintained stridently that he had not lied under oath and was keen to protect his nephew who was young and starting his career from the ATO and didn’t want him dragged into Mr Salib’s business affairs vis-à-vis the ATO. In maintaining that he had not lied under oath, Mr Salib took points of fine distinction illustrated by the passage:
[Counsel] And then you’re asked, “But you don’t know who it is, do you?” And you say, “I basically follow customer information”?‑‑‑ [Salib] Yes, I didn’t deny it, I didn’t say, “I don’t know who he is.” [Counsel] Mr Salib, it’s a stunning answer, isn’t it?‑‑‑ [Salib] No, it’s not.[110] … [Counsel] But he was your nephew, Mr Salib?‑‑‑ [Salib] Yes, that’s why I didn’t want to mention his name. [Counsel] You knew who he was?‑‑‑ [Salib] Yes. [Counsel] And you were asked ‑ ‑ ‑?‑‑‑ [Salib] Did I say here, “I don’t know who he is”? [Counsel] You were asked a direct question, but you don’t know who it is, do you?‑‑‑ [Salib] And what did I say? [Counsel] You said, “I basically follow customer instruction”?‑‑‑ [Salib] And that’s what happened. I didn’t say I don’t know him. He’s my nephew.[111] … [Counsel] And so when you were asked after line 35, so three lines down at line 38, “But you don’t know who it is, did you?” you did know and you didn’t say?‑‑‑ [Salib] Is that a question? [Counsel] Yes?‑‑‑ [Salib] What’s the question? [Counsel] You knew who the mechanic was?‑‑‑ [Salib] Yes. [Counsel] And you didn’t say who it was?‑‑‑ [Salib] Did I lie under oath, is that what you’re trying to say? [Counsel] Listen to my questions and we’ll get to ‑ ‑ ‑?‑‑‑ [Salib] I didn’t lie under oath. [Counsel] I’m not asking you that at the moment, Mr Salib?‑‑‑ [Salib] My answer was, “The guys don’t see me introduce him to me”, and that was not a lie either. [Counsel] They didn’t introduce your nephew to you, Mr Salib?‑‑‑ [Salib] Yes, they did, as a courier.[112] … [Counsel] You were required to answer questions?‑‑‑ [Salib] I did answer the question. I’ve never been asked, “Is he your nephew?” and I said no. “Is he related to you?” and I said no; never been asked that question. You asked do I know him, I said, “Yes, I know him, he’s a brother, he’s a nephew, he’s a friend.” [113] [110]Transcript, 13 May 2021 p109.
[111]Transcript, 13 May 2021 p110.
[112]Transcript, 13 May 2021 p111.
[113]Transcript, 13 May 2021 p112.
In cross examination concerning the name of Mr Saad’s business, Mr Salib said:
[Counsel] And then you were asked again: Well, that your company used?
And your answer was: They appointed the driver, it was Ottoman or something like that. ?
[Salib] Yes [Counsel] Now the Ottoman that you ‑ ‑ ‑?‑‑ [Salib] It’s actually Autumn but I joke with my nephew on that, call them Ottoman ‑ ‑ ‑[114] [114]Transcript 13 May 2021, p 108 l 5 to l 16.
Conclusions regarding Mr Salib’s evidence
There are some notable features or aspects of Mr Salib’s evidence.
(a)When asked questions concerning the identity of the Golden Angel and Golden Touch courier who Mr Salib knew was Mr Saad, Mr Salib gave nonresponsive information that concealed both Mr Saad’s identity as the courier and that Mr Salib knew that he was. It is unquestionably the case that Mr Salib was intent on withholding information that he knew, and understood, that the ATO was keen to know, and he allowed a different perception to be formed by the ATO staff knowing that that perception would be wrong. That behaviour is unquestionably a deception. That kind of deception is prone to produce precisely the result as would a conventionally understood lie. Mr Salib might have a particular, and very precise, concept of what constitutes a lie or a false answer to a question. And by reference to that concept, he may well be honest, or expressing a genuinely held belief in what he said in the Tribunal under cross examination explaining his s 353-10 interview contents that he had not lied under oath. It remains on any objective assessment a conscious deception created by a positive statement, or a consciously created deception wholly created by Mr Salib’s behaviour. Familial relationships may have motivated the behaviour, but they don’t change the nature or character of the deception. Nor do they excuse the deception.
(b)In what can only be seen as an attempt to exculpate himself from the falsity of the “Ottoman” evidence given in the s 353-10 interview, and after Mr Saad’s identity had been fully disclosed, Mr Salib gave plainly false evidence to the Tribunal in cross examination. Even by Mr Salib’s concept of a lie, that evidence is just that. And here it was not motivated by protecting a younger family member.
(c)Mr Salib contributed to and checked what were plainly false responses to questions from the ATO concerning Golden Angel and Golden Touch courier arrangements. If they were intentional, which can be assumed given other examples concerning this topic, that too would meet Mr Salib’s concept of a lie.
(d)Mr Salib’s witness statement evidence concerning matters associated with penalty, see [241] below and following, possibly evidence with which he was greatly assisted by a tax advisor, was plainly at odds with his oral evidence in the hearing which is accepted as the accurate version of events.
(e)Notwithstanding:
(i)acknowledging awareness of rumours and gossip of misbehaviour of the kind the Commissioner alleges in the gold trading industry, and that those rumours are widespread widespread or widely known;
(ii)admitting that he does not want to know and is unlikely to take steps to get to know the accuracy or truth of the rumours and gossip; and
(iii)admitting that he does not want to know and is unlikely to take steps to get to know any of what happened to the bullion Galaxy sold, what Galaxy’s customers did to and with that bullion, or the sources of the Direct Suppliers’ scrap gold purchased by the applicant,[115]
and in the face of the same people buying bullion from his companies and selling scrap gold to the applicant on a regular basis, Mr Salib has consistently denied knowledge of, and it can be inferred belief about, the affairs and transactions of the Intermediaries. Mr Salib contends, and his evidence is corroborated, that the gold trading industry is prone to participants not revealing their customers and sources of gold. It might be inferred that participation in some parts of the gold trading industry is contingent upon maintaining the approach of not knowing, and not wanting to know, what happens to the product of the industry before it is received and after it is despatched.
[115]Mr Salib s 353-10 interview, ST 1, p 334, l 28 to 36.
In a case where the relevant competition or comparison is between pursuit of commercial ends and pursuit of a GST benefit with no illegal evasion involved, the existence of steps that are uncommercial or extraordinary in the manner or execution of the scheme might suggest pursuit of the GST benefit is dominant. However, where the relevant comparison is between pursuit of a dishonest end and pursuit of a GST benefit, extraordinary, or irrational or uncommercial steps might be expected in the sequence of events. In that setting such steps might more appropriately indicate, as part of the analysis of the manner of execution of a scheme, that that other goal was either the sole or dominant purpose of a participant in the scheme.
Absent adulteration of gold bullion, in many respects the relevant transactions were carried out in the way of ordinary transactions. The steps taken were largely as would be expected in arm’s length sales of scrap gold and gold bullion. Indeed, aside from the one respect noted immediately below, but for the non-payment of GST by the Direct Supplier the transactions would likely have been regarded as unremarkable from a fiscal perspective.
It was extraordinary that the Direct Suppliers adulterated bullion, destroyed some of its value and then, ignoring GST effects on prices, sold what had become scrap gold at prices that were less than their acquisition costs. But those prices at which they transacted were not remarkable as a bargain struck between the suppliers and the applicant for scrap gold.
The applicant paying dollar for dollar amounts as components of GST-informed purchase prices, in a setting where for the applicant, only refining profits were generated, suggests the manner of execution test does not point to a dominant purpose of the applicant or any other participant in entering into or carrying out the scheme that the applicant obtain ITC entitlements.
The pricing issue is, of course, linked to the adulteration of bullion which is certainly out of the usual. However, in the Tribunal’s view that part of the scheme is explicable by the Direct Suppliers’ purpose of securing a GST-informed amount of money and its retention through evading GST liabilities. It does not suggest a separate dominant purpose of the applicant obtaining ITCs.
For these reasons, the manner in which the scheme was entered into or carried out does not support a conclusion that any entity entered into the scheme or any part of the scheme with the dominant purpose of the applicant obtaining the Denied ITCs. Even with the applicant turning a blind eye to others’ activities, the manner in which it was carried out supports a conclusion that the Direct Suppliers had a dominant if not sole purpose of securing a GST-informed amount of money and its retention through evading GST liabilities. It would not support a conclusion that any entity had a dominant purpose of the applicant obtaining the Denied ITCs. The applicant would still have obtained refining profits only.
Similarly, the Tribunal does not identify any aspect of the manner in which the scheme was entered into or carried out that supports a conclusion that the principal effect of the scheme or any part of the scheme was the applicant obtaining ITCs. The principal effects of the scheme as a whole were the change of ownership of very high values of gold and after that securing a GST-informed amount of money and its retention through evading GST liabilities. The principal effect of the adulteration aspect of the manner of execution was to transform the character of the relevant gold and to devalue it.
Form and substance test (para (b))
The legal form of the transactions was not consistent with the economic and commercial substance. What was precious metal in investment form was altered so that it no longer conformed to the “in investment form” standard. It was an alteration that facilitated a different attribute in the marketplace that attracted a different trading price structure which in turn facilitated a receipt of money that the Direct Suppliers would keep. Where an actual purpose is to effectuate illegal GST evasion, it can be expected that trickery or facades may be involved, and that form and substance might differ.
The Tribunal does not consider the form and substance of the scheme support a conclusion that any entity entered into or carried out the scheme or a part of the scheme with the dominant purpose of the applicant obtaining ITCs.
Similarly, the Tribunal does not consider that the difference between the form and substance of the scheme leads to a conclusion that the principal effect of the scheme or any part of the scheme was for the applicant to obtain ITCs.
The system of levying GST on dealings in gold substances is very much form driven. Metal in substance, i.e., chemically and atomically, identical, may be treated differently depending on its presentation or its form. Producing something that is in form different to its substance and transacting in it, as has happened here, transformed the character and its sale transferred the ownership of the highly valuable commodity. This was the principal effect to be recognised.
Purpose or object of Act etc (para (c))
So far as the applicant obtained the Denied ITCs on the acquisition of taxable supplies in the course of its enterprise, that is an unremarkable outcome under the GST Act. It is well-known that, with limited exceptions, GST on acquisitions is intended to have a neutral impact on a GST-registered taxpayer’s costs. That is a fundamental feature of value-added taxation systems throughout the world. It does not support a conclusion that any entity entered into the scheme or a part of the scheme with the dominant purpose of the applicant obtaining ITCs.
The artificial creation of a GST liability, and corresponding ITC entitlement, by defacing bullion may be seen as not an object of the GST Act. However, a liability arising on a taxable supply is an intended outcome under GST law regardless of the circumstances giving rise to the liability. Even illegal supplies may be taxable supplies.[342] Once the gold was no longer precious metal its subsequent supply being taxable was unremarkable and an intended outcome under the GST Act.
[342]Section 9-10(3).
The purpose or object of the GST Act includes, fundamentally, to create a liability for GST on taxable supplies. That is what occurred here. It is the failure to pay the GST that departs from the object of the GST Act, not the allowance of ITCs on business-to-business acquisitions which is the standard and intended object of value-added taxation.
This factor does not suggest a conclusion that producing the GST benefit was the dominant purpose of the scheme for these supplies.
Nor is there anything in the object of the GST Act that suggests the principal effect of the scheme, or a part of the scheme was for the applicant to obtain ITCs.
Timing of the scheme (para (d))
The period over which the scheme was entered into or carried out (para(e))
The two tests can be considered together.
There does not appear to be any timing aspect of the scheme that suggests a dominant purpose or principal effect of securing the ITCs for the applicant. If anything, the timing aspects suggest the contrary.
To the extent it happened, the round robin nature of the movement of the same gold from the applicant to and through the Direct Suppliers and back to the applicant, and the repetition of the cycle of transactions, and the timing of those steps suggest that the scheme was structured to be, to the extent of this circularity, self-contained and possibly self-perpetuating. The timing of the circular steps suggests, if anything, pursuit of securing a GST-informed amount of money and its retention through evading GST liabilities.
These factors do not suggest a conclusion that producing the GST benefit was the dominant purpose of any entity entering to or carrying out the scheme or any part of the scheme.
Effective discontinuance after the Commissioner stopped refunds goes to affordability. The applicant could no longer afford to pay market prices for scrap gold so stopped paying them. That prevented continued enjoyment of a normal refining profit.
The Tribunal is unable to identify any basis on which timing matters could support a conclusion that the principal effect of the scheme or a part of the scheme was the applicant obtaining ITCs.
The effect of the Act on the scheme apart from Division 165 (para (f))
The conventional analysis is that this test necessarily reveals that, absent the operation of Division 165, less GST would be payable, or a bigger refund would ensue. Just because a transaction has an effect of lowering tax liability or increasing a credit does not necessarily attract an inference that the parties to the transaction entered into it or carried it out for the sole or dominant purpose of obtaining that tax consequence.[343] This is particularly so when other benefits and taxation liabilities are also produced by the scheme identified. Under this conventional analysis, little weight would be attached to this factor. This is so because the mere fact of a GST benefit cannot lead to the result that the dominant purpose of the relevant scheme was to secure that benefit. If it did there would be no need for the other factors to be assessed.
[343]Federal Commissioner of Taxation v Hart (2004) 217 CLR 216 at [15] per Gleeson CJ & McHugh J; [65] per Gummow & Hayne JJ.
An alternative approach rests on a premise that any test ought be capable of pointing in either a positive or negative way in the analysis required and should be capable of supporting or contradicting the requisite conclusion in different settings. There seems little point in having a test factor which can only point in one direction. Under the alternative approach, it is necessary to look to whether the outcome of the scheme transactions absent Division 165 applying is consistent with the operation as intended by the GST Act.
Here, the GST Act intends to allow an ITC to an entity carrying on an enterprise that has paid for an acquisition, and paid dollar for dollar for it, in a business-to-business transaction under a practical business tax system that places great reliance on the use and acceptance of tax invoices. On that footing, absent the operation of Division 165, the outcome in the present circumstances is entirely consistent with an intended outcome of the GST Act. This factor, analysed this way, suggests that the dominant purpose of participants in the scheme was not to secure a GST benefit. This is not a case where, by some artifice on the part of the taxpayer, a GST benefit ensues without the full cost of securing it having been paid.
The Tribunal considers that either little weight ought to be given to this factor, or it should suggest a non-GST benefit purpose.
It is true that if one considers only the part of the scheme that is the defacing of bullion before its sale to the applicant, that part of the scheme causes a change in the GST status of the commodity and its subsequent sale. But that is a change that causes GST to become payable where it would not otherwise have been payable. And, more importantly, the economic impact is neutral because of the applicant’s entitlement to ITCs. That supports a conclusion that the dominant purpose of the Direct Suppliers was to secure for themselves money and to evade payment of GST rather than for any entity to obtain ITCs. It does not support a conclusion that the principal effect of the scheme or a part of the scheme was for the applicant to obtain ITCs.
The Commissioner’s propositions to the effect that the scheme made no sense without the Disputed ITC entitlements, and an inability to trade viably without them, in respect of this test seem misplaced. However, the Commissioner’s proposition under this test that:
After the Intermediaries obtained a GST inclusive price that depended on [the applicant’s] GST refunds for input tax credits (the GST benefits), many evaded their obligation to remit GST that [the applicant] paid them in the price of its scrap acquisitions.
The Tribunal ought to find that such evasion would not have occurred but for the creation of [the applicant’s] entitlement to GST refunds under the scheme, as it was uneconomical for the Intermediaries to acquire bullion, supply scrap and pay the GST on their scrap supplies to [the applicant].
reveals the facilitative nature of the payment of a GST-informed price and the taxable supplies that lead to it and any ITC entitlement associated with it in a scheme to acquire and keep money in an illegal evasion scheme.
Change in the avoider’s financial position (para (g))
It is difficult to dispute the Commissioner’s contention that the applicant’s net asset position and cash flow depended on entitlements to the Disputed ITCs. Two observations are self-evident: first, in any arrangement where prices are paid for inputs equal to the ITCs claimed, net asset positions will be affected by ignoring half of the money flows or entitlements to money flows, and second, if margins are very tight, denying an entitlement to 10% of the revenue flows to a business without ignoring 10% of the expenses of the business is likely to affect profitability in a material way.
However, the test and necessary comparison is not:
any change in the avoider’s financial position that has resulted, or may reasonably be expected to result, from the GST benefit
Inviting a comparison of balance sheets with and without the GST benefits recognised might be permissible if the test were as stated. The test has to have regard to the scheme. Here the scheme includes payment of a GST-informed price.
From the applicant’s perspective, namely an enterprise that produced precious metal and sold it thus making GST-free supplies:
(a)ITC entitlements arose in respect of all of its inputs to that process that were taxable supplies to it including all of the supplies underlying the Disputed ITCs;
(b)for each of the taxable supplies it paid a price that was informed by the fact that they were taxable supplies and that exceeded the price that would have been payable had the supplies not been taxable, and that excess equalled the ITC entitlement mentioned in (a);
(c)the applicant enjoyed enhanced turnover from its participation in the scheme and resultant trading profits from that enhanced turnover.
Viewed globally, the only potentially measurable financial benefit was enhanced profitability from enhanced trading.
The Full Court ACN decision made clear that availability of ITCs has a neutral effect on profit[344] which is determined net of GST considerations. Mere availability of ITCs cannot be regarded as a source of profit.
[344]At [206].
The Tribunal also considers this factor does not support a conclusion that the principal effect of the scheme or a part of the scheme was the applicant obtaining the Denied ITCs. The obtaining of the ITCs had a neutral impact on the applicant since it was matched by the obligation, which it met, to pay a price for the scrap gold that was informed by a corresponding GST amount.
Change in financial position of connected entities (para (h))
There is no question that the Direct Suppliers were financially disadvantaged by the scheme if the non-payment of GST, which does not form part of either of the Commissioner’s articulated schemes, is ignored. That is because their sales prices for the scrap gold were less than they paid for bullion in investment form.
The Commissioner’s submission, which stops there, analyses half the story, and ignores the facts revealed by the evidence he led.
It is artificial to ignore the non-payment of the evaded GST when that is undeniably the end goal of the scheme. It is objectively clear that without that non-payment the Direct Suppliers Intermediaries participation in the scheme would have made no sense, and would not have happened. The artificiality in ignoring the non-payment by the Direct Suppliers probably explains the extensive evidence led by the Commissioner[345] of the financial affairs of the Intermediaries and their lack of GST compliance.
[345]The Deng affidavit.
The Direct Suppliers were, if outstanding liabilities are not taken into account, enriched in a cash sense by not paying the GST they were liable to pay. That enrichment exceeded the spot price differential between what they paid for bullion and what they sold the scrap gold for. That suggests those entities had a dominant purpose of enriching themselves by collecting money but not paying GST – that was the sole source of their enrichment.
There are no identifiable financial changes for any other entity that could be regarded as supporting a conclusion that an entity had a dominant purpose of the applicant obtaining the Denied ITCs. It may be the case, that entities enjoyed an enhanced turnover and profitability from the scheme, but they continued to enjoy refining styled profits.
Accordingly, the Tribunal concludes that any changes in the financial position of the other parties would not support a conclusion that any entity entered into or carried out the scheme or a part of it with the dominant purpose of the applicant obtaining the ITCs.
Similarly, this factor does not support a conclusion that the availability of the ITCs was the principal effect of the scheme or a part of the scheme. A financial effect of ITCs would be illusory when, as here, matched by a liability to pay a price that includes a corresponding amount of GST.
Other consequences for the avoider or connected entities (para (i))
Nature of connection between entities (para (j)).
There is no suggestion that the dealings between the Direct Suppliers other than CFGA and the applicant were other than at arm’s length in both the relationship sense and in the sense that commercial prices were paid for the relevant supplies. The latter is not surprising since there is no common ownership between the Direct Suppliers and the applicant or Galaxy.
This factor does not support a conclusion that any entity entered into the scheme or a part of the scheme with the dominant purpose of, or that the principal effect of the scheme or any part of the scheme was, the applicant obtaining the Denied ITCs.
Any knowledge of activities of transacting parties as contended for by the Commissioner could be attributed to pursuit of the end goal of the GST evasion in any event.
Circumstances surrounding the scheme (para (k)) and other relevant circumstances (para (l))
One such circumstance, excluded by the Commissioner from his articulated scheme, is the illegal evasion by non-payment of the Direct Suppliers’ GST liabilities.
That circumstance points in favour of a conclusion that the dominant purpose of the Direct Suppliers participating in the scheme or a part of the scheme was those suppliers enriching themselves by evading liabilities to the Commonwealth. It does not support a conclusion that any entity entered into the scheme or a part of the scheme with the dominant purpose of, or that the principal effect of the scheme or any part of the scheme was, the applicant obtaining the Denied ITCs.
Creating a structure of separate refining company and bullion dealing company pointed to by the Commissioner is quite equivocal in what it suggests. The Commissioner’s private ruling suggests that that is a normal event. The GST system of taxing transactions in gold specifically provides for two types of sale by a refiner, input taxed and GST free, both of which do not involve a GST impost to the refiner. Creation of the GST free sale pathway is the measure intended so as to allow ITCs to be claimed by a refiner. Creating that structure does not of itself, as the Commissioner’s ruling suggests, involve any GST mischief.
Purpose or effect – further observations
Some further observations are called for.
A single composite purpose or non-dominant incidental purposes facilitating a dominant purpose?
The passages from Ludekens and Complete Success Solutions extracted above indicate that a single purpose may appropriately be found in some circumstances. They did not go on and consider whether those purposes were facilitative of an ultimate purpose in the sense contemplated by Gageler J in Mills also noted above. The Mills analysis is apposite in the present circumstances for two reasons: first, creating taxable supplies that also produced GST-informed prices being paid and ITC entitlements to arise, was a necessary preliminary to an ulterior and ultimate goal as contemplated by His Honour’s analysis, and second because His Honour suggests that the text of the Explanatory Memorandum under discussion confirmed the ordinary meaning of language and natural reading of statutory text. Thus, the hierarchy of incidental and dominant purposes to which His Honour refers can and should have wider application. This analysis informs how facilitative steps in a wider design ought to be characterised. Viewed through this lens, any purpose of obtaining ITCs in the present circumstances, assuming there was one, was a purpose properly regarded as central to the design of a scheme directed to achieving an ulterior and ultimate purpose, and therefore any purpose of obtaining ITCs was incidental and not dominant.
In the present case, what was essential for the scheme to operate was the creation of a product that the marketplace traded at a GST-informed price, and the Direct Suppliers receiving that price and not paying the GST to the Commissioner, or more fundamentally, for the Direct Suppliers not to pay their GST liability having received a market driven price that assumed they would. As already noted, without that feature there would not have been ongoing sales by the suppliers, as they would have traded at a loss. The availability of the ITCs was an ordinary incident of a purchase of a taxable commodity on commercial terms by a GST-registered entity in the course of its enterprise.
In those circumstances, the non-payment of amounts referrable to GST stands aside from the creation of the GST liability and the entitlement to corresponding ITCs. The applicant’s entitlement to ITCs was dependent only upon the acquisition of gold in a taxable supply for which it paid a full commercial price for what it acquired.
In short, even if it would be correct to view the making of taxable supplies and obtaining of ITCs as a single purpose, that single purpose was a step in a wider process. The Tribunal sees the Direct Suppliers’ non-payment of GST as a separate and ulterior and ultimate purpose to any purpose of making taxable supplies and the applicant obtaining ITCs.
Collection failures
On the Division 165 case as advanced in its entirety, the Commissioner seeks to uphold an assessment disallowing ITCs of approximately $9m, and a penalty of over $5m, in circumstances where, accepting the applicant’s financial statements (and ignoring the findings regarding Golden Angel supplies):
(h)it is the Direct Suppliers, not the applicant, that profited from the scheme by illegally retaining the cashflow profit produced by the GST-informed prices paid to them by the applicant, and not paying their GST liabilities;
(i)the applicant is unrelated to any of those entities that perpetrated the evasion;
(j)the Commissioner does not allege the applicant participated in the evasion;
(k)the disallowing of the ITCs of approximately $9m is in a context where the applicant had sales revenue of approximately $111m and after refining and selling bullion the applicant’s entire margin was approximately $4.5 m.
(l)disallowing the Denied ITCs does not reverse the huge financial gain enjoyed by the Direct Suppliers that failed to pay GST but drastically effects the applicant which did not enjoy the financial benefit of the evasion.
The Commissioner would not be seeking to deny the Denied ITCs if he had been able to recover the unpaid GST from the suppliers. There is nothing in the text of Division 165, or extraneous materials, or in the jurisprudence relating to Division 165 or Part IVA of the1936 Assessment Act upon which it was plainly modelled, to indicate Division 165 was intended to be invoked, where it would not otherwise be applied, as an alternative to recovery of liabilities owed by other entities.
These observations are, of course, not part of the Tribunal’s task in determining whether Division 165 applies which must be approached according to the terms in which the Division is cast. And they have not been treated as if they are. However, these observations suggest careful and close scrutiny of the statutory considerations relevant to whether Division 165 applies is required. That is especially so in a case where the result of applying Division 165 strikes the Tribunal as both surprising, in terms of visiting extraordinarily severe consequences on the applicant, who did not participate in the evasion, rather than the Direct Suppliers who were the perpetrators that benefited directly from their evasion, and out of all proportion to any benefit that, on any view, could have been enjoyed by the applicant from participation in the scheme.
Knowledge or blind eye
As noted, the applicant is regarded as having turned a blind eye to the activities of the Intermediaries, but did not participate in or co-ordinate any transactions not involving any of the applicant, Galaxy or CFGA.
Ultimately, the Intermediaries entered into the arrangements to profit, and did profit in precisely the way they intended to profit, by failing to pay GST on the taxable sales they made to the applicant. In this regard, the term profit is used in a cash flow profit sense only. Properly calculated, they made no profit from their scheme because profit ought be determined net of the impact of GST.[346] To make their profit, the Direct Suppliers needed to create or procure a system or process where they outlaid less money than they received. In the present setting that entailed two steps: first, they needed to acquire the goods they sold at a price not informed by GST, and second, they needed to sell those goods at GST-informed prices. It can be accepted that the applicant would not rationally have paid GST-informed priced for the scrap gold in question had there not been an entitlement to ITCs. In those circumstances, is it reasonable to conclude that the dominant purpose of any entity entering into the scheme or a part of the scheme, or the principal effect of the scheme or part of the scheme, was for the applicant to obtain, or that the applicant did obtain, the Denied ITCs?
[346]An alternative profit calculation would recognise both the GST effect on the sales price received and the liability to the ATO producing the same effect.
While a search for an alternative purpose is not the Division 165 test, the existence of such a purpose throws light on whether the requisite GST benefit purpose conclusion should be reached. When looking at a scheme, or a part thereof, if there is an alternative dominant purpose of any participant, or an alternative principal effect, then it is unlikely that the dominant purpose test will be satisfied in respect of that participant or that the principal effect test will be satisfied. If that alternative dominant purpose of a participant in, or alternative principal effect of, a scheme or a part thereof was that the Direct Suppliers benefit from their evasion, or to place an inflated, GST-informed, price or amount of money into the hands of the Direct Suppliers so as to set up the possibility of the evasion being executed profitably, it is unlikely that it would be reasonable to conclude that that participant had the requisite dominant purpose or that the scheme had the requisite principal effect.
In summary, in the Tribunal’s view, the proper conclusion is that the dominant purpose of the Direct Suppliers was to execute their scheme to profit by first obtaining and then retaining the GST-informed prices they charged the applicant. Their participation in the transactions made no sense unless they did that.
Even if the creation of the taxable supplies to the applicant and the applicant’s entitlement to ITCs are viewed as a single purpose, that would, in itself, achieve no benefit for either the applicant or the Intermediaries. As already noted, for the Intermediaries, it would achieve a loss because they were selling gold at a price (before GST considerations) that was less than they paid for it. It was only by failing to pay their GST liabilities that the Intermediaries were able to profit in any way that explains the scheme. While it is not the statutory question to be addressed, an alternative purpose suggested by the weighing of the requisite factors assists the requisite process. In the present circumstances there is an alternative purpose suggested by the requisite factors. It is reasonable to conclude that evading debts due to the Commonwealth was the Intermediaries’ dominant purpose. Taking into account the required factors, it is not reasonable to conclude that the dominant purpose of any entity was for the applicant to obtain the Denied ITCs.
The conclusion does not change dependent upon the applicant’s knowledge of the arrangements. Little if anything concerning purpose conclusions and the testing for them changes with the applicant’s relevant knowledge.
Conclusion and disposition
For the reasons indicated in the foregoing consideration of the s 165-15 factors, it would not be reasonable to conclude any entity entered into either scheme or a part of either scheme identified by the Commissioner with the sole or dominant purpose of, or that the principal effect of either scheme or any part of either scheme was, the applicant obtaining the Denied ITCs.
It follows that the power to make the declarations under s 165-40 negating the GST benefit being the Denied ITCs is not enlivened. That being the only basis contended for the remaining Disputed ITCs to be disallowed, the assessments of net amount are excessive.
ISSUE FOUR
Because of the outcome for Issue three, Issue four does not arise.
DECISION
The decision under review is set aside and in substitution there for:
1.The applicant is not entitled to input tax credits of claimed in respect of supplies contended to have been made by Golden Angel Pty Ltd and the shortfall penalty imposed, including the 20% increase is affirmed without remission.
2.The applicant is entitled to all remaining input tax credits in dispute and scheme penalty does not arise.
The panel below contains details for the usual topics concerning, among others, hearing dates and representation. The details shown are not the product of misfortune. The framers of the coming Administrative Review Tribunal may wish to contemplate the new body having discretionary costs order powers, exercisable by exception, to address exceptional circumstances in an appropriate way.
I certify that the preceding paragraphs 1(one) to 385 (three hundred and eighty-five) are a true copy of the reasons for the decision herein of Deputy President F D O'Loughlin KC
.................................[sgd].......................................
Associate
Dated: 5 January 2024
Date(s) of hearing:
11, 12 ,13, 14, 17, 18, 24 May 2021
1, 2, 4 March 2022Date final submissions received:
5 May 2023
Counsel for the applicant:
C G Wallis
Solicitors for the applicant:
Moray & Agnew Lawyers (from 29 November 2022)
Madgwicks Lawyers (until 28 November 2022)
Counsel for the Respondent:
G J Davies KC, M L Baker (1, 2 and 4 March 2022)
C M Pierce, O M Ciolek (11, 12 ,13, 14, 17, 18, 24May 2021)
Solicitors for the Respondent:
Australian Government Solicitor
Other Counsel Appearing
E P White (1 March 2022]
Annexure 1
Term
Definition
AGS
Australian Government Solicitor
ATO
Australian Tax Office
AU Scrap
Au Scrap Pty Ltd
AX Traders
AX Traders Pty Ltd
Baird & Co
Baird & Co Pty Limited
BAS
Business Activity Statements
Blanco Supply Chain 1
Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap and/or AX Traders, by AU Scrap and/or AX Traders to Sell Your Gold, by Sell Your Gold to the applicant
Blanco Supply Chain 2
Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap, by AU Scrap to GB Traders, by GB Traders to Sell Your Gold, by Sell Your Gold to the applicant
Butt Supply Chain 1
Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap and/or AX Traders, by AU Scrap and/or AX Traders to GB Refiners, by GB Refiners to the applicant
Butt Supply Chain 2
Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap and/or AX Traders, by AU Scrap and/or AX Traders to GB Traders, by GB Traders to the applicant
Butt Supply Chain 3
Supply Chain comprising the following: sales of gold products (in various forms) in two combinations. The first combination by Galaxy (via GB Traders or directly) to R&N Metals, by R&N Metals to Manila, by Manila to GB Refiners, by GB Refiners to the applicant, and the second combination
Butt Supply Chain 4
Supply Chain comprising the following: sales of gold products (in various forms) in two combinations. The first combination: by Galaxy to GB Traders, by GB Traders to R&N Metals, by R&N Metals to Manila, by Manila to GB Traders, by GB Traders to GB Refiners, by GB Refiners to the applicant. The second combination; by
Cash for Gold Australia or CFGA
Cash for Gold Australia Pty Ltd, collectively Cash For Gold Victoria, Cash For Gold Queensland and Cash For Gold NSW
Cash For Gold Supply Chain
Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to CFGA, CFGA to various suppliers, by various suppliers to CFGA (or PMR), and by CFGA (or PMR) to the applicant
Cash Pal
Cash Pal Holdings Pty Ltd
Cheap Bullion
Cheap Bullion Pty Ltd
CPG
The applicant, CPG Group Pty Ltd
Creditable Acquisitions
As defined in ss 195-1 and 11-5 of the GST Act
Dealer in Precious Metal
As defined in ss 9-30, 38-385 and s 195-1(1) of the GST Act.
Diamond Moment
Diamond Moment Pty Ltd
Denied ITCs
Input tax credits of $9,457,634.69
Direct Suppliers
Entities the applicant contends supplied gold to CPG directly:
· Golden Angel
· HA Exchange
· Gold Dust
· CFGA
· Sell Your Gold
· GB Refiners
· GB Traders
· Quality Gold
Disputed Tax Periods
The five monthly tax periods that ended on 31 July, 31 August, 30 September, 1 October, and 30 November 2016 respectively.
Galaxy
Galaxy Coins and Bullion Pty Ltd
GB Refiners
GB Refiners Pty Ltd
GB Traders
GB Traders Pty Ltd
Gold Dust
Gold Dust Buyers and Sellers Pty Ltd
Gold Dust Supply Chain
Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to Universal Distribution Australia, by Universal Distribution Australia to Gold Dust, by Gold Dust to the applicant
Golden Angel
Golden Angel Australia Pty Ltd
Golden Angel Supply Chain
Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to Golden Touch, by Golden Touch to Golden Angel, and by Golden Angel to the applicant
Golden Touch
Golden Touch International Pty Ltd
GST
Goods and Services Tax
GST Act
A New Tax System (Goods and Services Tax) Act 1999 (Cth)
HA Exchange
HA Exchange Pty Ltd
HA Exchange Supply Chain
Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to PH Gold, by PH Gold to HA Exchange, by HA Exchange to the applicant
Indirect Suppliers
Entities who supplied gold to Direct Suppliers:
· Golden Touch;
· PH Gold;
· Universal Distribution Australia;
· Cheap Bullion;
· Cash Pal;
· AU Scrap;
· AX Traders;
· R&N Metals; and
· Manila;
· Niyazi Candag trading as NC Jewellery (NC Jewellery)
· Diamond Moment; and
· Infinity Jewellers
Infinity Jewellers
Infinity Jewellers Pty Ltd
Intermediaries
Direct Suppliers and Indirect Suppliers as a group.
Input Taxed
As defined in ss 9-30 and 40-100 of the GST Act.
ITC
Input Tax Credit
Manila
Manila Exchange Pty Ltd
Mr Balant
Mr Les Balant
Mr Salib
Mr Michil Salib
NC Jewellery
A trading name for Mr Niyazi Candag
Infinity Jewellers
Infinity Jewellers Pty Ltd
PH Gold
PH Gold Pty Ltd
PMR
A name under which Cash For Gold Australia traded
Precious Metal
Precious metal within the meaning of the s 195-1 definition of that term.
The terms gold bullion and bullion used by the applicant have the same meaning.
QN Traders
QN Traders Pty Ltd
Quality Gold
Quality Gold Pty Ltd
Quality Gold Supply Chain
Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to Quality Gold, and by Quality Gold to the applicant
scrap gold
Gold metal of any fineness that is not in investment form. The terms scrap and scrap gold, which are sometimes used by the parties, have the same meaning
R&N Metals
R&N Metals Pty Ltd
RCTI
Recipient Created Tax Invoice
Sell Your Gold
Sell Your Gold Pty Ltd
Supply Chains
Bullion Dealers or Intermediaries that sell gold to each other and/or the applicant. The 11 Supply Chains are the:
· Golden Angel Supply Chain
· HA Exchange Supply Chain
· Gold Dust Supply Chain
· Cash For Gold Supply Chain
· Blanco Supply Chain 1
· Blanco Supply Chain 2
· Butt Supply Chain 1
· Butt Supply Chain 2
· Butt Supply Chain 3
· Butt Supply Chain 4
· Quality Gold Supply Chain
Supply Chain Parties
Entities that form part of each of the Supply Chains
Taxable Supplies
Sections 9-5, 78-50, 84-5 and 105-5 as affected by the provisions listed beneath the definition of taxable supply in s 195-1(1) of the GST Act.
Universal Distribution or UDA
Universal Distribution Australia Pty Ltd
Valuable Metal
See s 195-1 of the GST Act - gold, silver or platinum; or any other substance specified for the purposes of paragraph (d) of the definition of ‘precious metal’
Indirect Suppliers
· Golden Touch
· PH Gold
· UDA
· AU Scrap
· Manila
· GB Traders
· Cash Pal
· Cheap Bullion
· NC Jewellery, Diamond Moment, Infinity Jewellers
· R&N Metals
.
Key Legal Topics
Areas of Law
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Tax Law
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Administrative Law
Legal Concepts
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Statutory Construction
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Judicial Review
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Remedies
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Penalty
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Procedural Fairness
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