Magna Stic Magnetic Signs Pty Ltd v Commissioner of Taxation
[1990] FCA 284
•18 MAY 1990
Re: MAGNA STIC MAGNETIC SIGNS PTY LIMITED
And: COMMISSIONER OF TAXATION
Nos. G159, G160, G1407 and G 1408
FED No. 284
Taxation
96 ALR 507
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTY
GENERAL DIVISION
Wilcox J.(1)
CATCHWORDS
Taxation - Sales Tax - Notice of assessment of sales tax issued to taxpayer pursuant to incorrect Sales Tax Act - whether such notice constituted a requirement by the Commissioner to pay the tax within the meaning of s.12B of the Sales Tax Procedure Act.
Sales Tax Procedure Act 1934 s.12B
HEARING
SYDNEY
#DATE 18:5:1990
Counsel for the Applicants: A H Slater
Solicitors for the Applicants: J W Walker and D6 K L Raphael
Counsel for the Respondent: N R Burns
Solicitors for the Respondent: Australian Government Solicitor
ORDER
No. G1407 of 1988
1. It be declared that the applicant is indebted to the
respondent in respect of sales tax and additional tax in the sum of $175,549.04, this sum being calculated as follows:
Sales tax $98,171.49 Additional tax 77,377.55 Sales tax due and
payable $175,549.04
2. The applicant pay to the respondent three quarters of
his costs to 16 March, 1990 and the whole of his costs thereafter, noting that this matter was heard with matters G159 of 1988, G160 of 1988, and G1408 of 1988
No. G1408 of 1988
1. It be declared that the applicant is indebted
to the respondent in respect of sales tax and additional tax in the sum of $183,892.97, this sum being calculated as follows: Sales tax $107,788.95 Additional tax 101,845.33 Less by payment 25,741.37 Sales tax due and
payable $183,892.97
2. The applicant pay to the respondent three
quarters of his costs to 16 March, 1990 and the whole of his costs thereafter, noting that this matter was heard with matters G159 of 1988, G160 of 1988 and G1407 of 1988.
No. G159 of 1988
1. The appeal be allowed.
2. The notice of assessment issued by the respondent to
the applicant in respect of the period 1 March, 1982 to 31 October, 1986 be set aside and an amended assessment be issued as follows: Sales tax $107,788.95 Additional tax 101,845.33 Less by payment 25,741.37 Sales tax due and
payable $183,892.97
3. The applicant pay to the respondent three quarters of
his costs to 16 March, 1990 and the whole of his costs thereafter, noting that this matter was heard with matters G160 of 1988, G1407 of 1988 and G1408 of 1988.
No. G160 of 1988
1. The appeal be allowed. 2. The notice of assessment issued by to the
respondent to the applicant in respect of the period 1 March, 1982 to 31 October, 1986 be set aside and an amended assessment be issued as follows:
Sales tax $98,171.49 Additional tax 77,377.55 Sales tax due and
payable $175,549.04
3. The applicant pay to the respondent three
quarters of his costs to 16 March, 1990 and the whole of his costs thereafter, noting that this matter was heard with matters G159 of 1988, G1407 of 1988 and G1408 of 1988.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
On 20 September, 1989 I delivered judgment in four related matters: references to the Court under s.41 of the Sales Tax Assessment Act (No.1) 1930 by two associated companies, Magna Stic Magnetic Signs Pty Limited ("Signs") and Magna Stic Products Pty Limited ("Products") and actions remitted to the Court by the High Court of Australia in which Signs and Products respectively seek certain declaratory and injunctive relief. In that judgment I dealt with, and rejected, a suggested exemption under the Sales Tax (Exemptions and Classifications) Act 1935 and an argument that s.12D of the Sales Tax Procedure Act 1934 applied to require remission of the tax. These were the primary matters in issue between the parties.
However, a further point was advanced on behalf of Products. The respondent had issued a notice of assessment against that company, relying upon the Sales Tax Assessment Act (No. 1) ("the No.1 Act"). Products argued that any sales tax liability which it had arose under the Sales Tax Assessment Act (No.2) 1970 ("the No.2 Act") and that, consequently, the notice of assessment was ineffective. I agreed with these submissions and held that the notice of assessment must be set aside.
The setting aside of the notice of assessment did not affect the obligation of Products to pay such tax as might be due pursuant to the No.2 Act; it merely meant that the extent of that tax remained unquantified. In that regard, both taxpayers wished to have an opportunity of checking, and discussing with the respondent, the detail of the claims made against them. Accordingly, I made no final orders on 20 September. I simply adjourned all four matters for mention on a later date.
The matters were subsequently further adjourned whilst discussions ensued between the parties. Eventually I was informed that agreement had been reached on all matters (but subject to the taxpayers' right of appeal in respect of the decisions made contrary to their submissions) with one exception: the possible application to Products' case of s.12B of the Sales Tax Procedure Act 1934. That section relevantly provides:
"12B(1) Where tax (not being tax paid prior to the commencement of this section) in respect of any transaction, act or operation effected or done in relation to any goods has not been paid at the expiration of a period of three years from -
(a) where the tax is payable in respect of the importation of those goods - the date of the entry of those goods for home consumption;
or
(b) in any other case - the close of the month in which the transaction, act or operation was effected or done, the Commissioner may remit that tax unless he -
(c) has required payment of the tax prior to the expiration of that period; or
(d) is satisfied that the payment of the tax was avoided by fraud or evasion.
(2) ...
(3) For the purposes of this section the Commissioner shall be deemed to have required payment of the tax if he, or an officer acting on his behalf, has served upon any person a notice in writing specifying that an amount of tax is payable by that person in respect of -
(a) the transaction, act or operation specified in sub-section (1) of this section; or
(b) any transactions, acts or operations which include the transaction, act or operation specified in that sub-section.
(4) For the purposes of this section "tax" includes any further tax payable under any Sales Tax Assessment Act and any additional tax for which the person is liable under this Act or under any Sales Tax Assessment Act."
I indicated to counsel that I would make the orders they had agreed upon and would hear submissions on the s.12B point. Submissions were made on 27 April, 1990.
Two issues were argued in respect of s.12B. The first question raised by counsel for the taxpayers was whether, in their context in subs.(1), the words "may remit" cast upon the Commission an obligation, as distinct from a discretion, to remit the tax whenever the condition imported by para.(a) or (b), as the case might be, was satisfied and neither para.(c) or (d) applied. The second question was whether the notice of assessment made against Products under the No.1 Act constituted a requirement within the meaning of para.(c).
I think that it is convenient to consider these two conditions in the reverse order. If para.(c) applies, s.12B has no application to Products' case.
The contention for Products is that there is only a requirement for payment of the tax, within the meaning of para.(c), if the Commissioner has required payment pursuant to the Act under which liability arises. Counsel says that the words "the tax", in para.(c), refer back to the opening words of the subsection, where reference is made to "tax...in respect of any transaction" etc. That is tax which is "payable", says counsel, referring to para (a). But tax is not payable in the abstract, it is "payable" only because a particular statute so provides. So, the argument runs, the tax which is the subject of subs.(1), and capable of remission, is tax which is payable under a particular Act and the subject of a requirement of payment under that Act; accordingly, a requirement made under one Act does not operate to preclude a remission of tax payable under a different Act.
I do not accept this submission. It seems to me that it overlooks both the generality of the language used by the Parliament and the policy underlying para.(c). As to the first matter, it is true that the "tax" referred to in para.(c) is the tax described in the opening words of the subsection. But, significantly in my view, that tax is not described in terms of its exigibility under a particular Act but rather its connection with "any transaction" etc. The subsection relates to any "tax" payable in connection with a transaction etc, without any further express limitation. Even in the absence of a definition of "tax", it would, no doubt, be implied that the subject tax must be a sales tax; but in fact the Act contains a definition which makes this clear.
The definition section, s.3, provides that, unless the contrary intention appears: "Sales tax or tax means any tax imposed under the name of sales tax by any Act". There is no indication that this definition is inapplicable to s.12B. Accordingly, the opening words of subs.(1) should be read as if they said: "Where any tax imposed under the name of sales tax by any Act in respect of any transaction" etc "has not been paid". The subject tax was imposed under the name of sales tax by an Act, namely the No.2 Act, and all of it remained unpaid at the expiration of three years from the close of each of the months in which the relevant transactions were effected. Consequently, the subject tax is described by the opening words of the subsection. The question, then, is whether the Commissioner required payment of that tax - that is, the tax payable in respect of the relevant transactions - before the expiration of the three years. There can be only one answer to that question. The Commissioner did so require, albeit that he mistakenly claimed that the tax was payable under the No.1 Act rather than the No.2 Act.
Counsel for the respondent places some emphasis upon subs.(3). In the view I take, it is not really necessary to go to this subsection. But reference to the subsection confirms the construction just suggested. Subsection (3) provides that, for the purposes of the section, that is including para.(c), the Commissioner shall be deemed to have "required payment of the tax" - that is the tax which is payable in respect of the relevant transactions - "if he ... has served upon any person a notice in writing specifying that an amount of tax" - that is, an amount of tax imposed under the name of sales tax by any Act - "is payable by that person in respect of" the transactions etc, or one or more of them. The notice served in this case did specify that an amount of tax imposed under the name of sales tax was payable by Products in respect of the relevant transactions.
The evident purpose of s.12B was to guard against a situation in which a trader dealt in goods over a lengthy period in ignorance of its liability to pay sales tax and was then confronted with a claim for which no provision had been made. This purpose is confirmed by reference to the speech of the Treasurer, Mr Casey, in the House of Representatives on 14 November 1936 in relation to cl.60 of the Sales Tax Amendment Bill 1936. That clause introduced into the Sales Tax Procedure Act the provisions which are now subs.12B and 12D of that Act. In the course of his speech, Mr Casey said:
"Clause 60 provides for the curtailment of retrospective taxation, and the bill contains the following provision for that purpose:-
(a) A three years' time limit on retrospective taxation ...
(b) No retrospective taxation where taxpayers act in accordance with departmental rulings and advices. This has certain necessary limitations which I shall touch upon later.
"The three years' time limit will not apply where the Commissioner is satisfied that tax has been avoided by fraud or evasion. This is comparable to provisions of the income tax law." The general effect of the provision is that sales taxpayers will not be called upon to pay tax more than three years after the close of the month in which a taxable transaction took place, unless they receive a specific notice from the department to pay tax on those sales, andc., within that period. The present law requires the Taxation Department to seek to collect back taxation for a period reaching back to the coming into force of the sales tax law, if it finds that a taxpayer has not complied with the full requirements of the law during that period. This may cause serious hardship to taxpayers who, through inadvertence, have not appreciated the incidence of the sales tax law on their business, and who, when required to pay the additonal tax, are not in a position to recoup themselves by passing it on to their customers. For that reason, the Government takes the view that a time limit upon the retrospective application of an indirect tax such as sales tax is justifiable. As a necessary complement of this proposal, the bill also provides for a three years' time limit upon the making of refunds to taxpayers."
See Parliamentary Debates (House of Representatives) p 2128.
The purpose referred to by Mr Casey would, of course, be achieved by any claim for sales tax made by the Commissioner to a taxpayer, whether or not the claim refers to the correct Act. The taxpayer would then be on notice that its dealings may attract sales tax. It could take advice and make any necessary allowances in fixing resale prices. Consequently, the interpretation which I favour does not deny the policy underlying the provision.
If para.(c) is interpreted in the manner I consider appropriate, the question whether the Commissioner has a discretion about remission does not arise.
In the action brought by Products I will make a declaration that the company is liable to pay sales tax with respect to goods sold by it from 1 March, 1982 to 3 October, 1986 pursuant to the No.2 Act in the sum of $98,171.49 and that the company is also liable to pay additional tax with respect to those goods in the sum of $77,377.55. The remaining orders will be those agreed between counsel as appropriate to reflect the views expressed by me on 20 September, 1989.
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