Strathfield Group Wholesale Pty Ltd v Deputy Commissioner of Taxation
[1997] FCA 734
•8 August 1997
FEDERAL COURT OF AUSTRALIA
SALES TAX - late-payment penalty imposed by s 68 of Sales Tax Assessment Act1992 (Cth) - whether Commissioner extended time for payment or accepted payment by instalments under s 66 - if so, whether this involved the “determination” of “later dates” than the “usual due dates” from which late-payment penalty was to be calculated, for purposes of s 68 - construction of, and relationship between, ss 66 and 68 - whether Commissioner’s decision not to determine a “later date” under s 68 is a reviewable decision under Administrative Decisions (Judicial Review) Act 1977 (Cth).
Sales Tax Assessment Act 1992 (Cth), ss 66, 68
Administrative Decisions (Judicial Review) Act 1977 (Cth), s 3 (“decision to which this Act applies”), Sch 1, par (e)
Deputy Commissioner of New South Wales v Davies (1958) 75 WN (NSW) 485
Deputy Commissioner of Taxation v Kavich (1996) 138 ALR 323
ARM Constructions Pty Ltd v Deputy Commissioner of Taxation (1986) 65 ALR 343
Refrigerated Express Lines (A/Asia) Pty Ltd v Australian Meat and Live-stock Corporation (No 2) (1979) 44 FLR 455
Downey v Trans Waste Pty Ltd (1991) 172 CLR 167
Deputy Commissioner of Taxation v Ichwan Pty Ltd (1987) 87 ATC 5013
Deputy Commissioner of Taxation v Fontana (1988) 88 ATC 4751
STRATHFIELD GROUP WHOLESALE PTY LIMITED v DEPUTY
COMMISSIONER OF TAXATION
NG 221 of 1996
LINDGREN J
SYDNEY
8 AUGUST 1997
IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) NG 221 of 1996 ) GENERAL DIVISION )
BETWEEN: STRATHFIELD GROUP WHOLESALE PTY LIMITED ACN 060 462 884
ApplicantAND: DEPUTY COMMISSIONER OF TAXATION
Respondent
JUDGE: LINDGREN J PLACE: SYDNEY DATED: 8 AUGUST 1997
MINUTES OF ORDER
THE COURT ORDERS THAT:
The objection to competency be dismissed.
The application be dismissed.
The application be stood over to Monday 11 August 1997 at 9.30 am for the purpose of the making of orders as to costs.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) NG 221 of 1996 ) GENERAL DIVISION )
BETWEEN: STRATHFIELD GROUP WHOLESALE PTY LIMITED ACN 060 462 884
ApplicantAND: DEPUTY COMMISSIONER OF TAXATION
Respondent
JUDGE: LINDGREN J PLACE: SYDNEY DATED: 8 AUGUST 1997
REASONS FOR JUDGMENT
INTRODUCTION
By its amended application filed in Court on 28 July 1997, the applicant (“SGW”) seeks review of a decision of the respondent (“the Commissioner”) not to determine “later dates” as the dates from which late-payment penalty under s 68 of the Sales Tax Assessment Act 1992 (Cth) (“the Act”) payable by SGW is to be calculated (“the Decision”). For that purpose, SGW seeks to invoke the jurisdiction conferred on the Court by the Administrative Decisions (Judicial Review) Act 1977 (Cth) (“the ADJR Act”). SGW also seeks an injunction restraining the Commissioner from taking any step to recover a sum of $300,000 as late-payment penalty (the Commissioner had advised SGW of his intention to take legal action to recover this sum) and also relies on s 39B of the Judiciary Act 1903 (Cth) as giving the Court jurisdiction.
SGW contends that on the proper construction of ss 66 and 68 of the Act and in the circumstances which have occurred, the penalty for late payment for which s 68 provides is properly calculated from certain dates to which, according to SGW’s submission, the Commissioner extended the time for payment of the primary tax, or on which instalments of primary tax, payment of which the Commissioner had agreed to accept, became payable. The Commissioner, on the other hand, contends that late-payment penalties are properly calculated from the “usual due date” for payment of each amount of primary tax without regard to any indulgences which were granted by him.
LEGISLATION
The provisions of the Act relevant to the present case fall within narrow compass. Subsections 16(1) and (2) are as follows:
“16. (1) Table 1 sets out all the assessable dealings that can be subject to sales tax.
(2) If the time of an assessable dealing (as specified in column 4 of the Table) is on or after the first taxing day, and no exemption applies under Division 2 of this Part, then:
(a) the dealing is a taxable dealing;
(b)the person specified in column 3 is the person liable to the tax;
(c)the tax becomes payable at the time of the dealing, as specified in column 4;
(d)the tax is due for payment at the time that applies under Division 2 of Part 5.”
It is not in dispute that SGW became liable to pay sales tax pursuant to these provisions.
Part 5 (ss 61-77) of the Act provides for collection and recovery of sales tax. Section 61 provides that a person who is a “monthly remitter” for a month during which the person becomes liable to tax must lodge a return within twenty-one days after the end of the month. It is common ground that SGW was a monthly remitter. Division 2 (ss 63-68) provides for the dates on which sales tax becomes due for payment. The provisions of Div 2 which are central to the present case may now be noted:
“63. (1) Tax that is payable by a monthly remitter for a month becomes due for payment at the end of the 21st day after the end of that month.”
“66. (1) The Commissioner may, in a particular case, extend the time for payment of tax, or allow it to be paid by instalments.
(2) In this section:
‘tax’ includes penalty under Part 9 and late-payment penalty.”“68. (1) If tax payable by a person remains unpaid after the usual due date, the person is liable to pay a penalty at the rate of 16% per year on the unpaid amount. The penalty is calculated from the usual due date, or from a later date determined by the Commissioner if the Commissioner has granted an extension, or permitted payment by instalments, under section 66.
...(4) The Commissioner may remit some or all of the penalty in any of the following cases:
(a)the Commissioner is satisfied that the person did not contribute to the delay in payment and has taken reasonable steps to mitigate the causes of the delay;
(b) the Commissioner is satisfied that:
(i)the person contributed to the delay but has taken reasonable steps to mitigate the causes of the delay; and
(ii)having regard to the nature of the things that caused the delay, it would be fair and reasonable to remit some or all of the penalty;
(c)the Commissioner is satisfied that there are special circumstances that make it reasonable to remit some or all of the penalty.
(5) In this section:
‘tax’ includes penalty under Part 9;
‘usual due date’ means the date on which tax becomes due for payment, ignoring any extension of time granted under section 66.”
The reference to “penalty under Part 9” is a reference to penalties for non-compliance with various provisions of the Act. Section 99 in that Part requires the Commissioner to make an assessment of penalty that is payable under Pt 9, and further provides that it becomes payable on the day specified in the notice of assessment, which must be at least fourteen days after the issue of the assessment. Section 100 empowers the Commissioner to remit all or any part of such a penalty, before or after the penalty is assessed.
“Late-payment penalty” is defined in s 5 to mean penalty under s 68. Unlike penalty under Pt 9, late-payment penalty is not “assessed” by the Commissioner nor is it the subject of a notice of assessment. It is imposed by the operation of s 68 directly where the circumstances referred to in that section exist.
The controversy between the parties centres upon the construction of the following words in subs 68(1) and their application in the circumstances of the present case:
“ ... or from a later date determined by the Commissioner if the Commissioner has granted an extension, or permitted payment by instalments, under section 66.”
As noted earlier, SGW contends that on the facts the Commissioner granted extensions of time for payment and, in doing so, determined “later dates” for the purpose of subs 68(1) from which the relevant penalties for late-payment must be calculated. The Commissioner, on the other hand, contends that there never has been, on the facts, a “later date determined by the Commissioner” for the purpose of subs 68(1).
AMENDED APPLICATION
By its amended application filed in Court on 28 July 1997, SGW propounds the following grounds in support of its application under the ADJR Act for review of the Commissioner’s decision not to determine later dates:
“1 That the Decision involved an error of law.
Particulars
(i) The Respondent misconstrued sections 66 and 68(1) of the STAA.
........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....
2. That the Decision was not authorised by sub-section 68(1) of the STAA.
Particulars
(i)The Respondent had extended the time for payment of tax by the Applicant and also allowed the Applicant to pay by instalments in accordance with sub-section 66(1) of the STAA.
(ii)Sub-section 68(1) of the STAA operated by reference to the later dates for payment already determined by the Respondent in accordance with sub-section 66(1) of the STAA and conferred no independent power or duty on the Respondent to determine any date.
(iii)Alternatively, sub-section 68(1) of the STAA imposed a duty on the Respondent to determine later dates corresponding with those already determined under section 66(1) of the STAA.
(iv)Alternatively, sub-section 68(1) of the STAA imposed a duty on the Respondent to determine dates for payment later than the usual date.
3.That the Decision involved an exercise of power that was so unreasonable that no reasonable person could have so exercised such powers.”
However, SGW has relied primarily on s 39B of the Judiciary Act1903 (Cth). It contends that on the facts the Commissioner, in fact, granted extensions or permitted payment by instalments or both, and, that in the course of doing so, he determined later dates for payment of the primary tax, from which later dates alone penalties are required and permitted by subs 68(1) to be calculated. According to SGW’s submission, no further or separate determination by the Commissioner was or is necessary or appropriate, and in threatening to seek recovery of an amount calculated differently, the Commissioner is proceeding on an assumption that is erroneous in law.
FACTS
SGW sells mobile phones, car audio and security equipment by wholesale. It sells exclusively to Strathfield Car Radios Pty Ltd (“SCR”) which, in turn, sells by retail to the public. I will refer to SGW and SCR as “the Strathfield Group”. In 1994 the Strathfield Group commenced preparations to become listed on the Australian Stock Exchange. In anticipation, it purchased a Queensland business called “Brisbane Car Sound”. For that purpose it borrowed about 90% of the purchase price on a short term basis, proposing to repay the loan from funds raised by the float. For reasons not presently material, the proposed float did not proceed. In consequence SGW did not receive the funds expected. It retained a Mr Adrian Firmstone, initially of Ernst & Young, to apply for the Commissioner’s approval of an extended programme for payment of sales tax. (Mr Firmstone was later of “Feil & Partners” and later still of “Firmstone & Feil”, but for convenience I shall refer throughout simply to “Mr Firmstone” without distinguishing between the various firms.)
By letter dated 18 December 1994, Mr Firmstone wrote to the Commissioner requesting, “pursuant to Section 66 of the Sales Tax Assessment Act 1992”, an extension of time for payment of SGW’s sales tax liability for November 1994 in accordance with a schedule set out in the letter. The tax for November was to become due for payment only three days later on 21 December. The letter asserted that the total amount of the liability was $1,104,476. It proposed payment by nine instalments, the first, of $100,000, by 21 December, and the last, of $104,476.22, by 20 February 1995. The proposal did not refer to late-payment penalty which, in the ordinary course, would be calculated from 21 December.
On 30 January 1995, Mr Firmstone wrote to the Commissioner advising that as at that date, SGW owed sales tax of approximately $3,200,000 which it was unable to pay at that time. The letter sought:
“approval of a payment program involving weekly payments which should see SGW pay off its outstanding sales tax in approximately six months, as well as the normal monthly sales tax which will become payable during that period.”
The letter attached a schedule of twenty-eight weekly payments from and including 6 February 1995 to and including 14 August 1995. The schedules also showed estimated amounts of sales tax which would fall due on the twenty-first days of the respective months occurring in that period. According to the schedule, the amount outstanding as at 30 January, which was said to be $3,200,569, together with the additional monthly amounts of tax to become due, would be fully paid after a final payment of $600,569 on 14 August. Again, there was no mention of late-payment penalty.
On 23 February 1995 the Commissioner replied. This letter is the first of three from the Commissioner on which SGW relies to establish that the Commissioner made “determinations” which activated subs 68(1) of the Act. The letter advised Mr Firmstone that payment of “the amount owing” would be “accepted” in accordance with a list of payments (including dates) set out in the letter. In fact, the payments listed by the Commissioner were identical with those which had been proposed in Mr Firmstone’s letter of 30 January, subject to two qualifications: first, the payments proposed for 6, 13 and 20 February 1995 were shown as having been received; secondly, there was added after 14 August 1995, a provision for payment on 21 August 1995 of “Balance of Account”, no doubt as a “catch-all” provision. The Commissioner’s letter contained the following two paragraphs in bold typeface:
“This arrangement should be strictly adhered to. Any departure from the terms of this letter will result in commencement of legal action without any notice.
You are reminded that where the principal amount remains unpaid, additional tax for late payment accrues at the rate of 16% per annum under the provisions of section 68 of the Sales Tax Assessment Act.” (underlining supplied)
The Commissioner submits that the paragraph underlined by me was calculated to make clear that late-payment penalty was, notwithstanding the Commissioner’s acceptance of the arrangement proposed by SGW, to be calculated from the usual due dates. SGW concedes that the Commissioner was attempting to protect his position in this respect but submits that, as a matter of law, once he accepted the proposal, in law he determined “later dates” for the purpose of subs 68(1) and so deprived himself of that possibility. It is not obvious to me that the concession was well made. With respect, I think that the reminder in the Commissioner’s letter is arguably open to the construction that the writer was intending to emphasise that late payment of any weekly amount would have the effect that late-payment penalty would be payable on that amount calculated from the date fixed for payment of that amount. As will appear, however, in view of the conclusions which I reach below, nothing turns on the meaning of the paragraph in the Commissioner’s letter.
By 28 April, SGW had made within time all but one of the twelve weekly payments which had fallen due to that date, and the one which was paid late was paid only one day late. However, on 28 April, Mr Firmstone advised that unfortunately his client would not be able to adhere to the programme in the future. Accordingly, he submitted a revised proposal for payments covering the period from 1 May to 30 October which would, he said, see SGW pay off its outstanding sales tax as well as the monthly sales tax which would become due for payment during that period. On 5 May, the Commissioner advised that he would need further time to make a decision on SGW’s new proposal, and that in the meanwhile SGW should continue with the payments as outlined in the Commissioner’s letter dated 23 February. In fact, on 1 May SGW had paid only $100,000 rather than $350,000 as provided for in that letter, and on 8 May it again paid only $100,000 rather than $450,000 as provided for in that letter. Accordingly, the Commissioner advised SGW by letter dated 11 May that “the agreement of 23 February 1995” was at an end, and, further, that SGW’s “offer dated 28 April 1995 of instalment payments to constitute a new agreement” was not acceptable and that recovery action for the outstanding amount would be commenced forthwith. The letter enclosed a demand for payment of $3,816,860.83. The demand purported to be a demand pursuant to par 459E(2)(c) of the Corporations Law. It particularised the debts in question as follows:
“SALES TAX $
Sales Tax and Additional Tax payable under the
Sales Tax Assessment Act 1992 as amended.
For the period from 1 October 1994
to 31 March 1995 3,554,543.18
Additional tax for late payment
calculated to 11 May 1995 262,317.65
TOTAL 3,816,860.83”
It is clear that the “additional tax for late payment” was in fact “penalty” under subs 68(1) which was calculated from the usual due dates rather than from the dates stipulated in the programme accepted by the Commissioner.
On 17 May, Mr Firmstone wrote a letter which included the following:
“I refer to our telephone conversations today and as requested set out my understanding of the agreement reached with the ATO.
1.Strathfield Group Wholesale (‘SGW’) to agree to participate in a fast track review on the terms set out below;
2.SGW to pay $100,000 per week in excess of that set out in the amended payment schedule attached to my letter to the ATO dated 28 April 1995, commencing 15 May 1995 and continuing until completion of the fast track review;
3. ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....;
4. ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....;
5. ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....;
6. ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....;
7.In the event the practitioner agrees or substantially agrees with the amended payment schedule referred to in 2 above the ATO will accept payments in accordance with that schedule; and
8.The ATO to withdraw immediately the statutory demand issued to my client under cover of letter dated 11 May 1995.”
By the second letter on which SGW relies, the Commissioner replied on 18 May 1995, relevantly as follows:
“This office agrees with your understanding with the following additional points:-
1/ Only the six weeks payments up to and including that of 19 June 1995 (from your ‘amended payment schedule’ attached to your letter of 28 April 1995) were the subject of agreement at our meeting of 12 May 1995.
2/ An additional $100,000 per week to be forwarded in respect of the above-mentioned six weeks.
3/ The agreement in respect of the above-mentioned six weeks to be contingent upon the Fast Track Review report.
3/ [sic] The balance after the May return (to be lodged on 21 June 1995) to be renegotiated so that the total of the weekly payments for each month will be sufficient to cover each of the subsequent anticipated monthly debits plus one sixth of the balance remaining after the above-mentioned May return. This requirement is to be part of the Fast Track Review report.
4/ This office reserves the option of asking for security such as directors’ guarantees in respect of the debt.
5/ If these points are agreed to, this office will immediately withdraw the Creditor’s Statutory Demand of 11 May 1995.”
SGW relies on this letter as establishing “determinations” by the Commissioner which activated subs 68(1) in respect of the six week period referred to. In fact, SGW paid on 15 May, 22 May, 29 May, 5 June, 12 June and 19 June the amounts which it had proposed on 28 April, increased in each case by $100,000. Accordingly, the effect of SGW’s submission is that no additional tax became payable in respect of the amounts of those six payments (the first three were of $250,000 each and the last three were of $300,000 each).
On 19 May, Mr Firmstone wrote to the Commissioner. He stated his understanding of what the Commissioner was proposing by way of a programme for payments after the six week period. As well, he enclosed a schedule containing an alternative proposal for discussion purposes and asked the Commissioner to request “the practitioner conducting the fast track review to consider this alternative”. The alternative programme proposed twenty-five weekly payments on and from 26 June 1995 to and including 18 December 1995, followed by a payment of $1,000,000 on 21 December 1995 which would, it was said, reduce the balance to nil.
On 24 May, the Commissioner advised Mr Firmstone as follows:
“As discussed with Mr Firmstone, the fourth point in our letter of 18 May (wrongly designated as an additional third point), needs to be clarified. This point should read as follows:-
4/ The balance after the May return (to be lodged on 21 June 1995) to be renegotiated so that the total of the weekly payments for each month will be sufficient to cover the actual debit as disclosed in each month’s return plus one sixth of the balance remaining after the above-mentioned May return and taking into account the penalty for unpaid tax. This renegotiation is to be contingent upon the Fast Track Review report.”
Mr Firmstone disputed the account in the Commissioner’s letter of the discussion with him. Also on 24 May, the Commissioner withdrew his statutory demand for payment.
On 19 July, the Commissioner wrote the third and final letter upon which SGW relies. After dealing with background matters, the Commissioner advised that the payment schedule proposed by Mr Firmstone under cover of his letter of 19 May was “acceptable” to the Commissioner “as the means of repayment”. The letter continued:
“However, the right at any time to request further information and/or to seek a form of security is retained during the currency of this agreement. In addition, you are advised that any breach of the repayment schedule will result in the immediate issue of a statutory demand.”
On 19 October, Mr Firmstone had a telephone conversation with Mr Richard Howard of the Commissioner’s staff. Mr Howard advised that SGW’s account was clear but for late-payment penalty and that he wished to discuss continuation of the existing arrangements for payment of that penalty. Mr Firmstone asserted in the conversation that it was not appropriate that such an arrangement be agreed to at that stage, since SGW wished to make submissions for remission of some or all of the penalty, and, further, that it had always been his understanding that the question of penalty was being left until the question of the arrears of the primary tax had been paid in full.
On 27 October, the Commissioner raised the question which has given rise to the present dispute. He wrote to SGW care of Mr Firmstone:
“Your repayment of the outstanding Sales Tax balance has been proceeding satisfactorily. It is considered that this is an opportune time to remind you of your obligation to pay additional tax for late payment as pointed out in our letter of 24 May 1995 to your agents Feil & Partners (as they were then known) and as made clear in our earlier discussions which included your Mr Trevor Hannah.
It is noted that after your payment of $400,000 on 23 October the balance outstanding stands at $ 1,626,955.16 which includes $417,218.03 additional tax for late payment. If three further weekly payments of $400,000 are made up to and including 13 November next, the balance due will be $378,396.66 totally comprised of additional tax for late payment. A cheque for this amount on 20 November will then reduce the balance to nil. Of course the debit from the October sales return, due to be lodged on 21 November, may be paid off by instalments as agreed. The final instalment, scheduled for 18 December 1995, will have to include a minor amount for late payment.
It is considered that the repayment schedule outlined above will lead to a smooth transition to the resumption of normal monthly payments anticipated to recommence on 24 December next.”
On 11 December, Mr Firmstone wrote a lengthy letter in reply. He stated that his purpose in the letter was to set out his understanding of the status of arrangements between SGW and the Commissioner in relation to the imposition of late-payment penalties, to request the Commissioner to “determine” a “later date” for the purpose of the calculation of such penalties pursuant to subs 68(1) of the Act, and, in the alternative, to seek the exercise of the Commissioner’s discretion to remit any late-payment penalties pursuant to subs 68(4). Mr Firmstone went on to assert that the payment being made by SGW on 11 December would complete repayment of the sales tax arrears in accordance with the approved plan. His letter referred to the agreements which were to be found in the Commissioner’s letters dated 23 February, 18 May and 19 July. It will be noted that Mr Firmstone’s request that the Commissioner determine a later date for the purpose of a calculation of late-payment penalties pursuant to s 68 of the Act assumed that any determination for the purposes of s 68 was yet to be made by the Commissioner. In this respect and others, the correspondence on and after 11 December 1995 was not to reflect adequately the parties’ submissions made on the hearing. The letter also made out a case for remission of penalty pursuant to subs 68(4).
On 11 December, the Commissioner advised that his understanding had always been that SGW was subject to a liability to pay late-payment penalties. The letter concluded by advising that he had decided to reduce “the culpability component of the penalty” and to accept, if paid within seven days of SGW’s receipt of the letter, a sum of $300,000 in full satisfaction of the total amount of late-payment penalty without remission, namely $429,858.58.
Mr Firmstone replied on 19 December, again asserting his client’s understanding that the issue of penalties was to be considered at the end of the programme once payment of the arrears of primary sales tax was completed. He advised that SGW would prefer that the question of remission of penalties be clarified before it made payment.
On 8 January 1996 the Commissioner advised that he adhered to the position expressed in his letter of 11 December, but would allow a further period of twenty-eight days for payment of the sum of $300,000. His position at that time in relation to both the question of extension of time for payment and remission was expressed in the following paragraphs:
“Secondly the calculation of penalties was considered. Under section 66 of the Sales Tax Assessment Act the Commissioner may choose to extend the time for payment or he may choose not to do so. In your case he has chosen not to do so, so that the penalty is calculated from the respective ‘usual due date’ for each payment.
Thirdly, the remission of penalty under section 68(4) of the Act was considered. The amount of the remission and the reasoning leading to it were advised. This office is still of the view that the non-proceeding of the float was a hazard of business for which there are remedies other than late payment of tax.”
On 9 January Mr Firmstone requested the Commissioner, pursuant to s 13 of the ADJR Act, to furnish a statement of his reasons for not determining a later date for the purpose of the calculation of penalties under subs 68(1) and for his decision not to remit any further part of the late-payment penalty. The statement, furnished on 16 February, included the following:
“1The Commissioner has the statutory power to choose, in a particular case, not to extend the time for payment of tax [s. 66(1)]. In this case he has exercised his power not to extend the time for payment.
...
6It is not the Commissioner’s policy to determine a later date in accordance with s. 68(1). That is, it is not his policy to extend the time for payment in accordance with s. 66. The Commissioner relies on remission of penalty as authorised by s. 68(4) to reduce the penalty in part or in full.
7Alternatively, if the commissioner determines a later date under s. 68(1), he is not bound to choose later dates which correspond with a particular taxpayer’s schedule of late payments even where the Commissioner has approved such a schedule.
8The Commissioner is not satisfied that there were special circumstances which would warrant the determination of a later date being applied.”
The application which commenced the present proceeding was filed on 18 March 1996. As noted earlier, an amended application was filed in Court on 28 July 1997 on the hearing.
REASONING
The positions and contentions of the respective parties changed in the course of the hearing and had apparently done so prior to it. I find it convenient to attempt immediately to state my construction of subs 68(1) followed by my understanding of the “scheme” of Div 2 (ss 63-68).
In my view, the effect of the second sentence of subs 68(1) can be stated thus:
“The penalty is calculated from the usual due date or, if the Commissioner has granted an extension, or permitted payment by instalments, under s 66, and the Commissioner has determined a date later than the due date, from such later date.”
I do not accept SGW’s submission that the second sentence means:
“The penalty is calculated from the usual due date or, if the Commissioner has granted an extension or permitted payment by instalments, under s 66, from the date to which the extension has been granted or the dates on which the instalments become due for payment, as the case may be.”
Sections 63 and 64 provide, relevantly, that sales tax payable by a monthly remitter for a month or by a quarterly remitter for a sales tax quarter, “becomes due for payment” at the end of the twenty-first day after the end of that month or quarter, as the case may be (s 63), and that sales tax payable on a customs dealing is “due for payment” at the time of the dealing (s 64). If the Commissioner has reason to believe that a person may leave Australia before a particular amount of tax would “become due for payment” in accordance with s 63 or s 64, the tax “becomes due for payment on such date as the Commissioner fixes and notifies to the person”: s 65. The notion of the date when tax becomes due for payment is important. Once that date, identified in s 63, s 64 or s 65, has passed without payment, the tax in question is “unpaid tax” and may be recovered as a debt in any court of competent jurisdiction pursuant to s 69. Moreover, for the purpose of s 68, any one of these three dates on which tax becomes due for payment is the “usual due date” from which, in the ordinary case, penalty for late payment begins to accrue by reason of the operation of subs 68(1).
Section 66 empowers the Commissioner to extend the time for payment of tax or allow it to be paid by instalments. Unlike s 65, s 66 does not, in terms, empower the Commissioner to alter the date on which tax “becomes due for payment.” I am not called upon to decide whether, upon a proper construction of ss 63-66, an exercise of the Commissioner’s discretion under s 66 has the effect that any dates which may have been fixed by the Commissioner as part of that exercise of discretion, become the dates when the tax in question “becomes due for payment” for the purpose, for example, of s 69, or whether the answer differs according to whether the discretion is exercised before or after the usual due date in question. The reason is that subs 68(5) provides that in s 68 the expression “usual due date” means “the date on which tax becomes due for payment ignoring any extension of time granted under section 66” (underlining supplied).
The better view seems to me to be, however, that any fixing of a date by the Commissioner which may occur as part of an exercise by him of his discretion under s 66 does not alter the date on which tax will become, or has become, due for payment in accordance with s 63, s 64, or s 65 and that the words “ignoring any extension of time granted under section 66” were included in the definition of “usual due date” in subs 68(5) for more abundant caution. I think that the section is intended to do no more than to assimilate the Commissioner’s position to that of a private creditor, by giving him flexible commercial judgment in relation to recovery of debts as distinct from binding him to seek recovery of the full amount promptly after the usual due date in every case. It is not inconsistent with this view, however, that the conduct of the Commissioner in granting an extension of time or allowing payment by instalments may, in the circumstances of a particular case, and as a result of the operation of private law doctrines such as that of estoppel, disentitle him from commencing recovery action under s 69 for the time being. This is another matter which I am not presently required to explore.
The expression “usual due date” in the first sentence of subs 68(1) is a reference to a date identified in s 63, s 64 or s 65. In my opinion, the second sentence refers to a determination of a date for the purpose of that subsection and is distinct from an exercise of the discretion for which s 66 provides. Several considerations lend support to this construction. Firstly, the second sentence of subs 68(1) plainly suggests the “determination” of a “date” where, as a separate matter, a condition has been satisfied, namely, that the discretion under s 66 has been exercised in favour of the taxpayer. Of course, the determination of the later date may take place on the same occasion as the exercise of that discretion. What is important for present purposes, however, is that the second sentence of subs 68(1) is constructed so as to refer to the granting of an extension or permitting of payment by instalments as a condition which must have been satisfied before the Commissioner determines a later date.
Secondly, the fixing of a date or dates is not inherent in every exercise of discretion possible under s 66, since an extension of time may be granted until a future event of uncertain timing. Even allowing tax to be paid by instalments does not necessarily involve a “determination” by the Commissioner of “dates” since “the allowing” might consist of nothing more than the receipt of part payments coupled with an uncommunicated decision by the Commissioner not to seek full recovery immediately (cf Deputy Commissioner of New South Wales v Davies (1958) 75 WN (NSW) 485 (FC) at 487 (Herron J)). The notion of a “determination” of a “date” suggests a procedure distinct from the extending of time or allowance of payment by instalments to which s 66 refers.
Thirdly, in my view, it would require clearer language than that of s 66 alone to produce the result that even in a case where the Commissioner fixed dates in the course of extending the time for payment or allowing payment to be made by instalments, and payment was made accordingly, the payment was no longer to be treated as having been made late. In the case of a private debt, a unilateral gratuitous indulgence of either of the kinds described in s 66 does not signify that the date of accrual of the cause of action or of interest is postponed. There is no obvious reason why the legislature would have intended the Commissioner to be in a less favourable position than that of a private creditor.
Fourthly, the effect of the construction advanced by SGW is that any later date or dates fixed in the Commissioner’s decision under s 66 would become the date or dates from which late-payment penalty was to be calculated and would thus involve a “remission” of such penalty, at least in a case where the decision was made after the applicable usual due date. Yet subs 68(4) provides expressly for the circumstances in which, and the grounds on which, the Commissioner may remit some or all of a late-payment penalty. Similarly, the provision in subs 66(2) that in s 66 the word “tax” includes, inter alia, late-payment penalty, indicates that the extending of time for payment or allowing of payment by instalments is not itself intended to eliminate or reduce the amount of any late-payment penalty which is the subject of the decision. The foregoing of part or the whole of the amount of a late-payment penalty is the subject matter of s 68 and may occur only pursuant to that section.
Fifthly, the Explanatory Memorandum which accompanied the Bill for the present Act of 1992 stated that the provisions for penalty for late payment had been simplified but that the effect of the law remained unchanged (par 12.17). Section 29 of the Sales Tax Assessment Act 1930 (Cth) made “additional tax ... due and payable by way of penalty” where tax remained unpaid after the time when it became due and payable. Section 28 of that Act empowered the Commissioner in such cases as he thought fit to extend the time for payment of tax as he considered the circumstances warranted or permit payment by instalments within such time as he considered the circumstances warranted. Section 29 provided that where the Commissioner had extended the time for payment or permitted payment by instalments, the additional tax by way of penalty was to be calculated:
“from such date as the Commissioner determines, not being a date prior to the date on which the tax was originally due and payable.” (underlining supplied)
The words underlined by me suggest that the legislature accepted that without them, the Commissioner might determine a date even earlier than “the date on which the tax was originally due and payable”. But this would be an impossibility if a determination of a date for the purpose of calculation of penalty was inherent in the granting of time under s 28, since the result of such an extension would always be that the date determined would be later than the date on which the tax was originally due and payable. The determination of the date under s 29 was clearly considered to be a step distinct from the exercise of the discretion provided for in s 28. The new Act was not intended to change the law in this respect.
Sixthly, in at least two cases decided under the comparable provisions of the Income Tax Assessment Act 1936 (Cth) (ss 206 and 207 of that Act) it seems to have been taken for granted that the determination of a later date for the purpose of the calculation of penalty is distinct from granting an extension of time for payment or allowing payment by instalments. In Deputy Commissioner of Taxation v Kavich (1996) 138 ALR 323 (FCA/FC), Lockhart J said (at 328):
“Additional tax payable under s 207 accrues from the time that the unpaid income tax becomes due and payable, unless the Commissioner has granted an extension of time or permitted payment by instalments under s 206 and the Commissioner determines that s 207 is to apply from a date that is later than the date the income tax originally became due and payable.” (underlining supplied)
(In ARM Constructions Pty Ltd v Deputy Commissioner of Taxation (1986) 65 ALR 343 (FCA/Burchett J) the taxpayer seems to have made the same assumption since it sought review of both the Commissioner’s decision refusing to determine a later date for the purpose of calculation of penalty under s 207 or to remit accrued penalty under that section and review of his decision to refuse an extension of time for payment pursuant to s 206.)
The foregoing resolution of the question of construction makes it unnecessary for me to decide whether the Commissioner in fact exercised his discretion under s 66 (as SGW contends) or not (as the Commissioner contends). However, the matter was fully argued and I think it desirable that I express my view on it. I think that the Commissioner did exercise his discretion under s 66. It suffices to say simply that the evidence to which I have previously referred shows that the Commissioner both extended the time for payment of the primary tax and allowed it to be paid by instalments. Therefore, what he did fell squarely within s 66. He should be taken to have exercised power given by the appropriate provision of the Act.
The Commissioner submits that s 111 of the Act supported what he did. Section 111 provides simply that:
“The Commissioner has the general administration of the sales tax law.”
The expression “sales tax law” is defined in s 5 of the Act to mean, inter alia, the Act. Let it be assumed that in the absence of s 66, s 111 would permit the Commissioner to extend time for payment and to accept payment by instalments. Nonetheless, and notwithstanding the fact that s 66 is not inconsistent with s 111 and is not conditional, I think that as a specific provision, it supplants s 111 which no longer operates in the field covered by s 66: cf Refrigerated Express Lines (A/Asia) Pty Ltd v Australian Meat and Live-stock Corporation (No 2) (1979) 44 FLR 455 (Deane J) at 468-469; Downey v Trans Waste Pty Ltd (1991) 172 CLR 167 at 171-172.
In terms of SGW’s amended application, I conclude that the Commissioner did not misconstrue ss 66 and 68(1); that subs 68 (1) does not operate by reference to any later dates for payment inherent in the exercise of the discretion given by s 66; that subs 68(1) does give the Commissioner an independent power to determine a date; that subs 68(1) did not impose a duty on the Commissioner to determine later dates corresponding with those stipulated by him pursuant to s 66; and that subs 68(1) does not impose a duty on the Commissioner to determine dates for payment later than the usual due dates. In the result, the grounds relied on by SGW in its amended application are not made out.
The Commissioner filed a notice of objection to competency. His case in this respect was that the decision not to determine later dates pursuant to subs 68(1) was a decision making, or forming part of the process of making, or leading up to the making of, an assessment or calculation of tax under an Act providing for the assessment of sales tax, and was therefore not a decision to which the ADJR Act applied (see the definition of “decision to which this Act applies” in s 3 of the ADJR Act and par (e) of Sch 1 to that Act). Initially, the Commissioner’s case was that, in the exercise of my discretion, I should not exercise the jurisdiction given by s 39B of the Judiciary Act 1903 (Cth) either, since to do so would be to enable SGW to circumvent the provision of the ADJR Act to which I have referred. Ultimately, however, the Commissioner joined SGW in asking the Court to decide the issues raised.
In my opinion, I have jurisdiction to do so and should do so. In my view the penalty for late payment imposed by s 68 is not a tax; cf Deputy Commissioner of Taxation v Ichwan Pty Ltd (1987) 87 ATC 5013; Deputy Commissioner of Taxation v Fontana (1988) 88 ATC 4751 and Deputy Commissioner of Taxation v Kavich (1996) 138 ALR 323 (FCA/FC) at 328 (Lockhart J), which were decided on the similar provision in s 207 of the Income Tax Assessment Act 1936 (Cth). In the alternative, I would exercise my undisputed jurisdiction under s 39B of the Judiciary Act 1903 (Cth). There are three reasons why I would not, in the exercise of my discretion, refrain from exercising that jurisdiction. First, both parties now ask me to exercise it. Secondly, the legal issue involved is significant and has been fully argued. Thirdly, if, contrary to my view, the Commissioner’s decision is not reviewable under the ADJR Act, it is not reviewable at all except pursuant to s 39B, since late-payment penalty is not the subject of an assessment in respect of which s 107 of the Act gives a taxpayer a right of objection in the manner set out Pt IVC of the Taxation Administration Act 1953 (Cth).
CONCLUSION
The notice of objection to competency will be dismissed. The amended application will be dismissed. Unless SGW notifies my Associate by 5 pm on Friday 8 August 1997 that it wishes to submit that there should be some other result on costs, I will, on Monday 11 August 1997, order that it pay the Commissioner’s costs of the proceeding. If SGW so notifies my Associate, I will hear submissions on costs at 9.30 am on Monday 11 August 1997 with a view to deciding the question of costs on that date.
I certify that this and the preceding fourteen (14) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren
Associate:
Dated: 8 August 1997
Counsel for the Applicant: Mr S J Gageler Solicitor for the Applicant: Firmstone & Feil Counsel for the Respondent: Miss R M Henderson Solicitor for the Respondent: The Australian Government Solicitor Date of Hearing: 28 July 1997 Date of Judgment: 8 August 1997
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