Ketua Pengarah Kastam dan Eksais v 1. ) Tomoe Sdn Bhd (PA-24NCvC-300-04/2021)

DAN TOMOE MALAYSIA SDN BHD (No. Syarikat: 1164031-V) …RESPONDEN PERTAMA

TRIBUNAL RAYUAN KASTAM …RESPONDEN KEDUA JUDGMENT (APPEAL AGAINST THE DECISION OF THE CUSTOMS APPEAL TRIBUNAL) PRELUSION [1] Before a taxpayer registered to pay goods and services tax (GST), he paid an input tax amount on goods that he imported for his business. [2] After the taxpayer registered to pay GST, he paid a GST output tax related to those goods. [3] In this circumstance, according to GST Regulations, the taxpayer could make a claim for the refund of the GST input tax paid earlier. Page 3 of 30 [4] The Customs Department allowed the claim for a refund, but reduced the amount refunded. [5] Can Customs reduce the amount to be refunded? Does Customs have the power to reduce the amount to be refunded? CHRONOLOGY OF UNDISPUTED FACTS AND PROCEEDINGS [6] The following is the chronology of the undisputed facts and proceedings which are pertinent to this Appeal—

16.6.2016—Tomoe submitted its application to register to pay GST under the Goods And Services Act 2014 (GSTA).

7.8.2016—Tomoe’s registration application was approved. Tomoe’s effective registration date was 1.10.2016. July – September 2016—Tomoe imported approximately RM4.93 million worth of goods for use in its business. Tomoe paid 6% of RM4.93 million as GST, which amounted to RM295,809.19. Note: This amount was paid before Tomoe was registered to pay GST.

1.10.2016—Tomoe’s effective registration date.

5.4.2017—Tomoe applied for an exceptional input tax claim for a refund of the GST that it paid on the imported goods i.e. the RM295,089.19.

28.12.2017—Tomoe submitted the supporting documents to support its Exceptional ITC.

10.5.2018—The Government Of Malaysia announced that the GSTA would be repealed.

1.9.2018—The effective repeal date of the GSTA.

30.11.2018—The Director General Of Customs (Customs) allowed Tomoe’s Exceptional ITC for a refund but reduced/apportioned the refund amount from the RM295,089.19 claimed to RM112,537.88 (38.36%). The reason that was given was that the GSTA was repealed.

2.1.2019, 15.1.2019, 3.5.2019—Tomoe appealed to Customs and the Ministry Of Finance.

25.6.2019—Customs maintained its 30.11.2018 decision. Tomoe appealed to the Customs Appeal Tribunal (CAT).

22.3.2021—The CAT allowed Tomoe’s Appeal, ordering the full refund of the RM295,809.19. April 2021—Customs filed this Appeal (by Originating Summons) to the High Court against the CAT’s decision. [7] The Appellant here is Customs. I will also use the term “Customs” to denote either the Director General Of Customs or the Royal Malaysian Customs Department. PERTINENT PROVISIONS [8] Regulation 46 of the Goods And Services Tax Regulations 2014 (Regulations) provides that when a taxpayer pays tax on goods that are imported by the taxpayer before the taxpayer is registered to pay GST, then after the taxpayer is registered to pay GST, the taxpayer can make a claim for the refund of that GST paid. And Customs can authorise the refund as if it were input tax. This is known as an exceptional input tax claim (Exceptional ITC) Page 5 of 30 [9] Section 2 (the interpretation section) of the GSTA defines “input tax” to include the tax that a taxpayer pays when the taxpayer imports goods for use in the taxpayer’s business. [10] I set out the relevant portions of Regulation 46 here for reference (with my emphases in bold)— Regulation 46. Exceptional claims for input tax

Subject to subregulation (2), the Director General may authorise a taxable person to treat as if it were input tax, any tax paid on the supply of goods to the taxable person before the date with effect from which he was, or was required to be registered, or paid by him on imported goods before that date, for the purpose of a business which was carried on or was to be carried on by him at the time of such supply or payment. [11] I also set out the relevant portions of the following sections— sections 2, 38 and 39—for reference (with my emphases in bold)— Section 2. Interpretation

In this Act, unless the context otherwise requires— "this Act" includes any subsidiary legislation made under this Act; "input tax" means—

tax on any supply of goods or services to a taxable person; and

tax paid or to be paid by a taxable person on any importation of goods, Page 6 of 30 and the goods or services are used or are to be used for the purposes of any business carried on or to be carried on by the taxable person: Provided that where the goods or services are used or are to be used partly for the purposes of any business carried on or to be carried on by the taxable person and partly for other purposes, tax on the supply and importation shall be apportioned so that only so much as is attributable to the purposes of his business is counted as his input tax; "output tax" means tax on any taxable supply of goods or services made by a taxable person in the course or furtherance of his business in Malaysia; Section 38. Credit for input tax against output tax

Any taxable person is entitled to credit for so much of his input tax as is allowable under section 39 to be deducted from any output tax that is due from him. . . Section 39. Amount of input tax allowable

The amount of input tax for which any taxable person is entitled to credit in any taxable period shall be so much of the input tax for the period that is allowable and reasonable to be attributable, as may be prescribed, to the following supplies made or to be made by the taxable person in the course or furtherance of any business in Malaysia: Page 7 of 30

any taxable supply, including a taxable supply which is disregarded under this Act;

any supply made outside Malaysia which would be a taxable supply if made in Malaysia; or

any other supply as may be prescribed. THIS APPEAL IS DISTILLED DOWN TO TWO ISSUES [12] From the parties’ Written Submissions and through my pre-hearing case management of this Appeal, the parties agree that there are two primary issues to be decided in this Appeal. The two issues are—

Does the GSTA repeal affect Tomoe’s rights to make the Exceptional ITC?

Whether Regulation 46(1) is subject to section 39 of the GSTA such that Customs has the discretion to reduce or apportion the Exceptional ITC, to refund an amount that is “allowable and reasonable to be attributable”? In other words, does Customs have the power to reduce or apportion the Exceptional ITC under Regulation 46(1)? Note: This expression “allowable and reasonable to be attributable” is the expression used to describe the amount that Customs can determine when they exercise their discretion under section 39. THE JUDGMENTS THAT GUIDE ME [13] There is an accumulating body of case law on Exceptional ITC for refund under Regulation 46(1). Several case law authorities guide me in my deliberation. The case law authorities that are instructive include— Page 8 of 30

Nobuyasu Sdn Bhd v Tribunal Kastam Diraja Malaysia & Anor [2020] 11 MLJ 182 (HC); [2020] AMTC 513; [2020] 1 LNS 336; [2020] MLRHU 518—the judgment of Justice Nordin Hassan J (later FCJ);

Primary Goldennet Sdn Bhd v Ketua Pengarah Kastam Dan Eksais & Anor [2021] WA-24-77-12/2019 (HC)—the judgment of Justice Mariana Yahya J (later JCA);

Jimah East Power Sdn Bhd v Ketua Pengarah Kastam, Jabatan Kastam Diraja Malaysia [2021] MLJU 2764 (HC); [2021] AMEJ 2171; [2021] MLRHU 2801—the judgment of Justice Mariana Yahya J (later JCA);

Broadway Metal Snd Bhd v Ketua Pengarah Kastam Dan Eksais [2022] MLJU 2005 (HC); [2022] 1 LNS 1955—the judgment of Justice Ahmad Kamal Md Shahid J;

Metrogold Commercial Sdn Bhd v Ketua Pengarah Kastam [2022] MLJU 2556 (HC); [2022] 1 LNS 2448—the judgment of Justice Noorin Badaruddin J;

JT Broadway Sdn Bhd v Ketua Pengarah Kastam & Anor [2023] MLJU 109 (HC); [2023] 1 LNS 127—the judgment of Justice Noorin Badaruddin J;

Zillion Sunrise Sdn Bhd v Ketua Pengarah Kastam & Anor [2023] MLJU 1072 (HC); [2023] AMEJ 0940; [2023] 1 LNS 930. *Note: All these cases are judgments in favour of the taxpayer asking for an Exceptional ITC for refund. Page 9 of 30 THE ISSUE OF WHETHER THE REPEAL OF THE GSTA AFFECTED TOMOE’S EXCEPTIONAL ITC [14] Customs argues that they reduced or apportioned Tomoe’s Exceptional ITC because the GSTA was repealed. But I find this argument untenable. My reasons are as follows. [15] First, the GSTA was repealed with effect from 31.8.2018. But Tomoe applied for the Exceptional ITC on 28.12.2017, months before the repeal. [16] It is trite that a repealed law does not have retrospective effect i.e. the rights acquired and obligations imposed under a repealed statute are not extinguished when the statute is repealed. This principle of law is codified in section 30 of the Interpretation Acts 1948 & 1967. [17] The relevant portions of section 30(1) of the Interpretation Acts 1948 & 1967 provide as follows— Section 30. Matters not affected by repeal.

The repeal of a written law in whole or in part shall not—

affect the previous operation of the repealed law or anything duly done or suffered thereunder; or

affect any right, privilege, obligation or liability acquired, accrued or incurred under the repealed law; or… [18] Second, in Metrogold (supra), Justice Noorin Badaruddin pointed out that the Goods And Services Tax (Repeal) Act 2018 does not provide for the repeal of the GSTA to have a retrospective effect. She wrote— Page 10 of 30 [38] The position of the law is clear. A statute should not be interpreted retrospectively so as to impair an existing right or obligation unless that result is unavoidable on the language used (see Yew Bon Tew & Anor v Kenderaan Bas Mara [1983] CLJ (Rep) 56). On retrospective operation of an Act, the presumption is that an enactment is not intended to have a retrospective operation unless a contrary intention appears (see: National Land Finance Co-Operative Society Ltd v Director General of Inland Revenue [1993] 4 CLJ 339). In the present matter there is no clear terms in the Goods and Services Tax (Repeal) Act 2018 [Act 805] that states the repeal of the GST Act is intended to be retrospective. Section 4 (1) of Act 805 for that matter is clear. It states: “4. Continuance of liability, etc.

Notwithstanding the repeal of the Goods and Services Act 2014-

(a)any liability incurred may be enforced; or

(b)any goods and services tax due, overpaid or erroneously paid may be collected, refunded or remitted, under the repealed Act as if the repealed Act had not been repealed.” [19] Third, I agree with Justice Noorin Badaruddin that taxpayers like Tomoe should not lose-out or be punished or penalised by the repeal of the GSTA. Tomoe’s Exceptional ITC, made before the GSTA’s repeal, must be given its due consideration for a refund, even after the repeal. This is what she wrote in Metrogold (supra)— [41] It is of the considered view that the Respondent’s Decision centres at the fact that the GST Act was repealed. It must be borne in mind that the taxpayers must not be permitted to be ‘punished’ for something that is beyond their control. The Applicant had incurred the GST amount of RM 10,239,000 way before the repeal of the GST Act and therefore legally entitled to a refund of the ITC Claim prior to the repeal of the GST Act. Page 11 of 30 [20] Fourth, I am of the view that just as the taxpayer should not be disadvantaged by the GSTA’s repeal, Customs should not be given the advantage of procuring more tax than it is permitted to procure because of the repeal. To illustrate, let us say an amount of tax was paid while the GSTA was in force. Then an Exceptional ITC for refund was made also while the GSTA was in force. But when the GSTA was repealed, Customs refused to refund the Exceptional ITC on the mere ground that the GSTA was repealed. Such a position is not reasonable. And such a circumstance is contrary to the principles of fairness and justice. [21] I therefore conclude that the repeal of the GSTA is not an acceptable ground to reduce or apportion Tomoe’s Exceptional ITC for a refund. DOES CUSTOMS HAVE THE POWER TO REDUCE THE EXCEPTIONAL ITC REFUND? [22] I will now deliberate on the issue of whether Customs has the power to reduce or apportion the Exceptional ITC for refund under Regulation 46(1). [23] This is Customs’ argument. Under sections 2, 38 and 39 of the GSTA, when a taxpayer asks for a general ITC for refund, Customs has the discretion to reduce or apportion the refund to an amount that is “allowable and reasonable to be attributable” (citing the expression used in section 39). To work out the amount that is “allowable and reasonable to be attributable”, Customs uses what they allege is an accounting-based formula that is called the “best method formula” (BMF). Page 12 of 30 [24] Customs argues that if an Exceptional ITC for refund is made under Regulation 46(1), Customs is entitled to exercise their discretion in the same manner, that is, to apply the BMF to ascertain the amount that is “allowable and reasonable to be attributable”. [25] Utilising the BMF, the amount of the Exceptional ITC refunded is invariably less than the amount of the Exceptional ITC claimed. To illustrate, I will apply the numbers applicable to Tomoe’s claim. [26] According to Customs, the BMF is— The input tax paid x The period the taxpayer is a taxable person --------------------------------------------------------- The useful life of the imported goods [27] The input tax paid is the amount of the Exceptional ITC = RM293,402.35. [28] The period Tomoe was a taxable person was from the date that Tomoe was registered as a taxpayer under the GSTA and the date that the GSTA was repealed i.e. from 1.10.2016 to 31.8.2018 = 700 days. [29] The useful life of the goods that Tomoe imported was the period in which the goods can be used for Tomoe’s business = 5 years i.e. 1,825 days. [30] When we fill in these numbers into the BMF, the refundable amount is RM112,537.88, which is 38.36% of Tomoe’s claim for refund. Page 13 of 30 [31] Foremost, I wish to address a point that Customs makes about the discretion that they allege that they have to reduce or apportion the Exceptional ITC. Customs argues that they have the discretion because of the word “may” in Regulation 46(1). Regulation 46(1) provides that Customs may authorise a taxpayer to make an Exceptional ITC. [32] To my mind, this argument misses the point. The issue here is not whether Customs has the discretion to allow Tomoe’s Exceptional ITC. Customs certainly has the discretion. In fact, Customs had already exercised the discretion to allow Tomoe’s Exceptional ITC. [33] So the argument over the word “may” in Regulation 46(1) is no longer pertinent and no longer relevant. [34] Instead, the issue is whether Customs has the discretion to impose the BMF onto the amount of Exceptional ITC, to reduce the amount to be refunded. [35] In my judgment, Customs has no power nor discretion to reduce the amount of the Exceptional ITC, or to apply the BMF or any other formula or method to compute an amount that is invariably lower than the actual amount of Exceptional ITC. My reasons are as follows. A taxing statute requires an interpretation that produces a just result [36] First, it is a well-established principle under tax law that a taxing statute requires a purposive interpretation that reflects the intention of Parliament and that produces “neither injustice nor absurdity”. In other words, a taxing statute must lead to a just and reasonable outcome. Page 14 of 30 [37] The Federal Court in Palm Oil Research And Development Board Malaysia & Anor v Premium Vegetable Oils Sdn Bhd & Another Appeal [2005] 3 MLJ 97 (FC); [2004] 4 AMR 202; [2004] 2 CLJ 265, speaking through Justice Gopal Sri Ram JCA (later FCJ), propounded that— 78 …The correct approach to be adopted by a court when interpreting a taxing statute is that set out in the advice of the Privy Council delivered by Lord Donovan in Mangin v Inland Revenue Commissioner [1971] AC 739 : First, the words are to be given their ordinary meaning… Secondly, '…one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption so to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. (Per Rowlatt J in Cape Brandy Syndicate v Inland Revenue Commissioners [1921] 1 KB 64 at 71, approved by Viscount Simons LC in Canadian Eagle Oil Co Ltd v Regeim [1945] 2 All ER 499; [1946] AC 119). Thirdly, the object of the construction of a statute being to ascertain the will of the legislature, it may be presumed that neither injustice nor absurdity was intended. If therefore a literal interpretation would produce such a result, and the language admits of an interpretation which would avoid it, then such an interpretation may be adopted… 79 …Hence, the governing principle is this. When construing a taxing or other statute, the sole function of the court is to discover the true intention of Parliament. In that process, the court is under a duty to adopt an approach that produces neither injustice nor absurdity… [emphasis mine] Page 15 of 30 [38] I am guided and agree with these views expressed by Justice Ahmad Kamal Md Shahid in Zillion Sunrise (supra)— [23] It is also clear from the express wording in Regulation 46(1) of the GST Regulations that the Parliament did not intend to confer any discretion on the Respondent to impose additional requirements when considering an Exceptional ITC Claim. [24] If the Parliament intends for the Respondent to be able to impose additional requirements, they would have expressly stated so in Regulation 46(1) of the GST Regulations, as they have done in Regulation 34(1)(e) and Regulation 38(3) of the GST Regulations. . [42] It is not disputed that the Respondent has powers under Section 177 of the GST Act 2014 and Section 38 and 39 of the GST Act 2014 to make regulations to impose the Formula. However, I find that there was no regulation made to enable the imposition of the Formula by the Respondent. Therefore, it is my view that it is ultra vires for the Respondent to impose the Formula in the Decision. [emphases mine] Courts should not add to or subtract from the words of a statute [39] Second, it is a principle of statutory interpretation that courts should not—actually, cannot—add to or subtract from the words of a statute. [40] The Federal Court in Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd and Another Appeal [2020] 6 MLJ 224 (FC); [2019] 5 AMR 516; [2019] 8 CLJ 433; [2019] 5 MLRA 584, speaking through Justice Zawawi Salleh FCJ, sets out the principle in this way— Page 16 of 30 [57] It is well-established principle of interpretation that the court cannot rewrite, recast or reframe the legislation because it has no power to do so. The court cannot add words to a statute or read words which are not there… [emphasis mine] The BMF is not included in any provision of the GSTA or the Regulations [41] Third, the BMF is not to be found in any provision of the GSTA or the Regulations. [42] At the CAT hearing, Customs’ witnesses admit that the BMF is not provided for nor referred to in the GSTA and the Regulations. Customs’ Puan Habibah Binti Abdul Shukor (SR1) admitted that the BMF is not stated in the GSTA. And Customs’ Encik Mohammad Fauzi Bin Rasib (SR2) admitted that the BMF is not in any of the GST legislations. Customs cannot use the BMF to reduce the amount of tax to be refunded [43] Fourth, I am of the view that because the BMF is not to be found in the GSTA and the Regulations, Customs cannot rely on it or apply it when they are considering an Exceptional ITC for a refund under Regulation 46(1). Customs' conduct of relying on the BMF to reduce Tomoe’s Exceptional ITC is therefore an arbitrary act that is ultra vires the GSTA and the Regulations. [44] Additionally, since the BMF is not referred to in the GSTA and the Regulations, and the GSTA and the Regulations do not give Customs the discretion to reduce or apportion any Exceptional ITC, the public— Page 17 of 30 particularly taxpayers—have a legitimate expectation that when Customs allow an Exceptional ITC, the entire amount of the claim will be refunded to them. [45] My views here correspond with and are guided by the case law authorities that I cited earlier. I briefly refer to the presiding Judges’ reasons stated in their respective Grounds Of Judgment. [46] In Nobuyasu (supra), Justice Nordin Hassan held— [22] There is nothing in reg 46(1) or any other provisions in the GST Act 2014 and its Regulations which expressly provides for the reduction and apportionment of the input tax claim including the formula for the said reduction or apportionment. Here, the respondents reliance on ss 2, 38 and 39 of GST Act 2014 and reg 39 of the GST Regulations 2014 is misconceived and untenable. [23] If the Parliament intention is to have the input tax reduce or apportion with a certain formula, it would have expressly provided it in the statute as in the following provisions in the GST Regulations 2014:

(a)sub-regs 33(2) and 33(3) — formula to determine adjustment on input tax or output tax when there is a change accounting basis: .

(b)sub-reg 39(4) — formula to calculate the recoverable of persentage [sic] of residual input tax: . [24] In addition, if the legislation intended to empower the Director General to make any reduction in relation to the input tax claim, it would have expressly stated in the statute as for example in sub-s 57(2) of the GST Act 2014 as follows:

The Director General may reduce or disallow any refuncld [sic] due under this section to the extent that the refund would unjustly enrich the person referred to in subsection (1). [25] In the present case, there is no express provisions under the law for the Director General to reduce the appellant’s input tax claim nor any formula prescribed for the said reduction and apportionment of the input tax claim. . [27] The pertinent point here is that if the law does not prescribed any formula or given any power for the said reduction or apportionment, it simply mean that it cannot be done. This also would avoid any arbitrary and discriminatory decision by the second respondent. [emphases mine] [47] On Nobuyasu (supra), Customs asserts, in their Outline Of Submissions, that the Nobuyasu judgment was “overturned by the Court Of Appeal” and that “full reliance [on the] decision is unsustainable”. I asked Customs for the Grounds Of Judgment of the Court Of Appeal panel which Customs assert overturned the Nobuyasu judgment, so that I can ascertain the Court Of Appeal’s grounds for overturning Nobuyasu. But Customs did not produce or refer me to the Court Of Appeal’s Grounds Of Judgment. [48] I then checked the four main law report publishers (LexisNexis for MLJ, Thomson Reuters for AMR, CLJLaw for CLJ, and Malaysian Law Review for MLRA), but could not find the Court Of Appeal’s Grounds Of Judgment that disagreed with the reasoning in Nobuyasu. [49] Facing this circumstance, I am both guided and bound by the Federal Court in Vishnu Telagan v Timbalan Menteri Dalam Negeri, Page 19 of 30 Malaysia & Ors [2019] 6 MLJ 1 (FC); [2019] 5 AMR 554; [2019] 9 CLJ 177; [2019] 5 MLRA 83. The Federal Court, speaking through Justice David Wong Dak Wah CJSS, propounded— [40] The respondents argued that the Federal Court there had heard a similar argument on this point and refused the detainee a writ of habeas corpus. As at the date of our decision in this appeal, no written grounds had been delivered in respect of that case and so we were therefore unable to glean any reasons why such a decision was made. Therefore, we did not see how the said judgment lent any support to the respondents’ case. Surely, in arriving at our decision, we had to consider and apply the law according to the facts and circumstances of this case. [emphasis mine] [50] Further, I am also guided by the reminder given by Justice Wong Kian Kheong J (later JCA) about the principle that under the doctrine of stare decisis, it is the ratio decidendi in a higher court’s judgment that persuades another court of equal jurisdiction and that binds a lower court. And the ratio decidendi can only be ascertained from the reasoned grounds of that judgment. [51] Justice Wong Kian Kheong did so in the case of Syahin Hafiy Danial bin Soh Ahmad Luptepi Amin v Mansur bin Yunus & Anor [2021] 8 MLJ 297 (HC); [2019] 1 LNS 1237; [2019] MLRHU 1237, where he wrote— [14] I am not able to accept the reference by the defendant’s learned counsel to other cases except if written judgments have been delivered in the other cases. This is because from the view point of the stare decisis doctrine, only the ratio decidendi ascertained from a written judgment of a superior court, has binding or persuasive effect. I refer to the judgment of Raja Azlan Shah FJ (as his Majesty then was) in the Federal Court case Page 20 of 30 of Malaysia National Insurance Sdn Bhd v Abdul Aziz bin Mohamed Daud [1979] 2 MLJ 29 at 32 as follows: However, I would once again emphasize what has so often been said before, that precedents are not to be slavishly followed; a case may be followed only for its strict ratio decidendi. (Emphasis added.) Without a written judgment of a previous case, the court cannot ascertain the ratio decidendi of the previous case by considering the following three matters (‘three matters’):

(a)the material facts of the case which give rise to the issue to be decided by the court;

(b)the rule of law which has been applied by the court to resolve the issue; and

(c)the reasoning of the court in applying the rule of law to decide the issue in question. [15] In Datuk Haji Harun bin Haji Idris v Public Prosecutor [1977] 2 MLJ 155, the appellant’s learned counsel referred to a digest, summary or extract of a previous decision, Heah Chin Kim. Suffian LP held as follows in the Federal Court in Datuk Haji Harun at p 170: The full judgment in Heah Chin Kim [1954] MLJ xxxiii is not available and it is impossible for us to determine its ratio decidendi. (Emphasis added.) Based on Datuk Haji Harun, no reliance can be placed on a digest, summary or extract of a previous decision because the court cannot extract the ratio decidendi of the previous case by considering the three matters. [emphases mine] Page 21 of 30 [52] As such, as far as the Nobuyasu judgment is concerned, I remain guided and persuaded by the grounds expounded by Justice Nordin Hassan in it. [53] In Primary Goldennet (supra), Justice Mariana Yahya said this about Customs’ use of a formula to reduce or apportion the amount to be refunded in an Exceptional ITC— [30] …Formula pengiraan yang digunakan oleh Defendan Pertama tersebut [Note: Customs] tidak merujuk kepada mana-mana kaedah atau peruntukan undang-undang GST. Mahkamah ini bersetuju dengan hujahan pihak Plaintif bahawa tiada mana-mana peruntukan undang-undang sama ada di bawah Akta GST, Peraturarn-Peraturan GST atau Akta Pemansuhan GST mengenai kaedah atau formula pengiraan yang dibuat khusus mengenai perkara Tuntutan Luar Biasa. [31] Peraturan 46 juga tidak menetapkan sebarang kaedah atau formula pengiraan bayaran yang patut dibuat oleh Defendan Pertama. Mengambil kira bahawa Peraturan 46 adalah jelas maksudnya, maka apa-apa yang dibuat diluar dari yang diperuntukan adalah bertentangan dengan Peraturan 46 tersebut. Mahkamah ini berpendapat, Defendan Pertama tiada sebarang kuasa untuk membuat penetapan pengiraan kelayakan Tuntutan Luar Biasa tanpa kuasa yang diperuntukan di bawah undang-undang. Surat keputusan bertarikh 9.10.2018 tersebut juga tidak menyatakan sumber undang-undang yang diguna pakai oleh Defendan Pertama dalam membuat pengiraannya. [note and emphasis mine] [54] I am informed that there was an appeal to the Court Of Appeal against this decision, and that the Court Of Appeal affirmed the High Court’s judgment in Primary Goldennet. But I am informed that the Court Of Appeal’s Grounds Of Judgment is not or not yet available. Page 22 of 30 [55] In the later case of Jimah East Power (supra), Justice Mariana Yahya consistently held that as there is no formula prescribed under Regulation 46(1), Customs cannot rely on a formula to compute the amount of Exceptional ITC to refund. She wrote— [30] The Respondent also applied the formula in considering the Applicant’s Exceptional ITC Claim. This Court agrees with the Applicant’s submission that there is no such formula prescribed in Regulation 46(1) of the GST Regulations in considering the Applicant’s Exceptional ITC Claim… [56] I am informed that there was also an appeal to the Court Of Appeal against this decision. But in contrast to Primary Goldennet, I am informed that the Court Of Appeal reversed the High Court’s judgment in Jimah East Power. I am similarly informed that the Court Of Appeal’s Grounds Of Judgment is not or not yet available. [57] In this connection, similar to the circumstance with the Nobuyasu case, I remain guided and persuaded by the grounds expounded by Justice Mariana Yahya in both the Primary Goldennet and the Jimah East Power cases, for the reasons that I alluded to earlier. [58] In Broadway Metal (supra), Justice Ahmad Kamal Md Shahid found that Customs’ reliance on an unprescribed formula to reduce a taxpayer’s Exceptional ITC is ultra vires. He puts it in this manner— [25] I am of the considered opinion that the Respondent has no power and/or discretion to arbitrarily apply a formula which was not prescribed by law to reduce the Applicant’s Exceptional Claims. . [31] It is not disputed that the Respondent has powers under Section 177 of Page 23 of 30 the GST Act 2014 and Section 38 and 39 of the GST Act 2014 to make regulations to impose the Formula. However, I find that there was no regulation made to enable the imposition of the Formula by the Respondent. Therefore, it is my view that it is ultra vires for the Respondent to impose the Formula in the Decision. [emphases mine] [59] In Metrogold (supra), Justice Noorin Badaruddin is of a similar view—that Customs has no discretion to apply a formula that is not prescribed in the GSTA and the Regulations. She also finds that Customs’ act of reducing the Exceptional ITC in that case is a denial of the taxpayer’s legitimate expectation to be refunded the full amount of the claim. She puts it this way— [25] It is of the considered view that the Respondent has no discretion to apportion the ITC Claim by the Applicant. The Respondent can only apply what is prescribed under the GST Act and the GST Regulations. The Respondent in their Affidavit-in-Reply in fact admitted that the formulas used by them are not prescribed under any law. In paragraph 13 (c) of the Affidavit-in-Reply, the Respondent states: “13 (c) Formula kiraan yang diguna pakai tlada dlnyatakan secara speslfik di dalam mana-rriana peruntukan di bawah perundangan GST…” . [43] The Respondent’s [Note: Customs’] Decision is therefore tainted with illegality and unreasonable. The Respondent had acted in a clear excess of authority as the Respondent has misconstrued the terms of the GST Act and GST Regulations by disregarding express provisions mandatorily requiring the Respondent to refund input tax credit. There is also a clear lack Page 24 of 30 of jurisdiction for the Respondent to apportion and reduce the Applicant’s ITC Claim. The Decision is therefore ultra vires, in excess of the Respondent’s authority, made without proper purpose, unreasonable and goes against the doctrine of legitimate expectation. [note and emphases mine] [60] In JT Broadway (supra), Justice Noorin Badaruddin elaborated on her view about Customs relying on an unprescribed formula as merely internal policy and an act that is ultra vires. She enunciated— [59] It must be borne in mind that any assessment to tax can and should only be done in accordance to law, and cannot be subject to any other internal policies which do not have the force law. Customs cannot act ultra vires by using a formula which is not officially disclosed to the public or having the force of law to ascertain the amount of input tax credit to be refunded… [emphasis mine] [61] I find it unjust and unfair that the BMF, as a formula for reduction or apportionment, is not known to the public. It is known only to Customs. I hold that Customs cannot use a formula that is not known to the public to ascertain the amount of Exceptional ITC to be refunded. Reducing the Exceptional ITC refund increases the business costs of the taxpayer [62] Fifth, if Customs allows a taxpayer’s Exceptional ITC, but reduces the amount of refund given to the taxpayer, it is my view that Customs is effectively doing two things—

taxing the taxpayer outside of their powers under the GSTA; and

causing an increase in the taxpayer’s business costs. [63] When Customs reduces the amount of the Exceptional ITC to refund under Regulation 46(1)—which does not provide for a reduction in the amount refunded—Customs is effectively taxing the taxpayer additionally, as well as increasing the business costs of taxpayers like Tomoe, who import goods for the use of its business. [64] The taxpayer should only be taxed on what is provided for under the GSTA and the Regulations. The taxpayer should not be taxed, or effectively taxed, on what is not provided for in the GSTA and the Regulations. [65] In Mandarin Pavilion Sdn Bhd v Chang Vui Lun & Anor [2018] 8 AMR 670 (CA); [2019] 3 MLJ 395; [2019] 2 CLJ 22; [2019] 2 SSLR 352, the Court Of Appeal, speaking through Justice David Wong Dak Wah JCA (later CJSS), propounded— [17] We found that for tax legislation any imposition of tax on anybody must be expressly provided for. There is no equity in tax jurisprudence. [66] The taxpayer cannot be taxed unless there are clear words to that effect. Any “ambiguity” in a tax statute must be “resolved” i.e. construed in the taxpayer’s favour. This is because “a taxing statute is penal in nature”—Ketua Pengarah Hasil Dalam Negeri v Kim Thye & Co [1992] 2 MLJ 708 (SC); [1992] 1 AMR 413; [1992] 4 CLJ 2079; [1992] 1 MLRA 184; at MLJ page 713. Page 26 of 30 [67] As for effectively increasing the taxpayer’s cost of doing business, the reasoning of Justice Ahmad Kamal Md Shahid in Zillion Sunrise Sdn Bhd v Ketua Pengarah Kastam & Anor [2023] MLJU 1072 (HC); [2023] AMEJ 0940; [2023] 1 LNS 930; is instructive. He said this— [15] It is to be noted that GST is a broad-based consumption tax based on a value-added concept. The Explanatory Statement to the GST Bill 2014 state as follows: - ”… The GST is a broad-based consumption tax based on a value-added concept…Payment of tax is made in stages with by the intermediaries in the production and distribution process. The tax itself is not a cost to the intermediaries and does not appear as an expense item in their financial statements. GST covers all sectors of the industry and is a tax on final consumption of goods and services. It is collected through a credit system where GST incurred on inputs is offset against GST charged on ouiputs [sic].” (emphasis added) [16] Based on the above, the GST concept is that businesses may recover the GST incurred on costs and business expenses from the Government (in the form of an input tax credit) to ensure that GST is chargeable only on the value added by business activity. [17] This has been recognised by the Respondent [note: Customs] in the Respondents’ Guide and admitted by them in their affidavit. It is in the same spirit that the Parliament enacted Regulation 46(1) of the GST Regulations to enable businesses to claim for input tax incurred by them before their registration under the GST Act. Page 27 of 30 [18] Based on the above, this Court is of the view that the Respondent’s - Decision to reject the Disallowed ITC is clearly against the object and spirit of the GST Act as it increases the cost for the Applicant’s business:

(a)The Disallowed ITC is the input tax incurred by the Applicant on the cost of the purchase of the parcels of Land; and

(b)In the event that the Disallowed ITC is not refunded to the Applicant, the Applicant would be burdened by the sum as additional cost of purchasing the parcels of Land. Such outcome clearly goes against the spirit and object of GST Act which is not meant to burden businesses with additional costs to carry out businesses. [note and additional emphases added] [68] I am guided and agree with the reasoning of Justice Ahmad Kamal Md Shahid in Zillion Sunrise (supra) that the Exceptional ITC is meant to be refunded to the taxpayer. He refers to the Explanatory Statement to the GST Bill 2014 i.e. the Hansard, and concludes that the tax collected from inputs is meant to be offset against the tax payable on outputs. This, to me, means that the full sum of the Exceptional ITC made under Regulation 46(1) must be refunded. [69] Further, if Customs reduces the amount of Exceptional ITC to be refunded, it necessarily means that Tomoe has to pay more tax than it is statutorily liable to pay. This additional tax becomes a substantial additional cost to Tomoe’s business. [70] Taken on a wider scale across all sectors, such a result will stifle and hinder businesses by increasing their costs. I am not inclined to permit or endorse such an unjust and undesirable outcome. Page 28 of 30 CONCLUSION [71] For these reasons, I dismiss Customs’ Appeal by way of this Originating Summons with costs of RM8K to be paid by Customs to Tomoe by 26.7.2023. Costs are subject to the allocatur. The 2nd Respondent: CAT’s decision dated 22.3.2021 is affirmed i.e. Customs is to refund the RM293,402.35 to Tomoe. Dated: 25 August 2023 signed KENNETH ST JAMES Judicial Commissioner High Court of Penang Counsel/Solicitors For the Appellant: Nabilah Binti Ahmad Po’ad [Bahagian Perundangan, Jabatan Kastam Diraja Malaysia (Putrajaya)] For the 1st Respondent: John Ung Soon Hock & Por Lee Wen [Messrs. John Ung & Co. (Pulau Pinang)] Legislation referred to:

Sections 2, 38 and 39 of the Goods And Services Act 2014

Regulation 46 of the Goods And Services Tax Regulations 2014

Section 30 of the Interpretation Acts 1948 & 1967 Cases referred to:

Nobuyasu Sdn Bhd v Tribunal Kastam Diraja Malaysia & Anor [2020] 11 MLJ 182 (HC); [2020] AMTC 513; [2020] 1 LNS 336; [2020] MLRHU 518.

Primary Goldennet Sdn Bhd v Ketua Pengarah Kastam Dan Eksais & Anor [2021] WA-24-77-12/2019.

Jimah East Power Sdn Bhd v Ketua Pengarah Kastam, Jabatan Kastam Diraja Malaysia [2021] MLJU 2764 (HC); [2021] AMEJ 2171; [2021] MLRHU 2801.

Broadway Metal Snd Bhd v Ketua Pengarah Kastam Dan Eksais [2022] MLJU 2005 (HC); [2022] 1 LNS 1955.

Metrogold Commercial Sdn Bhd v Ketua Pengarah Kastam [2022] MLJU 2556 (HC); [2022] 1 LNS 2448.

JT Broadway Sdn Bhd v Ketua Pengarah Kastam & Anor [2023] MLJU 109 (HC); [2023] 1 LNS 127.

Zillion Sunrise Sdn Bhd v Ketua Pengarah Kastam & Anor [2023] MLJU 1072 (HC); [2023] AMEJ 0940; [2023] 1 LNS 930.

Palm Oil Research And Development Board Malaysia & Anor v Premium Vegetable Oils Sdn Bhd & Another Appeal [2005] 3 MLJ 97 (FC); [2004] 4 AMR 202; [2004] 2 CLJ 265.

Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd and Another Appeal [2020] 6 MLJ 224 (FC); [2019] 5 AMR 516; [2019] 8 CLJ 433; [2019] 5 MLRA 584.

Vishnu Telagan v Timbalan Menteri Dalam Negeri, Malaysia & Ors [2019] 6 MLJ 1 (FC); [2019] 5 AMR 554; [2019] 9 CLJ 177; [2019] 5 MLRA 83.

Syahin Hafiy Danial bin Soh Ahmad Luptepi Amin v Mansur bin Yunus & Anor [2021] 8 MLJ 297 (HC); [2019] 1 LNS 1237; [2019]

Mandarin Pavilion Sdn Bhd v Chang Vui Lun & Anor [2018] 8 AMR 670 (CA); [2019] 3 MLJ 395; [2019] 2 CLJ 22; [2019] 2 SSLR

352.

Ketua Pengarah Hasil Dalam Negeri v Kim Thye & Co [1992] 2 MLJ 708 (SC); [1992] 1 AMR 413; [1992] 4 CLJ 2079; [1992] 1 MLRA 184; at MLJ page 713.