Lion Pacific Sdn Bhd v Kementerian Kewangan Malaysia (WA-25-457-08/2022)

PENGARAH KASTAM DIRAJA MALAYSIA …RESPONDEN-RESPONDEN

The Applicant was issued a Bill of Demand requesting it to pay goods and services tax amounting to RM 3,042,431.51. The tax arose from the works undertaken by the Applicant in respect of the extension of the rail link from Subang Commuter Station to Terminal Skypark Subang Phase 1.

The Applicant appealed to the Minister of Finance in respect of the tax imposed. Its request was rejected.

Its subsequent appeal against the rejection met with the same response. The decision to impose the goods and services tax was maintained. Salient facts

The background facts upon which the decision is challenged is not in dispute. They are as follows:

The Applicant, Lion Pacific Sdn Bhd is a construction company engaged in infrastructure development, civil construction, railways, electrical power, and transportation;

(ii) On 28.10.2011 the Applicant formed an unincorporated consortium with Skypark Link Sdn Bhd (“Skypark”), known as the Skypark-Lion Consortium (“Consortium”) for the purpose of submitting a tender for Projek Landasan Keretapi dari Subang ke Terminal Skypark Subang Fasa 1 (“the Project”);

(iii) Vide a Letter of Acceptance dated 22.1.2013, the Ministry of Transport (“MOT”) awarded the tender for the Project to the Consortium;

(iv) On 1.4.2015, the Ministry of Finance (“MOF”) issued a letter dated 4.3.2015 titled Pelaksanaan Cukai Barang dan Perkhidmatan (GST) Ke Atas Perolehan Kerajaan exempting any Ministry/Federal Department/State Department from goods and services tax (“GST”). The exemption was to be implemented through the issuance of a Certificate of GST Relief (“CoGSTR”);

Pursuant thereto, a CoGSTR was issued by MOT to the Consortium to give effect to the letter of MOF dated 4.3.2015;

(vi) The CoGSTR was intended to be utilized by the Consortium for the purpose of the Project;

(vii) On 21.2.2019, the MOF in its letter to Skypark explained the mechanism for the GST tax exemption in relation to the Project in view of the Consortium being an unincorporated entity. Skypark was deemed the lead representative for the Consortium to give effect to the CoGSTR;

(viii) In 2021, the 2nd Respondent conducted a verification audit on the Applicant for the period of April 2015 to October

The audit findings were that Skypark was the party responsible on behalf of the Consortium. It acted as the Consortium’s representative to send all invoices to MOT for payment. Upon verification of the invoices by MOT, all payments for the Project will be released to Skypark. Skypark will then pay the Applicant for the work done based on the scope agreed upon;

(ix) Consequent to the audit findings, the 2nd Respondent issued a Bill of Demand dated 8.3.2021 for the amount of RM 3,042,431.51 due as GST;

The Applicant lodged an appeal to the 1st Respondent through its letters dated 9.3.2021 and again on 14.12.2021, seeking to be accorded the same GST treatment as

(xi) MOF rejected the appeals of the Applicant vide letters dated 13.7.2021 and 18.5.2022.

Aggrieved by the decision of the 1st Respondent, the Applicant seeks the following reliefs:

An Order of Certiorari be moved that this Honourable Court quash the decision of the 1st Respondent as found in the contents of its letter with the Ref. No.: MOF.TAX(S)700- 5/9/366 (22) dated 18.5.2022 which was received by the

(ii) A Declaration be made that the decision of the 1st Respondent in its letter dated 18.5.2022 was made without any authority of law and/or made ultra vires Goods and Services Act 2014 and is illegal, invalid, unlawful and of no effect in law;

(iii) A Declaration that the Applicant is not required to GST in the sum of RM3,042,431.51 as demanded by the 2nd Respondent. Ground for review

The Applicant advances the following grounds for review. Firstly, the MOF had acted illegally and unreasonably in granting the GST exemption only to Skypark and denying the same to the Applicant, without taking into consideration the fact that both the Applicant and Skypark are part of the Consortium.

Secondly, the Respondents’ denial of the exemption constitutes a denial of the Applicant’s legitimate expectation. The legitimate expectation arose from the letter dated 4.3.2015 that Government awarded contracts would be exempted from GST. The letter was issued to the Consortium of which the Applicant was a part of. This gave rise to an expectation that both the Applicant and Skypark would receive the same treatment in respect of GST exemption.

Thirdly, no reasons were given by the MOF for the rejection of the Applicant’s appeal.

The cumulative response of both Respondents as contained in the respective affidavits, are summarized as follows:

In 2021, the 2nd Respondent conducted a verification audit for the Applicant for the period of April 2015 to October

It showed the relationship between the parties to be as represented below:

(ii) The Consortium was not a legal entity as it was not incorporated. Pursuant to the Supplementary Agreement dated 29.9.2013 entered into with MOT, it was stipulated that Skypark may be appointed the Consortium leader. The Board Circular Resolution of both companies stated that Skypark was expressly authorized to receive payment for Project works from MOT;

(iii) The Applicant was responsible for the trackworks which comprised 30% of the Project works. This scope of works was provided by the Applicant to Skypark and not directly to MOT. The documents furnished showed the Applicant to (SUB-CONTRACTOR) `SYSTEM WORKS’ MINISTRY OF TRANSPORTATION (MOT) IKHMAS JAYA SDN BHD (SUB-CONTRACTOR) `CIVIL WORKS’ (30%) `TRACKWORKS’ SKYPARK SDN BHD (70%) KONSORTIUM SKYPARK LINK SDN BHD – LION PACIFIC SDN have invoiced Skypark for the trackworks. This rendered the Applicant ineligible for the GST exemption as the supply by the Applicant to Skypark was considered a separate transaction from the supply by the Consortium to MOT;

(iv) The GST exemption granted only to Skypark had taken into consideration the business model of Skypark, the Applicant and the Consortium;

In fact, on 21.2.2019, MOF had written to Skypark to explain the mechanism for the tax exemption. MOF stated that the Applicant ought to impose the 6% GST in respect of the trackworks done for Skypark and Skypark being the GST registrant can then claim the input tax credit. In the same letter, Skypark was also informed that it was deemed the representative of the Consortium for purposes of issuing invoices for CoGSTR. Skypark was allowed to claim input tax credit in respect of supplies by the Consortium to MOT, subject to the documents in support of input tax credit being issued in the name of Skypark. However, this special treatment was not to be extended for the trackworks supplied by the Applicant to Skypark as they pertain to two separate and different transactions;

(vi) The documents submitted by Lion Pacific were identical to those submitted by Skypark;

(vii) Following the rejection of the appeal vide letter 13.7.2021, MOF held a meeting with the Applicant to explain the reasons for issuing the Bill of Demand dated 8.3.2021. The Applicant was therefore aware of the reasons for the demand of GST for RM 3,042,431.51. Analysis and findings Illegality and irrationality

The grounds of illegality and unreasonableness had been succinctly explained in R Rama Chandran v The Industrial Court of Malaysia & Anor [1997] 1 MLJ 145) by the Federal Court as follows: In this context, it is useful to note how Lord Diplock (at pp 410–411) defined the three grounds of review, to wit, (i) illegality, (ii) irrationality, and (iii) procedural impropriety. This is how he put it: By ‘illegality’ as a ground for Judicial Review I mean that the decision maker must understand directly the law that regulates his decision making power and must give effect to it. Whether he has or not is par excellence a justiciable question to be decided, in the event of a dispute, by those persons, the judges, by whom the judicial power of the state is exerciseable. By ‘irrationality’ I mean what can by now be succinctly referred to as ‘Wednesbury unreasonableness’ (see Associated Provincial Picture Houses Ltd v Wednesbury Corp [1948] 1 KB 223). It applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it. …

The Bill of Demand issued to the Applicant on 8.3.2021 is as reproduced below: NO. JENIS KESALAHAN TIDAK MEMATUHI AKTA CBP 2014 KESALAHAN AKTA CBP 2014 AMAUN (RM) AMAUN

Jumlah cukai CBP bagi pembekalan berkadar standard. 38(1) & 46(2) 88(b) 2,945,749.25 2,945,749.25 2. Cukai input dituntut dua kali menggunakan invois cukai yang sama di atas nama Lion Pacific Sdn Bhd. 39(1) 88(b) 5,467.43

Cukai input dituntut menggunakan invois cukai di atas nama Artic Rail Sdn Bhd. (Peraturan 38(1)(a)(i), Peraturan-peraturan cukai barang dan perkhidmatan 2014). 39(1) 88(b) 91,214.83 Jumlah kesalahan cukai input 96,682.26 JUMLAH BOD 3,042,431.51

The Bill of Demand expressly states the relevant provisions of the Goods and Services Tax 2014 upon which the amounts were demanded of the Applicant. It is significant that the Applicant did not raise any challenge to these or any provisions of the Act as the basis for which the GST was imposed. Such a challenge would fall squarely within the meaning of illegality explained in R Ramachandran.

Instead, the Applicant takes issue with the factual basis upon which the GST was imposed.

The Applicant contends that both itself and Skypark are the Consortium partners who have undertaken to complete the Project with different scope of works. They were direct contractors of the Project. The Applicant was not a sub-contractor. Therefore, to give a different tax treatment to both was an illegal act on the part of the Respondents.

I find that the Respondents were well aware that Skypark and the Applicant were Consortium partners. This is not in dispute. However, they have justified in their Affidavits in Reply why Skypark was granted the GST exemption, and not the Applicant.

Having considered the reasons as stated in paragraph 9(i)-(vi) above, I do not find any illegality in the reasons given. The consortium formed by Skypark and the Applicant was an unincorporated consortium. The Consortium was also not a GST Registrant under the Goods and Services Tax Act 2014 at the material time. However, to give effect to the CoGSTR issued, Skypark was deemed a representative of the Consortium. Vide MOF’s letter 21.2.2019, Skypark was duly explained regarding the mechanism for GST exemption for the Project. The reasons for the GST exemption granted only to Skypark was also stated. In the said letter, MOF specifically dealt with the issue pertaining to the trackworks and advice was given on how the input tax credit was to be claimed in respect of the trackworks.

As the letter is material, it is reproduced below:

In 2021, the audit verification findings of the 2nd Respondent confirmed that the GST exemption should be granted only to Skypark.

Having considered the reasons given by the Respondents, I am of the view that the Applicant has failed to show how the decision of the Respondents was in any way contrary to the Goods and Services Tax Act 2014. The ground of illegality therefore fails.

I shall now deal with the grounds of unreasonableness. It is trite that for this ground to succeed, the decision must be one that is outrageous in its defiance of logic that no sensible person who had applied his mind to be matter would have arrived at the impugned decision.

The Applicant relies on basically the same reason advanced for the ground of illegality. It contends that there is absolutely no reason to deny the GST exemption to the Applicant who was part of the Consortium, and who supplied the trackworks directly to MOT.

This assertion of fact was expressly refuted by the Respondents. Both the Affidavits in Reply stated as follows: Berdasarkan dokumen yang dikemukakan, didapati Lion Pacific telah mengemukakan invois bagi kerja trackworks dan system works kepada Skypark Link. Perkara ini juga menunjukkan kerja-kerja tersebut bukan dibekalkan terus kepada MOT (Salinan invois berkaitan adalah seperti yang dilampirkan dan ditandakan sebagai Eksibit “A-11” Afidavit Sokongan Pemohon).

The Respondents specifically denied the fact that the trackworks were supplied to MOT. The documentary evidence supports that the trackworks was supplied to Skypark instead. The averment of fact by the Respondents therefore puts paid to the Applicant’s basis for contending the Respondents’ decision to be irrational. Legitimate expectation

The Applicant’s basis for legitimate expectation is the letter dated 4.3.2015 informing that Government awarded contracts are exempt from GST, followed with MOT’s letter dated 4.6.2015 that the Project would be exempt from GST until its completion.

I am of the view that the Applicant’s contention is misconceived. These letters say nothing more than that the Project would be GST exempt. It did not state how the exemption was to be given effect. MOF’s letter of 21.2.2019 explained the mechanism.

It is trite law that for legitimate expectation to arise, there must be evidence of a promise or undertaking made to the Applicant by the Respondents to the effect that GST will not be charged on the Applicant. Case laws are replete on that principle. (See: YKK (Malaysia) Sdn Bhd v. Pengarah Tanah Dan Galian Johor [2021] 6 MLJ 496 (Federal Court), Lembaga Minyak Sawit Malaysia v Kyrox Sdn Bhd & Anor [2025] 7 CLJ 940 (CA)). There is no such evidence of a promise or representation. Duty to give reasons

In relation to this issue, the courts have consistently held that if the statute upon which the decision is premised on, is silent on the duty to give reasons, the decision maker has no duty to do so. (See: Datuk Bandar Kuala Lumpur v Perbadanan Pengurusan Trellises & Ors and other appeals [2023] 3 MLJ 829, Ketua Pengarah Hasil Dalam Negeri v Alcatel-Lucent Malaysia Sdn Bhd & Anor [2017] 1 MLJ 563).

The Applicant has not referred to any provision in the Goods and Services Act 2014 stipulating an obligation on the Respondents to give reasons.

In any event, the Applicant cannot be said to be in the dark as to reason for the decision as it was consistent with the contents of the letter of 21.1.2019 explaining the GST exemption treatment. It is safe to say that since 2019, the Applicant was aware as to the position taken by the Respondents on the GST exemption.

Further, there is evidence of a meeting held after the rejection of the first appeal by MOF to explain the reasons for its decision. Even if a duty to give reasons can be said to exist, it was already fulfilled. Consequently, there is no merit in the Applicant’s reliance on this ground. Preliminary objection by the Applicant

For the sake of completeness, I shall also deal with a preliminary objection raised by the Applicant. The Applicant contends that the Affidavits in Reply filed by both Respondents ought to be disregarded.

The Applicant contends that firstly, the the Affidavit filed on behalf of the 1st Respondent was affirmed by Tengku Datuk Seri Utama Zafrul bin Tengku Abdul Aziz. When the Affidavit was affirmed on 14.12.2022, he was no longer the Minister of Finance.

However, he was the Minister of Finance when he rejected the appeal of the Applicant on 18.5.2022. Having knowledge of the matter, his affidavit is relevant to the issues at hand. He was therefore the proper person to affirm the Affidavit.

Next, the Applicant contends that the deponent of the Affidavit filed on behalf of the 2nd Respondent had erroneously held himself out as the Director when he was only the Deputy Director at the material time. Again, there is no merit in this objection as the deponent was the acting Director then.

Having considered the objections and found them to be devoid of merit, I proceeded to dismiss them.

Premised on the foregoing reasons, there are no grounds shown upon which judicial review should lie against the decision of MOF dated 18.5.2022. Consequently, the Applicant’s judicial review application is dismissed with costs of RM 5,000.00 subject to allocatur, to be paid to the Respondents. Dated: 20th May 2026 -sgd-Alice Loke Yee Ching Judge High Court Kuala Lumpur Counsel for Applicant: En. Rodney Gan (En. Adam Lee and Cik Khao Shinnie (PDK) together with him) Tetuan Christopher & Lee Ong Counsel for Respondents: Pn. Shahidah Nafisah binti Leman