RAUB RESOURCES SDN. BHD. v Kerajaan Malaysia (BA-12ANCvC-19-05/2023)

This is the Appellant/Defendant’s appeal in respect of the learned Sessions Court Judge’s decision in allowing the Respondent/Plaintiff’s application to enter Summary Judgment against the Appellant/Defendant pursuant to Order 14 rule 1 of the Rules of Court 2012 (ROC 2012).

For ease of reference the parties will be referred to as they were at the Court below.

I am reminded that this appeal is by way of re-hearing under Order 55 rule 2 of the ROC 2012.

The Defendant is obligated to pay the Government RM612,911.50, which accounts for taxes for the Years of Assessment 2015, 2016, and 2018, along with any increments specified in the Income Tax Act 1967 (ITA 1967).

The Defendant neglected to submit a return in Form C within seven

months from the date following the close of its accounting period, as mandated by section 77A of the ITA 1967.

Due to the Defendant's failure to provide a return, the Plaintiff raised an assessment for the Years of Assessment 2015, 2016, and 2018 under section 90(3) of the ITA 1967, as outlined below. YEAR OF ASSESSMENT DATE OF NOTICE OF ASSESSMENT AMOUNT OF TAX (RM) 2015 23.09.2016 288,000.00 2016 24.11.2017 244,800.09 2018 15.09.2020 132,762.00

The Defendant was served with the Notices of Assessment at its last known address, and none of them were returned undelivered to the Respondent.

Despite the delivery of the Notices of Assessment, the Defendant failed to pay the entire outstanding sum owed to the Plaintiff for the Years of Assessment 2015, 2016, and 2018, amounting to RM612,911.50, which includes the specified increases.

On 23 August 2022, the Plaintiff filed a claim against the Defendant to recover the outstanding debt. Subsequently, a Notice of Application for Summary Judgment was filed on 28 November 2022, and it was granted by the Sessions Court. As a result, the Defendant has filed this appeal.

In the case of Ng Hee Thoong & Anor v Public Bank Berhad [1995] 1 MLJ 281, Gopal Sri Ram JCA (as His Lordship was then) stated: “In Malayan Insurance (M) Sdn Bhd v Asia Hotel Sdn Bhd [1987] 2 MLJ 183 at p 185, Hashim Yeop A Sani SCJ explained the basis of the summary jurisdiction in clarity of language that is usually associated with that eminent judge: The underlying philosophy in the O 14 provision is to prevent a plaintiff clearly entitled to the money from being delayed his judgment where there is no fairly arguable defence to the claim. The provision should only be applied to cases where there is no reasonable doubt that the plaintiff is entitled to judgment. Order 14 is not intended to shut out a defendant. The jurisdiction should only be exercised in very clear cases.”

The legal principles concerning Summary Judgment applications are well-established. In such applications, the Plaintiff must meet the fundamental criteria outlined in Order 14 of the ROC 2012. These prerequisites were articulated in the case of National Company for Foreign Trade v Kayu Raya Sdn. Bhd. [1984] 2 MLJ 300, where the Federal Court held that: “For the purposes of an application under Order 14 the preliminary requirements are: i. The defendant must have entered an appearance; ii. The statement of claim must have been served on the defendant; and iii. The affidavit in support of the application must comply with the requirements of Rule 2 of the Order 14.”

After fulfilling the essential criteria, the burden shifts to the Defendant to demonstrate to the Court the existence of a triable issue that justifies a trial and to provide reasons why judgment should not be entered against the Defendant (see: National Company for Foreign Trade v Kayu Raya Sdn. Bhd. [1984] 2 MLJ 300; Cempaka Finance Bhd. v Ho Lai Ying (trading as KH Trading) & Anor [2006] 2 MLJ 685).

As decided in the case of Ng Hee Thoong & Anor v Public Bank Berhad (supra), it is settled that the appeal before this Court is a rehearing and not a review of the exercise of the learned Sessions Court Judges’s discretion. The Court of Appeal held: “In Koh Siak Poo v Perkayuan OKS Sdn Bhd [1989] 3 MLJ 164 the same learned judge, sitting as the Chief Justice of Malaya demarcated the parameters of appellate interference in O 14 cases. He said (at p 165): The approach to be taken by an appellate court in an O 14 appeal has been settled. The appeal court should not regard the appeal as reviewing the exercise of the judge's discretion but should approach the appeal as a rehearing. This principle was reiterated in Malayan Insurance (M) Sdn Bhd v Asia Hotel Sdn Bhd which referred to National Company for Foreign Trade v Kayu Raya Sdn Bhd [1984] 2 MLJ 300 following European Asian Bank v Punjab and Sind Bank [1983] 2 All ER 508 at p 516.”

This Court is satisfied that the Plaintiff in this case has met the prerequisites for applying for Summary Judgment, as stipulated under Order 14 rule 2 of the ROC 2012. Consequently, upon fulfilment of these conditions, the Plaintiff has successfully presented a prima facie case and is entitled to the judgment. The burden has now shifted to the Defendant to demonstrate the existence of a triable issue warranting a trial.

In the context of an Order 14 application, it is trite that should the Defendant successfully raise just one triable issue, the case would not be deemed suitable for granting Summary Judgment (see: South East Asia Insurance Bhd. v Kerajaan Malaysia [1998] 1

This Court finds that the Defendant has failed to satisfy this Court that there are triable issues that could not be dealt with summarily. The reasons are as stated below.

The Notices of Assessment for the years 2015, 2016, and 2018 was served to the Defendant on 23 September 2016, 24 November 2017, and 15 September 2020, respectively, through ordinary post to the Defendant’s last known address at 89A, Jalan SS15/4C, 47500 Subang Jaya, Selangor. As per section 145(2)(a)(ii) of the ITA 1967, these Notices are deemed served on the Defendant (see: Kerajaan Malaysia v Central Strata Sdn. Bhd. [2013] 8 CLJ 632). Additionally, the Defendant has not contested the service of these Notices.

Under section 103 of the ITA 1967, upon proper service of the Notices to the Defendant, the Defendant is obligated to settle the tax due and payable, irrespective of whether or not the Defendant appeals against the assessment. Section 103(2) specifies the following: “Where an assessment is made under section 90(3), 91, 92 or 96A, or where an assessment is increased under section 101(2), the tax payable under the assessment or increased assessment shall, on the service of the notice of assessment or composite assessment or increased assessment, as the case may be, be due and payable on the person assessed at the place specified in that notice whether or not that person appeals against the assessment or increased assessment.” [emphasis added]

In the case of Chong Woo Yit v Government of Malaysia [1989] 1 CLJ (Rep) 9 the Supreme Court held: “[2] On service of a notice of assessment on the person assessed, the tax payable under the assessment becomes due and payable whether or not the person appeals against the assessment and would be recovered by the Government by civil proceedings as a debt due to the Government. [3] On such civil proceedings being brought by the Government, the Court, unlike the Special Commissioners of Income Tax, has no power to entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased." [emphasis added]

In accordance with section 99 of the ITA 1967, any person dissatisfied with an assessment can appeal to the Special Commissioner of Income Tax within thirty (30) days after being served with the notice of assessment. However, in this particular case, the Defendant did not submit an appeal to the Special Commissioner of Income Tax following the receipt of the Notices of Assessment. Consequently, as per section 97 of the ITA 1967, the assessments in question are deemed final and conclusive.

In the case of Ta Wu Realty Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri & Anor [2008] 6 CLJ 235, the Court of Appeal held that: - “...It has to be clarified that a prompt payment to the Inland Revenue is not an indulgence on the part of a taxpayer but a statutory requirement. The law on this point is well established, as once the Director General has made an assessment, and issued a notice of assessment to a taxpayer calling upon him to pay the tax mentioned, he must pay up that tax liability within a specific period, even though dissatisfied with that assessment. Whether the assessment is right or wrong the tax must be paid notwithstanding any objection or appeal. … Any reluctance to pay that tax liability will attract a penalty imposed for late payment; under s.103(4) a penalty of 10% on the unpaid tax if remains unpaid within 30 days of receipt of the assessment and another 5% for the balance under s.103(5) if remains unpaid within 60 days.” [emphasis added]

Furthermore, in this case, the Defendant had failed to submit its tax form, therefore, pursuant to section 90(3) of the ITA 1967, the Director General of the Inland Revenue has the power to raise an assessment to the best of his judgement when a person fails to submit a return. Section 90(3) states as follows: “Where a person for a year of assessment has not furnished a return in accordance with section 77 or 77A, the Director General may according to the best of his judgment determine the amount of the chargeable income of that person for that year and make an assessment accordingly…” [emphasis added]

Hence, this Court holds the opinion that the Defendant's argument, asserting that the Plaintiff's claim in this proceeding was an estimate and not an exact assessed amount, and therefore, not a final sum claimable by the Plaintiff against the Defendant, is unfounded and misconceived in law.

The Defendant also asserted that the Plaintiff's claimed estimated tax amount was unreasonably high and lacked a formal assessment process. This Court holds the considered opinion that this argument by the Defendant lacks merit based on the provisions of law and authorities cited above.

The Defendant additionally contended that this Court should either grant its appeal or, at the very least, stay the proceedings herein until the resolution of two (2) appeals before the Federal Court - namely, Appeal No. W-01(IM)(NCvC)-337-07/2020 between Mohd Najib bin Hj Abd Razak v Kerajaan Malaysia and Appeal No. W- 01(IM)(NCvC)-328-07/2020 between Mohd Nazifuddin bin Mohd Najib v Kerajaan Malaysia (the two Appeals). The learned counsel for the Defendant argued that the legal questions raised in these Federal Court appeals are highly pertinent to this proceeding as both involve the same statutory provision, i.e., section 106(3) of the

Section 106 of the ITA 1967 explicitly provides that tax due and payable may be recovered by civil proceedings as debt due to the Government, and the Court shall not entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased. The relevant section 106 of the ITA 1967 states the following: “106(1) Tax due and payable may be recovered by the Government by civil proceedings as a debt due to the Government. ... 106(3) In any proceedings under this section the court shall not entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased under subsection 103(3),

or (7).”

The Plaintiff argued that a certificate issued under section 142(1) of the ITA 1967 should serve as adequate evidence for the Court to rule in favour of the Plaintiff. The purpose of the certificate was to notify the Defendant of the amount of debt he owed to the Plaintiff. Section 142(1) states as follows: - “142(1) In a suit under section 106 the production of a certificate signed by the Director General giving the name and address of the defendant and the amount of tax due from him shall be sufficient evidence of the amount so due and sufficient authority for the court to give judgment for that amount.”

In Government of Malaysia v. Dato’ Mahindar Singh [1996] 5 MLJ 626, the Court allowed the Summary Judgment entered against the Defendant and held that: “On the last issue raised by the respondent, ie that there had been an agreement reached between the parties for payment by instalment of the arrears of tax, I hold that this could not stand in the face of the certificate issued under s 142 of the Act. The said certificate is expressly provided to be sufficient evidence of the amount of taxes due from the defendant and gives the court sufficient authority to give judgment for the amount. The intention of the legislature is clearly to overcome any plea by any taxpayer as is now raised by the defendant herein in order to delay the payment of the tax. For the court to entertain such a plea would be to go against the express words of the Act.” [emphasis added]

In the case of Government of the Federation of Malaysia v. Lee Tain Tshung [1992] 1 MLJ 629 the Court stated that- “(2) Immediately upon the issuance of the certificate, the amount of income tax due could no longer be questioned and the certificate is sufficient authority for the court to give judgment for that amount.”

Moreover, the Defendant's complaint about the inaccuracy of the Notices of Assessment, claiming it was merely an estimation, falls under the jurisdiction of the Special Commissioner of Income Tax. This Court is not the appropriate forum for matters related to assessment. Under section 106(3) of the ITA 1967, this Court should not entertain any pleas challenging the excessiveness, incorrect assessment under appeal, or incorrect increase of the tax amount. Thus, the validity of the assessment should be heard and decided by the Special Commissioner of Income Tax, who is the judge of facts-not by this Court at this stage. Therefore, the Defendant's argument suggesting the existence of a triable issue based on the assessment lacks merit.

The Federal Court in Sun Man Tobacco Co. Ltd. v Government of Malaysia [1973] 2 MLJ 163 held- “There is a string of decided cases … in which it has been held that the effect of the relevant provisions of the Income Tax Act, 1967 is that on the service of a notice of assessment on the person assessed, the tax payable under the assessment becomes due and payable at the place specified in the notice, whether or not the person appeals against the assessment, and can then be recovered by the Government by civil proceedings as a debt due to the Government. On such civil proceedings being brought by the Government, the court has no power to entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased.” [emphasis added]

Further, this Court finds no merit in the Defendant's plea for a stay of this proceeding until the disposal of the two Appeals. Firstly, the Defendant solely appealed the decision on Summary Judgment and did not contest the dismissal of its application for a stay by the lower court. Secondly, the existence of the two Appeals does not constitute special circumstances warranting a stay of this proceeding. This Court aligns with the stance taken by the High Court in the case of Kerajaan Malaysia v Golden Citrus Sdn. Bhd. & Ors [2022] 7 CLJ 631, which held that: “[40] As for the Defendants’ argument that this civil suit proceeding should be stayed, to wait for the outcome of the Mohd Najib Bin Abdul Razak’s Federal Court tax Appeal-I find that the existence of that Appeal does not tantamount to a rare and compelling circumstance that warrants a stay of this civil suit proceeding. This civil suit can and should be determined on the current existing law and on current legal principles. [41] Also, I am of the view that there is a fundamental principle in our procedural law that-recognised exceptions aside-one proceeding should not be held back by another proceeding. Expressing it complementarily, one proceeding should not be allowed to hold back another proceeding. [42] That is the reason behind principles such as these – there must be “special circumstances” before a stay of execution can be granted; and in our context here, there must be “rare and compelling circumstances” before a stay of present proceedings pending the outcome of another proceeding, can be granted. [43] This rationale is also in line with the charge contained in Order 34 of the Rules Of Court 2012, for the Court to “make such order or give such direction as it thinks fit” to “secure the just, expeditious and economical disposal” of matters before the Court.”

Moreover, in the recent Federal Court case of Mohd Najib bin Hj Abd Razak & Anor v Government of Malaysia and another appeal [2023] 6 MLJ 483, in dismissing the two Appeals, the Federal Court had unanimously decided as follows -

The purpose of the ITA as outlined in the Hansard was to ensure that there was full and speedy settlement of tax debts and that recalcitrant taxpayers did not use objections and the appeal procedure to defer payment of their taxes indefinitely. It was in the public interest that taxes were collected expeditiously. The Federal Constitution subsisted in, and for, the public interest and the nation as a whole. The ‘pay first, dispute later’ system of tax collection and recovery under the ITA served the public interest in terms of the fiscal needs of the public and the nation as a whole.

Consonant with the ‘pay first, dispute later’ system, s 106(1) of the ITA provided that tax that had been assessed as due and payable was recoverable by way of civil proceedings as a debt due to the Government. This did not mean that the ‘statutory debt’ under s 106 was final but that it merely facilitated an enforcement and recovery mechanism to meet the needs of collecting the sum due from the taxpayer first whilst postponing the adjudication of the debt on its merits to a later date. The taxpayer was entitled to appeal to the Special Commissioners of Income Tax (‘SCIT’) against the assessment under s 99(1) of the ITA and, thereafter, to appeal further against the decision of the SCIT to the entire hierarchy of the superior courts on questions of law. Judicial power was thus preserved in the ITA for adjudication of the taxpayer’s dispute, notwithstanding an earlier collection mechanism. When this was considered together with the subsisting supervisory judicial powers of the court and the statutory entitlement of the taxpayer to a refund of any sum that had been erroneously claimed or assessed, it could not be said that judicial power had been abrogated or removed. Dispute resolution was simply deferred to enable collection to take place first.

Neither s 106(3) nor the other subsections of s 106 and s 103 in their entirety, taken in the context of the ITA, had the effect of ousting, suspending or abrogating judicial power. On the contrary, when read in context and purposively, they allowed for judicial intervention and the judicial process to take its full course. The ITA allowed for an appeal process which subsequently led to a full appeal before the hierarchy of the superior courts, the grant of a stay at the discretion of the court and the right of judicial review. The preclusion in s 106(3) of the ITA that the court was not to consider certain defences relating solely to the assessed amount did not curtail, but merely deferred, the taxpayer’s right to raise those defences subsequently.

It was only in relation to the immediate collection and recovery of tax due and payable under the ITA that the court undertook a recovery function to give effect to the purpose and object of the ‘pay first, dispute later’ model embedded in the ITA without negating, abrogating or suspending judicial power in any way. Section 106(3) of the ITA was therefore neither invalid nor unconstitutional. It did not contravene art 5(1) of the FC by denying the taxpayer of the right to a fair trial or the right of access to justice. And there was no basis to contend that art 8(1) of the FC had been infringed as the respondent was carrying out a public function in levying tax and was, in that context, neither a ‘person’ within art 8 (for the anti-discriminatory argument to be invoked) nor had the respondent singled out the appellants from all other citizens of the nation for any discriminatory treatment in the levying of the tax.

Where the O 14 summary judgment procedure was employed to obtain judgment for the statutory debt under s 106(1) ITA, the purpose and intent of the ITA did not envisage the court undertaking a rights-determining trial under s 106. It was not tenable for a s 106 debt to be determined finally at trial if the taxing statute also prescribed a specific manner of challenging the tax assessed, as was the case under the ITA. If it was found under the O 14 procedure that the matter should go to trial, it would render the method prescribed under the ITA for adjudication, nugatory. The judgment obtained was only for the purposes of collection and recovery of the tax and did not enjoy the rights-determining character of finality that a judgment delivered after full adjudication in a court of law enjoyed. The courts below in the instant appeals recognised that the merits of the dispute were properly to be determined under s 99(1) of the ITA.

The courts below were entirely correct in their respective decisions. The defences put forward by the appellants did not warrant examination during the proceedings for the entry of the s 106 of the ITA judgment. Those defences, if raised, were properly the subject-matter for full ventilation before the SCIT and, after that, the High Court, on points of law.” [emphasis added]

Thus, it is evident that the Defendant's argument lacks merit. The Notices of Assessment were duly served, making the tax amount due and payable irrespective of the Defendant's decision to appeal. According to section 106 of the ITA 1967, the Plaintiff has the authority to recover the debt through civil proceedings. The Defendant can seek recourse under section 99 of the ITA 1967. As established by the Federal Court in the case of Mohd Najib bin Hj Abd Razak & Anor v Government of Malaysia and another appeal (supra), it is not feasible for a section 106 debt to be conclusively determined at trial if the taxing statute also prescribes a specific method for challenging the assessed tax. If, under the Order 14 procedure, it is determined that the matter should proceed to trial, it would render the adjudication method prescribed under the ITA 1967 nugatory.

There are no triable issues raised by the Defendant. Thus, this Court finds there is no error in facts and law in the decision of the learned Sessions Court Judge.

For the foregoing reasons stated above, I, therefore, ordered that the Defendant’s appeal be dismissed with costs of RM5,000.00. Dated: 29 January 2024 -sgd-JAMHIRAH ALI JUDICIAL COMMISSIONER High Court of Malaya at Shah Alam (NCVC 1) To the parties’ solicitors: For the Appellant : Ooi Xi Fang (Messrs Xi Fang & Co.) For the Respondent : Nur Sakinah Binti Ahmad (Lembaga Hasil Dalam Negeri)