U.E.S. Nutrifarmer Sdn Bhd v Ketua Pengarah Jabatan Kastam Diraja Malaysia (WA-25-423-07/2022)

KETUA PENGARAH KASTAM

JABATAN KASTAM DIRAJA MALAYSIA … RESPONDEN Judgment

The Applicant on 8.7.2022 filed an application for leave to commence judicial review proceeding (Enc.1) under Order 53 of the Rules of Court 2012 (ROC) seeking, among others the following:-

1.1 That the Applicant is given leave of this Honourable Court to file this application for judicial review pursuant to Order 53

an order of Certiorari to quash the 1st Respondent’s decision dated 6.4.2022 (Decision) in rejecting the Applicant’s application for review dated 21.9.2021 (Review Application) which was communicated to the Applicant on 11.4.2022 through the 2nd Respondent’s letter dated 11.4.2022 on the ground that the 1st Respondent failed to consider and take into account the Customs Ruling dated 24.3.2020 (2020 Ruling);

a declaration that the Respondent’s failure to give effect to the 2020 Ruling namely that the product “Electric Potential Thermotherapy Mattress” under the brand ÄMLIFE (Product) imported and supplied by the Applicant shall be classified under the tariff code 9404.29.20 00 (Customs Duties Order 2017) as a “mattress, hyperthermia type” and thus, attracts zero percent (0%) import duty rate and is exempted from sales tax, amounts to a breach of, amongst others, Section 10C(4) of the Customs Act 1967 (Customs Act) and/or Section 45(4) of the Sales Tax Act 2018 (Sales

a declaration that the Product should attract zero percent (0%) import duty rate pursuant to the 2020 Ruling and the provisions of the Customs Duties Order 2017;

a declaration that the Product should be exempted from sales tax pursuant to the 2020 Ruling and the provisions of the Sales Tax (Goods Exempted from Tax) Order 2018; and

a declaration that the Decision is unlawful/illegal, null and void and thus, the Application is not required to pay the total sum of RM2,372,162.98 as demanded by the Respondents through the Bills of Demand dated 24.8.2021 (Bills of

1.2 That all further proceedings including the enforcement of the Decision and/or the Bills of Demand be stayed until the full and final determination of this application;

1.3 That the Respondents are prohibited from taking any enforcement action or proceeding in relation to the Decision and/or the Bills of Demand until the full and final determination of this application;

1.4 That the costs of and/or incidental to this application be paid by the Respondents to the Applicant; and/or

1.5 That all such further, alternative, consequential or other reliefs, orders and/or directions as this Honourable Court deems fit and proper are given.

In the Application, the Applicant essentially challenges decisions order for certiorari to quash Respondent’s decision in the form of two bills of demand dated 24.8.2021.

After the hearing, I dismissed the Applicant’s application for leave for judicial review (Encl. 1) This judgment contains the full reasons for my decision.

The background facts gathered from the cause papers, Affidavit in support and submission of the parties. I respectfully adopt them subject to some modifications and can be summarized as follows:-

4.1 The Applicant is Involved in the business of supplying healthcare and other related products including the product Ëlectric Potential Thermotherapy Mattress” under the brand ÄMLIFE”(Product).

4.2 The product has the function of raising body temperature and can be used for hyperthermia treatment to, amongst others, treat hypothermia symptoms and thus, the Applicant takes the position that the Product should be classified under the tariff Page 5 of 14 code 9404.29.20.00 (Customs Duties order 2017) as a “hyperthermia / hypothermia type”mattress which does not attract any import duty and sales tax.

4.3 The key chronology of events leading to this application is undisputed and is as follows:

2.7.2018 The Applicant applied for a customs ruling pursuant to Section 10A of the Customs Act in respect of the tariff classification of the Product.

11.12.2018 The Respondents issued a customs ruling (2018 Ruling) classifying the Product under the tariff code 9404.29.09 00 (Customs Duties Order 2017) as a “mattress of nonwoven fabric, other than hyperthermia/hypothermia” which attracts an import duty of 20% and is not exempted from sales tax.

22.1.2019 The Applicant was not satisfied with the 2018 Ruling and thus, the Applicant appealed against the 2018 Ruling.

24.3.2020 The Respondents issued the 2020 Ruling, classifying the Product under the tariff code 9404.29.20 00 (Customs Duties Order 2017) as a “mattress, hyperthermia type”, which does not attract any import duty and sales tax. In the 2020 Ruling, Respondents revoked the 2019 Ruling.

24.8.2021 The Respondents issued the Bills of Demand for:

a sum of RM1,482,601.85, allegedly for underpayment of import duty under the Customs Act.

(ii) a sum of RM889,561.13, allegedly for underpayment of sales tax under the Customs Act. Page 6 of 14 The Bills of Demand are from July 2019 to March 2020.

21.9.2021 The Applicant filed the Review Application for the Respondents to review his decision as contained in the Bills of Demand.

6.4.2022 The Respondents issued the Decision where the Respondents maintained their decision as stated in the Bills of Demand.

4.4 Aggrieved with the decision of the 1st Respondent, the Applicant has filed an application for judicial review seeking the aforementioned reliefs.

The governing provision for leave application to commence judicial review proceedings is provided under Order 53 Rule 3 of the ROC.

The well-settled test in leave application is found in WRP Asia Pacific Sdn Bhd v. Tenaga Nasional Bhd [2012] 4 MLRA 257; [2012] 4 MLJ 296; [2012] 4 CLJ 478 where the Federal Court held that the aggrieved party has to satisfy the Court that leave application is not thought of as frivolous. And, if leave is granted, an arguable case in favor of granting the relief sought at the substantive hearing may be the resultant outcome. A rider must be attached to the application though i.e., unless the matter for judicial review is amenable to judicial review, no success may be envisaged.

The principles governing applications for leave to commence judicial review proceedings have also been set out in Tang Kwor Ham & Ors v. Pengurusan Danaharta Nasional Bhd & Ors [2006] 1 MLRH 507; [2006] 3 CLJ 448; [2006] 5 MLJ 159 where Gopal Sri Ram JCA (as he then was) held: “[10] …the High Court should not go into the merits of the case at leave stage. Its role is only to see if the application for leave is frivolous… So too will the court be entitled to refuse leave if it a case where the subject matter of the Page 7 of 14 review is one which by settled law (either written law or the common law) is non-justiciable.”

In Association of Bank Officers, Peninsular Malaysia v. Malayan Commercial Banks Association [1990] 1 MLRA 324;[1990] 3 MLJ 228; [1990] 1 CLJ (Rep) 33; [1990] 1 MELR 128; [1990] 2 ILR 308, the then Supreme Court held that the guiding principle in granting an order of certiorari is that the Applicants must show prima facie that the application is not frivolous or vexatious and that there is some substance in the grounds supporting the application. The then Supreme Court stated the followings: “At the outset of the hearing of the appeal before us we indicated to the parties that we would hear submissions on the issue of leave only. After giving due consideration to the evidence in this case and the submissions advanced by the parties we were of the view that leave to apply for an order of certiorari ought to have been given. In his grounds of judgment the learned judicial commissioner had gone further than the leave stage and embarked on substantial issues on merit. We did not think that this was the right approach when the application for leave to apply for an order of certiorari is made. The guiding principles ought to be that the applicants must show prima facie that the application is not frivolous or vexatious and that there is some substance in the grounds supporting the application. On the evidence in this case we found that the appellants had prima facie an arguable case for the granting of the relief they were seeking. Their application was not frivolous or vexatious. There were grounds to consider the allegations made by the appellants and which could only be properly heard and determined on the substantive application for an order of certiorari after leave has been granted.” (emphasis added)

In the case of Bandar Utama Development Sdn Bhd & Anor v. Lembaga Lebuhraya Malaysia & Anor [1997] 3 MLRH 293; [1997] 4 CLJ 725; [1998] 1 MLJ 224 at 225; Visu Sinnadurai J (as he then was) held that: “…The court, in exercising its discretion that an application for leave be granted, must be convinced by the applicants that prima facie the application is genuine and there is some substance in the grounds supporting the application. The test’s threshold is very low; a prima facie case of reasonable suspicion, an arguable case must be shown, not a prima facie case. Additionally, an application will fail if it is frivolous, vexatious, misconceived, made by busybodies with misguided or trivial complaints of administrative errors, groundless, where there are more appropriate alternative remedies, and where the application for judicial review is inappropriate”. (emphasis added)

In Dr Amir Hussein Bin Baharuddin v. Universiti Sains Malaysia [1989] 4 MLRH 408; [1989] 3 MLJ 298 at 298; Judge Edgar Joseph J (as he then was) held that: “…the test in an application for leave is whether the applicant has an arguable case for review, a sufficient interest and whether there has been any undue delay”.

Based on the above cases, the Applicant in the instant application have to satisfy the test or requirement propounded in order to secure leave to commence the judicial review proceedings. At this stage, this Court need not go into the merits of the case, but only to see if the subject matter is amenable to judicial review or not; whether the application for leave is frivolous and whether an arguable case of granting the reliefs sought at the substantive hearing may be the resultant outcome.

At the outset of the hearing, the learned Federal Counsel (FC) raised a PO. The PO was premised on the ground that the Applicant has not exhausted the statutory appeal procedure to the Customs Appeal Tribunal under the Customs Act and Sales Tax Act before filing this application for judicial review.

It is noted that the Applicant is seeking relief under this application based on the:-

13.1 bill of demand dated 24.8.2021 issued under section 17(1) of the Customs Act; and

13.2 bill of demand dated 24.8.2021 issued under section 38 of the Sales Tax Act. Bill of Demand dated 24.8.2021 issued under section 17(1) of the

Section 143 of the Customs Act provides as follows:- Page 9 of 14 Review of and appeal against decision of the Director General

(1) Subject to subsection (4), any person aggrieved by any decision of the Director General may apply to the Director General to review any of his decision within thirty days from the date the person has been notified of such decision provided that no appeal has been made on the same decision to the Tribunal or High Court.

An application under subsection (1) shall be made in the prescribed form.

Where an application for review has been made under subsection (1), the Director General shall, where practicable within sixty days from the date of the receipt of such application, carry out the review and notify the decision of the review to the person.

No review may be made in any matter relating to the compound or subsection 128(3).

Any person aggrieved by any decision of the Director General under subsection (3) or any other provision of this Act, except any matter relating to compound or subsection 128(3), may appeal to the Tribunal within thirty days from the date of notification in writing of the decision to the aggrieved person.

Any customs duty payable under this Act shall be paid on the due date notwithstanding that any review or appeal has been made under this section. (emphasis added)

Section 143 of the Customs Act clearly shows that there are provision in the Customs Act for review against the decision of the Respondent.

The Applicant had put forward the review application pursuant to section 143 (1) of the Customs Act [See Exhibit OSS-6 of the Applicant’s Affidavit in Support.

The Applicant however failed to exhaust the domestic remedy available for him by filing an appeal under section 143 (5) of the Customs Act.

It is my view that since the subject matter concerned is the decision of the 1st Respondent, instead of filing an appeal before the Customs Appeal Tribunal, the Applicant had short-circuited by filing the Page 10 of 14 judicial review application to this court which is an abuse of process thus and frivolous and vexations application.

Section 141M of the Customs Act gives the Customs Appeal Tribunal the ability to determine any appeal made under section 143 of the same Act.

141M.(1) The Tribunal shall have jurisdiction to determine any appeal made under section 143 of the Act, section 47 of the Excise Act 1976, subsection 96(5) of the Sales Tax Act 2018, section 81 of the Service Tax Act 2018, and section 126 of the repealed Goods and Services Tax Act 2014 as provided under section 5 of the Goods and Services Tax (Repeal) Act 2018 [Act 805].

Without affecting subsection (1), the Minister may by order prescribe any additional matters to be within the jurisdiction of the Tribunal.

An appellant may lodge with the Tribunal an appeal in the prescribed form together with the prescribed fee. (emphasis added) Bill of Demand dated 24.8.2021 issued under Section 38 of the Sales Tax Act.

Section 96 of the Sales Tax Act gives an avenue for review and against the decision made by the Respondent. Review and appeal

(1) Any person aggrieved by any decision of the Director General may apply to the Director General for review of any of his decision within thirty days from the date the person has been notified of such decision provided that no appeal has been made on the same decision to the Customs Appeal Tribunal or court.

An application for review under subsection (1) shall be made in the prescribed form.

Where an application for review has been made under subsection (1), the Director General shall make the review and notify the decision of the review to the person, where practicable, within sixty days from the date of the receipt of such application. Page 11 of 14

No review may be made in any matter relating to compound.

Any person aggrieved by any decision of the Director General under subsection (3) or any other provision of this Act, except any matter relating to compound, may appeal to the Customs Appeal Tribunal in writing within thirty days from the date of notification of the decision to the aggrieved person.

Any sales tax due and payable under this Act shall be paid notwithstanding any review or appeal has been made under this section. [emphasis added]

Thus, from the application made by the Applicant, there is no evidence to show that the Applicant has made an application as provided for under such provision of the law and that the dissatisfaction of the Applicant against the decision of the Respondent under section 143 of the Customs Act and section 96 of the Sales Tax Act clearly warrants the Applicant to first file review.

Therefore, it is my view that the Applicant therein is not entitled to initiate a judicial review proceeding against the Respondent herein as the Applicant had failed to exhaust the statutory appeal procedure to the Customs Appeal Tribunal under the Customs Act and Sales Tax Act before filing this application for judicial review.

In Robin Tan Pang Heng v. Ketua Pengarah Kesatuan Sekerja Malaysia & Anor [2010] 1 MELR 61; [2010] 2 MLRA 571; [2011] 2 MLJ 457; [2010] 9 CLJ 505 the Federal Court was posed with the following question: whether the existence of a statutory appeal procedure / alternative remedy is a bar to judicial review or declaratory relief. The Federal Court referred to the speech by Lord Templeman in Re Preston [1985] 1 AC 835 that: Judicial review process should not be allowed to supplant the normal statutory appeal procedure. And answered the question in the positive.

The Federal Court decision in Robin Tan Pang Heng (supra) is therefore an authority for the proposition that the existence of a statutory appeal procedure is a bar to judicial review.

Further in the case of Yick Hoe Ferrous Steel Sdn Bhd v. Tribunal Rayuan Kastam & Anor [2010] 3 MLRH 454; [2011] 7 CLJ 544 Aziah Ali J (as she then was) held that: [5] The applicant should have exhausted the appeal process before resorting to the courts. Based on the clear provision of the Regulation, it would be wrong for the court to intervene at this stage, as it would tantamount to interfering with the 1st respondent from hearing the appeal pending before it, and its right under the law to adjudicate the matter. (paragraph 23) (emphasis added)

Further reference is made to the case of Pengarah Kastam Negeri Johor & Anor v. Kedai Makan Kebun Teh (Sutera Utama) Sdn Bhd & Ors and Another Appeal [2014] 5 MLRA 324; [2014] 4 MLJ 377; [2014] AMTC 63; [2014] 3 CLJ 733 where the Court of Appeal held: [19] Again, with regard to the statutory remedy as contained under s 68 of the Sales Tax Act 1972 (supra) we are of the view that the position in such a case is rather trite. This court is guided by a slew of cases emanating from high authority such as Manggai v. Government of Sarawak & Anor [1970] 1 LNS 80; [1970] 2 MLJ 41; Government of Malaysia & Anor v. Jagdis Singh [1987] 1 CLJ 451; [1987] CLJ (Rep) 110; 2 MLJ 185 and Robin Tan Pang Heng v. Ketua Pengarah Kesatuan Sekerja Malaysia & Anor [2010] 9 CLJ 505. These cases have decided that where a statute has provided for a further internal remedy to an aggrieved party, then it would become incumbent that recourse must first be had to that grievance mechanism. In other words, the respondent is statutorily obliged to exhaust that remedy first before running, as it were, to the courts for what is essentially a discretionary relief. The apex court in the Robin Tan case (supra) was guided by what Lord Templeman had said in the Re Preston case [1985] 1 AC 835 to the following effect: “Judicial review process should not be allowed to supplant the normal statutory appeal procedure.” (emphasis added)

Thus, the failure of the Applicant to exhaust the statutory appeal procedure to the Customs Appeal Tribunal under the Customs Act and Sales Tax Act is a bar for a proceeding under judicial review. It would also be an abuse of court process which makes the judicial review application premature.

The Customs Act reflects the clear intention of the Parliament that it is for the person aggrieved by the decision of the Director General of Customs to first exhaust the internal remedy available to the Respondent and not come to court. In the Court of Appeal case of Ketua Pengarah Kastam dan Eksais v Coach Malaysia Sdn Bhd

2 MLRA 377; 2019 4 CLJ 454; [2019] 2 MLJ 716 it was held as follows:- “[36] This was not done by the respondent. In our view the intention of the Legislature then was clear, and that was for the person aggrieved by the decision of the DG to first exhaust the internal remedy before appealing to the tribunal or to the court. (emphasis added)

Given the above, I am of the view that without first resorting to the alternative statutory remedies, the present application for leave to commence judicial review is premature and is an abuse of process.

Having perused the evidence produced before this court, I am of the view that the Applicant failed to show there is an exceptional circumstances for the court to grant leave for judicial review.

I find that there is no averment in the Applicant’s Affidavit in Support [Enclosure 3] that this case falls under any special or exceptional circumstances justifying the invocation of the discretionary judicial review process instead of the normal statutory appeal procedure.

The Applicant failed to show exceptional circumstances on why the Applicant should not resort to the statutory appeal remedy provided for under the Customs Act and Sales Tax Act.