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2021 MarsdenLR 3679
HIGH COURT MALAYA SHAH ALAM
RESTORAN WONG SOLO (SHAH ALAM) SDN BHD & ORS – Appellant
Versus
KERAJAAN MALAYSIA – Respondent
[Civil Appeal No: BA-12GS-01-09-2017]
A restaurant exceeding RM3 million turnover is a taxable person under the Service Tax Act regardless of licensing, and liabilities can be pursued civilly.
Headnote:(A) Service Tax Act 1975 (Act 151) – Sections 15, 17 – Appeal against summary judgment for unpaid service tax – Service tax is applicable to any taxable person with sales over RM3 million as per regulations – The appellants argued lack of license invalidated service tax liability, but the court affirmed tax obligations based on annual sales irrespective of licensing status. (Paras 4, 8, 12, 30, 70)
Facts of the case: The appeal was filed by Restoran Wong Solo and its directors against a summary judgment regarding RM822,582.38 in unpaid service taxes after an audit by customs found their sales exceeded RM3 million.
Findings of Court: The court confirmed that the first appellant was a taxable person under the STA 1975 due to their annual sales exceeding stipulated thresholds and upheld tax liability.
Issues: The main issues included the nature of the appellants' status as a taxable person under the STA 1975 and if service tax recovery required prior criminal conviction.
Ratio Decidendi: The court ruled that being unlicensed did not negate tax liability; tax applies provided revenue surpasses thresholds, and service tax due can be claimed civilly without prior conviction.
Result: Appeal dismissed with costs.
JUDGMENT
Introduction
[1] This is an appeal by the appellants, Restoran Wong Solo (Shah Alam SdnBhd and its two directors, against the summary judgment entered against thempursuant to O 14 of the Rules of 2012 ("ROC") by Shah Alam Sessions Courtin respect of the respondent's claim for non-payment of service tax in the sum of RM822,582.38 together with interest and costs.
[2] At the material time, the first appellant operates a restaurant carrying on the business of providing and selling food and drink. The second and third appellants are the directors of the first appellant.
[3] In an audit conducted by the Jabatan Kastam Diraja Malaysia ("customs") in 2012 on the first appellant's operations at the restaurant, the first appellant's "z" report and daily sales report showed that the first appellant's total annual sales turnover for the 12 months period prior to September 2012 was in the sum of RM3,078,981.42.
[4] The Service Tax Act 1975 (Act 151) (" STA 1975") stipulates that service tax shall be charged and levied in accordance with the Act on any "taxable service" provided by any "taxable person". The 1975 has since been repealed by the Goods and Services Tax Act 2014 (Act 762) ("GST Act 2014") and which in turn was repealed by the Goods and Services Tax (Repeal) Act 2018 (Act 805). The repealed GST Act 2014 was replaced by the Sales Tax Act 2018 (Act 806).
[5] Pursuant to Group C of the Second Schedule of the Service Tax Regulations 1975 (" STA Regulations 1975"), a restaurant operating outside a hotel carrying on the business of providing and selling food and drinks, with an annual sales turnover of more than RM3 million is a taxable person.
[6] The respondent's case against the first appellant is that it is a "taxable person" providing "taxable service". Therefore, it should pay the respondent the service tax charged and levied on the first appellant for the taxable service provided. The service charge due and payable by the first appellant for the taxable period from October 2012 to March 2015 is in the sum of RM822,582.38.
[7] The respondent issued a notice of demand ("bil tuntutan") dated9 October 2015 for the sum of RM1,233,873.54 made up of the unpaid service tax in the sum of RM822,582.38 and penalty in the sum of RM411,291.16. The penalty was later remitted by the Minister of Finance. Thus, the claim by the respondent against the appellants was for the unpaid service tax only.
[8] The appellants failed and/or refused to pay the service tax. The respondent then proceeded to commence a civil action against the appellants at the Shah Alam Sessions Court for recovery of the service tax due and payable. Section 15 of the STA 1975 states that any service tax due and payable and any penalty or surcharge payable under the Act may be recovered as a civil debt due to the Government.
[9] The appellants in its defence and its affidavit-in-reply to the respondent's application for summary judgment admitted that the first appellant annual sales turnover was more than RM3 million for the 12 months prior to September 2012.
[10] The defence put forward by the appellants is that as the first appellant did not apply for a licence and is not licensed under the STA 1975, it is not a taxable person under the Act. The appellants averred in their affidavit-in-reply that as the first appellant did not collect any service tax from its customers, it is not liable to pay any service tax to the respondent.
[11] The learned Sessions Court Judge ("SCJ") found that the appellants did not have any defence to the respondent's claim for recovery of the unpaid service tax. He held that the issues raised by the appellants in reply to the respondent's application for summary judgment were all questions of law only. He then went on to decide on the questions of law raised by the appellants. The learned SCJ held that pursuant to STA 1975 and the Second Schedule of the Regulations 1975, the first appellant is prescribed as a "taxable person" and is
