The court ruled that the cess imposed by the Malaysian Palm Oil Board is a valid tax imposition under federal law, affirming its use for subsidies within the regulatory framework.

Introduction

[1] These two appeals concerned the constitutionality of the Malaysian Palm Oil Board (Cess) (Oil Palm Fruit) Order 2007 (2007 Order), made by Minister of Plantation, Industries and Commodities pursuant to s 35(1) of the Malaysian Palm Oil Board Act 1998 .

[2] The High Court struck down the 2007 Order as invalid. The Court of Appeal upheld the judgment of the High Court. The 2007 Order was declared invalid by the High Court on the ground as mentioned below in this judgment (see para 14) that the cess collected was used for purposes outside the scope of s 33, thus rendering the 2007 Order void and illegal.

[3] The appellants (defendants) in these appeals are the Malaysian Palm Oil Board, the 1st appellant ("the Board"), the Minister of Plantation, Industries and Commodities, the 2nd appellant ("the Minister") and the Government of Malaysia, the 3rd appellant ("the Government").

[4] The respondents are the oil palm owners who were subjected to the 2007 Order. They were the plaintiffs in the High Court and had instituted proceedings against the defendants to have the 2007 Order declared null and void, and an order for the refund of the cess collected from them.

[5] Leave to appeal was granted by this Court to the appellants on two questions of law, namely:

"(a) Whether s 35 of the Malaysian Palm Oil Board Act 1998 which empowers the 2nd appellant to impose cess via subsidiary legislation is ultra viresart 96 of the Federal Constitution; and

(b) Whether the imposition of cess on a class of parties/individual under s 35 of Malaysian Palm Oil Board Act 1998 and the exclusion of certain parties/individual from the same class is a form of discrimination and in breach of art 8 of the Federal Constitution."

Background Facts

[6] The background facts of this case which led to these appeals have been well set out in the judgments of the High Court (Arunamari Plantations Sdn Bhd & Ors v. Lembaga Minyak Sawit Malaysia & Ors, ) and the Court of Appeal (Arunamari Plantations Sdn Bhd & Ors v. Lembaga Minyak Sawit Malaysia & Ors And Other Appeals; [2013] 1 CLJ 906). We will rely on them to a large extent and set them out in the following paragraphs in so far as they are relevant to the issues which arise for determination in these appeals.

[7] Sometime in early May 2007, the Government was informed about the losses suffered by the local millers and packers of cooking oil as a consequence of a combined effect of rising prices of crude oil and the ceiling price imposed by the Ministry of Domestic, Trade and Consumer Affairs on the sale of the cooking oil to local consumers. To mitigate the losses suffered by the millers and packers of cooking oil, the Government reactivated the Cooking Oil Subsidy Scheme (COSS). A similar scheme was successfully introduced in year 1999 and 2004.

[8] In order to finance the COSS, the Minister, after consultation with the Ministry of Finance, issued the 2007 Order. It was made under s 35 of the Malaysian Palm Oil Board Act 1998 ("the Act").

[9] The 2007 Order provided a levy and collection of cess by the Board from oil palm fruit producers who owned (a) oil palm holdings which is not less than 40.46 hectares or (b) oil palm holdings which is in aggregate amount to not less than 40.46 hectares. These oil palm fruit producers were required to pay the Board a cess for every metric tonne of oil fruit produced at the rate specified in the Schedule to the 2007 Order when the monthly average price of crude palm oil exceeds RM1,500 per metric tonne.

[10] Under the same order,