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2024 MarsdenLR 3096
HIGH COURT MALAYA KUALA LUMPUR
BATU TIGA QUARRY SDN BHD – Appellant
Versus
KETUA PENGARAH KASTAM JABATAN KASTAM DIRAJA MALAYSIA – Respondent
[Judicial Review Application No: WA-25-56-02-2021]
The court ruled that K2 Forms are not conclusive proof of exportation, allowing the applicant's quarry products to be treated as zero-rated supplies under the GST Act.
Headnote:(A) Goods and Services Tax Act 2014 – Section 17(1)(b) – Judicial review of the Director General of Customs' Bill of Demand for GST on quarry products exported to Singapore – Applicant contended that the supplies were zero-rated under the GST Act – The court found that the K2 Forms are not conclusive proof of exportation and that the applicant, as the parent company of CIQ, effectively operated the quarry, thus qualifying for zero-rated supplies. (Paras 22, 36, 37)
(B) Judicial Review – The court held that the DG's decision was tainted with Anisminic error and Wednesbury unreasonableness, warranting intervention. (Paras 37)
Facts of the case: The applicant, a quarry operator, supplied granite aggregates to Singapore and claimed zero-rated GST on exports. The DG issued a Bill of Demand asserting that the applicant failed to prove exportation. (Paras 2-8)
Findings of Court: The court concluded that the applicant's operations and the relationship with CIQ justified treating the supplies as zero-rated under the GST Act. (Paras 36-37)
Issues: Whether the applicant's supplies were zero-rated under the GST Act and the validity of the DG's Bill of Demand. (Paras 9-10)
Ratio Decidendi: The court emphasized that K2 Forms are not the sole determinant of export status and that the DG failed to rebut the statutory presumption of exportation. (Paras 32-36)
Result: Application for judicial review allowed, and the Bill of Demand quashed. (Paras 37)
JUDGMENT
[1] There is, before me, an application for judicial review to challenge the decision of the respondent, the Director General of Customs ("DG"), in the form of a Bill of Demand dated 19 November 2020 ("BOD"). The Bill of Demand was issued under the Goods and Services Tax Act 2014 ("GST Act").
The Factual Background
[2] The applicant is in the principal business of operating quarry and trading granite aggregates. Its customers are based in Malaysia and Singapore. For the local supplies of quarry products, the applicant is charged 6% GST.
[3] As for Singapore, the applicant supplies quarry products to YTL Cement Marketing Singapore Pte Ltd ("YTL Singapore") or its customers, all of which are in Singapore. The supply of quarry products arose out of an agreement dated 7 April 2011 signed with YTL Singapore ("the said Agreement"). Clause 4 of the said Agreement provides that products are sold on a delivery basis.
[4] The applicant took the view that the quarry products exported to Singapore are treated as zero-rated supply under s 17(1)(b) of the GST Act. Hence, there is no need to charge GST on the same.
[5] Section 17 (1)(b) of the GST Act provides that a zero-rated supply is "any supply of goods if the goods are exported". The implication is, if a supply is zero-rated, the rate of GST chargeable on the supply shall be zero percent.
The Audit Exercise And Issuance Of The BOD
[6] On 15 January 2019, the DG initiated a GST audit on the applicant. After a series of correspondences and round table discussions ("RTD") held between the parties, the DG concluded that the applicant failed to prove export. In the circumstances, the DG issued the BOD to the applicant.
[7] The total amount of GST raised in the BOD is RM1,269,225..78 and consist of the following:
(a) 6% GST is imposed on all the applicant's export transactions amounting to RM1,196,461.46; and
(b) 6% of GST being imposed for other GST issues amounting to RM72,764.32.
The applicant in this application for judicial review seeks to challenge the DG's decision in respect of item (a) only.
[8] The DG proceeded with raising the BOD on the following grounds:
(a) The applicant failed to comply with s 17(1)(b) of the GST Act.
(b) The Customs export declarations, known as Customs No. 2 ("K2 Forms"), were not declared under the name of the applicant. Consequently, the applicant is not the exporter of the goods and is unable to prove the exportation of the goods.
The Judicial Review
[9] In its application in Encl 1, the applicant seeks, inter alia, for the following reliefs:
(a) An order of certiorari to quash the respondent's decision in issuing the BOD for the taxable period from 1 August 2016 to 31 August 2018 for a total sum of RM1,196,461.46.
(b) A declaration that the respondent is bound by and shall give effect to the express wording of s 17(1)(b) of the GST Act that the applicant's supply of quarry products exported to Singapore were zero-rated supplies.
(c) A declaration that taxing legislation must be interpreted strictly, declaring the relevant K2 Forms under the applicant's name is not a pre-requisite to treat a supply as zero-rated under the GST Act.
(d) An order that the DG shall refund all the applicant's input tax credits totalling RM1,503,939.25, which were offset by the DG against the amount of the penalty imposed.
[10] The application is supported by the affidavit of Patrick James Pereira in Encl 2 ("AIS-2"). Encik Patrick is the Director of the applicant company.
[11] Leave to commence the judicial review application was granted by this Court on 5 April 2021.
[12] The grounds of the application for the judicial review are as follows:
(a) Declaring the relevant K2 Forms under the applicant's name is not a pre-requisite condition to treat the supply as zero-rated under s 17(1)(b) of the GST Act. By imposing the additional condition on the applicant, the DG had acted illegally, arbitrarily, and contrary to the express provisions of the GST Act.
