Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2023 MarsdenLR 1505

COURT OF APPEAL PUTRAJAYA
KETUA PENGARAH KASTAM – Appellant
Versus
METROGOLD COMMERCIAL SDN BHD – Respondent
[Civil Appeal No: W-01(A)-342-05-2022]

Petitioner Advocates:Nur Idayu Amir ,Respondent Advocate: Vijey Mohana Krishnan,Chang Ee Leen

The court affirmed that a taxable person is entitled to input tax credit incurred prior to registration under the GST Act, and the authority to apportion such claims is ultra vires.

Headnote:(A) Goods and Services Tax Act 2014 - Sections 2, 38, and 39 - Goods and Services Tax Regulations 2014 - Regulation 39(2)(b) - Input tax credit claim - Appellant's decision to apportion and reduce respondent's claim quashed by High Court - Respondent was a taxable person at the time of incurring input tax - Appellant's authority to apportion input tax credit under Regulation 46 was found to be ultra vires. (Paras 19, 20, 38, 62, 100)

(B) Judicial Review - Grounds for quashing administrative decision - Decision found to be unreasonable, ultra vires, and contrary to the doctrine of legitimate expectation. (Paras 100, 134)

Facts of the case:
The respondent, a property development company, incurred input tax on the purchase of land and claimed an input tax credit, which was partially rejected by the appellant, the Director-General of Customs, leading to judicial review proceedings. (Paras 3, 8, 10, 12)

Findings of Court:
The court upheld the High Court's ruling that the respondent was entitled to the full input tax credit as a taxable person at the time of the claim, and that the appellant's apportionment of the claim was unlawful. (Paras 100, 135)

Issues: The main issues were whether the respondent was a taxable person when the input tax was incurred and whether the appellant had the authority to apportion the input tax credit. (Paras 24, 70)

Ratio Decidendi: The court concluded that the respondent qualified as a taxable person prior to registration under the GST Act, thus entitled to claim input tax credit without apportionment, and that the appellant's decision to apportion was not supported by law. (Paras 100, 135)

Result: Appeal dismissed.

Table of Content
1. judicial review application for certiorari. (Para 1 , 2)
2. background facts of the case. (Para 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12)
3. arguments of the dg of customs and the respondent. (Para 13 , 14 , 15 , 16 , 17 , 18)
4. essence of the high court's decision. (Para 19 , 20 , 21 , 22)
5. principal grounds of appeal. (Para 23 , 24)
6. court's analysis on the respondent's status as a taxable person. (Para 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33)
7. interpretation of the gst act. (Para 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43)
8. discussion on input tax credit claims. (Para 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53)
9. regulatory framework for input tax credit. (Para 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61)
10. court's findings on the appellant's authority. (Para 62 , 63 , 64 , 65 , 66)
11. conclusion on the appellant's claims. (Para 67 , 68 , 69 , 70 , 71)
12. court's analysis on the dg of customs' powers. (Para 72 , 73 , 74 , 75 , 76 , 77 , 78 , 79 , 80 , 81)
13. court's findings on the apportionment of claims. (Para 82 , 83 , 84 , 85 , 86 , 87 , 88 , 89 , 90 , 91)
14. discussion on the gst repeal act. (Para 92 , 93 , 94 , 95 , 96 , 97 , 98 , 99 , 100)
15. court's interpretation of taxing statutes. (Para 101 , 102 , 103 , 104 , 105 , 106 , 107 , 108)
16. court's rejection of the appellant's arguments. (Para 109 , 110 , 111 , 112 , 113 , 114 , 115 , 116 , 117)
17. final conclusions and decision. (Para 118 , 119 , 120 , 121 , 122 , 123 , 124 , 125 , 126)
18. summary of the court's reasoning. (Para 127 , 128 , 129 , 130 , 131 , 132 , 133 , 134)

Mohd Nazlan Mohd Ghazali JCA:

Introduction

[1] This is an appeal against the judgment of the High Court which had allowed the respondent's judicial review application for a certiorari under O 53 of the Rules of Court 2012 ("the RC 2012") quashing the appellant's decision in apportioning and reducing the respondent's claim of input tax credit under the now repealed Goods and Services Tax Act 2014 .

[2] Having heard the appeal - which was conducted by way of a remote communication technology via Zoom - examined the appeal records and considered the submissions by parties, we unanimously decided to affirm the decision of the High Court, and therefore dismiss the appeal, for the reasons which we set out herein. Key Background Facts

[3] The respondent company, Metrogold Commercial Sdn Bhd is principally involved in the property development business, which therefore includes the buying and selling of lands. The appellant is the Director-General of the Royal Malaysian Customs Department ("the DG of Customs").

[4] On 24 November 2015, in pursuance of its property development activities, the respondent executed a Lease Purchase Agreement ("the Agreement") with Metrogold Assets Sdn Bhd ("M Assets") for the purchase of the lease of five plots of freehold land in Medini Iskandar Malaysia (for present purposes identified as Plots C4, C5, C6, C13 and C14) from the owner, M Assets (" the Lands") for a purchase consideration of RM170,650,000.00.

[5] The respondent had however paid not only the RM170,650,000.00 as the purchase price but also RM10,239,000.00 as the Goods and Services Tax ("GST") amount incurred by the respondent in respect of the said purchase.

[6] The respondent was registered as a GST registered person effective 1 March 2016. The respondent then made an input tax credit claim ("the ITC Claim") amounting to RM10,239,000, being the GST in the respondent company's first GST Return Form for its first taxable period of 1 March 2016 to 31 March 2016.

[7] On 9 September 2017, the respondent entered into two lease purchase agreements with Distinctive Industry Sdn Bhd ("Distinctive Industry") to sell two plots of the lease on the Lands - specifically Plots C13 and C14.

[8] By way of a letter dated 10 April 2019, the Royal Malaysian Customs Department (RMCD) rejected the ITC Claim by the respondent on the stated ground that there was no approval from the DG of Customs for an exceptiona

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2023 MarsdenLR 1505

COURT OF APPEAL PUTRAJAYAKETUA PENGARAH KASTAM – AppellantVersusMETROGOLD COMMERCIAL SDN BHD – Respondent[Civil Appeal No: W-01(A)-342-05-2022]

The court affirmed that a taxable person is entitled to input tax credit incurred prior to registration under the GST Act, and the authority to apportion such claims is ultra vires.

Cases Referred (4)

COURT OF APPEAL PUTRAJAYA
KETUA PENGARAH KASTAM – Appellant
Versus
METROGOLD COMMERCIAL SDN BHD – Respondent
[Civil Appeal No: W-01(A)-342-05-2022]