MALWATTEVALLEY PLANTATIONS PLC

MALWATTE VALLEY PLANTATIONS PLC

Vs.

COMMISSIONER GENERAL OF INLAND REVENUE

COURT OF APPEAL
DR. FERNANDO, J.
WlJERATNE, J.
CA/TAX/6/2017
TAC/VAT/11/2014
OCTOBER 29, 2021

Tax Appeals Commission Act, No. 23 of 2011, as amended, sections 7, 7(3), 11A-Case stated-Procedure-Assessment notices-Letter of intimation-Identifying a sale of goods and a sale of service-Sale of Goods Ordinance, sections 2(1), 2(3), 18, 19, 59- Open market value- Taxable activity-Value Added Tax Act, No. 14 of 2002, as amended, sections 2(1)(a), 4(1), 21(1), 21(4), 29, 31, 31(1), 33(1), 34, 60(1), 83, Part II of the First Schedule

The appellant was engaged inter alia in the cultivation of rubber and had entered into agreements pertaining to the sale of rubber trees with three individual purchasers, setting out the location of the trees, the number of trees to be sold and the price. The appellant tendered its Value Added Tax (VAT) returns for the relevant taxable period and it was revealed from a VAT audit conducted by the assessor that the appellant had not disclosed the value of the trees sold under the aforesaid agreements.

Consequently, the assessor rejected the claim of the appellant and issued a letter of intimation. The appellant then unsuccessfully appealed to the Commissioner General of Inland Revenue and to the Tax Appeals Commission (TAC) and thereafter moved the TAC to state a case to the Court of Appeal.

The appellant argued that (a) the assessor's fresh assessment was out of time, as section 21(1) of the Value Added Tax Act, No. 14 of 2002, as amended (VAT Act), required an assessment to be made within three years from the end of the relevant taxable period; (b) the fresh assessment was not signed by the assessor as mandated by section 60(1) of the VAT Act, although a seal had been affixed thereto; (c) the aforesaid contracts for the sale of rubber trees were not contracts for the sale of goods, as it was the 'purchaser' who had to uproot the trees from the appellant's estate and, in any event, the sale of rubber trees

was not a "taxable activity" within the meaning of section 2(1) of the VAT Act; (d) the sale of rubber trees pertained to the supply of 'unprocessed agricultural products', which is exempt from VAT in terms of item (xxiii) of paragraph (b) of Part II of the First Schedule to the VAT Act.

Held:

1. Section 33(1) of the VAT Act requires an assessment or an additional assessment to be made within three years from the end of the relevant taxable period. This does not mean that the registered person should be notified of the assessment within the said time limit, as section 31 (1) of the Act does not contain any such requirement. To read such a requirement into section 31 (1) would be tantamount to modifying the language of the Act.

2. Section 29 of the VAT Act requires the assessor to inform the taxpayer of the reasons for not accepting the return. However, the assessor is not bound to inform the ground or basis for the assessment.

3. It is sufficient for the purposes of section 60(1) of the VAT Act that the name of the official be either printed or signed on the notices. Printing includes the placement of a seal on printed paper.

4. The contracts for the sale of the rubber trees were contracts for the sale of goods, although the purchasers bore the responsibility of uprooting the trees from the appellant's estate. The services rendered by the purchasers were merely ancillary to the main object of the agreements.

5. The definition of "goods" in the VAT Act encapsulates all forms of trees, whether alive or dead.

6. Fiscal statutes are to be interpreted strictly. However, such strict interpretation is not warranted when there is neither a benefit nor disadvantage to either party.

7. The definition of 'taxable activity' in terms of section 83 includes anything done in the cessation of any activity referred to in that section. The disposal of rubber trees is

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