UKWATTE

Vs.

DEPUTY PROVINCIAL COMMISSIONER OF REVENUE AND OTHERS

COURT OF APPEAL
WICKREMASINGHE, J.
J. DE SILVA, J.
CA/PHC/45/2009
HC COLOMBO REV/80/2007
MC COLOMBO 72700/5
JANUARY 9, 2019

Turnover tax-Financial Statute of the Western Province, No. 6 of 1990, sections 21(1), 85(3) and 89-Income Tax Ordinance, sections 62 and 81-lnland Revenue Act, No. 4 of 1963, sections 90(1) and 106- "Defaulter" for the purposes of turnover tax-Liability of principal officers of the company when there is a tax default by the company

A certificate under section 89 of the Financial Statute of the Western Province had been filed in the Magistrate's Court against the respondent company for the recovery of turnover tax. The appellant, who was the Chairman of the respondent company, filed an affidavit objecting to the same. At the conclusion of the inquiry, the Magistrate's Court made an order directing the respondent company to pay the tax in default, and in the event that the respondent company failed to do so, the same was to be recovered from the appellant as a fine with a sentence of 12 months rigorous imprisonment to be imposed in default.

The argument before the Court of Appeal broadly concerned whether the appellant was the "defaulter" for the purposes of the certificate filed in the Magistrate's Court and whether a director of the respondent company not named in the certificate can be made vicariously liable for the taxes in the said certificate.

Held:

1. The word "defaulter" in section 89(1) of the Financial Statute of the Western Province includes the respondent company, which was assessed, and its secretary, manager, director, or another principal officer of the respondent company on whom a statutory obligation to perform all acts of the company has been imposed by section 21 (1) of the Statute.

2. The appellant is a defaulter as, firstly, there is a default by the respondent company and, secondly, the appellant has admitted that he is the Chairman of the respondent company.

3. There is no vicarious liability imposed on the appellant, as tax in default was sought to be recovered from the appellant only in the event that the respondent company failed to pay the tax in default as directed.

Cases referred to:

1. M.E. De Silva v. Commissioner of Income Tax 51 NLR 280
2. Ranjit Wijemanne v. Commissioner of Income Tax Reports of Ceylon Tax Cases Vol. 1437
3. Philip v. Commissioner of Inland Revenue Sriskantha's Law Reports Vol. I Part 10 133
4. Hamza v. Commissioner of Inland Revenue [1988] 1 Sri LR 312
5. Ramlin v. Commissioner of Inland Revenue [1988] 2 Sri LR 259
6. Dias v. Commissioner General of Inland Revenue [2011] 2 Sri LR 15
7. Jinawathie and others v. Emalin [1986] 2 Sri LR 121 at 130
8. Meridian Global Funds Management Asia Ltd v. Securities Commission Respondent (1995) 2 AC 500 at 506
9. Seneviratne v. Abeykoon [1986] 2 Sri LR 1
10. Government Medical Officers Association and another v. Senanayake [2001] 3 Sri LR 377

APPEAL from the Order of the High Court of Colombo.

Faisz Musthapha, P.C., with Riad Ameen for the Petitioner-Appellant.

Anusha Samaranayake, D.S.G., for the Complainant-Respondent-Respondent and Respondent-Respondent.

cur. adv. vult.

May 3, 2019

J. DE SILVA, J.

This is an appeal against the order of the learned High Court Judge of the Western Province holden in Colombo dated 02.02.2009.

The Complainant-Respondent-Respondent (Complainant) filed a certificate against Three Coins Company (Pvt) Limited, who is the Respondent-Respondent-Respondent (Respondent Company) under section 89 of the Financial Statute of the Western Province No. 06 of 1990 as amended (Statute) for the recovery of turnover tax in the Magistrate's Court of Colombo. The amount sought to be recovered as turnover tax was a sum of Rs. 3,069,418/- inclusive of penalty. The Respondent Company was noticed to show cause.

The Petitioner-Appellant (Appellant) filed an aff