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Waqavuka Development Co Ltd v Commissioner of Inland Revenue [2009] FJVATT 1; Appeal 10.2007 (6 February 2009)

IN THE VALUE ADDED TAX TRIBUNAL
AT SUVA

(Appeal No 10 of 2007)

In the matter of an appeal to the Value Added Tax Tribunal

BETWEEN:

WAQAVUKA DEVELOPMENT CO. LTD
Appellant

AND:

THE COMMISSIONER OF INLAND REVENUE
Respondent

H. Nagin for the Appellant
Ms S. Takilai for the Respondent

Date of Hearing: 30^th September 2008
Date of Judgment: 6^th February, 2009

JUDGMENT

This is an appeal against the decision of the Commissioner of Inland Revenue to assess/reassess the Appellant company Value Added Tax on its sales in its Transit Café at the Nadi International Airport.

In its Notice of Appeal, filed on 3^rd August 2007, the grounds of Appeal are stated as follows:

1. The Commissioner of Inland Revenue erred in law and in fact in holding that the taxpayer's sales in the Transit Lounge Café at the Nadi International Airport were subject to Value Added Tax.

2. The full grounds are contained in the 8 objections lodged by the taxpayer with the Commissioner of Inland Revenue on 11^th July, 2006.

The 8 objections lodged were identical letters dated 11^th July, 2006, except for the different taxable periods which are stated in the introductory paragraph to the Notice of Appeal.

The case was first called before the VAT Tribunal on 22^nd August 2007. The parties then proceeded to prepare for trial. At the insistence of Appellant counsel, indicative hearing dates for the week 26 – 30^th November 2007 were allocated by the Tribunal. On 19/10/07, by consent, hearing dates of 28^th and 29^th November, 2007 were fixed. On 23/11/07 the parties informed the Tribunal that there would be no dispute on facts, which would be filed by agreement. The hearing dates of 28 and 29^th November, 2007 were vacated, pending the filing of a Statement of Agreed Facts. This was tendered in Court on 18 January, 2008. By consent of the parties written submissions were ordered to be filed. The Appellant filed its submissions on time but the Respondent's submissions were delayed. The Tribunal had allocated the 8^th of May 2008 as the day for the parties to orally respond to each other's submissions.

However, on 8/5/08 Counsel for the CIR consented to the Appellant's request to file a written reply to the Respondent's submissions, filed on 31^st March, 2008. The Tribunal had expressed its concerns regarding the submissions filed, and the voluminous annexures in the Statement of Agreed Facts. It also intimated to the parties that it appeared that they were running parallel arguments without clarifying the critical legal issues. The Tribunal did manage to hear the parties in oral arguments on 30^th September 2008. However, it notes with regret that these were not as helpful as expected.

The Tribunal is also not clear on what basis submissions on Omitted Income Penalty and Amended Assessments are being made. These are contained in Sections 12 and 13, respectively, of the submissions filed by Appellant Counsel on 15 February 2008. The submissions appear to be directed at the Commissioner of Inland Revenue and essentially repeat what is contained in the letters to the Commissioner dated 11 July 2006 (Annexures 5 - 11). It is not clear why these are put before the Tribunal. The issue of penalties are not sufficient grounds of appeal. Under the VAT Decree, sections 50 and 51, this Tribunal only has powers to hear and determine appeals against assessments of the Commissioner.

The first paragraph of the letters dated 11 July, 2006 assert, inter alia, that they object to the amended assessment, "On the basis that this is not in accordance with the VAT Decree 1991, related case law and natural justice". The Tribunal recalls that it had requested the parties whether there were any relevant case law to assist in the interpretation of the relevant provisions of the Decree. In particular, the Tribunal questioned the parties as to how transit lounge cafes were treated in Australia and New Zealand as far as their Goods and Services Tax (GST) legislations were concerned. The VAT Decree, like GST, is essentially a consumption tax and follows the same taxation/fiscal policy philosophy. No cases were provided. Some extracts from the Australian and New Zealand GST legislation from the relevant websites were tendered by Respondent counsel. These were of some assistance. The Tribunal is not clear what the accountants mean by the assessments being not in accordance with natural justice, given the correspondence and meetings held between the parties, as disclosed in the annexures. Counsel did not, properly, raise the issue before the Tribunal.

Facts:

A Statement of Agreed Facts was filed by the parties on 18^th January 2008. Much of this is not relevant facts as such but contain assertions which impinge on legal issues. For the purpose of its decision the only relevant fact that the Tribunal can extract is that since July 2001 the Appellant has been operating a Café in the Transit Departure lounge for transit passengers at Nadi International Airport (Paragraph 1). It is not clear what is meant by "beyond Immigration and Customs". This is not a "fact" given the submissions of counsel. The letters contained in the Annexures contain each parties assertions or the law.

The Submissions:

The crux of the Appellant's submission is contained in the conclusion (Section 14) of its submissions filed on 15/02/08. It is stated in the following terms in para 14.01:

"In conclusion, the Appellant contends that the sales by its Departure Café located in the air side of the Nadi International Airport is properly accounted for as zero-rated under the VAT Decree 1991 and the auditors' findings as per their amended assessments are not in accordance with the provisions of the VAT Decree 1991".

This is repeated in its submissions in reply filed on 2^nd June 2008 (para 4.01). In oral argument, learned counsel for the appellant re-stated his position, in the following terms: "The sales are in the customs controlled/designated area. Everyone in this area should be treated the same. All the sales should be zero-rated'". The Respondent's basic contention is that the sales of the appellant's food and beverages at its café located in the transit lounge does not qualify as zero-rated, and is, therefore, vatable.