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A Haulage Business v Fiji Revenue and Customs Authority [2012] FJVATT 2; VAT Appeal 9.2008 (27 September 2012)

IN THE STATUTORY TRIBUNAL, FIJI ISLANDS
SITTING AS THE TAX TRIBUNAL

Value Added Tax Appeal No 9 of 2008

BETWEEN:

A HAULAGE BUSINESS
Applicant

AND:

FIJI REVENUE & CUSTOMS AUTHORITY
Respondent

Counsel: Mr M. Sakim, on behalf of the Applicant
Ms I. Ratuvuku, FRCA Legal Unit, for the Respondent

Date of Hearing: Wednesday 26 September 2012
Date of Judgment: Thursday 27 September 2012

JUDGMENT

VALUED ADDED TAX – Section 15 Value Added Tax Decree 1991 – Input Tax Credit; Taxable Activity; Section 24 –Change of Status

Background

1. This is an application for review by the owner of a haulage business, in relation to Tax Assessments made by the Respondent on 13 August 2007 and 26 June 2008, in which claims made by the Applicant for input tax credits for goods and services provided by a digging service business to the Applicant, were disallowed.
   
2. It is a matter of record that the two businesses in question are owned separately by a father and son and that for some time, due to the infirmity of the father, were operated by the son. [1]
   
3. At issue is whether or not diesel fuel and spare parts, provided to the haulage business by the digging service business, is capable of being treated as an input credit for the purposes of Section 15 of the Income Tax Decree 1991.
   

Scheme of Taxable Activity and Registered Persons

4. The starting point for assessing this issue must be in the nature of the goods and services supplied to the Applicant. Put simply, in order for an input tax credit to be claimed by the Applicant, the digging service would need to be a person registered to make taxable supplies in accordance with Section 22 of the Decree, for taxable activities.
   
5. In the case of the digging service, it would appear that it became registered in accordance with Section 22 of the Decree, on 19 March 1998.
   
6. Section 4(1) defines "taxable activity " to mean
   
   • (a) any activity which is carried on continuously or regularly by any person, whether or not for pecuniary profit, and involves or is intended to involve, in whole or in part, the supply of goods and services to another person for a consideration; and includes any such activity carried on in the form of a business, services, trade, manufacture, profession, vocation, association, or club; and
     

(b) without limiting the generality of paragraph (a) of this subsection, the activities of any local authority or public authority.

7. The nature of the taxable activity was according to the Respondent, machinery and equipment rental. It is also noted that the digging service is the provider of soil and river gravel and so much appears to be recognised by the Respondent in this regard.[2]
   
8. What the digging service is not and there is no evidence of anything to suggest to the contrary, is the registered supplier of diesel fuel and spare parts.
   
9. There has been no attempt by the digging service to alter its status in accordance with Section 24 of the Decree and so much appears to have been conceded by the taxpayer during submissions.
   
10. On that basis, the claim for input credits against the supply of diesel fuel and spare parts, despite the goodwill between the parties, is simply not achievable. The activity of supply of diesel and spare parts would have had to had been "carried on continuously or regularly by any person"[3]; it would have also had been required to been the registered taxable activity of the digging service. It simply does not meet this requirement.
    

Conclusions

11. On its face, the digging service should be able to claim as input credits, the value added tax charged to it, by the supplier of the diesel and spare parts. Presumably that cost could have been passed on to the haulage service. If the digging service did not wish to claim that input, the simplest way of enabling the haulage service to do so, would have been to have purchased fuel and spare parts on behalf of the haulage service. For whatever reason, that course of action was not explored.[4]
    
12. In any event, the issue most fatal to the Applicant in seeking to claim input tax credit, was that it was purchasing these goods, from an entity that was not registered to supply such services, as a taxable activity. That seems to be the hub of the matter.
    
13. It is perhaps worth adding, the fact that the digging and haulage services, were for a good period of time, under the control of the owner of the digging service, due to the owner of the haulage service being unwell, has further clouded the judgement and business practices of those involved.
    

DECISION OF THE TRIBUNAL

The Tribunal orders that the application be dismissed.

Mr Andrew J See
Resident Magistrate

^[1] This evidence was adduced from the Applicant and also by submissions from Mr Sakim.

^[2] It appears an earlier dispute between the Applicant and Respondent in relation to the claims made for the supply of gravel, have now been resolved in favour of the Applicant.

^[3] See definition of taxable activity at Section 4 of the Decree.

^[4] These comments are made only as a passing view and should not be construed as being determinative of these matters.