A recent decision by the Court of Appeal affirms a principle that although taxation laws do not impose a legal duty on revenue officers to provide reasons, there is nevertheless a duty to give reasons as a public decision-making body. In the grounds of judgment of the case Uniqlo (Malaysia) Sdn Bhd v Ketua Pengarah Kastam dan Eksais dated 9-07-2020, the court held that the High Court was wrong in finding that since the Goods and Services Tax Act 2004 (“the Act”) did not impose a legal duty to give reasons, the Director General of Customs and Excise (“Respondent“) is therefore excused from giving reasons.
The case concerns a claim for a special refund of sales tax for goods held by Uniqlo (Malaysia) Sdn Bhd (“Uniqlo”) under Section 191 of the Act.
Briefly, Section 191 of the Act was a transitional provision that allowed businesses, especially in the manufacturing and retail sector, to avoid the imposition of 6% GST upon the price of goods which already contained the 10% Sales Tax. If the claim is above RM 10,000, the claim must have the claim certified by a chartered accountant. In this case, Uniqlo’s claim was duly certified by Ernst and Young.
The Respondent requested supporting documents and carried out an audit on Uniqlo’s premises. The Respondent had conducted stock takes and requested details of stock movement in furtherance of its verification of the Uniqlo’s claim.
Vide a letter dated 16-11-2016, the Respondent issued a letter informing Uniqlo that it’s special refund application was rejected due to “Keputusan Ketua Pengarah” (“Decision“). Uniqlo’s request for reasons why the application was rejected was akin to throwing a stone in the ocean as letters went unanswered. Uniqlo then applied for a judicial review to quash the Respondent’s decision.
In the High Court:
The High Court found in favour of the Respondent and held that the Decision was valid in law.
The first ground for rejection was due to inaccurate information provided by Uniqlo. The High Court found that the Respondent’s findings after conducting physical audits were different from the refund application. This allowed the Respondent to reject Uniqlo’s claim.
Secondly, the High Court was of the view that Section 191 of the Act does not make it mandatory for the Respondent to provide reasons for rejection. It favoured the position of Pendaftar Pertubuhan v Datuk Justin Jinggut  3 MLJ 16 (“Justin Jinggut”) in finding that the GST does not mandate an obligation for the Respondent to give reasons.
Additionally, the High Court considered an undated letter after the filing of the juridical review from the Respondent which stated the reasons for rejection were due to inaccurate information and failure to remove the sales tax element from the selling price for stocks on hand.
Aggrieved by the decision of the High Court, Uniqlo filed an appeal to the Court of Appeal.
In the Court of Appeal:
The Court of Appeal allowed the appeal and overturned the decision of the High Court and quashed the Respondent’s decision.
On the point of inaccuracies, the Court Appeal found:
- The Respondent did not challenge the certificate issued by Ernst & Young; and
- The verification physical audit was conducted 6 months after the claim was made hence the goods held by Uniqlo as of 1.4.2015 would naturally be different from October 2015.
On the second point, the Court of Appeal distinguished the case of Justin Jinggut and instead found reliance in the case of Kesatuan Pekerja-Pekerja Bukan Eksekutif Maybank Bhd v Kesatuan Kebangsaan Pekerja-pekerja Bank & Anor  2 MLJ 590. Accordingly, the Court of Appeal held that silence on the duty to give reasons in the Act cannot be equated to the same as no reasons need to be given, and duty to give reasons can be implied. This approach was favoured on the concept of fairness and inculcates transparency and accountability.
Similarly, the Court found that the High Court erred in considering the undated letter as it was filed after the filing of the judicial review.
The Decision is welcome to encourage accountability by public servants and ensure that discretion was exercised properly. The practice to give reasons further instills confidence and provides an opportunity to taxpayers and to remedy mistakes/ discrepancies, if any.
It is noted that the Respondent had since filed an appeal to the Federal Court.