State(on Application of Batatawala t/a Lindo Group of Companies) v Malawi Revenue Authourity (Judicial Review Cause 1 of 2022) [2022] MWHCRev 5 (6 May 2022)

RRR cee IN THE AGH COURT OF MALAWI PRINCIPAL REGISTRY RE VENUS DIVISION JUDICIAL REVIEW CAUSE NO. t OF 2022 THE STATE (ON APPLICATION OF ABDUL KARIM BATATAWALA (a LEDO GROUP ©. F COMPANIES o.oo occ ccccscseessenessceevoescene CLAIMANT AND MALAWT REVENUE AUTHORITY .......cccccccscscesceevessooees DEFENDANT HON, DUSTICE &. MBYUNBULA Pearson, Counsel for the Claimant Chengu, Counsel for the Defendant Chimang’ anga, Official Interpreter CORA The application The cleimant filed an application for permission to apply for judicial review of 1. a decision by the defendant demanding payment of taxes due from the ciaimant “without paying due attention to special circumstances regarding the ‘otal amount of taxes already collected and the outstanding taxes due vis-a-vis to the continuity of the claimant’s business contrary to the irue interpretation of section 105 ofthe Taxation Act;” and 2. a decision of the defendant to demand the taxes due without affording the claimant a pre-action hearing in view of the special circumstances of the case, namely aj) that the claimant already paid huge sums of money to the defendant and ithe claimant has not exhausted the appeal process, and that the decision of the defendant to not dispose of the pending appeal for almost a year is unfair and inconsistent with fair administrative procedures under section 43 of the Constitution. cc Nee The claimant seeks the following declarations and orders: i. a declaration that the defendant’s decision demanding payment of all taxes due without paying due regard to the special circumstances, namely, the total taxes peid and the existence of a pending appeal is unreasonable in the Wednesbury sense and “is devoid of’ the claimant’s legitimate expectation of fair agmiinistrative treatment under the Constitution”; 2. a asclaration that on a trae construction of section 105 of the Taxation Act and section 43 of the Constitution the principle of “pay and argue later” ts subject to fair administrative treatment including conducting pre-action hearmg where there are special circuinstances as in the instant case hence the decisions are iHeeal and irrational; 3. orders Of certiorari quashing the defendant’s decision, stay of the decision and directions as to the heaving of the matier and for costs. Upon my examination of the application and the grounds advanced therefor I formed the view that the anplication for permission would best be considered infer pcrfes, mm and directed accordingly. This is my Ruling on the infer partes hearing of the same. Facts relied on by the claimant The cisimant relies on the affidavit of Azery Mnyalira, holding himself out as tne latmmaitia Tay seeayatant cigiment’s bax Accountant. He states that the defendant carried out investigations into the claimant’s tax liabilities and issued an assessment amounting to K.7 622 953 102.07 (hereinafier to be cited as “K7.6bn”, unless otherwise necessary). The assessment is exhibited and markec “PTC 1”. The said amount, he states, was paid by the claimant under protest who proceeded to lodge an appeai with the Commissioner General which the iatter dismissed. He avers that he thereafter appealed to the Special Arbitrator who decided { in the cialmant’s favour, which decision tne defendant appealed against in the righ Court, therein succeeding, and being dissatisfied with the High Court’s determination, the claimant lodged an appeal in the Supreme Court of Appeal, which appeal is pending. It is averred that since the lodging of the appeal in the Supreme Court of Appeal, the claimant has submitted his annual corporate tax returns for fimancial years 2016/2017 uo to 2020/2021 and that prior to the 2016/2017 financial year, and specifically before the High Court determination the claimant was in an assessed loss position and that the tax computations for that year were based on the said assessea loss carry forward and ihe taxes were paid under protest in ine spirit that the appeai process had not been exhausted in view of the appeal pending in the Supreine Court of Appeal. The deconent further avers that by letter dated 3“ September 2020 the defendant issued ta the claimant a demand notice for the sum of 4 192 734.92, against which the clairnant profested on the ground that the tax issues which gave rise to the claimait’s assessed loss anc refund position in the 2016/2017 financial year were suoject ol an appeal in the Supreme Court of Appeal and that the interest of justice tilted im favour of allowing the claimant to continue claiming the assessec ioss carry forward until the tinal disposal of the appeai, and on the ground that the taxes due and demanded had been duty paid, though under protest, hence the defendant wouid not be prejudiced in any way. This submission was rejected by the defendant who proceeded to collect ithe K4 192 734,97. li is ihe view of the claimant, as deposed by Mr Monyaliva, that the defendant's decision declining the claimant’s submission and proceeding to collect ihe K4 192 734.92 was in disregard to the claimant’s busimess survival and unfair to him as a taxpayer having earlier collected huge sums of tz Mr Mnyatira further avers that following this the claimant lodged an appea! to the Commissioner General with regard to the K4 192 734.92 which appeai is sil pending osfore the Commissioner General and that there is no indication as ic when the same will be determined. The appeal, exhibit “PTC 11” is dated 25° January 2021. Tt is averred further for the claimant that, to the claimant’s dismay, by letter cated 21% Mecember 2021, the defendant issued an initial warning notice for domestic ta arrears amounting to K 199 840 781.40 whose correctness the claimant queried and this resulted din th e defendant revising the amount to K-74 317 813.66 and demanding the immediate payment thereof, or in any event, not later than S$" February 2022, without, 6 so it is averred, “engaging the claimant on the payment plan”. Mr Minyalira ate states that according to the advice proffered by the claimant’s lawyers, which he verily believes to be true, the manner in which the defendant is treating the claimant as a taxpayer is unfair, illegal and unreasonable of a public body and amenable to judicial review. He states that in view of the circumstances relating to the total taxes paid under protest and the appeal pending in the Supreme Court of Appeal and the Commissioner General, there are special circumstances requiring the defendant to call for a pre-action hearing on ihe further taxes payable before issuing any demand letter as in the iustant case, hence the defendant’s demand tor further taxes cue without a pre-action hearing is, in his view, unreasonable and unfair by all standards. It is contended that the defendant’s actions taken in totality are aimed at choking the claimani’s business and/or killing it completely without any legal justification whatsoever, and only driven by malice, It is exalicit from both the affidavit of Mr Mnyalira and the submissions of counsel for the claimant, that this application is in relation only to the decision cmnbodied in the defendant’s letter dated 21% December 2021, demanding domestic tax arrears amounting to K192 840 781.40 and later reduced to 74 317 813.66 (hereinatter “K-74 million” unless otherwise necessary) to be paid not later than $"" Psoruary 2022, and it is that decision which the claimant argues ought to have been preceded by a gre-action hearing, the failure of which must be subjected to judicial review. in this regard the issue wnich the court would have to decide at the judicial review, if permission was granted, inay be summarized as follows: Whether the defendant’s decision demanding payment of the K.74 317 814.66 under the section 105 Taxation Act principle of “pay and argue later”, without conducting a pre-action hearing in view of what the claimant perceives as suecial circumstances, namely that the claimant has previously paid ‘uge mounts of taxes, and in light of the appeal pending in the Supreme Court of tik /.opeal, is unreasonable in the Wednesbury sense and im violation of tae ciaimant’s cight to fair administrative treatment under section 43 of the Constitution, and therefore ilegai and irrational. Claimeont’s Submissior Counse. ieiterated that the present application emanates from the collection of ihe K74 million; that the claiment’s expectation is that before the enforcement of that amount, and taking into account the amount of tax already collected under protest (746n and 4bn), i would only be fair if the defendant would cail for a pre-action hearing notwithstanding the terms of section 105 of the Taxation Act principie of “nay now argue later” if you have any objection. In this regard counsel referred the court two decisions of this court, namely Alliance One Tobacco v Commissioner General of the Malawi Revenue Authority Judicial Review Cause No. 5 of 2017 (Chigona J) and Blantyre Printing and Publishing Co Ltd vy Commissioner General ofihe Malawi Revenue Authority Revenue Cause 15 of 2017 (Mbvunduia J) where, as counsel submitted, if was held that instances may arise where a the defendant must cali for a pre-aciion hearing and affording the taxpayer fair administrative proceaures. According to counsel if this court finds that the decision is unreasonable the court should grant 2 quashing order, which order, so he submitted, would not entail that the taxes cue will not be paid but, rather, fairness to the claimant by way of a pre- action hearing where fair terms will be agreed. Counsel thus submitted that the present acpiicaiion raises a ground fit for further inquiry by way of pudicial review. The defendant’s response he detendant relied on two affidavits, the first by Lilian Nyirenda, nolcing herself out as a Manager Collection and Piling Enrorcement Large Tax Payer Orfice” and a supplementary one by Mr Anthony Chungu, of counsel, both in the employ of the defendant. In her ofidavit Mes Nyirenda refers to the affidavit by Mr Mnyalira and gives the vd w . a following account, She avers, in relation to the demand for the £74 million that on 9" February 2022 the defendant was served with the present application for permission to apply for judicial review. The background facts, according to her affidavit, are that the claimant was audited from May 2021 to 16" June 2021 for the period April 2019 to March 2026 covering Value Added Tax (VAT) and Corporate Tax and folowing the quclit a total of £32 515 685.57 was quantified for Corporate Tax and VAT which was communicated to the clainiant in the final audit report dated 28" June 2021. She avers further that the claimant was given seven days in the audit report (Audit 2) to settle the tax Hability failing which the defendant would be corapelled to escalate enforcement measures. She states that the case was then handed over to the s Collection and Filing Office (CFE), for collection of those taxes, on 38 1 PE sp 2021. As of that date, so she avers, the clatmant nad other outstanding wevious audit conducted in 2019 (Audit 1) and a corporate tax balance, and as at 21" December 2021, the defendant’s records reflected arrears amounting to KiS2 840 781.40. As at 24 February 2022 the amount reflected a tax arrears balance of K.74 317 813.66. This is in agreement with the averments by Mr Mnyalira in the affidavit in support. Mrs Nyirenda goes on to state that following failure by the claimant to seftle the debt, tne CFE tssued an Initial Warning Notice on 21% Deceraber 2021 which demanded K.192 840 781.40, to which the claimant responded in his letter of 23"! December 2021, enclosing therewith some withholding tax certificates for 2016 and 2020 which had not been credited in the assessments and stating that he was working on getuing the arrears within the shortest possible time. She siaies that action was taken tc enter the necessary credits, It is the deconent’s further account that on 10" January 2022 the claimant made some payments towards the arrears and provided details of how some of the amounts i were sett! a anc wpon 4 1 verifying the payments the same were acknowledged ndant’s letter dated 2 February 2022, and the interest previously charged Was accordingly “ocala ated, Following, that, se it is stated, the claimant through his Tax Manager, Mr Mnvyalica, contacted the CFE case officer, Rhoda Chibwana, on 4" February 2022, indicating thet due to the slowness of business the claimant would not manage to pay the whole sum demanded Py 9 February 2022 and requested to pay that the arrears be settied by installments, in response to which the officer advised Mr Ivinyalira to put the request in writing and deliver it to tae Manager CFE before 9" February 2022. On the sate day, it is averred, Wir Mnyalira visited the deponent herein with a proposal to be oaying KIO million every mouth and the deponent rejected the proposa:, advising tum io present the same in writing so that the defeneant may respond officiaily. Lf is stated that when the case officer called Mr Mnyalira for the letter, nis respurise was that the letter had noi yet been signed. To-date, it is stated, tne claimant has not cisputed tire ta. x liability. In the view of the denonent the defendant has duly accorded the claimant the claimant the reht to be heard through the various letters of demand and warning letters (exhibited end marked “MRA 1”, “MRA 2” and “MRA 3”. She avers that in addition the claimant is at liberty to appeal to the Commissioner General, if agerieves, with the outcome of the process and outcome, the enforcement of which the Giaimant is saic lo nave participated in by offering payment modalities, Thus sne prays that the prayer for leave fe apply for judicial review should be reTuser The supplementary affidavit of Mr Chungu merely seeks to clarify what he considers misconceptions in the position taken by the claimant and of no sesrios consequential effect. Defendant's submissions Counsel for the deferndarc countered the claimant’s application with wo Issues, namely a} whether there were serious issues fit for Judicial review, b} ond whether the claimant has exhausted al! the alternative remedies et nis cisposal and related thereto, whether the application is academic and a waste of the court’s time. [min 20] Counsel argued the issues in reverse order, i) On whether the claimant has exhausted aliernative remedies te Counsel referred to a statement by counsel for the claimant that it would not be novel for the parties po back to the drawing table, which in defendant’s counsel’s understanding related to exhaustion of alternative remedies. With reference to the affidavit of Mrs Nyirenda, counsel seemed to have erroneously understood that the claimant had aircady staried paying towards the assessment. Contrary io that undersiancing the aftiaavit pointed oui tnat ine claimant had verbally requestec for payment terms which he was yet to reduce to writing. in the submission of counsel that the claimant was requested to formally put in writing his offer for payment by insiallycenis to the Commissioner General, which he did not take up within tne number of days siypulated by the defendani, left it clear that there is stil an aliernative remedy that nas not been exhausted. In line with si 105 (2) of the Taxation Aci, so submitted counsel, tax 1s payatis unless the Commissioner General directs otherwise. In the present case, it was suomitiec, ne appeal had been lodged before the Commissioner General relating to the asse ssment in issue. Secondly, no application for waiver to pay et once wa: i granted, All these, in the submission of counsel for the defendant, are alterna Counse. mace soecific reference to the fact that under both the Taxation Aci auc the Value vidded Tax Act the claimant has outstanding alternative remedies. s rernedies still a: the disposal of the claimant, and not been exhausted. mE On whether there ore serious issues to be examined at a judicial review Counsel! subraitted that in the present case the claimant defaulted in his duty to carry out a self-assessment and submit a return which prompted the defendant under its statutory duty to assess him and demand oayment accordingly. in the submission of counsel, doing what is provided in the law, as the defendant did, cannot be a ground for judicial review. Consequently, so proceeded counsel, there will be no question to oe ¢ considered | i judicial review. Determination i torm the view that the issuc of availability of alternative remedies is dispositive of this application. Granied that tne parties agree that the application herein velaies o nly to the K/4m tax assessment which is not in dispute, and therefore due as a tax hability, a ‘ad tt not being disputed that the claimant was asked to submit his written proposal for settlement, which he did not honour, it cannot lie in the clalmart’s mouth that the defendant should ve restrained from demanding the said iax merely because there was fio pre-action hearing. Whilst it has been heid in previous court dovisions that in certain circunistances @ pre-action hearing ought to be held, its iy opinicn: that woere the tax bayer has been grarrtecdl an opportunity to state ois case and present a proposal for settlement, and ne ignores it, as is the case herein, he cannot justly claiin want of a pre-action hearing or that his mphts under section 43 orihe Constitution have teen violated. The notion of a pre-action hearing, as a matter of faci, simply connotes or extends to an opportunity for the taxpayer to make SUDTMISSiOns im relation to his tax assessment in whatever way. in the premises | find mysel! ia apreernent with the defendant thai the claimant has haa an alternative remedy by way of submitting his payment plan to the defendant, which for his own reasons née has not utilised. Accordingly the prayer for pernussion to commence judicial review proceedings is dented. Consequently all and ary restraint orders granites herein apairnst the derendant are set aside. The claimant shai bear the costs of the application. th [fade in chambers at Blantyre this 6" day of May 2022. R Mbvundufa We yt JUDGE