Table of contents
Introduction
In Howe Keat Sdn Bhd v Ketua Pengarah Kastam, Jabatan Kastam Diraja Malaysia, the Applicant filed for a judicial review to challenge the Royal Malaysian Customs Department's (RMCD) decision that rejected its appeal against a sales tax charge. The Applicant sought to overturn this decision, arguing that the bill of demand was invalid and claiming that its imported goods should be exempt from sales tax.
Background
Between 2020 and 2021, the Applicant imported goods labelled “WEX-SL” from Thailand, which it believed were exempt from sales tax under existing regulations. However, the RMCD later reclassified these goods under a different tariff code, asserting that they were not exempt from sales tax. This reclassification led to a demand for RM201,636.33 in sales tax. In August 2023, the Applicant's appeal against this tax demand was rejected. It contended that the goods were incorrectly classified and argued that the decision was made without proper evidence or expertise.
The High Court's Decision
The court reviewed the RMCD's decision and identified several issues. It determined that the RMCD had failed to provide a chemist's report or any expert analysis to support its classification of the goods. This omission was considered a significant error in law, as the RMCD’s decision required a technical evaluation of the goods' chemical composition. The lack of expert input rendered the decision irrational and unsupported by evidence. Additionally, the tax demand, based on a ruling made in January 2023, was applied to goods imported before that date. The court ruled that the tax could not be imposed retroactively based on a new ruling. The court also found that the RMCD's decision breached legal principles and procedures, as it had failed to adequately justify its decision.
Key Takeaways
- Decisions affecting tax liabilities must be supported with proper evidence, such as expert reports. The absence of such evidence undermines the validity of decisions made in technical matters.
- New rulings cannot apply to past transactions unless specifically stated in the law. This ensures fairness and prevents an undue burden on taxpayers.
- Authorities must follow legal procedures and provide adequate explanations for their decisions to ensure they are justifiable and lawful.
Conclusion
The court allowed the judicial review, overturning the RMCD’s decision. The court’s decision reflects a commitment to ensuring administrative fairness and consistency with international standards. The ruling highlights the importance of evidence and procedural fairness in administrative decisions, especially regarding tax matters.
