High Court Judge Fidela Corbin-Lincoln last Friday annulled a decision of the Guyana Revenue Authority (GRA) to reassess and impose additional taxes on goods imported by Chinese businessman Shanglin Lin.
Finding that the GRA failed to establish the statutory basis upon which it embarked upon the reassessment of duty, the Court quashed its demands for Shanglin Lin (the Applicant) to pay the more than $5,000,000 in additional duties and taxes.
Lin is engaged in the importation of sanitary products manufactured in China. The action filed is in respect of several containers of adult and children diapers imported between January and July of 2019.
Following the demands made by the GRA, the Applicant subsequently discovered that he had been blocked by the revenue authority from electronically filing customs entries and declarations with the ASYCUDA system which it operates.
Lin would later file an action asking the Court to declare among other things, that any assessment of duties and taxes or demand therefor by the Post Clearance Audit Unit (PCAU) to be paid to GRA is without statutory power and unlawful.
It is against this background that he asked the Court to quash the revenue authority’s decision demanding him to pay a total of $5,763,755 in additional taxes on duties which he argued through his attorney Manoj Narayan, was in breach of the Customs Act.
Additionally, he sought an order quashing the GRA’s (Respondent) decision blocking him from uploading documents to ASYCUDA.
Lin argued in his fixed date application that he had imported several containers of diapers between January and July 2019 for which duty was assessed and paid and the goods released to him; all of which were sold within a few months thereafter.
According to him, at no time between that period did GRA ever raise any concern or query regarding the invoices or declared value of the items imported, nor had he ever been required to submit additional invoices or other documents regarding the items.
His claim, too, was that he was never informed by the revenue authority of any error regarding the declared value of the items or the duty or taxes payable thereon; nor ever informed of the reason or basis for the imposition of additional taxes.
The Applicant complained, too, that he was never afforded any opportunity to be heard prior to the authority’s decision demanding the additional taxes.
Lin deposed in his application that a letter he would eventually receive from the revenue authority, indicated that the demand was premised on “anomalies” which cited transactions going back to January 2019 for which he said duty was already fully assessed and paid.
He said that the letter, however, failed to identify any of the anomalies and also failed to state how the additional duties and taxes were calculated or what legal principles were used to compute same.
According to the GRA, however, Lin was informed of its review of the transaction values of his consignments prior to the January 3rd, 2020 “letter of demand” which it sent him. It said, too, that he was made aware of concerns and queries it had as well as its request for additional documents.
The GRA contended that the Applicant had also been given an opportunity to be heard; through the exchange of a number of correspondences way before January 3rd, 2020 and invited to a meeting as well which he never attended.
“A post clearance limited scope audit of the declarations …was conducted by the Post Clearance Audit Unit of the Respondent after it was observed that the declared values for pampers and soap powders imported by the Applicant were low in comparison to other importers of similar products,” the GRA said.
It submitted further, that in the absence of records to verify the Applicant’s transaction values and the fact that he was the sole importer of “Prime Diapers” brand, it conducted a search for importers who imported similar goods from China in similar quantities as Lin and who would have imported the said goods in or around the said time as the Applicant.
According to the GRA, it discovered other importers who satisfied the criteria to be considered as comparators for transaction values of similar goods.
Among other things, the GRA argued that it is authorized by Section 17 (2) of the Customs Act to demand for short levied duty and “upon failure of the individual to comply with the demand, certify upon any entry, specification or shipping bill subsequently presented to a proper officer by that individual, the particulars of the amount demanded.”
The Respondent further went on to say that since ASYCUDA is the only method by which customs brokers can file and submit customs entries and declarations , a record of the demand was recorded in ASYCUDA which resulted in the Applicant’s inability to upload any further customs entries and declarations.
That restriction the GRA contended, is in accordance with Section 17 (2) while adding that it acted within its legal authority.
Justice Corbin-Lincoln noted that apart from the powers of the revenue authority under Section 17 of the Customs Act, it also contended in the alternative that it was the cumulative effect of Section 17, Section 233 and Regulations 36 and 204 (w) of the Act and the Customs Regulations which give it the power to demand and receive additional taxes and duty.
The judge examined whether Section 17 by itself gives the GRA power to demand and receive additional taxes and duty in respect of the Applicant’s goods which were entered cleared and delivered between January and July 2019.
In assessing the various provisions of the Act, the Court found that Section 17 by itself does empower the Respondent to demand additional duty after duty has been paid and even after goods have entered and been delivered if it is determined that the duty paid for the goods is below that which should have been paid or what is termed “short levied.”
Justice Corbin-Lincoln said that while Section 17 states that the Commissioner General of the GRA may demand additional duty after duty has been paid and goods entered on the basis of duty being “short levied,” the Section does not set out the process by which a determination is to be made that goods have been “short levied”.
She said there is no reference made in that Section to any other Section of the Act to which it is referable or applicable.
The judge said that what is clear is that the revenue authority purported to carry out an “audit” and reassess duty on Lin’s goods as a result of his failure to provide requested document pursuant to Section 17 (2).
She said that an examination of Section 17 (2), however, does not by itself expressly empower the Respondent to carry out an “audit” or reassessment of the Applicant’s goods in the manner it did as a result of the Applicant failing to provide requested documents.
In those circumstances, she said she found GRA’s “audit” and or reassessment of duty on Lin’s goods and the consequent demand for additional duties as a result of his failure to provide 16 requested documents purportedly pursuant solely to Section 17 (2) of the Act, to have been unlawful.
The judge went on to examine whether Section 17 together with Sections 233 and Regulations 36 and 204W give the Respondent the power to reassess and demand and receive additional taxes and duty from the Applicant.
She said that Section 233 gives the Respondent the power to demand and examine a wide range of documents even after goods have entered. This, she said, can perhaps be termed as a form of “audit,” but noted that that was the extent of the power conferred.
The judge said that the consequence of failing to provide the requested documents is set out in Section 233 and that there is no power conferred by that Section to take the action which the Respondent took.
Against that background, Justice Corbin-Lincoln said, “I do not find that there is any power conferred by Section 233 to conduct a “review” in accordance with the Fifth Schedule or any other part of the Act for failure to provide requested documents.”
She said that Section 233 therefore, “does not provide for a reassessment of duty on goods which have entered and been delivered for failure to provide documents. The only sanction imposed for failure to provide documents in relation to goods which have entered is a fine.”
She added that Section 233 in fact does not provide for what is to be done “if the documents requested are provided.”
“It does not state that if the documents are provided the Respondent may reassess duty on goods for which have entered and been delivered based on the documents provided and/or any other basis.”
The judge went on to reason that “specifically, Section 233 does not empower the Respondent whether due to failure to provide documents or even if documents are provided to re-assess duty on goods which have entered and been delivered based on the documents provided or on some other basis so as to determine that duty has been “short levied” and thus give the Respondent the power to exercise the power given under Section 17 (2).”
Meanwhile, in examining Regulation 204W, the Court noted that the audit or inspection thereunder is “of the books and papers required to be kept and maintained by a broker.”
On this point, she said that assuming the “review” was being done pursuant to Regulation 204W there is nothing within 204W which provides either that upon failure to provide the documents required to be kept for inspection or to submit to the audit; or even if documents required to be provided for inspection are submitted or an audit completed— that the Respondent may then embark upon a reassessment of duty.
In all of the circumstances, Justice Corbin-Lincoln said that the GRA had failed to establish the statutory basis upon which it embarked upon a reassessment of duty—including the methodology employed—on the Applicant’s goods which were entered and delivered due to his failure to provide requested documents under Sections 233 and Regulation 36 or to co-operate with the audit and inspection under Regulation 204W.
She said that the statutory basis upon which it was determined that the goods were “short levied” for the purposes of Section 17 (2) was not established.
She further added that since the purported reassessment and demand for additional duty was unlawful, the consequential blocking of the Applicant from the ASYUDA) is also unlawful.
The Court will assess costs on February 1st, 2022.
The GRA was represented by attorney Maritha Halley.
