High Court finds no jurisdiction to judicially review the Commissioner's reassessment of goods and services tax
2013 case note – High Court finds no jurisdiction to judicially review the CIR's reassessment of GST - natural justice, maladministration, deemed acceptance.
Goods and Services Tax Act 1985, Tax Administration Act 1994, Interpretation Act 1999
The plaintiff applied for judicial review of the Commissioner of Inland Revenue's ("the Commissioner") reassessment of goods and services tax ("GST") on a number of grounds. The Commissioner objected to the jurisdiction of the High Court to hear and determine the causes of action based on Tannadyce Investments Ltd v Commissioner of Inland Revenue  NZSC 158,  2 NZLR ("Tannadyce"). The High Court held that it lacked jurisdiction to determine the matter, as the proscription in section 109 of the Tax Administration Act 1994 ("TAA") prevents litigation of "disputable decisions."
Impact of decision
The Courts will uphold the decision on Tannadyce.
The Forest Trust ("the Trust") claimed a refund of $67,011.65 for the GST period ended 31 July 2009. The Commissioner used section 89C(eb) of the TAA to make a reassessment of that amount, which she reassessed to nil, without issuing a notice of proposed adjustment ("NOPA").
The Trust issued its own NOPA in relation to that reassessment, and the Commissioner responded with her notice of response ("NOR"). The Trust claimed that the Commissioner's NOR was issued out of time and therefore the Commissioner was deemed to have accepted the Trust's adjustment.
The trustee of the Trust, Peter Mawhinney, applied for judicial review in relation to the Commissioner's reassessment, pleading five separate but interconnected grounds:
- The Commissioner's use of section 89C(eb) was unlawful as the section does not authorise the Commissioner to assess or disallow refunds. Further, there is nothing in the Goods and Services Tax Act 1985 that excludes GST from being applied to fraudulent activity.
- The Commissioner's reassessment was made in breach of natural justice.
- The Commissioner's failure to reassess the corresponding output tax in the GST period ended 30 September 2010 was unreasonable and amounted to conscious maladministration.
- The Commissioner failed to respond to the Trust's NOPA in time and so the Trust's NOPA was deemed to be accepted under section 89H(2) of the TAA.
- The Commissioner breached three statutory duties:
- a duty under the Interpretation Act 1999 to interpret the Inland Revenue Acts by ascertaining their meaning from their text and in light of their purpose;
- a duty under section 111 of the TAA to issue a NOPA to the Trust as soon as convenient after making an assessment; and
- a duty to observe the principles of natural justice.
The Commissioner objected to jurisdiction on the basis that the statutory disputes and challenge procedures under Parts 4A and 8A of the TAA preclude judicial review, in accordance with the Supreme Court's decision in Tannadyce.
The Court found that Mr Mawhinney could invoke the statutory disputes and challenge procedure to raise each of the five issues.
The proper assessment of the GST in question was plainly a matter that was able to be resolved in the statutory disputes and challenge procedure. Anything of relevance to the correct assessment could be considered in that process, including the fraudulent activity issue.
Any relevant breach of natural justice could be resolved or ameliorated in the disputes and challenge procedure because that procedure involves the potential exercise of the same powers that are available to the High Court on an application for judicial review.
The Commissioner had issued a NOPA in respect of the period ended 30 September 2010. Accordingly, Mr Mawhinney was able to have the Commissioner's failure to reassess the corresponding output tax considered and determined in the disputes and challenge process.
The issue concerning whether the Commissioner was deemed to have accepted the Trust's NOPA was one that could be considered in the disputes and challenge process.
Each of the alleged breaches of statutory duty could be raised and considered in the disputes and challenge process.
Accordingly, the Court had no jurisdiction to determine the causes of action against the Commissioner and the application as against the Commissioner was dismissed.
The Court understood Mr Mawhinney to be an undischarged bankrupt and therefore inferred no issue as to costs arose.