Photo by Zahid Izzani/The Edge

PUTRAJAYA (Aug 1): The Federal Court earlier this week granted leave to the Royal Malaysian Customs Department to appeal against the Court of Appeal’s dismissal of its attempt to impose a RM28 million bill of demand (BOD) on Hong Leong Yamaha Motor Sdn Bhd.

On the same day, the same three-member bench also allowed leave for an edible-oil packaging company, Wintercorn Malaysia Sdn Bhd, to challenge the imposition of a RM3.697 million BOD given to it in 2018, over the same issue of sales tax exemption.

Chief Judge of Sabah and Sarawak Tan Sri Abdul Rahman Sebli, who sat with Federal Court judges Datuk Nordin Hassan and Datuk Abdul Karim Abdul Jalil on Tuesday, granted leave to both the Customs Department and Wintercorn on questions of law posed before the apex court.

The Customs Department posed three questions of law, while the company posed seven with regard to the Sales Tax (Persons Exempted from Payment of Tax) Order 2018.

The department was represented by senior federal counsel Liew Horng Bin, while S Saravana Kumar and Yap Wen Hui from Messrs Rosli Dahlan Saravana Partnership appeared for Hong Leong Yamaha and Wintercorn.

Liew and Saravana Kumar confirmed the outcomes of the decisions with The Edge.

In civil proceedings at the apex court, leave must be obtained first on questions of law before the merits of an appeal can be heard. This is to make sure that such appeals are decided on novel issues of law only.

In January this year, the Court of Appeal had allowed an appeal for a judicial review by Hong Leong Yamaha to set aside the RM27.96 million BOD issued by the department.

The three-member appellate court ruled that the High Court judge had erred in not allowing the company’s judicial review.

High Court judge Datuk Dr Choo Kah Sing, who read the broad grounds of the decision, ruled that the director general of the Customs Department could not change the words on the schedule of the Sales Tax Act 2018, and this resulted in the wrongful charging of the BOD on the company.

The judge said “finished goods” under the schedule also mean non-taxable finished goods, and that it should be given a literal interpretation.

“If there is any change, it must be done through the legislation,” Choo said in delivering the decision.

Hong Leong Yamaha is the franchise holder of locally assembled Yamaha motorcycles, which imports various components for motorcycles and have them assembled at a factory.

It received an exemption certificate issued by the department dated Aug 30, 2019, in respect of the sales tax component.

However, the Customs Department arbitrarily raised the BOD by imposing additional sales tax.

Following that, Hong Leong Yamaha filed three judicial reviews at the Shah Alam High Court between Oct 15, 2019 and Jan 10, 2020, which were consolidated into one but dismissed by the court.

Regarding Wintercorn, the company obtained verbal confirmation from the department that it was eligible for sales tax exemption for packaging materials under Item 57 of Schedule A of the Sales Tax (Persons Exempted From Payment of Tax) Order 2018.

As a result, Wintercorn applied for sales tax exemption through the MySST portal between Sept 7, 2018 and April 5, 2019, and was granted 17 exemption certificates.

However, on Dec 19, 2019, the department issued a letter informing Wintercorn that it was not eligible for the sales tax exemption, and did not provide any explanation.

As a result, Wintercorn paid the RM3.697 million under protest, and filed a judicial review application at the High Court in 2020, which was dismissed by the court. The Court of Appeal also upheld the High Court’s decision, resulting in this appeal.