– In GRA Vs DDL C-Tax matter
IN FEBRUARY 2005, the Demerara Distilleries Ltd., writs of Certiorari and Prohibition, issued by Justice Dawn Gregory-Barnes, quashed a Guyana Revenue Authority (GRA) demand on DDL to pay it $1, 072, 959, 861 as Consumption Tax. Following the ruling of the High Court Judge to quash the over one billion dollars consumption tax imposed on DDL, GRA appealed the ruling.

The appeal was dismissed by the Guyana Court of Appeal, constituted by Acting Chancellor of the Judiciary, Mr. Carl Singh, Chief Justice (Ag.) Mr. Ian Chang, S.C.,  and Justice William Ramlal.

Mr. Ashton Chase, S.C., represented the appellant, while Mr. Rex Mc Kay, S.C., appeared for the respondent, DDL.

The facts of the case disclosed that the respondent, DDL, was a registered manufacturer of alcoholic products for local consumption in Guyana which attracted consumption tax under a Consumption Tax Order made under Section 4 of the Consumption Tax Act.

Upon application of the respondents , the court issued a Writ  of Certiorari against the appellant, GRA, quashing the decision of the GRA to assess and demand from the respondent payment of  [a sum of over  $1B ] consumption tax for manufactured alcoholic products for the period January 2001 – September 2002, on the grounds that the said assessment was erroneously computed and not assessed in accordance with the provision of the Consumption Tax Act, Chapter 80:02, and was therefore unconstitutional, unlawful, arbitrary, unreasonable,  made in bad faith , without or in excess of jurisdiction, was ultra vires, null void and of no legal effect.

The Writ of Prohibition prohibited the GRA from proceeding with the assessment and recovery of the sum on the said grounds.The GRA appealed  on a number of grounds, in particular the interpretation or construction of Section 3 of the Consumption Tax Act.

The respondents cross-appealed , contending that statements made  by His Excellency the President of Guyana to the Guyana Manufacturers Association  on September 14,  2001 concerning the basis for the computation of consumption tax for the manufacturers of chargeable goods created a legitimate expectation in the respondent.  The government had decided that the value, for consumption tax purposes, on chargeable goods manufactured locally would be calculated on the basis of the ex-factory price plus a 15 per cent markup. Section 3 of the Consumption Tax Act provides that:

(1)  There shall be raised, levied and collected  at such rate as the Minister may determine… a consumption tax in respect of any chargeable goods imported into Guyana or manufactured therein;

(2)  the tax …shall be due and collected  in relation to…

(b) chargeable goods manufactured in Guyana  at the time of the delivery of the goods from the premises  of the registered manufacturer, or the appropriation of such goods for consumption in Guyana, whichever is the earlier; and

(3) where tax is chargeable on any goods by reference  to their value, that value shall:

(b) …if the goods are manufactured in Guyana, be the price which, in the opinion of the Comptroller, the goods would fetch on a sale made at the time when the tax in respect of such goods becomes due by a manufacturer selling on the open market in Guyana, if the sale were made in the circumstances specified in the schedule.

The Guyana Court of Appeal, in its judgment, held that:

“Section 3 (2) (b) of the Consumption Tax Act focused, not on the place at which there was appropriation or delivery, but the time when there was appropriation or delivery.  It followed that appropriation or delivery commenced for those purposes when the first item of alcoholic product was set aside or apart or delivered for local consumption.

“What was of materiality was when or  during which time  the products were appropriated or delivered  for local consumption  since it was that period of time  which had statutory relevance  to the determination by the  Comptroller of the open market price of the products 3 (3) (b).”

According to the judgment, “Parliament had identified a single authority, the Comptroller, to determine the notional price in a notional sale. That notional price became the actual value on which the consumption tax was chargeable.

“The function of determining the notional open market selling price of the product was not that of the company but of the Comptroller, under Section  3 (3) (b).

“The Comptroller had to engage, not in mere speculative guesswork but in a computation exercise in which the circumstances mentioned in the schedule (including the commission and sales costs and expenses) were to be assumed.

“Such computation had of necessity to involve not only the cost of production but any other post-production costs incurred by the manufacturers right up to the process of appropriation or delivery (inclusive of  appropriation or delivery costs ) and a profit margin which would allow for the marketability of the product in the open market.

“Accordingly, the appeal by the GRA was dismissed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              The writ of certiorari quashed the decision of the Guyana Revenue Authority to assess and demand from the applicant payment of the sum of one billion, seventy two million, nine hundred and eighty nine thousand, eight hundred and fifty one dollars as consumption tax  for manufactured  alcohol products for the period January 2001 to September, 2002 on the grounds that the said assessment  was erroneously computed  and not assessed in accordance with the provision  of the Consumption Tax Act Chapter 80: 02, and was unconstitutional, unlawful, arbitrary,  unreasonable, made in bad faith, without  or in excess of jurisdiction, was ulra vires, and void and of no legal effect.

“The Writ of prohibition prohibited the said Guyana Revenue  Authority from  proceeding with the said assessment  and recovery of the said sum  on the said grounds.

“On March 2, 2005, the Guyana Revenue Authority  filed a Notice of Appeal to the Guyana Court of Appeal  against the decision of Barnes J.  Several grounds of appeal were set out in the Notice of Appeal, and advanced before the court.”

In his judgment, however, the Chief Justice said: “Since it appears to me that the crux  of the matter  is related to the interpretation  or construction of Section 3 of the consumption Tax Act, Chapter 89: 02, I will confine my judgment essentially to the ground of appeal which relates to the  interpretation or construc
tion of Section 3 ( ie. Ground VII).”

According to Justice Chang, Ground 7 of the appellant’s grounds of appeal read:-

“The learned trial judge erred in the construction and interpretation of Section 3  of the Consumption Tax Act.”

Chang said that Section 3 of the Consumption Tax act provides that:

(i) Subject to and in accordance with the provisions of the Act and any regulations made thereunder, there shall be raised  and collected  at such rate  as the Minister may determine by order made under Section 4, a consumption tax  in respect  of any chargeable goods imported  into Guyana or manufactured therein , except chargeable goods imported or acquired  as material for,  and used as such by a registered manufacturer.

Chargeable goods, the Chief Justice said, is defined in Section 2 of the Act as meaning such goods as may be specified in an order made by the Minister under Section 4.            

The appeal ended in a victory for the respondent.