BY Navin C Naidu
KUCHING: While Monday’s main arguments and submissions centered upon Petronas questioning Sarawak’s power and right to impose the State Sales Tax (SST), State Legal Counsel Datuk Seri JC Fong yesterday told the High Court that the power to tax emanated from (the Malaysia Agreement 1963) MA63 and the Inter-Governmental Committee Report of 1962 being the seminal sacraments that determined, defined and described Sarawak’s constitutional rights.
Fong suggested to the court that the Federal Constitution must be read and interpreted through the Inter-Governmental Committee Report of 1962 and the Malaysia Agreement 1963 after factoring in the findings and final report of the Reid Commission and the Cobbold Commission.
He said the issue of double taxation, as asserted by Petronas, had no merit when seeking the relevant and applicable statutes that grant Sarawak the right to impose and collect the State Sales Tax on petroleum.
The power of judicial review under Order 53 of the Rules of the High Court was also mentioned when the issue of an “adversely affected” party was raised.
Fong advanced the argument that Petronas became a taxable person ipso facto by virtue of Article 95B(3) of the Federal Constitution as ratified by the Inter-Governmental Committee Report of 1962 and the Malaysia Agreement 1963.
He also reminded the Court that Article 95B (3) was not constitutional architecture but an enduring safeguard.
The issue of public law litigation which governed this case is not similar to private law litigation, Fong added, when applying certain principles of law germane to the public interest test.
He urged the court to take the seminal documents in a historical context while it laid the groundwork for state-federal relations enshrined in the Federal Constitution.
Petronas advanced the argument that the power to impose the SST was ultra vires the Federal Constitution despite the factual and textual record showcased in Article 112C and the 10th Schedule, Part V(7) of the Federal Constitution which gave that power to the Sarawak’s State Comptroller to assess, impose and collect the state sales tax.
Various American, British and Malaysian Federal Court authorities were cited and quoted by Fong to underscore the fact that the question of the SST was ultra vires the Federal Constitution.
The power to assess, impose and collect the petroleum tax of five percent was mandated in Section 21 of the State Sales Tax Ordinance, 1998. There are no limitations, restrictions or limitations on this power, asserted Fong because this power was ratified by the Federal Constitution in reverence to the Inter-Governmental Committee Report of 1962, and Article VIII, specifically, of MA63.
Fong also touched on the issue of the appropriate interpretation of the taxing statutes which must be accorded a purposive interpretation with clear words that will require a literal interpretation.
He made reference to the fact that Tan Siew Sin, as Finance Minister of Malaya, and one of the members of the Inter-Governmental Committee of 1962, made sure that the purposive approach to the interpretation of a taxing statute was made relevant and applicable under Article 95(B)(3).
The question of a sales tax as opposed to an export tax was examined in great detail.
Fong told the court that the argument advanced by Petronas that it was engaged in the export of petroleum and therefore the question of a sale was moot.
He reminded the court that export can only come after a sale is consummated, and therefore the question of an export tax was totally moot and irrelevant to the central issue of the imposition of the SST under the State Sales Tax Ordinance.
He also advised the court that the State Comptroller issued the Notice of Assessment on the basis of a sale not predicated upon the purported export.
Reference was also made to the Petroleum Mining Act 1966 and the Oil Mining Ordinance which did not subsume the right to sales taxes and oil royalties. The words “petroleum” and “petroleum products” were also examined in light of what constituted their content as a mineral oil, hydrocarbon, gas and other associated products and by-products.
Besides Fong, Sarawak was represented by State Attorney-General Datuk Talat Mahmood Abdul Rashid and three other lawyers.
Talat told the court after Fong completed his submission that the Stay Order to prevent a public officer such as the State Comptroller in the exercise of her statutory duties is akin to an injunction which Petronas counsel Datuk Malik Imtiaz Sarwar referred to when he submitted his arguments saying that “akin to” is not the same as or equated to an actual injunction.
Malik then briefly stated his objections to JC Fong’s submissions where the constitutionality was relevant as was Petronas’s position concerning the ultra vires argument.
The word “sale” was also put to task as was the right of the State Comptroller’s power to assess, impose and collect the SST.
Malik also referred to the Government Proceedings Act concerning a “public officer” and the Danaharta Act concerning arbitrariness, including the State Comptroller’s basis for assessment.
His entire argument stayed on course with his “ultra vires the Federal Constitution” stand.
Sarawak’s reliance on the Federal Constitution for its taxing power, and the arguments by Petronas that the sales tax is ultra vires the Federal Constitution will inevitably become settled law when the High Court decides whether a state statute that comports with the Federal Constitution can be deemed and declared as ultra vires.
Judge Azahahari Kamal Ramli said he will deliver his judgement on March 15.
