Deputy Commissioner of Taxation v Deangelis

[2008] SADC 103

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• The impact of this case on ATO policy is discussed in Decision Impact Statement: Deputy Commissioner of Taxation v De Angelis (2093/2005).

(Judgment by: Judge Shaw)

Deputy Commissioner of Taxation
v. Deangelis

Court:

Judge:
Judgment of Her Honour Judge Shaw

Subject References:
Taxes and Duties
Income Tax and Related Legislation
General Matters
Construction of Income Tax Statutes
Particular Words and Phrases

Legislative References:
Taxation Administration Act 1953 (Cth) - 8AAZA; 8AAZC; 8AAZD; 8AAZF; 8AAZH; 8AAZJ; 8AAZN; 8AAZA; 8AAZA; 8AAZA; 8AAZA; 8AAZA; 60; Schedule 1 - 105-5; Schedule 1 - 105-100; Schedule 1 - 255-5; Schedule 1 - 255-45
Income Tax Assessment Act 1936 - 175; 177(1)
Bankruptcy Act 1966 (Cth) - 60
A New Tax System (Goods & Services Tax) Act 1999 (Cth) - Part 2-5; 165-40; 165-45(3)
Fuel Tax Act 2006 (Cth) - 75-40; 75-45(3)
Corporations Act 2001 (Cth) - the Act

Case References:
Owens v Comlaw - (2006) 201 FLR 275; [2006] VSCA 151
Kadeh v Gill - (2000) 211 LSJS 88; [2000] SASC 367
Woolworths (SA) Pty Ltd v Basetone Pty Ltd - (2006) 95 SASR 174; [2006] SASC 225
Wicklow Enterprises Pty Ltd v Doysal Pty Ltd - (1985) 124 LSJS 225
Neutral Bay Pty Ltd & Ors v Commissioner of Taxation - (2006) 205 FLR 470; (2007) 25 ACLC 1,341; [2006] QSC 394; 65 ATR 270
Commissioner of Taxation v Futuris Corporation Limited - [2008] HCA 32; 247 ALR 605; 82 ALJR 1177; 69 ATR 41; 2008 ATC 20-039
MacCormick v Federal Commissioner of Taxation - (1984) 158 CLR 622; 15 ATR 437; 84 ATC 4230
Zolsan Pty Ltd v Deputy Comissioner of Taxation - (2007) 215 FLR 143; [2007] NSWSC 1326; 67 ATR 652
Chippendale Printing Co Pty Ltd v Commissioner of Taxation - (1996) 62 FCR 347; 32 ATR 128; 96 ATC 4175

Judgment date: 14 August 2008

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Judgment by:
Judge Shaw

Civil

Introduction

1 This is an appeal by both the plaintiff ("the appellant") and the defendant ("the cross appellant") from a decision of the Master posted to the parties on 7 March 2007. The plaintiff had sought an order that judgment be entered summarily in her favour for the sum of $85,210.74, which sum was the alleged deficit debt owing by the defendant on a Running Balance Account ("the RBA deficit debt"), pursuant to s8AAZH of the Taxation Administration Act 1953 (Cth) ("TAA"). The RBA deficit debt included a general interest charge component issued under s8AAZF of the TAA.

2 The defendant had sought an order that the plaintiff's application be stayed pending determination of firstly, his Notice of Objection served on 15 May 2006, and secondly, a foreshadowed Federal Court action to set aside a GST assessment made by the plaintiff.

3 The Master granted leave to the plaintiff to enter judgment in her favour in the sum of $77,018.00. He held that the plaintiff had no entitlement to a claim for the general interest charge component of the RBA deficit debt because no notice had been given pursuant to s8AAZN(2) of the TAA.

4 The Master refused the defendant's application for a stay of the proceedings.

5 The plaintiff claims that the Master erred in holding that the plaintiff was not entitled to the general interest charge component of the RBA deficit debt.

6 The defendant appealed firstly, against the Master's decision that the plaintiff be given leave to enter summary judgment for the sum of $77,018.00 and secondly, against his decision that the defendant had no grounds for a stay of proceedings.

The Cross Appellant's Bankruptcy

7 The arguments of the parties concluded on 13 December 2007 and I reserved my decision.

8 On 21 December 2007, the cross appellant was declared bankrupt and the Official Receiver in Queensland was appointed as trustee. On 8 February 2007, Mr Ferguson was appointed as trustee. Through no fault of the parties, the bankruptcy of the cross appellant was not brought to my attention immediately, despite the appropriate correspondence having been forwarded to the court.

9 The matter was re-listed on 23 May 2008, so that I could hear the parties as to the effect of s60 of the Bankruptcy Act 1966 (Cth) ("the Bankruptcy Act") upon the proceedings. The trustee in bankruptcy attended. He informed the court that he did not propose to elect to take over the proceedings pursuant to s60(2) of the Bankruptcy Act. He explained that the bankrupt estate had no funds and that he did not wish to take part in the proceedings.

10 Section 60 of the Bankruptcy Act provides as follows:

60 Stay of legal proceedings

(1)

The Court may, at any time after the presentation of a petition, upon such terms and conditions as it thinks fit:

(a)

discharge an order made, whether before or after the commencement of this subsection, against the person or property of the debtor under any law relating to the imprisonment of fraudulent debtors and, in a case where the debtor is imprisoned or otherwise held in custody under such a law, discharge the debtor out of custody; or

(b)

stay any legal process, whether civil or criminal and whether instituted before or after the commencement of this subsection, against the person or property of the debtor:

(i)

in respect of the non-payment of a provable debt or of a pecuniary penalty payable in consequence of the non-payment of a provable debt; or

(ii)

in consequence of his or her refusal or failure to comply with an order of a court, whether made in civil or criminal proceedings, for the payment of a provable debt;

and, in a case where the debtor is imprisoned or otherwise held in custody in consequence of the non-payment of a provable debt or of a pecuniary penalty referred to in subparagraph (i) or in consequence of his or her refusal or failure to comply with an order referred to in subparagraph (ii), discharge the debtor out of custody.

(2)

An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.

(3)

If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.

(4)

Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of:

(a)

any personal injury or wrong done to the bankrupt, his or her spouse or a member of his or her family; or

(b)

the death of his or her spouse or of a member of his or her family.

(4A)

Notwithstanding paragraph (1)(b), this section does not empower the Court to stay any proceedings under a proceeds of crime law.

(5)

In this section, action means any civil proceeding, whether at law or in equity.

11 Both parties submitted that because judgment was reserved at the time that the cross appellant was declared bankrupt and there were no further steps to be taken in the action before delivery of judgment, s60(2) of the Bankruptcy Act did not apply. Therefore, the court ought to deliver judgment.

12 Having regard to the authorities,^[1] I am of the view that the cross appellant's bankruptcy does not impact upon the delivery of judgment in this matter.

13 I turn to a consideration of the merits of the appeal and cross appeal.

Background

14 In May 2001 the cross appellant entered into a partnership with AV and D Carpinelli ("the partnership") in relation to the construction and sale of residential units at 27A East Avenue, Hectorville ("the Hectorville units"). On 31 July 2002, the cross appellant registered the partnership ("the first registration") and lodged a claim for GST tax input credits. The Australian Tax Office ("ATO") paid the sum of $77,018 to the cross appellant as a GST refund in relation to that claim. Subsequent to the first registration, the ATO incorrectly invited another partner, Mr Carpinelli to register the partnership for a second time ("the second registration") and to make a claim for GST tax input credits in relation to the same transactions. Later in 2002, the ATO made a GST refund payment to Mr Carpinelli in relation to the GST tax input credits claimed on behalf of the partnership pursuant to the second registration.

15 In July 2005, the ATO reviewed and disallowed the GST input tax credits claimed by the cross appellant in relation to the first registration. It issued Notices of Assessment which revised the balance from a total credit of $77,018 to a nil balance. The appellant notified the cross appellant that the claim on behalf of the first registration had been disallowed because he had failed to supply supporting documentation. The appellant claimed that the sum of $77,018 was an administrative overpayment to the cross appellant, pursuant to s8AAZN of the TAA. As a debt due to the Commonwealth, the sum was allocated under the TAA to the RBA of the cross appellant, and interest accrued.

16 The appellant sought summary relief in relation to the claim for payment of the RBA deficit debt as at 1 May 2006, in the sum of $85,210.74. The appellant relied upon Notices of Assessment as conclusive evidence of the overpayment, and an evidentiary certificate of the Deputy Commissioner of Taxation under s8AAZJ of the TAA, as prima facie evidence of the RBA deficit debt. The appellant contended that the cross appellant had no arguable defence.

Chronology of Relevant Events

17 In about May 2001, the cross appellant and AV and D Carpinelli entered into a partnership for the construction and sale of the Hectorville units.

18 From June to November 2001, the partnership received certain invoices in relation to the construction of the Hectorville units.

19 On 31 July 2002, the first registration of the partnership occurred. The cross appellant registered the partnership with the ATO for GST under Part 2-5 of the A New Tax System (Goods & Services Tax) Act 1999 (Cth) ("GST Act") and received notification of registration effective from 1 April 2001.^[2]

20 On 31 July 2002, the cross appellant lodged the partnership's Business Activity Statement ("BAS").

21 On 2 August 2002, the ATO advised the partnership of the tax file number ("TFN") in relation to the first registration.

22 On 13 August 2002, the cross appellant's accountant prepared claims on behalf of the partnership for GST refunds totalling $77,018. The GST component of the price paid for goods and services under the GST Act is called an input tax credit.

23 On 28 August 2002, the second registration of the partnership occurred. Mr Carpinelli, registered the partnership with the ATO for GST under the GST Act, and received notification of registration effective from 1 July 2001.^[3]

24 On 2 September 2002, Mr Trevor Lloyd of the ATO advised Mr Carpinelli to claim under the partnership, the input tax credits which he had originally claimed under his individual TFN.

25 On 2 September 2002, the ATO advised Mr Carpinelli of a TFN in relation to the second registration.

26 On 16 September 2002, the ATO processed the input tax credits in relation to the first registration.

27 On 23 September 2002, Mr Carpinelli's accountants claimed a GST refund in relation to the second registration.

28 On 14 November 2002, the ATO paid the GST refund in relation to the first registration, into the wrong bank account.

29 On 19 November 2002, the ATO reviewed the BAS claims for the period 1 July 2001 to 30 June 2002, lodged under the second registration of the partnership. It revised the credit to $51,260.

30 On 21 November 2002, the refund for the first registration was reversed.

31 On 22 November 2002, the credit due as a GST refund in relation to the second registration was reviewed ("2002 review").

32 On 9 December 2002, a refund of $5,851.00 was paid to Mr Carpinelli's accountant. This was a net amount after the ATO had set off an alleged GST refund against tax owed personally by Mr Carpinelli.

33 On 26 November 2002, the ATO deposited into the cross appellant's business tax account with the ATO, the sum of $77,018 as a GST refund, in relation to the BAS statements lodged in respect of the first registration.

34 On 1 June 2005, the ATO attended at the offices of the cross appellant at North Adelaide and obtained copies of invoices and other documentation relating to the construction of the Hectorville units.

35 On 8 July 2005, the ATO reviewed the BAS statements for the period 30 June 2001 to 30 June 2002, lodged in respect of the first registration of the partnership and disallowed and reversed previously allowed input tax credits. The ATO advised that the input tax credits were disallowed because supporting documentation had not been supplied.

36 On 12 July 2005, the sum of $77,018 was allocated to the RBA account in relation to the first registration of the partnership and a general interest charge was imposed.^[4]

37 On 15 July 2005, the appellant issued three Notices of Assessment addressed to the cross appellant, in total showing that the GST net amount had altered from a credit of $77,018.00 to $0.00.

38 On 12 August 2005, the cross appellant provided invoices to the ATO relating to the construction of the Hectorville units.

39 On 2 December 2005, the appellant commenced this action against the cross appellant.

40 On 16 January 2006, the solicitor for the cross appellant sought information from the appellant in relation to the basis of this action and sought copies of relevant documentation.

41 On 24 January 2006, the ATO provided a copy of the RBA and advised that the only other document to be relied upon was an evidentiary certificate.

42 On 27 February 2006, the ATO advised the cross appellant's solicitor that the basis for the decision to disallow the GST refund claim for the first registration was that the cross appellant "had failed to provide documentation substantiating the amounts reported on the original activity statements".

43 On 1 May 2006 before the Master, counsel for the ATO advised that "there is no other documentation which is of any relevance".

44 On 15 May 2006, the cross appellant lodged an objection with the ATO in relation to the assessments.

45 On 7 March 2007, the ATO disallowed the objection in relation to the assessments.

46 On 7 May 2007, the Master granted leave to enter summary judgment against the cross appellant for the sum of $77,018.

47 On 9 May 2007 at a preliminary conference at the Administrative Appeals Tribunal, ("AAT"), the cross appellant's solicitors requested copies of invoices relevant to the construction of the Hectorville units which had been provided in respect of the 2002 review.

48 On 11 May 2007, the cross appellant filed an application for a review of the ATO's decision.

49 On 7 August 2007, in response to the cross appellant's requests, the ATO advised the cross appellant that the documents already in the possession of the ATO were the only invoices issued in respect of the construction of the Hectorville units.

50 On 20 November 2007, the ATO provided copies of requested documents supplied in relation to the ATO 2002 review.

51 On 13 December 2007, judgment was reserved in relation to this appeal.

52 On 21 December 2007, the cross appellant was declared bankrupt.

53 On 8 February 2008, Mr Ferguson was appointed as official trustee.

54 On 23 May 2008, further submissions were made in relation to the cross appellant's bankruptcy.

The Appellant's Claim

55 The appellant sought summary relief in relation to its claim for the sum of $85,210.74 which comprised the sum of $77,018 in respect of the GST input tax credits paid to the cross appellant, plus a general interest charge from 13 July 2005 to 30 April 2006 in the sum of $8,192.74.^[5]

56 By Notices of Assessment under s22(1) of the TAA issued on 15 July 2005, the appellant reversed the GST refund in the total sum of $77,018 to $0.

57 The appellant treated the sum of $77,018 as an "administrative overpayment", pursuant to s8AAZN of the TAA.

58 The phrase "administrative overpayment" is defined in s8AAZN(3) of the TAA to mean "an amount that the Commissioner has paid to a person by mistake, being an amount to which the person was not entitled".

59 Pursuant to s8AAZN(1) of the TAA, that sum was said to be a debt due and payable to the Commonwealth. The administrative overpayment was a "primary tax debt" within the meaning of s8AAZA of the TAA.

60 Pursuant to s8AAZC of the TAA, the appellant created an RBA in respect of the first registration of the partnership. On 12 July 2005, the appellant allocated the alleged administrative overpayment of $77,018 to that RBA. The appellant submitted that she was entitled to allocate this amount as a primary tax debt to the RBA, pursuant to s8AAZD of the TAA. This resulted in an RBA deficit debt of $77,018.

61 Section 8AAZF of the TAA operated to impose a general interest charge on the amount of an RBA deficit debt at the end of each day without prior notice to the taxpayer. Further, pursuant to s8AAZF(2) of the TAA, the general interest component automatically became a component of the RBA deficit debt.

62 The Deputy Commissioner relied upon an evidentiary certificate dated 1 May 2006 ("the evidentiary certificate"), as prima facie evidence that as at 1 May 2006, the cross appellant owed the appellant an RBA deficit debt in the sum of $85,210.74, pursuant to s8AAZJ of the TAA.

Issues Before the Master

63 Before the Master, the appellant contended that her right to recover the RBA deficit debt and seek summary judgment was based upon the operation of the provisions to the TAA, and that the cross appellant had no arguable defence. On the other hand, the cross appellant argued that there were important factual disputes in relation to inter alia, whether the payment of $77,018 was an administrative overpayment as defined in s8AAZN(3) of the TAA and whether the cross appellant was indebted to the ATO as alleged. In addition, there were complex legal issues in relation to the application of the TAA to the cross appellant's alleged liability, and to the recovery of the alleged debt.

Master's Findings

64 The Master found that the sum of $77,018.00 was paid to the cross appellant by mistake and therefore, constituted an administrative overpayment as defined in s8AAZN(3) of the TAA.^[6]

65 The Master accepted that the cross appellant had failed to provide supporting documentation in relation to the input tax credits claimed in respect of the first registration of the partnership. He observed:

The Commissioner had information provided by both parties [that is, each partner]. One had apparently, no supporting material whilst the other did.^[7]

66 And further,

Mr DeAngelis had, apparently, no supporting material.^[8]

67 The Master held that the appellant was entitled to a grant of leave to enter summary judgment in respect of the original assessment of $77,018.

68 However, the Master held that the appellant was not entitled to the general interest charge because the appellant had failed to give notice pursuant to s8AAZN(2) of the TAA. In his reasons, the Master stated:^[9]

I do not accept the plaintiff's argument that there can be, by a separate route an allocation of the general interest charge pursuant to section 255-5 of TAA which effectively overrides s8AAZN(2). In my view the Commissioner, in the event that no notice is given, cannot allocate GIC to the RBA debt when the provisions relating to the accrual of that interest have not been complied with. It is a specific provision that applies to administrative overpayments. The general provision cannot override the specific provision in respect of GIC otherwise the s8AAZN(2) would have no work to do. As a matter of construction the specific statutory provision will override the general statutory provision in the event of inconsistency.

Legal Principles in Relation to Summary Relief

69 By application dated 15 March 2006, made pursuant to District Court Rules 46.18 and 25.02, the appellant sought an order for summary judgment in her favour.

70 Rule 25.02 of the District Court Rules provides:

(1)

In the alternative to Rule 25.01 the plaintiff may after the time of issuing his summons take out an application for immediate relief.

(2)

the application shall be supported by an affidavit verifying the plaintiff's claim and exhibiting all relevant documents.

(3)

the application shall be returnable not less than two days after service.

71 The procedure is available where there are circumstances of urgency and the issues are capable of speedy resolution without a lengthy hearing, and judgment is able to be given without a trial.

72 Doyle CJ observed in Kadeh v Gill^[10]

Unless there are circumstances of urgency, the only basis for making an order can be that the case is, as a matter of law and as a matter of fact, bound to fail. There has to be some good reason to deal with a claim or defence in this summary fashion.

73 In order for a court to finally dispose of a cause of action in this way, the plaintiff must establish that the defendant has no arguable defence or that the defendant is bound to fail.^[11]

74 I note that the court has a general discretion in determining the question of summary disposal. Further, it ought not be undertaken where there are complex questions of law and fact.^[12]

Appellant's Submissions

75 The appellant submitted that the Master was in error in failing to grant leave to the appellant to enter judgment for the full amount of the RBA deficit debt as at 1 May 2006, namely the sum of $85,210.74.

76 The appellant submitted that the Master erred in dissecting the debt because the TAA provided that the general interest charge formed part of the balance that constituted the RBA deficit debt.

77 The appellant contended that the Master wrongly took into account the provisions of s8AAZN(2) of the TAA.

78 The appellant submitted that the Deputy Commissioner was entitled to treat the sum of $77,018 as an administrative overpayment pursuant to s8AAZN of the TAA.

79 It was submitted that there was a mistake in relation to the net amount of the monies paid into the cross appellant's bank account. The invoices supported a claim of $51,260, not the amount of $77,018.

80 The partnership had claimed the same input tax credits twice. Therefore, one of the groups of claims could not be supported. Having discovered that the partnership had made two claims, the Deputy Commissioner sought to recover one of the payments from the cross appellant. The appellant reviewed and reversed the input tax credits in relation to the first registration of the partnership.

81 The appellant issued three Notices of Assessment so that the credit of $77,018 was revised to a nil balance.^[13] The appellant submitted that in these proceedings, the production of each Notice of Assessment was conclusive evidence that the assessment was properly made and that each amount was properly recoverable.^[14] Because the cross appellant was a partner, he was personally liable. Secondly, the monies were paid into his personal bank account.

82 It was submitted that the Deputy Commissioner had a choice in relation to the recovery of the administrative overpayment in the sum of $77,018. The overpayment is a primary tax debt. Therefore, the appellant was entitled to recover this amount by allocating it to an RBA without giving notice of her intention to do so. Upon the allocation of the debt to the cross appellant's RBA, the cross appellant was liable to pay that amount together with a general interest charge. Alternatively, the appellant was entitled to seek recovery of the overpayment pursuant to the provisions of s8AAZN of the TAA, where the liability for a general interest charge would not have arisen until proper notice had been given of the overpayment and of the resulting liability to repay. The appellant chose the former recovery process.

83 The appellant submitted that although the cross appellant had instituted Part IVC proceedings in the AAT, there was no genuine dispute as to the existence of the RBA deficit debt in these proceedings. It was submitted that the Notices of Assessment established the administrative overpayment and notified the cross appellant of its allocation to his business tax account. Therefore, the amount claimed including the general interest charge was in effect, immune from a challenge in these proceedings.

84 It was submitted that pursuant to s255-45 of the TAA, production of the evidentiary certificate dated 1 May 2006, was prima facie evidence that as that date, the cross appellant owed the amount of $85,210.74 to the appellant.

85 It was submitted that this constituted proof of the appellant's cause of action and that the cross appellant had not raised an arguable defence.

86 It was submitted that the court was entitled to determine points of law where an application for summary judgment turned solely on points of law.

Cross Appellant's Submissions

87 The cross appellant submitted that this was not an appropriate case for summary judgment. It was submitted that there are significant factual disputes and complex legal questions involved in the determination of the appellant's claim.

Fresh Evidence and Factual Dispute

88 The cross appellant submitted that the Deputy Commissioner had reviewed and disallowed the claimed input tax credits in relation to the first registration of the partnership, upon the basis of the cross appellant's alleged failure to supply supporting documentation.

89 It was contended that the Master had accepted that the cross appellant failed to provide that supporting documentation in relation to the first registration. Therefore, the Master's findings were made upon the premise that there was no genuine dispute in relation to the basis for the review.

90 This has now been shown to be incorrect. In fact, the necessary supporting documents had been supplied to the Deputy Commissioner. However, the Deputy Commissioner had allowed input tax credits twice in respect of two separate applications relating to the same partnership transactions. Subsequently, it was decided to review and disallow the application relating to the first registration.

91 The cross appellant submitted that he lodged and obtained the first registration under the GST Act, on behalf of the partnership. He provided appropriate tax invoices. He received a $77,018 tax credit on behalf of the partnership. A second assessment occurred in relation to the second registration on behalf of the partnership, as a result of an error by the ATO. On 2 September 2002, the ATO wrongly advised Mr Carpinelli that the partnership account was not registered for GST input tax credits. At the time of this error, the ATO had already received and accepted an application from the cross appellant in relation to the first registration of the partnership for GST purposes. In respect of the second registration and the second assessment, the ATO relied upon the same invoices which had supported the first assessment.

92 It was submitted, that the payment of $77,018 was not a payment made by mistake. The cross appellant provided the correct supporting documentation. The ATO correctly determined that the cross appellant was entitled to input tax credits. The decision to review and reverse this decision was not based upon a discovery that the original payment was made under a mistake of fact or law. Rather, it resulted from a subsequent grant of input tax credits to a third party (namely, that lodged by Mr Carpinelli) relating to the same transactions and based on the same supporting documents. Because the ATO had granted input tax credits twice in relation to the same transactions, it determined that it was necessary to reverse one such grant. The cross appellant submitted that the ATO erroneously reversed the grant to the cross appellant rather than to the third party.

93 It was therefore submitted that if there was an administrative overpayment, it was in respect of the second assessment giving rise to a credit of $51,260.

94 It is at least reasonably arguable that the first grant in relation to the first registration was not made by mistake. In fact, all relevant documentation supporting the grant had been received by the appellant.

95 If the payment in respect of the first registration was not an administrative overpayment, the appellant was not entitled to treat it as a debt which was recoverable either under s8AAZN of the TAA, or by allocating it to an RBA for recovery purposes.

Cross Appellant's Legal Contentions

96 The cross appellant submitted that even if it was determined that the payment to the cross appellant in respect of the first registration was made by mistake, and therefore was an administrative overpayment within the meaning of s8AAZN of the TAA, the ATO was not entitled to seek recovery of the amount overpaid without complying with the provisions of s8AAZN(2) of the TAA.

97 It was submitted that s8AAZN of the TAA provided a code directed specifically to the collection of monies which the ATO had mistakenly paid to the taxpayer.

98 Pursuant to that provision, the appellant was required to give notice in accordance with s8AAZN(2) of the TAA. Section 8AAZN(2) of the TAA provides that a general interest charge is only payable in respect of an administrative overpayment if the appellant has given notice to the recipient of the overpaid amount specifying firstly, the amount due and secondly, a due date for payment that was at least 30 days after the notice is given. The appellant had failed to give any notice to the cross appellant in the present case. It was submitted that in the absence of giving such notice, the appellant was not entitled to allocate the administrative overpayment to an RBA account. Therefore, the appellant could not rely upon an evidentiary certificate in respect of the RBA deficit debt, pursuant to s8AAZJ of the TAA.

99 The cross appellant submitted that the Notices of Assessment did not assist the Deputy Commissioner's argument because although they were conclusive as to what they stated, they did not show a debt to the ATO. Rather, they simply recorded a nil balance.

100 The cross appellant also submitted that the Notices of Assessment did not amount to assessments under the TAA. The documents did not comply with the TAA and therefore could not amount to conclusive proof of anything. It was submitted that this argument was not bound to fail having regard to the fact that the Notices of Assessment are all dated 15 July 2005. However, the purported allocation of the alleged administrative overpayment to the RBA account was on or before 12 July 2005.

101 The cross appellant contended in the alternative, that even if the evidentiary certificate was prima facie evidence, he had an arguable defence. He intended to prove that the payment of $77,018 was not an administrative overpayment within the meaning of s8AAZN of the TAA. There was no mistake by the Deputy Commissioner because the cross appellant was entitled to the claimed input tax credits in the sum of $77,018.

102 Next, the cross appellant submitted that the evidentiary certificate is no longer valid in any event. It cannot be prima facie evidence of the debt of $85,210.74. The Master had determined that the interest component of the alleged debt could not be the subject of a summary judgment order. It was submitted therefore, that the Master's order rebutted the evidentiary certificate as prima facie evidence of the total debt claimed. At the very least, it was reasonably arguable that the evidentiary certificate is invalid and that it is inadequate to support an order for leave to enter summary judgment.

Statutory Provisions

103 The respective contentions of the parties require a consideration of certain provisions of the TAA.

104 In relation to Administrative Overpayments, s8AAZN of the TAA provides:

8AAZN Overpayments made by the Commissioner under Taxation Laws

8AAZN(1) [Debt due and recoverable] An administrative overpayment (the overpaid amount):

(a)

is a debt due to the Commonwealth by the person to whom the overpayment was made (the recipient); and

(b)

is payable to the Commissioner; and

(c)

may be recovered in a court of competent jurisdiction by the Commissioner, or by a Deputy Commissioner, suing in his or her official name.

8AAZN(2) [Recipient of notice liable to pay charge] if:

(a)

the Commissioner has given notice to the recipient in respect of the overpaid amount, specifying a due date for payment that is at least 30 days after the notice is given; and

(b)

any of the overpaid amount remains unpaid at the end of that due date; then the recipient is liable to pay the general interest charge on the unpaid amount for each day in the period that:

(c)

started at the beginning of that due date; and

(d)

finishes at the end of the last day on which, at the end of the day, any of the following remains unpaid:

(i)

the overpaid amount;

(ii)

general interest charge on any of the overpaid amount.

8AAZN (3) [Definitions] in this section:

"administrative overpayment" means an amount that the Commissioner has paid to a person by mistake, being an amount to which the person is not entitled.

105 Pursuant to s8AAZC of the TAA, the Commissioner may establish one or more systems of accounts for primary tax debts, each of which is to be known as an RBA.

106 Section 8AAZD(1) of the TAA provides that the Commissioner may allocate a primary tax debt to an RBA that has been established for that type of tax debt.

107 Section 8AAZA of the TAA provides that:

Primary Tax Debt means any amount due to the Commonwealth directly under a taxation law, including any such amount that is not yet payable.

RBA deficit debt , in relation to an RBA of an entity, means a balance in favour of the Commissioner, based on:

(a)

primary tax debts that have been allocated to the RBA and that are currently payable; and

(b)

payments made in respect of current or anticipated primary tax debts of the entity, and credits to which the entity is entitled under a taxation law, that have been allocated to the RBA.

108 A general interest charge is imposed on an RBA deficit debt by reason of s8AAZF(1) of the TAA. The balance of an RBA is adjusted in the Commissioner's favour by the amount of the general interest charge by reason of s8AAZF(2) of the TAA.

109 Section 8AAZH of the TAA provides that an RBA deficit debt is a debt due and payable to the Commissioner.

110 Section 8AAZJ of the TAA provides that the production of an Evidentiary Certificate for use in recovery proceedings has evidentiary consequences. The section reads:

"8AAZJ(1) [ Certificate as evidence ] In proceedings for recovery of an RBA deficit debt, a Commissioner's Certificate stating any of the following matters in respect of a specified RBA is prima facie evidence of those matters:

(a)

that no tax debts (other than general interest charge on the RBA deficit debt) were allocated to the RBA after the balance date shown on a specified RBA statement for the RBA;

(b)

that general interest charge is payable on the RBA deficit debt as specified in the Certificate;

(c)

that payments and credits were allocated to the RBA as specified in the Certificate;

(d)

that a specified amount was the RBA deficit debt on the date of the certificate.

111 Section 105-5 of Schedule 1 to the TAA provides:

105-5(1) The Commissioner may at any time make an assessment of:

(a)

your net amount, or any part of your net amount, for a tax period; or

(b)

your net fuel amount, or any part of your net fuel amount, for a tax period or fuel tax return period.

105-5(2) The Commissioner may at any time make an assessment of the amount of indirect tax payable by you on an importation of goods.

105-5(3) The Commissioner may make an assessment under this section even if he or she has already made an assessment for the tax period, fuel tax return period or importation concerned.

112 Section 105-100 of Schedule 1 to the TAA provides:

Production of Assessment or Declaration is Conclusive Evidence.

The production of:

(a)

a notice of assessment under this Part; or

(b)

a declaration under

(i)

section 165-40 or subsection 165-45(3) of the GST Act; or

(ii)

section 75-40 or subsection 75-45(3) of the Fuel Tax Act 2006, is conclusive evidence;

(c)

that the assessment or declaration was properly made, and

(d)

except in proceedings under Part IVC of this Act on a review or appeal relating to the assessment or declaration - that the amounts and particulars in the assessment or declaration are correct.

113 Section 2 of the TAA defines "taxation law" as meaning the Act or any other Act over which the Commissioner has general administration.

114 Section 255-5 of Schedule 1 to the TAA provides that:

255 (1) An amount of a tax related liability that is due and payable:

(a)

is a debt due to the Commonwealth; and

(b)

is payable to the Commissioner.

(2) The Commissioner, a Second Commissioner or a Deputy Commissioner may sue in his or her official name in a court of competent jurisdiction to recover an amount of a tax related liability that remains unpaid after it has become due and payable.

Discussion

115 The Master determined the application for summary relief upon the basis that it was not genuinely disputed that the cross appellant had provided no supporting documentation for his GST input tax credits claim in respect of the first registration of the partnership. On the other hand, according to the evidence before the Master, Mr Carpinelli had provided the necessary documentation for his claim in respect of the second registration of the partnership. Therefore, the Master found that the payment of $77,018 to the cross appellant was an overpayment by mistake. However, further information provided during the appeal hearing demonstrates that this premise was incorrect.

Was there an Administrative Overpayment?

116 It was not disputed during the appeal hearing, that the cross appellant had supplied the necessary supporting documentation in relation to the input tax credits claim which he lodged on behalf of the partnership. Indeed, the appellant submitted at the appeal that the invoices substantiating the claimed input tax credits relied upon in the BAS lodged by the cross appellant on behalf of the partnership:

are the same as or not materially different from the invoices which substantiated the input tax credits which the partnership claimed under ABN 65 877 864 542 and was allowed by the appellant. The same invoices cannot support two separate claims for input tax credits.^[15]

117 Although it is correct to say that the same invoices cannot substantiate two separate claims on behalf of the same partnership, it does not follow that the claim lodged by the cross appellant in respect of the first registration did not have supporting documentation.

118 More importantly, it does not necessarily establish that the payment of $77,018 to the cross appellant on behalf of the partnership in respect of the claimed GST input tax credits, was made by mistake.

119 It is reasonably arguable that the cross appellant had lodged a correct claim with the appropriate supporting documentation on behalf of the partnership in respect of the first registration.

120 In my view, the taxpayer's liability to repay monies under s8AAZN of the TAA is limited to overpayments made by mistake.^[16] In my view, the cross appellant genuinely disputes that the payment of $77,018 to him was made by mistake.

121 It is reasonably arguable that if there was a mistaken payment, it was that which was made by the Deputy Commissioner in relation to the second registration of the partnership, following incorrect advice from an officer of the ATO to Mr Carpinelli. The Deputy Commissioner chose to review the cross appellant's claims in respect of the first registration of the partnership, rather than Mr Carpinelli's claims in respect of the second registration of the partnership.

122 In my view, it is at least arguable that if the appellant does not establish that the alleged overpayment was made by mistake, it does not amount to an administrative overpayment under s8AAZN(3) of the TAA. Therefore, it does not amount to a debt due to the Commonwealth under s8AAZN(1)(a) of the TAA, and could not be allocated to the cross appellant's RBA for recovery purposes.

The Notices of Assessment

123 I turn to a consideration of the conclusive nature of Notices of Assessment under s105-100 of Schedule 1 to the TAA.

124 The appellant contends that the effect of the Notices of Assessment was to reverse the credit of $77,018. It was submitted that this reversal established an administrative overpayment under s8AAZN of the TAA.

125 In Neutral Bay Pty Ltd & Ors v Commissioner of Taxation,^[17] where the plaintiff had instituted proceedings under the Corporations Act 2001 (Cth) to set aside a statutory demand, the Commissioner argued that the present existence of the debts which were the subject of the statutory demands, could not be disputed. The Commissioner relied upon s105-100 of Schedule 1 to the TAA. The primary judge held that a Notice of Assessment for GST does not of itself create a debt due and owing. Therefore, the existence of a genuine dispute in relation to the assessment, is not affected by s.105-100 of Schedule 1 to the TAA.^[18] In relation to the administrative overpayment component of the claim, His Honour said:^[19]

48. The next component, in the demands to Neutral Bay Pty Ltd and MA Howard Racing Pty Ltd, is for what are described as administrative overpayments. The respondent claims to have overpaid these applicants for input tax credits. Section 105-100 does not avail the respondent here. But she argues that because the amounts shown as administrative overpayments are the subject of certificates pursuant to s 255-45 of Sch 1 to TAA, the amounts cannot be said to be genuinely in dispute. That provision, unlike s 105-100, does not provide that the certificate is conclusive evidence. The applicants challenge these administrative overpayments, by arguments which they will put to the AAT and also by an argument that amounts of this kind cannot be allocated to an RBA. That last argument does not represent a genuine dispute as to the debt, but the arguments to be put to the AAT do. Again, it is conceded that each challenge in the AAT is arguable. And again this is not the context in which to assess the merits of that challenge, assisted or otherwise by the prima facie evidence which is provided by the certificates given pursuant to s 255-45. Accordingly, there is a genuine dispute in the sense required for s 459H.

126 His Honour held that s105-100 of Schedule 1 to the TAA did not allow the Commissioner to deny that there is a genuine dispute as to the existence of a debt in proceedings under the Corporations Act 2001 (Cth), to set aside statutory demands. The question is not whether the assessment was properly made. Rather, the question is whether there is a genuine dispute about the existence or amount of the debt. Further, the fact that the dispute could only be resolved within Pt IVC proceedings under the TAA, did not mean that there was no dispute.

127 On appeal to the Full Court of the Supreme Court of Queensland, Keane JA stated^[20]:

In summary, the appellant's submission requires the court to ignore the reality that the existence of the debt is being disputed, on a genuine basis, in a forum which is competent to set the assessment and hence the debt, aside. This requirement is not apparent in the tax legislation or the [Corporations] Act.

128 His Honour said:

Nor is there anything in the language or statutory history of s105-100 of Schedule 1 of the TAA which would warrant the expansive operation of its conclusive fictional effect for which the appellant contends.^[21]

129 The judgment of the Full Court was the subject of a grant of special leave to the High Court of Australia on 8 February, 2008. The High Court reserved its decision on 16 June 2008.

130 In Commissioner of Taxation v Futuris Corporation Limited,^[22] the High Court considered inter alia, the conclusive nature of Notices of Assessments under s175 and s177(1) of the TAA.^[23] It was noted that a tax may not be made incontestable.^[24] The existence of the right to challenge the Notice of Assessment in Pt IVC proceedings, saved a provision such as s175 of the TAA.

131 His Honour Justice Kirby observed that the constitutional validity of s175 of the TAA might be in doubt.^[25] His Honour also referred to circumstances in which a Notice of Assessment may not be a valid assessment under the TAA.^[26]

132 In Zolsan Pty Ltd v Deputy Commissioner of Taxation^[27], Young CJ in Eq said:

84. In an action for debt in the common law courts, however, it might be strongly arguable that, despite the liability for GST not being based on the assessment, para 105-100 could be used to the advantage of the Deputy Commissioner.

85. That argument may or may not succeed

86. An allied argument is that, depending on how the common law court construes the tax laws, there may be a constitutional question arising as to whether there is, in effect, the case of an invalid incontestable tax; see MacCormick v Commissioner of Taxation [1984] HCA 20; (1984) 158 CLR 622, 640. This passage was noted in passing by the Queensland court of Appeal in the Neutral Bay case at [66] and must be reinforced by the attitude more recently taken by the High Court to invalidate attempts by Federal or State legislatures to impose solutions on a Chapter III Court; see eg. In a different connection, Kable v Director of Public Prosecutions (NSW) [1996] HCA 24; (1996) 189 CLR 51.

133 It is plain that the respective arguments of the parties involve complex and important legal questions.

134 In the present case, at the time of the hearing of the appeal, not only was there a genuine dispute in relation to the existence of the alleged debt but the cross appellant had taken the appropriate action to challenge the alleged debt. That is, there was in existence a Part IVC proceeding before the AAT, seeking review of the disallowance of an objection.

135 On the facts of the present case, insofar as they are known at this stage according to the affidavit material and the pleadings, it is arguable that the Notices of Assessment upon which the appellant relies, do not establish the liability of the cross appellant to pay a particular amount of tax. The Notices of Assessment establish that the cross appellant has a nil liability. Although the Notices notify the cross appellant that there will be a debit adjustment to his RBA, it is arguable that such a Notice cannot exclude the cross appellant's right to contest that the alleged overpayment was an administrative overpayment under s8AAZN of the TAA.

136 I find that there is an arguable defence. That is sufficient to allow the cross appellant's appeal.

137 However, in my view, various of the cross appellant's contentions in relation to the interpretation of the TAA and, in particular, his liability for payment of the general interest component of the alleged tax debt, are also at least arguable.

The Scheme of the TAA

138 One of the issues for determination is whether the appellant was entitled to seek to recover the payment of $77,018 and the general interest charge, under the RBA provisions of the TAA, rather than pursuant to s8AAZN of the TAA.

139 The Commissioner's right to recover overpayments under s8AAZN of the TAA is limited to those which are made by mistake.

140 Further, the recovery of administrative overpayments pursuant to that section, is subject to certain conditions which do not apply to the recovery of an RBA deficit debt. Firstly, the taxpayer must be told of the alleged error by the Commissioner, and secondly, the taxpayer does not become liable to pay a general interest charge until 30 days after such notice.

141 On the other hand, in relation to the RBA deficit debts, s8AAZF of the TAA provides that the general interest charge is payable on an RBA deficit debt without any preconditions applying. No notice is required and no time is given to make the repayment before the general interest charge is imposed. That is, it is arguable that Parliament has prescribed one recovery procedure in relation to administrative overpayments and a different recovery procedure for RBA deficit debts.

142 Alternatively, it is at least arguable that where the taxpayer becomes indebted to the Commissioner because of a mistake by the Commissioner, s8AAZN of the TAA was intended to provide that the taxpayer receive notice of, and the opportunity to repay the overpayment, before interest accrued upon it.

143 It is at least reasonably arguable that s8AAZN(2) of the TAA is a specific provision applicable to the recovery of administrative overpayments as defined in s8AAZN(3) of the TAA. It cannot be overridden by the general provision relating to the recovery of primary tax debts through their allocation to an RBA. That is, Parliament provided a specific and different regime for the recovery of overpayments made as a result of a mistake by the Commissioner, as compared to the recovery of other tax debts. It is arguable that Parliament did not intend to permit the Commissioner to deprive the taxpayer of certain rights in relation to administrative overpayments under s8AAZN(3) of the TAA, by adopting an alternative route for recovery of this kind of overpayment.

144 The approach of the Commissioner means that in every case where there is an overpayment by mistake, the Commissioner is entitled to allocate the administrative overpayment to an RBA of the taxpayer, and therefore avoid compliance with s8AAZN(2) of the TAA. That is, s8AAZN(2) of the TAA would have no work to do.

145 It is at least arguable that the appellant is not entitled to deny a taxpayer his right to contest that a payment received by him was an administrative overpayment within the meaning of s8AAZN of the TAA, by adopting the recovery procedure adopted in the present case.

Conclusions

146 In order for the payment to the cross appellant in the sum of $77,018 to amount to an administrative overpayment and therefore, a debt due to the Commonwealth under s8AAZN of the TAA, the appellant must establish that it was an overpayment made by mistake. In my view, there is a genuine dispute as to whether it was an overpayment by mistake.

147 It is at least arguable that the Notices of Assessment are only conclusive evidence of a nil balance between the appellant and the cross appellant. Although the Notices of Assessment might be evidence of an overpayment to the cross appellant totalling $77,018, it is at least arguable that the Notices do not and cannot prove that the overpayment was made by mistake. That is, the Notices do not inform the basis upon which the appellant made the payments totalling the sum of $77,018 to the cross appellant. Therefore, it is arguable that the Notices of Assessment, do not establish a debt to the Commonwealth, under s8AAZN of the TAA.

148 If the administrative overpayment is genuinely disputed, it follows that there is a genuine dispute in relation to the interest charged in respect of that amount. Therefore, there is a genuine dispute as to the existence of the debt of $85,210.74.

149 It is at least arguable that even if the Notices of Assessment establish the debt and entitle the Commissioner to allocate it to the RBA, that debt cannot be allocated to the RBA prior to the date of the Notices of Assessment. In the present case, the Notices of Assessment are dated 15 July 2005. However, the debt had been allocated to the RBA on 12 July 2005.

150 Even if the payment of $77,018 to the cross appellant was found to be an administrative overpayment as defined in s8AAZN(3) of the TAA, it is at least arguable that the appellant was obliged to comply with s8AAZN(2) of the TAA in order to recover the overpayment. The appellant failed to give the required notice pursuant to s8AAZN(2) of the TAA.

151 In my view, it is arguable that in the absence of giving such notice, the appellant was not entitled to allocate the administrative overpayment to an RBA for the purpose of recovering this kind of overpayment. It is at least arguable that the cross appellant is not liable to repay the general interest charge component of the RBA deficit debt.

152 Therefore, it is at least arguable that the appellant is not entitled to rely on an evidentiary certificate under s8AAZJ of the TAA issued in respect of the RBA deficit debt. It is at least arguable that the appellant is not entitled to seek summary judgment relying upon such an evidentiary certificate.

153 There are complex issues of law to be considered and determined.

154 It is not necessary for me to be finally persuaded as to the merits of the cross appellant's arguments, nor indeed, to address all of them. I need only satisfy myself that the cross appellant has raised arguable grounds of defence.

155 I cannot say that on any view of the facts and law, all of the cross appellant's arguments are bound to fail.

156 Accordingly, in my view, the appeal by the cross appellant against the Master's order for leave to enter summary judgment for the sum of $77,018 ought to be allowed.

157 It is therefore, unnecessary for the cross appellant's application for a stay of proceedings to be considered at this stage.

Conclusion

158 The appeal of the appellant is dismissed. The appeal of the cross appellant against the grant of leave to enter judgment is allowed.

159 The judgment and orders of the Master are set aside. Leave to enter summary judgment is revoked. The application for summary judgment is dismissed.

160 I will hear the parties as to any consequential orders and costs.

On Appeal from DISTRICT COURT OF SOUTH AUSTRALIA (MASTER RICE)

Appellant: DEPUTY COMMISSIONER OF TAXATION Counsel: MR G DAVIES QC WITH MR R SALLIS - Solicitor: CROWN SOLICITOR

Respondent: AGOSTINO DEANGELIS Counsel: MR R SALLIS - Solicitor: STEPHEN MCNAMARA

Hearing Date/s: 23/11/2007, 13/12/2007, 23/05/2008