Deputy Federal Commissioner of Taxation v. Papadopulos & Tsingolos.
Judges:Master Greenwood
Court:
Supreme Court of New South Wales
Master Greenwood
On 10 April 1979, the Deputy Commissioner of Taxation issued a Statement of Claim against George Papadopulos and Steven Tsingolos. This Statement of Claim seeks the sum of $18,876.10 for unpaid sales tax and additional tax due under the Sales Tax Assessment Act (No. 1) (hereinafter referred to as the Act).
On 24 August 1979, Tsingolos, the second defendant, filed a Notice of Appearance and Defence. On 17 November 1982, the plaintiff filed a Notice of Motion seeking that the Defence of the second defendant be struck out, that leave be granted to file an Amended Statement of Claim and that judgment be entered summarily for the plaintiff against both defendants on the Amended Statement of Claim. The Amended Statement of Claim became necessary because of an error in the calculation of the claim in the original Statement of Claim. The Notice of Motion came before me on 19 February 1983 and I granted leave to enter judgment against the first defendant in the sum of $27,140.20, together with costs. In relation to the second defendant, the Notice of Motion was stood over until 15 April this year.
Counsel for the plaintiff filed in Court a copy of an assessment under sec. 25(2A) of the Act addressed to the second defendant as a partner in a partnership known as S & G Manufacturing Jewellers. This document, dated 26 July 1978, bearing the signature of R.R. Grey, Deputy Commissioner of Taxation, nominates the operative date for the payment of the assessed tax as 24 August 1978. The document also indicates that objection may be lodged against the sale value of the goods notified therein within forty-two days after the due date for payment of the tax assessed, i.e. an objection against the assessment could be lodged up to forty-two days after 24 August 1978. This document contained a Certificate as follows:
``I, BRUCE SHIRLAW, certify that this and the following two pages is a true copy of the Notice of Assessment for the period 23 May 1977 to 22 February 1978 which issued to the abovenamed taxpayer at the address shown hereon.''
Below this certification, between two pencilled ``x's'' is a signature, ``B. Shirlaw''. The document does not indicate the designation of the signatory but it was not disputed by the solicitor appearing for the second defendant that B. Shirlaw now occupies a position set out in sec. 39 of the Act. Counsel for the plaintiff indicated that the document was produced pursuant to sec. 39 of the Act. That section reads as follows:
``39(1) The production of any document or a copy of a document under the hand of the Commissioner, a Second Commissioner or a Deputy Commissioner purporting to be a notice or a copy of a notice specifying any liability of a taxpayer under this Act shall be conclusive evidence of the due exercise of any act required by this Act to be done or performed by the Commissioner, a Second Commissioner, or a Deputy Commissioner for the purpose of ascertaining the liability so specified and (except in proceedings on appeal when it shall be prima facie evidence only) shall be conclusive evidence of the correctness of any calculations upon which that liability is ascertained.
(2) The production of any document under the hand of the Commissioner, a Second Commissioner or a Deputy Commissioner purporting to be a copy of or extract from any document or return furnished to or of any document issued by the Commissioner shall for all purposes be sufficient evidence of the matter therein set forth, without producing the original.''
Counsel for the plaintiff then submitted that the Court had no power to look behind the assessment. She pointed out that Pt. VII of the Act set out a complete code for objections and appeals and that if the second defendant sought to challenge the assessment in any way, such challenge should have been launched as provided in that Part. She further submitted that the second defendant, having failed to pursue this course, no remedy lay outside the Act. In support of this contention, I was referred to
F.J. Bloemen Pty. Ltd. v. F.C. of T. 81 ATC 4280; (1981) 35 A.L.R. 104.
ATC 4158
This case deals with an appeal to the Court of Appeal of the Supreme Court of New South Wales from an assessment under the Income Tax Assessment Act 1936. The nub of the argument concerns itself with sec. 177(1) of the Income Tax Assessment Act. This section provides for the production of a notice of assessment of income tax in terms differing from but analogous to that of sec. 39 of the Act. At ATC p. 4288; A.L.R. p. 113, Mason and Wilson JJ. stated:``It does not necessarily follow from what we have said that the Act excludes the general jurisdiction of the Supreme Court. Section 177(1) specifically operates by compelling a Court, for example the Supreme court, in the exercise of its jurisdiction to treat a notice of assessment on its production as conclusive evidence that the assessment has been duly made and thereby foreclosing that issue. In theory sec. 177 leaves the Supreme Court with jurisdiction to decide whether an assessment has been duly made in a case in which an appropriate document is not produced.
However, the rights of review given to the taxpayer by Pt. V are comprehensive. Quite evidently it was contemplated that the Commissioner would in every case take advantage of sec. 177(1) and foreclose the exercise of jurisdiction to decide whether an assessment has been duly made. The general tenor of the statutory provisions suggests that a taxpayer wishing to challenge a notice of assessment served upon him will be effectively confined to the Pt. V procedures.''
They continue at ATC p. 4289; A.L.R. p. 115:
``Accordingly, in our opinion the Supreme Court is bound, on production of a notice of assessment, to rule that the assessment was duly made both in statutory proceedings and in the exercise of its general jurisdiction. In a given case a question may arise as to whether the notice produced by the Commissioner is a notice of assessment, e.g. a notice expressed to relate to a definitive assessment as distinct from a provisional or tentative assessment. Unless it can be characterized as a notice of an `assessment', sec. 177(1) will have no operation.''
Murphy J. sums the situation up succinctly when he says at ATC p. 4290; A.L.R. p. 115:
``Part V is a procedural code which impliedly excludes the exercise of any other jurisdiction to examine the correctness of an assessment.''
Counsel for the plaintiff contends that Pt. VII of the Act has the same effect as Pt. V of the Income Tax Assessment Act and hence Pt. VII of the Act also constitutes a complete code for challenging an assessment once the Commissioner of Taxation invokes sec. 39 as sec. 177(1) of the Income Tax Assessment Act was invoked in Bloemen's case.
Counsel for the plaintiff submits that the effect of sec. 39 is that upon certified assessment being tendered in Court there can be no defence to a Statement of Claim seeking the payment of tax claimed in the certified document. Counsel was of the view that such a certificate would destroy any defence. She further indicated that it was even doubtful if a defence based on the joining of an incorrect party could succeed.
The second defendant, Steven Tsingolos, filed a Verified Defence to the Amended Statement of Claim in which he traversed the general issue, denying indebtedness for the unpaid sales tax or for any additional tax. The second defendant also filed an affidavit dated 15 March 1983. Clauses 6 and 7 of the affidavit set out:
``6. I have never received any copy of the assessment alleged to have been posted to me in accordance with the regulations made under the Sales Tax Act.
7. I say that I am liable as to a certain portion of the sales tax on the basis that I was a partner with the First Defendant from the 23rd May, 1977, up to and including the 3rd July, 1977, and if the amount of sales tax is still outstanding I understand my liability if joint and several and I accordingly admit my liability as to that part of the unpaid sales tax.''
Annexed to the affidavit is a copy of an agreement between the two defendants, dated 3 July 1977. The agreement evidences the purchase of the second defendant's share in the partnership by the first defendant for the sum of $4,000. The agreement has not been stamped. However, in accordance with sec. 27 of the New South Wales Stamp Duties Act, 1920, the solicitor for the defendant drew my attention to
ATC 4159
the lack of stamp duty and undertook on behalf of his client to pay the amount of unpaid duty and fine. On the basis that this has been paid, I am prepared to accept the deed as evidence of a dissolution of the partnership on 3 July 1977.The defendant says that as the tax has been improperly levied against him in the sense that it was a tax levied against the partnership in which he is no longer a partner, that he is entitled to defend the Statement of Claim with such a defence.
The history of the steps taken in this matter is set out in the affidavit of Charles Christopher Legge, an employee of the Commissioner of Taxation, dated 15 April 1983. The relevant parts of the affidavit are as follows:
``2. By letter with an enclosed `stereo letter' both dated 16 June 1978 sent by the plaintiff to the second defendant by ordinary mail on that date the second defendant was advised in regard to his obligation to lodge Sales Tax Returns from May 1977. A true copy of such letter and said enclosure so forwarded to the second defendant is hereunto annexed and marked `A'.
3. On 26 July 1978 the plaintiff caused an assessment to be made of the amount upon which in his judgment sales tax ought to be levied against the second defendant in accordance with sec. 25(2A).
4. On 26 July 1978 notice in writing of the said assessment and of the second defendant's liability to sales tax was posted by ordinary prepaid mail, to the second defendant at the address shown in such notice. A true copy of such notice is hereunto annexed and marked `B'.
5. Such notice was subsequently returned to the plaintiff's office with the envelope marked `Addressee unknown at this address'. A check of the records of the plaintiff revealed that the said notice had been forwarded to the wrong address and that the correct address was `236A Marrickville Road'.
6. On 11 August 1978 the notice directed to Mr. S. Tsingolos was posted to the second defendant at 236A Marrickville Road, Marrickville, 2204 being the address for service of the said Steven Tsingolos within the meaning of reg. 66 of the Sales Tax Regulations promulgated under the Act. The said notice has not been returned through the post as unclaimed.
7. No objection has been lodged in respect of the said assessment by the second defendant.
8. The said Notice of Assessment included an additional amount of $6,292.03 by way of additional tax pursuant to sec. 25(2B) of the Act.
9. On 12 April 1979, the Statement of Claim herein was issued out of this Honourable Court by the plaintiff against the defendants claiming the sum of $20,836.11 together with additional tax on the sum of $18,876.10 calculated at the rate of 10% per annum from the date of filing the Statement of Claim until payment or judgment. No appearance or defence has been filed by or on behalf of the first defendant. An appearance and verified defence has been filed on behalf of the second defendant.
10. In calculating the additional tax for late payment in the said Statement of Claim an error was made in that the computation of such additional tax was made from the date of the Notice and not from the date specified for payment in the said Notice as required by sec. 29.
11. I am aware that an Amended Statement of Claim for the liquidated sum of $19,915.57 was filed in this Honourable Court on behalf of the plaintiff on 9 February 1983 by leave granted on that day by Master Greenwood and that an amended defence was filed on 17 March 1983.''
From the evidence, the following chronology of events can be garnered. On 23 May 1977, the two defendants formed a partnership. This was dissolved by a deed dated 3 July 1977. On 24 May 1977, the first defendant apparently on behalf of both defendants applied for the registration of the partnership as a manufacturer of wholesale jewellery in terms of the Sales Tax Assessment Act. The second defendant concedes that the Commissioner was not informed by him of the dissolution of the partnership.
On 12 June 1978, the Commissioner of Taxation accepted the registration and issued a Certificate of Registration. This was forwarded and addressed to the second defendant, c/o 22 Grove Street, Marrickville. This Certificate, of course, issued almost eleven months after the
ATC 4160
defendants dissolved their partnership. Such Certificate was forwarded to 22 Grove Street, Marrickville. I am not aware of whose address this is but I have gleaned from the affidavit of Christopher Charles Legge of 16 November 1982 that similar information was sent to the second defendant at the same address. On 26 July, the then Deputy Commissioner of Taxation issued Notice of Assessment of the sales tax in a sum of $18,876.10. Such assessment was made pursuant to sec. 25(2A) of the Act. (This is a provision which gives the Commissioner the power to assess where no returns have been lodged.) The due date for payment pursuant to sec. 25 was stated to be 24 August 1978. Pursuant to sec. 43(1) of the Act, the defendants had a period of forty-two days after 24 August 1978 in which to seek to dispute the tax pursuant to his rights under Pt. VII of the Act.The Notice sent to the second defendant was returned to the plaintiff, on an unstated date, because it had been forwarded to the wrong address. On 11 August 1978, the notice was once again posted to the second defendant at an address, which, under the Sales Tax Regulations, may be regarded as his address for service, this being ``the address of the person, as described in any record in the custody of the Commissioner'' (reg. 66).
The second defendant said he did not receive this letter but it was apparently not returned to the Commissioner. Counsel for the Commissioner has asked me to infer that the fact that the letter has not been returned is evidence that it was received by the second defendant. This is an inference which I am not prepared to draw. Notwithstanding that the Notice of Assessment was reposted on 11 August, the due date by which the assessed tax was required to be paid was not altered. At best, taking notice of the vagaries of the mail, the second defendant would have had only twelve days in which to pay his tax (assuming that he had received the Notice). However, this was not the end of this unfortunate story. The plaintiff issued a Statement of Claim on 10 April 1979 to recover the amount of the assessment. He subsequently determined that his calculation of the amount due in the Statement of Claim was incorrect and on 9 February 1983, by leave, filed an Amended Statement of Claim in Court. To this pleading, a Statement of Defence to the Amended Statement of Claim was also filed in Court when the matter came before me on 15 April 1983.
To the plaintiff's case, the defendant finds himself with a defence to put but no tribunal to listen to him. The time in which he could exercise his rights under Pt. VII of the Sales Tax Assessment Act have long since passed. This expired in mid-September 1978. I have been informed by counsel for the plaintiff that as the time in which an appeal can be lodged is fixed by the Act with no provision for an extension of time, time is construed strictly and no extension of time is granted. This point was not argued before me, nor was I referred to any authority on this aspect. For the purpose of this judgment, I accept that this is the position. Assuming that this is the case, the Commissioner, in his discretion, could undoubtedly have issued an Amended Assessment, based on either the acceptance that the partnership was dissolved and the second defendant was not liable in the amount calculated in the Notice of Assessment or because of the short time given to the defendant to get his house in order because of the error made in the Commissioner's office when the notice was originally served, issued another assessment to enable the defendant to have his defence heard. This the plaintiff has so far failed to do.
I might add that there is nothing before me to suggest that the defendant is not correct in his assertion that he did not receive the Notice of Assessment of sales tax.
The plaintiff, having denied the defendant the opportunity of being heard in the manner prescribed by Pt. VII of the Act, has sought fit to attempt to recover the debt in the Supreme Court by issuing a Statement of Claim. By so doing, he has given the defendant a forum in which he can pursue his defence. However, the plaintiff has sought fit to invoke sec. 39 of the Act.
I accept the submissions of the plaintiff that the scheme of the Act is such that the only mode of attack in an assessment of sales tax is through the provisions of the Act when the Commissioner invokes sec. 39. The effect of the invoking of sec. 39 in this application is that this Court is precluded from considering the due exercise of any act required to be done by the Commissioner and must accept the correctness of any calculations upon which that liability is ascertained.
I am also not entitled to consider that the defendant did not receive the assessment of
ATC 4161
sales tax, nor that he can no longer appeal by invoking the provisions of Pt. VII of the Act. There is no doubt in my mind that the provisions of the Act are equally as restrictive, perhaps even more restrictive, than the similar provisions under the Income Tax Assessment Act. Bloemen's case is applicable to the situation before me. The second defendant is in the position where he cannot attack the assessment.But this is not the end of the matter. There is nothing that I read in the Act which prevents a defendant from mounting an arguable case by saying, ``I am not in the partnership and hence this assessment, though proper, relates to the partnership and should be directed elsewhere''.
If this were not so, then there would be no purpose in the legislature requiring the Commissioner to come to Court to establish his debt as a Judgment of the Court. If the assessment of the Commissioner were absolute in the sense that when the Commissioner served a Notice of Assessment under the Act and then a Statement of Claim on a person that person could not dispute the Statement of Claim in any way whatsoever, then the use of the Court proceeding would be a waste of time. If this were the case all that is necessary would be for the Commissioner to have power to enforce his assessment without the need of proceeding to judgment in a Court of competent jurisdiction. An example of this power is the power vested in the N.S.W. Commissioner of Main Roads to issue a writ of possession of land without recourse to the Court.
The fact that Court proceedings are necessary to enforce indicates that whilst the assessment cannot be attacked by virtue of the Act, other aspects of the claim must be open to scrutiny by the Court. I have therefore come to the view that the defendant has an arguable case.
Part 13, r. 2 of the Supreme Court Rules sets out the basis on which the Court may enter summary judgment. It provides in Pt. 1:
- (a) that there should be evidence of the facts upon which the claim or part is based; and
- (b) there should be evidence by the plaintiff or by some responsible person that in the belief of the person giving the evidence, the defendant has no defence to the claim or part or no defence as to the amount of any damages claimed.
In the matter before me, there is evidence of the facts upon which the claim or part is based and in relation to satisfying para. (b) of that sub-rule, whilst the plaintiff attempted to meet this criterion by the filing of the certificate under sec. 39 of the Sales Tax Assessment Act and an affidavit I am of the view that the filing of such a certificate leaves the defendant an arguable case. This being the position, I have concluded the plaintiff is not entitled to summary judgment. It follows, however, from what I have said that the present defence of the plaintiff to the Amended Statement must be amended before this action can go to trial.
I might add that if I am wrong in my conclusions then a most unsatisfactory situation has arisen where the defendant who, prima facie, seems to have a defence is precluded by the action of the Commissioner from being heard in either this Court or in the various tribunals under Pt. VII of the Act.
The formal orders I make therefore are:
1. The Notice of Motion for summary judgment is dismissed.
2. I grant leave to the second defendant to file and serve an Amended Defence within twenty-eight days.
3. Plaintiff to pay the second defendant's costs of this Notice of Motion.
This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.