GENERAL ELECTRONICS INTERNATIONAL PTY LIMITED v DFC of T

Judges:
Lindgren J

Court:
Federal Court

Judgment date: 23 October 1996

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Lindgren J

Introduction

These Reasons for Judgment relate to an application by the applicant (``GEI'') for interlocutory relief. The original application was filed in Court on 27 September 1996. On that occasion, I abridged the time for service and made the application returnable at 2.00 pm on 30 September 1996, when an amended application was filed. The application for interlocutory relief was heard on 1, 4 and 9 October 1996.

GEI applies under ss 5 and 6 of the Administrative Decisions (Judicial Review) Act 1977 (``the ADJR Act''), and in the alternative under s 39B of the Judiciary Act, 1903, for review, and relief in respect, of decisions of the respondent (``the Commissioner'') of which the Commissioner gave notice to GEI by letters dated 26 August 1996. They are identified in the amended application as decisions that a notice of assessment of sales tax purportedly under s 101 of the Sales Tax Assessment Act 1992 (``the Assessment Act'') should be issued to GEI, and that notices purportedly under s 74 of the Assessment Act should be served in respect of the resultant sales tax debt. The amended application also seeks review of associated decisions, conduct and actions. The ADJR Act does not apply to the decision to issue the assessment: sub-s 3(1), Schedule 1, para (e).

In substance, the interlocutory relief is directed to staying the effect of the notices purportedly issued under s 74, which, it is said, are stultifying GEI's business.

Background facts

On the hearing of the application for interlocutory relief, the Commissioner read one short affidavit and tendered two documents. GEI's deponents were not cross examined. The following account of the background facts is therefore almost entirely based on untested affidavit evidence read by GEI. (The following company data are taken largely from company extracts which were in evidence.) GEI is a seller by retail of computers. It was incorporated on 29 August 1994. Its principal place of business is at Unit 10, 171 Gibbes Street, Chatswood. Its director and secretary is Youfa Chen. It has a paid up share capital of $10. Its registered office is c/- Mitchell & Partners, Suite 1, Level 2, 1 York Street, Sydney.

According to affidavit evidence, GEI, which trades as ``Datastar Computers'', has been retailing finished computer products since January 1996 and purchases its stock from various suppliers, including Stanton Technology Pty Limited (``Stanton''), the principal activity of which is the selling of computers by wholesale. According to a company extract, Stanton's registered office is also c/- Mitchell & Partners, Suite 1, Level 2, 1 York Street, Sydney, and, as well, its principal place of business is at that address. Its directors are Jing Wang and Sui Mui Kwong, both of Unit 10, 41 Broughton Road, Artarmon. Apart from sharing the same registered office and the fact that the directors of both companies were born in China, and in the case of Youfa Chen and Sui Mui Kwong, in Guangdong, China, the two companies are not shown by the evidence

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to date to be other than independent of each other. However, there was in evidence an agreement in writing dated 10 June 1996 which provided for the extension of credit by Stanton to GEI and the terms on which it was to be extended. This recent agreement provides for what it calls a ``revolving loan'' by Stanton to GEI of up to $500,000; for payment of interest quarterly; and for repayment of principal on the giving of three months' notice of demand by Stanton. There is no evidence of the making of any payments by GEI to Stanton of interest or otherwise. There is in evidence no copy of any running account kept as between Stanton and GEI (but see below).

For the purpose of the present application for interlocutory relief, David John McGuiness, solicitor, of Tress Cocks & Maddox, the solicitors for GEI, has sworn an affidavit on information and belief. The following paragraphs are based on his affidavit.

Mr McGuiness deposes (in an affidavit dated 27 September 1996 as corrected by a later affidavit dated 1 October 1996) that he is instructed that GEI's business arrangement with Stanton operated as follows:

• ``(a) A customer would place a sale order at the Applicant's retail store;
• (b) A copy of that sale order would be faxed to the Applicant's head office;
• (c) The Applicant would then send a copy of the sale order to its supplier which in most cases was Stanton;
• (d) Stanton would complete the sale orders and provide the Applicant with the finished computer product;
• (e) On receipt of the finished computer product GEI would credit a loan account between GEI and Stanton in consideration for receipt of the finished computer product;
• (f) Stanton would issue invoices to the Applicant in most cases in respect of the finished computer product supplied, however because of failures with its computer system it did not always do so.''

According to the affidavit evidence, the Commissioner has been investigating the affairs of GEI since early March 1996. Officers of the Commissioner have attended GEI's business premises on at least 15 occasions and have interviewed sales staff and inspected records. During the course of the investigation, GEI has, from time to time, produced a schedule showing computer products sold by it. Apparently the Commissioner's investigation has not, at least in all cases, revealed ``wholesale invoices'' issued by suppliers to GEI matching the ``retail invoices'' issued by GEI on the sales of computers by it.

Mr McGuiness is instructed that on or about 2 August 1996, Kenny Chen resigned as a director of GEI and Youfa Chen ``assumed that position''. (Mr McGuiness also refers to Kenny Chen's having ceased to be ``Managing Director''.) In fact, the company extract in evidence shows that Youfa Chen was appointed as a director of GEI as long ago as 30 August 1994. The extract also shows, however, that in August 1996 there was some change to the officeholders within GEI (the detail of which is not revealed by the extract) and that Youfa Chen was appointed as secretary of GEI on 2 August 1996.

At a meeting on 9 August 1996 between Kenny Chen (who, according to Mr McGuiness's affidavit, had ceased to be a director and managing director seven days previously) and Mr Robinson and Ms Gill of the Commissioner's office, Mr Robinson handed Kenny Chen a schedule of finished computer products sold by GEI in respect of which the Commissioner had not been able to locate invoices issued by suppliers. Mr Robinson told Kenny Chen that GEI had a fortnight, that is to say, until 23 August, to respond, in default of which a notice of assessment of sales tax would be issued to GEI. Kenny Chen told Mr Robinson that he would pass the material on to ``the new Managing Director'' but that it would take some time for the latter to respond to the schedule as he was in Brisbane and was not familiar with the matter. Present at the meeting also was a Mr Adrian Liaw of Comasters, solicitors, who had been retained by GEI.

Apparently Mr Liaw provided a written report to Youfa Chen arising out of the meeting. Youfa Chen asked for advice as to whether GEI could dispute any sales tax assessment which might be made. When GEI had not received that advice from Comasters by 19 August, it terminated their retainer and appointed Jimmy Chen, the brother of Youfa Chen, to act as GEI's agent in New South Wales to retain a sales tax adviser.

On 19 August 1996, Jimmy Chen retained Robert Wilson of Greenwood Challoner. Mr

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Wilson provides affidavit evidence of what has happened since that time. According to Mr Wilson's affidavit, at about 11.00 am on 26 August 1996, he telephoned Mr Robinson of the Commissioner's office and said that he wished to set up a meeting to discuss the issue. Mr Robinson said that he could not talk to Mr Wilson until he had an authority from GEI. In the course of the conversation, Mr Robinson said:

``... to understand their present situation, you've got to understand what they've done in the past.''

The Commissioner issued his notice of assessment of sales tax in a sum of $124,209.00 and of a penalty of $18,631.35 (totalling $142,840.35) on 26 August and GEI received it on 28 August.

A covering letter from the Commissioner referred to ``retail sales of computers which have not previously been subject to sales tax''. It asserted that details of the computers and the retail sales of them had been provided previously and enclosed a further copy (``the assessment schedule''). The assessment schedule was a seven page list headed ``Computers Sold without evidence of being Purchased''. The list was divided into columns. The columns were headed ``Serial No'', ``Date'', ``Invoice No'', ``Amount'' and ``Comments''. The invoice dates extend from 25 January 1996 to 28 June 1996. The invoice amounts, that is to say, the retail sale prices of the computers, total $1,073,716.50. A calculation at the foot of the last page of the schedule arrives at the amount of $124,209.21 which, it will be recalled, is, allowing for rounding off, the amount of sales tax assessed by the Commissioner as payable by GEI. The calculation demonstrates how the Commissioner assessed sales tax at the sum of $124,209.21.

The covering letter from the Commissioner continued as follows:

``No explanation could be provided by you on how these goods had been acquired by General Electronic International Pty Ltd (`GEI'). The computers were not purchased as all suppliers' invoices were provided for the period examined i.e., from 12 February 1996 to 30 June 1996 and this was confirmed with the related supplier Stanton Technology Pty Ltd. Although parts had been purchased over the period, it was explained that GEI did not manufacture the goods.

These computers are assessable goods under the sales tax legislation. Retail sales of tax free goods is an assessable dealing as determined by Section 21 of the Sales Tax Assessment Act 1992 and the dealing is AD2e of Table 1 to this Act. The taxable value used to establish a liability has been determined by the using [sic] the principles in the ATO Guidelines of ruling SST 6. The rate of tax applicable to this taxable value is 22% and results in a further sales tax liability of $124,209.00.

Although an offer was made for GEI to complete a Supplementary Sales Tax Return for this liability, the offer was rejected and assessment was preferred. This has now been completed and the Notice of assessment is attached.''

By a second letter dated 26 August 1996, the Commissioner advised GEI that notices had been issued under s 74 of the Assessment Act. Apparently there were seven of these and copies of them were enclosed with the letter. By way of illustration, one was issued to the Public Officer of Westpac Banking Corporation (``Westpac'') at which GEI had its trading account. The general effect of the notice was to direct the recipient pay to the Commissioner any moneys due or which might become due from it to GEI up to an amount of $124,209.00.

On 28 August 1996 Youfa Chen advised Mr Wilson that GEI had received the notice of assessment and copies of the s 74 notices. On the same day Mr Wilson telephoned the Commissioner's Chatswood office, advising that the s 74 notice issued to Westpac had effectively frozen GEI's business and would continue to cause it harm. He requested that the s 74 notices be withdrawn. Speaking to a different officer to whom his call was transferred, Mr Wilson pointed out that GEI was not a manufacturer or wholesaler and was not ``registered'' (cf Part 6 (ss 78-81) of the Assessment Act). He asserted that there could be no basis for the assessment, insisted that the s 74 notices be withdrawn immediately and said that if they were not, proceedings may have to be commenced.

On 3 September 1996, Mr Wilson faxed to the Commissioner a letter of authority dated 26 August 1996 from GEI. On the same day he

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wrote to the Commissioner complaining about the s 74 notices and, in particular, asserting that they would have the effect of ruining GEI's business. As well, the letter complained about a denial of natural justice.

On 4 September 1996, Mr Robinson of the Commissioner's Chatswood office telephoned Mr Wilson. They spoke at length. According to Mr Wilson's affidavit, the conversation included the following:

``Robinson: `GEI is a taxpayer. Like its associated businesses, it has not paid any sales tax. Like its associated companies, sales tax has not been paid for several years. Where is the July sales tax return? It has not been lodged or paid.'

Wilson: `It is not a taxpayer. It has no reason to lodge a return or pay sales tax. It has no liability. It's a retailer. It's entitled to assume the goods it buys are tax paid. They're mostly from Stanton.'

Robinson: `That's not possible. Stanton's shouldn't still be in business. The ATO has lodged section 74 notices on its bank account several months ago. It should not be trading.'

Wilson: `Well, that's certainly the effect of the section 74 notices on GEI.'

Robinson: `If I'd known you were acting for GEI, I might have held off issuing the assessment and the section 74 notices.'

Wilson: `I rang you on 26 August 1996 and told you that I was acting for Datastar, the retailer. That business was carried on by GEI and you issued the assessment notice to GEI and the section 74 notices to the banks naming GEI. How can you say you were not aware who it was that I was representing?'

Robinson: `There could be some confusion because lots of companies operate under the Datastar name.'''

On 5 September 1996, Mr Wilson attended a meeting at the Commissioner's Chatswood office. He asked that the s 74 notices be withdrawn and again complained that they were ruining GEI's business. Again, he asserted that GEI was a retailer and that its purchases constituted wholesale sales to it by its suppliers. He contended that the suppliers were liable to pay sales tax, and stated that GEI was not registered, was not a manufacturer, and did not make wholesale sales. He informed the Commissioner's officers that because of the s 74 notices, GEI could not pay wages or suppliers and would not be able to pay its group tax on 7 September. He said that GEI could not ``access its bank account to defend itself'' and that it had been ``denied natural justice''. Mr Robinson said that GEI had sold goods with serial numbers and could not demonstrate where it had purchased them or that tax had been paid on them. He asserted that the goods were ``untaxed goods'' and that the Commissioner had been entitled to issue a notice of assessment to GEI. According to Mr Wilson, the conversation included the following:

``Wilson: `... How many section 74 notices went out?'

Robinson: `To Westpac and to six other trading banks. In any case, I'm not certain that GEI's been denied [natural] justice. It's trading position seems to be the same. The stores are still open.'

Wilson: `The issue of the assessment and the section 74 notices couldn't have been calculated to cause greater harm to the company. All the goods sold by GEI have gone through a taxing point. It can't have a liability. Any liability must be Stanton's or some other supplier's problem.'

Robinson: `If you say so. OK.' (chuckling)''

On 6 September 1996, Mr Wilson wrote to the Commissioner asserting that GEI's dealings in goods were not ``assessable dealings'' (s 5 of the Assessment Act provides that unless the contrary intention appears, ``assessable dealing'' means any dealing covered by Table 1 in Schedule 1 to the Assessment Act) and, in particular, that they did not, contrary to the Commissioner's contention, fall within class AD2e of assessable dealing in Table 1. The letter asserted that as the goods had previously passed through a taxing point, namely when sold by wholesale to GEI, the retail sales by GEI were not ``untaxed-goods sales'' within the meaning of s 21 of the Assessment Act. The letter further asserted that the s 74 notices were void and of no effect because GEI had been ``denied natural justice'' by the Commissioner.

On 9 September 1996, the Commissioner replied at some length. The letter referred, inter alia, to ss 14ZZM and 14ZZR of the Taxation Administration Act 1953 (``the Administration Act'') (see later).

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On 17 September 1996 the Commissioner wrote again to Mr Wilson referring to Mr Wilson's letters of 3 and 6 September and advising that the s 74 notices would not be withdrawn. The letter advised that all the matters raised in the letters had been re- examined but that the conclusion had been reached that the assessment had been properly raised.

Mr Wilson wrote to the Commissioner on 25 September 1996. This letter enclosed a schedule (``the Response Schedule'') which, the letter said, responded to the assessment schedule. The Response Schedule gave wholesale invoice numbers or other information as to the supply to GEI of the computers which had been identified on the assessment schedule. The letter asserted that the Response Schedule provided a complete answer to the assessment schedule and therefore to the assessment. Accordingly, the letter requested that the notice of assessment and the s 74 notices be withdrawn.

On 13 September 1996, Westpac withdrew for payment to the Commissioner, $12,683.62 from GEI's account 034072 117561 and $12,979.58 from its trading account 034072 117553, a total of $25,663.20. Payment was made to the Commissioner on 19 September. It was common ground before me that the former amount represented moneys held by GEI as trustee for the ``Datastar Super Fund'', GEI's staff superannuation fund. Upon being informed by Westpac of the payment, GEI protested to the Commissioner, who, on the hearing before me, agreed that the amount of $12,683.62 was to be refunded. The solicitor who appeared for the Commissioner subsequently informed the Court that the amount had been refunded by the Commissioner.

I turn now from Mr Wilson's affidavit again to that of Mr McGuiness. Mr McGuiness has sworn that he is instructed that because of the issue of the s 74 notices, GEI has:

``in order to mitigate its losses, licensed its business to a company called Bose Technology Pty Limited under an arrangement that should the section 74 Notices be withdrawn the licence agreement will terminate and the Applicant will resume conduct of its business.''

Mr McGuiness has also sworn that, according to his instructions, GEI has, since 26 August 1996, suffered ``losses of gross profit in the order of $10,000 each business day'' and damage to its business reputation.

Reasoning

In order to obtain the interlocutory relief which it seeks, GEI must demonstrate that there is an arguable case for its obtaining final relief setting aside the s 74 notices, and, if there is, that the balance of convenience favours the granting of the interlocutory relief. On the former question it is necessary to refer to certain provisions of the Assessment Act and the Administration Act. Provisions of both Acts make the task of a person in the position of GEI a difficult one.

Section 16 of the Assessment Act provides that Table 1 sets out all the ``assessable dealings'' that can be subject to sales tax and, as noted earlier, the reference to Table 1 is a reference to Table 1 in Schedule 1 to the Assessment Act. Sub-section 16(2) provides as follows:

``16(2) If the time of an assessable dealing (as specified in column 4 of the Table) is on or after the first taxing day, and no exemption applies under Division 2 of this Part [the reference is to PART 3 in which s 16 occurs], then:

• (a) the dealing is a taxable dealing;
• (b) the person specified in column 3 is the person liable to the tax;
• (c) the tax becomes payable at the time of the dealing, as specified in column 4;
• (d) the tax is due for payment at the time that applies under Division 2 of Part 5.''

The Commissioner relies on assessable dealing AD2e in Table 1. That assessable dealing is described in Table 1 as an ``untaxed- goods sale as defined by section 21, by a person who is not the manufacturer of the goods''. The person liable to pay the tax is the ``seller''. The tax becomes payable at the time of the sale, and the normal taxable value of the dealing on which the tax is assessed is ``the notional wholesale selling price''. I need not stay to discuss that concept or other concepts to which reference is made in sub-s 16(2) quoted earlier.

Importantly, sub-s 21(1) provides as follows:

``21(1) A retail sale of goods by a taxpayer is an untaxed-goods sale unless:

• (a)...
• (b) the goods have previously passed through a taxing point; or

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• (c)...''

The expression ``taxpayer'' is defined in s 5 as, relevantly, ``a person who is, has been or may be liable to tax''.

GEI's case is that the computers which it sold by retail had previously passed through a taxing point. Sub-section 21(3) provides that for the purposes of s 21, goods are taken to have ``passed through a taxing point'' only if, relevantly, ``the goods have been the subject of a taxable dealing''. GEI submits that the computers were the subject of previous taxable dealings, namely, wholesale sales (cf Class AD1a (``wholesale sale by a person who manufactured the goods in the course of any business'') and AD1b (``wholesale sale by a person who is not the manufacturer of the goods'')). The Commissioner's case is that there have been retail sales by GEI of computers which have not previously been the subject of a taxable dealing.

Sub-section 101(1) empowers the Commissioner to make an assessment of tax payable by a person on assessable dealings. Sub-section 69(1) provides that unpaid tax may be recovered as a debt in any court of competent jurisdiction by the Commissioner, or by a Deputy Commissioner, suing in his or her official name. Section 74 empowers the Commissioner to direct a person who owes, or may later owe, money to a taxpayer to pay some or all of it to the Commissioner in accordance with the direction and that such a third party must comply with the direction.

I turn now to the various provisions of the Assessment Act and the Administration Act which, as I said earlier, make GEI's task difficult. Those provisions have the general effect that, subject to very limited exceptions, GEI is limited to the rights of review and appeal provided for in the legislation. Sub-section 103(1) of the Assessment Act provides that a taxpayer's liability to tax on an assessable dealing, and the due date for payment of that tax, are not dependent on, or in any way affected by, the making of an assessment in respect of that dealing. Sub-section 116(1) of the same Act provides that the production of a notice of assessment is conclusive evidence that the assessment was duly made and that the amounts and other particulars in the assessment are correct, but that the sub-section does not apply in proceedings under Part IVC of the Administration Act on a review of appeal relating to the assessment. Section 107 provides that a taxpayer who is dissatisfied with an assessment made in relation to the taxpayer may object against it in the manner set out in Part IVC of the Administration Act. The final section in the Assessment Act to be noted is s 125 which provides that a person who sells goods by wholesale at a price that includes tax that the person has or will become liable to pay on the goods must specify the amount of the tax on any invoice given to the purchaser. This, of course, is an obligation imposed on wholesale suppliers to GEI, not on GEI as purchaser from them.

I turn now to discuss briefly relevant provisions of the Administration Act. Section 14ZL provides that Part IVC of that Act applies if a provision of an Act provides that a person who is dissatisfied with, inter alia, an assessment, may object against it in the manner set out in Part IVC (such an objection is, in Part IVC, called a ``taxation objection''). It will be recalled that s 107 of the Assessment Act so provides in relation to an assessment of sales tax. Division 3 within Part IVC describes how taxation objections are to be made and how they are to be dealt with by the Commissioner. Division 4 provides for applications to the Administrative Appeals Tribunal (``AAT'') for review of decisions by the Commissioner in relation to certain taxation objections (``reviewable objection decisions''). Division 5 provides for appeals to this Court against decisions by the Commissioner in relation to certain taxation objections (``appealable objection decisions'').

Within Division 3, s 14ZY requires that the Commissioner decide whether to allow a taxation objection wholly or in part, or to disallow it. Section 14ZZ provides that if a person is dissatisfied with the Commissioner's decision (``objection decision''), the person may, if it is a reviewable objection decision apply to the AAT for a review of it, if it is an appealable objection decision appeal to this Court against it, and if it is both take either of those courses.

If the Commissioner were to disallow an objection by GEI or to allow it only in part, that objection decision would be both a reviewable objection decision and an appealable objection decision. Accordingly, GEI would be entitled to apply to the AAT for review of the decision or to appeal to this Court against it.

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Neither the pendency of a review before the AAT nor the pendency of an appeal before this Court would interfere with or affect the assessment ``and any tax, additional tax or other amount may be recovered as if no [review or appeal] were pending'' (ss 14ZZM, 14ZZR).

GEI could succeed finally in a proceeding of the present kind only if it successfully attacked the assessment or the decision to issue the s 74 notices. In relation to the former, the statutory provisions to which I have referred produce the result that GEI could succeed only if it could show that the supposed assessment was not truly a final assessment (GEI does not attack the assessment on this ground) or that the assessment was arbitrary or was not the result of a bona fide attempt to exercise the power of assessment given by s 101 of that Act for the purpose for which it is given (GEI attacks the assessment on these grounds). I referred to the cases which produce this result in the context of an assessment under s 167 of the Income Tax Assessment Act 1936 recently in
Giretti v Deputy Commissioner of Taxation, unreported, 11 September 1996, Full Court.
Madden v Madden & Ors 96 ATC 4268; (1996) 32 ATR 223 (FCA/FC) and
Darrell Lea Chocolate Shops Pty Ltd v FC of T 96 ATC 4493 (FCA/ Olney J) and
Hoare Bros Pty Ltd v Deputy Commissioner of Taxation 96 ATC 4988; (1996) 21 ACSR 449 (FCA/Ryan J) might now be added to the cases which I mentioned there.

It is of fundamental importance to appreciate the nature of the arguable case that GEI must show. It is not an arguable case that the assessment has been made in error. It is not an arguable case that on a review or appeal GEI will succeed. It is no less than an arguable case that the power to make the assessment given by s 101 was exercised arbitrarily or not in good faith for the purpose for which the power was given. Notwithstanding the thorough submissions made on behalf of GEI, I have concluded that the evidence does not establish an arguable case of that character.

In his submissions, counsel for GEI referred to references by Mr Robinson of the Commissioner's office to what GEI had ``done in the past'', but I think that the reference falls far short of establishing, even on an arguable basis, the kind of case which GEI must make out.

After the hearing on 1 and 4 October 1996, GEI applied to re-open to read a further affidavit of Mr Wilson sworn 9 October 1996. The application was opposed on the ground that it was irrelevant. I granted leave subject to the issue of relevance. The Commissioner then read a short affidavit in reply.

Mr Wilson's affidavit annexed what purported to be copies of invoices issued to GEI as purchaser of the computers in question and a revised Response Schedule. These raised many questions. None appear to be on printed stationery; those of Stanton were on blank paper. Many were dated later, and in many cases much later, than the dates of the retail sales by GEI. On some invoices, the supplier to GEI is shown as ``Datastar Computers'' but, as noted earlier, GEI's own evidence is that GEI itself trades as ``Datastar Computers''. The serial numbers for the computers on the invoices are often not compatible with those of the computers listed on the assessment schedule. Annexed to Mr Wilson's affidavit were also certain documents said to have been annexed to the invoices. But there is no evidence as to who prepared the attachments, who attached them to the invoices or when they were so attached.

In the Commissioner's written submissions, there is a more detailed analysis of the Response Schedule and the documents annexed to Mr Wilson's affidavit sworn 9 October 1996. I have studied that submission and accept it. It is as follows:

``Analysis of annexures I [the Response Schedule], K [the purported Invoices] and L [a revised Response Schedule] also reveals the following:

• (a) Annexures I and L suggest that 38 computer units were purchased by the applicant from Digital Systems Technology Pty Limited (or DST) and were the subject of an invoice numbered 955692. Included in annexure K is a Datastar Computers invoice numbered 955692. Mr Wilson states at para 5 of his affidavit of 9 October 1996 that he is instructed by the applicant that the business trading under the name Datastar Computers was carried on by Digital Systems Technology Pty Limited. (It is noted in passing that the evidence indicates that the applicant also uses the business name Datastar Computers. See annexure A to Mr Wilson's affidavit of 27 September 1996 and annexure E to

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  the affidavit of Youfa Chen. See also exhibit R2.) No serial numbers appear on the document purporting to be a Datastar Computers invoice numbered 955692. Further, annexure K contains no `attachment' listing the computer units said to have been the subject of that invoice. There is no indication as to how, in the absence of such information, annexures I and L were completed.
• (b) The following computer units said to have been the subject of Datastar Computers invoice 955692 (see both annexures I and L) are also shown on the document headed `Serial Numbers Details For Invoice 410014' which forms part of annexure K to Mr Wilson's affidavit of 9 October 1996:
  • 18161
  • 18165
  • 18178
  • 18180
  • 18899
  • 18955
  • 19024
• (c) Annexure I indicates that 21 of the computer units which were listed on Exhibit A1 were allegedly the subject of an invoice numbered 410047. No copy of an invoice bearing that number appears in annexure K and annexure L contains no mention of such an invoice. 19 of these 21 units are shown on annexure L as having been the subject of an invoice numbered 410051 dated 1 August 1996.
• (d) The document purporting to be a Stanton Technology invoice numbered 410052 dated 3 October 1996 - that is, after the commencement of the hearing in this matter - purports to evidence a sale to the applicant of two computer units (nos 19082 and 19141) which were apparently sold by retail on 10 April 1996 and 15 April 1996 respectively. (See annexure L pages 2-3). In annexure I, the units with serial numbers 19082 and 19141 were said to have been the subject of Grand Highway invoices numbered 960022 and 960023 respectively. The serial numbers 19082 and 19141 also appear on annexure A to the affidavit of Lorna June Gill.
• (e) The document headed `Serial Numbers Details For Invoice 410014' which forms part of annexure K to Mr Wilson's affidavit of 9 October 1996 is materially different from annexure A to Ms Gill's affidavit.
• (f) Annexure L indicates that during the period from 23 April 1996 to 30 June 1996, the applicant sold by retail 174 computer units which are said to have been purchased from New Link Computers. These account for over half of the sales which are the subject of the present assessment. In every case the retail sale occurred prior to the earliest date shown on any of the New Link Computers documents contained in annexure K (See the document purporting to be invoice number 96DT01 dated 1 July 1996). There is no evidence as to why this should be the case nor indeed any evidence at all as to the basis upon which the applicant dealt with New Link Computers.''

In the light of the foregoing, it is readily understandable that the Commissioner might have no confidence in the copy invoices. He may ultimately be proved to be wrong, but his failure to be persuaded by the copy invoices to accept that the computers had passed through a taxing point by being the subject of wholesale sales to GEI does not raise a triable issue of arbitrariness, bad faith or ulterior purpose.

In this respect, a truly remarkable feature of the case is that no officer of GEI has sworn that GEI purchased the computers under wholesale sales to it. Nor is there any evidence from a representative of any of the alleged wholesale sellers. The point is that since the burden of establishing even a triable issue of arbitrariness, bad faith or ulterior purpose is not an easy one to discharge, one might reasonably expect evidence from at least an officer of GEI dealing, in some detail, with its alleged purchases and with the evidence of them which it had placed before the Commissioner prior to his issue of the assessment.

I do not find it necessary to consider two other matters which I mention merely for the sake of completeness. The first is the proposition that on the questions of arbitrariness, bad faith and ulterior purpose, material of which GEI has made the Commissioner aware after the making of the

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assessment is irrelevant. The second is the positions of third parties to which the Commissioner's directions under s 74 were addressed and who were not joined as parties.

In relation to the decision to issue the s 74 notices, GEI submits that the Commissioner was under an obligation to give it an opportunity to be heard before taking such a decision. In my view, GEI has not made out an arguable case that such an obligation existed.

For the purpose of considering this contention, it must be assumed that there is a sales tax debt arising from the assessment. As noted earlier, s 69 provides that unpaid tax may be recovered as a debt in any court of competent jurisdiction. The remedy given to the Commissioner by s 74 is additional and special. As noted earlier, the pendency of an application for review or of an appeal does not affect recoverability.

Often, perhaps usually, it would put at risk the effectiveness of the remedy afforded by s 74 if a taxpayer knew in advance of the Commissioner's intention to give a direction under the section, since the taxpayer would be enabled to cause the third party to pay to it or to its nominee the amount in question which could then be dissipated. This consideration provides some indication that in the absence of special factual circumstances distinguishing a particular case, a taxpayer does not have a reasonable expectation of being afforded an opportunity to be heard before the Commissioner gives a direction under s 74. The various authorities relied on by GEI are in my view, all distinguishable. They are
Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd (1994) 127 ALR 699 (FCA/ FC);
FC of T v Biga Nominees Pty Ltd 88 ATC 4270; [1988] VR 1006 (FC);
Choice Investments Ltd v Jeromnimon; Midland Bank Ltd [1981] 1 QB 149 (CA).

Nor do I think that the particular facts of the present case as revealed by the evidence arguably give rise to such a duty. The dicta of Burchett J in
Edelsten v Wilcox 88 ATC 4484; (1988) 19 ATR 1370 are distinguishable. The Commissioner led Dr Edelsten to believe that he (the Commissioner) accepted that it would not be appropriate for him to take the whole of the health insurance payments. In the present case, GEI was given a fortnight's notice by the Commissioner on 9 August, yet did not keep the Commissioner informed of its position.

In the result, I do not think that an arguable case has been made out for the granting of final relief. This conclusion does not, of course, signify that a case for the granting of final relief may not be established on a final hearing when all the evidence is in.

The foregoing conclusion relieves me of the necessity of considering the balance of convenience. But against the possibility that it should be thought that the balance of convenience clearly favours the granting of interlocutory relief, I think it appropriate to say that in my view it does not clearly do so for the following reasons. There is no evidence of the solvency of GEI in support of its undertaking as to damages. So far as I know, the monies ``attached'' by the s 74 directions would cease to be available to satisfy the indebtedness to the Commissioner if GEI should fail. The ``evidence'' of loss and damage caused to GEI by the s 74 notices is not convincing. No officer of GEI has filed an affidavit attempting to prove such loss or damage. No doubt the issue of the notices under s 74 has caused embarrassment to GEI but that is not the same thing as financial loss. No business records of GEI have been tendered for the purpose of proving the suffering of loss. The evidence shows that as at 1 October 1996 ``Datastar Computers'' was still advertising in the newspaper.

Conclusion

The application for interlocutory relief is refused. The costs of that application are reserved. Directions will need to be made for the further conduct of the proceeding.

THE COURT ORDERS:

1. THAT the application, in so far as it seeks interlocutory relief, be dismissed.

2. THAT the costs of the application for interlocutory relief be reserved.

3. THAT the application be stood over to 9.30 am on 25 October 1996 for the making of directions providing for the future course of the proceeding.