Sanitation Enterprises Ltd v Commissioner of Sales Tax and Attorney General

• Jurisdiction: Belize
• Judge: Conteh, C.J.
• Judgment Date: 24 September 2010
• Court: Supreme Court (Belize)
• Docket Number: 795 OF 2009
• Date: 24 September 2010

Supreme Court

Conteh, C.J.

795 OF 2009

Sanitation Enterprises Limited

and

Commissioner of Sales Tax and Attorney General

Appearances:

Mr. E. Andrew Marshalleck SC, with Ms. Naima Barrow Badillo, for the applicant.

Ms. Priscilla Banner, Deputy Solicitor General, with Ms. Magali Perdomo for the respondents.

Administrative law - Sales tax — Demand on third party — Garnishee orders — Whether lawful — Certiorari — Legitimate expectation — Natural justice — General Sales Tax Act, s.60 — Proceedings for recovery of tax — Notice to be given to tax defaulters — Hasty recourse to s.84 providing for garnishment of debts — Provisions of General Sales Tax Act not complied with — Demands authorizing Belize City Council to deduct monies due to claimant in sales tax quashed.

Conteh, C.J.

1 In this case the claimant, Sanitation Enterprises Ltd (SEL or just “the claimant” hereafter) is seeking an order from this court quashing the decision of the Commissioner of General Sales Tax dated 26th June 2009 authorising the Belize City Council (BCC or just “the Council” hereafter) to deduct from monies due to SEL the claimant in the amount of $5,736,212.76 in Sales Tax (ST) and $533,711.41 in General Sales Tax (GST). The claimant also seeks an order that the defendants pay over to it all sums collected by the first defendant, the Commissioner of General Sales Tax, pursuant to its demands contained in the letter to the BCC which is sought to be impugned in these proceedings. The claimant therefore seeks an order striking down what in effects are garnishee orders by the first defendant to the Belize City Council in respect of monies the Council owes to the claimant.

2 The backdrop to this case, concerns two contracts for sanitation services relating to the Northside and Southside of Belize City entered into between the claimant and the BCC. The contracts related to the collection and disposal of garbage in the north and south of Belize City. The contracts had been; entered into before 1999 and had pre-dated the introduction of the Sales Tax Act of that year and later the General Sales Tax Act of 2006 which replaced the former. It is the collection and payment of first Sales Tax, and later General Sales Tax on these contracts that have agitated this case.

THE GROUNDS FOR THE APPLICATION

3 The grounds for the instant application by the claimant in relation to the demand notices issued by the Commissioner of General Sales Tax (the first defendant) to the BCC to garnishee funds in its hands for the claimant may be stated as follows:

First, in relation to the demand for Sales Tax:

• i. That prior to May 2006, the first defendant had issued a demand on Third Party to the BCC (the original demand) requiring the BCC to deduct from proceeds due to the claimant sales tax then owing by the claimant amounting to approximately $236,476.80.

• ii. That in pursuance of that original demand and in accordance with the authority thereby conferred the BCC in fact deducted from proceed due to the claimant in respect of payment under the contracts for sanitation services, the total sum of $706,365.39 by the end of December 2006 in full satisfaction of all sales tax plus interest and penalties then due and owing by the claimant.

• iii. That having deducted the said monies from proceeds due to the claimant, the BCC to the knowledge of the first defendant failed to pay over to the first defendant the amounts deducted and that the first defendant, then entered into negotiations and agreement with the BCC for it to pay over the sums deducted to the first defendant.

• iv. That the deduction of sales tax owing from monies due to the claimant under the legal authority of the original demand and the conduct of the first defendant in seeking collections of sales tax from the BCC Gave rise to a legitimate expectation on the part of the claimant that the defendants in particular, the Commissioner of Sales Tax (the first defendant) would enforce collection of outstanding taxes plus whatever interest and penalties accruing thereon as a result of non payment or the failure of the BCC to hand over the sums deducted to the first defendant, from the BCC.

• v. Therefore, the decision to issue a second demand on Third Party for sales tax on the BCC to deduct again from further proceeds due to the claimant, was in manifest breach of the claimant's legitimate expectation that the Commissioner of Sales Tax (the first defendant, would pursue collection of outstanding sales tax together with accrued interest and penalties from the BCC on the basis of the original deductions and is therefore manifestly unlawful.

• vi. Further or in the alternative, the claimant avers that the decision to issue the demands to the BCC to garnishee proceeds due to the claimant was made with an ulterior political motive so as to avoid the political consequences of the execution of a judgment debt in favour of the claimant against the BCC: the decision was made and the demands issued pursuant to a scheme devised by the BCC in response to the execution of a writ of execution against the BCC at the instance of the claimant to enforce the payment of a long outstanding judgment in its favour. The claimant therefore avers that the decision to issue the demand was on this basis as well unlawful.

Secondly, in relation to the demand for General Sales Tax the claimant avers as follows:

• i. That on the application of the BCC, the Ministry of Finance (under whose superintendence the first defendant falls) had on 25 July 2005 approved a waiver of all “sales tax” payable to the BCC in respect of sanitation contracts with the claimant,

• ii. That the first, defendant informed the claimant that the waiver extended to include the new General Sales Tax which came into force in June 2006 and replaced the Sales Tax and that in fact over the years from 2005 through 2009, the first defendant continued to break the waiver as including the GST.

• iii. That the claimant even with the waiver granted to the BCC in July 2005, was however required by the first defendant to continue filing Sales Tax returns showing the amounts received from the Belize City Council under the sanitation contracts; and the first defendant explained that this was required so that the loss occasioned by the waiver could be accounted for. The claimant accordingly continued to file General Sales Tax returns showing its receipts under the contracts just as it had done in relation to the replaced Sales Tax.

• iv. That even though under section 92 of the General Sales Tax, the claimant was entitled to charge the BCC the amount of GST payable on its, contracts with the BCC in addition to the contract price in reliance upon the express position and conduct of the first defendant and to the knowledge of the first defendant, the claimant in fact never charged or collected any GST from the BCC.

• v. That therefore the stated position and conduct of the first defendant gave rise to a legitimate expectation on the part of the claimant that the first defendant would treat and continue to treat all GST payable by the BCC in respect of its sanitation contracts with the claimant as having been duly waived by the Ministry of Finance.

• vi. That the decisions to issue the demand on Third Party in respect of GST was therefore in breach of the claimant's legitimate expectation that all GST would have been treated by the first defendant as having been duly waived by the Ministry of Finance under and by virtue of the general waiver granted by the Ministry on 1st August 2005 and that the decision to issue the Demand was unlawful.

• vii. Further or in the alternative, the claimant avers that the decision to issue the demand requiring deductions for GST from monies in the hands of the BCC for the claimant, was made in breach of natural justice in that the claimant was never given any prior notification that the first defendant was conducting an assessment of the claimant for GST nor was any demand ever made on it to pay any GST and that it was never informed that the first defendant was even considering issuing a Demand for GST and was never given any opportunity to be heard.

• viii. Further and in the alternative, the claimant avers that the decision to issue the Demand was made with an improper political motive, namely, to avoid the political consequences of the execution of a judgment in its favour against the BCC and that the decision was made and the Demand issued pursuant to a scheme concocted at the request of and in concert with the BCC in response to the execution of a writ of execution against the BCC at the request of the claimant and that the decision to issue the Demand was therefore unlawful as well.

A DISTURBING FEATURE OF THE CASE

4 A striking feature of this case I cannot help noting, is that the demand notices to deduct the sums in issue (the Third Party Demand Notices) of 26th June 2009, authorising the deduction of the two sums said to be owed by the claimant for ST and GST respectively, were issued to the BCC authorising it to do so by way of garnishment. This arose because BCC had purchased services from the claimant and had monies in its hands on the claimant's account under the two contracts for sanitation services to the Southside and Northside of Belize City. The claimant later obtained judgment against the BCC for sums owed it by the Council.

5 It is the sale and purchase of these services and the taxes exigible thereon under the relevant applicable statutory regime that is at the heart of this case: the defendant by its demands on the BCC sought to garnishee monies owed to the claimant by the BCC for tax penalties and arrears. The claimant contends that if any tax was owed, the Council had deducted from payment due it and should have paid over to the defendant.

6 Unarguably on any view, the BCC would be an interested party in these proceedings. Consequently, I ordered on 5th...