Court of Appeal rules against Grand Coastal in $31m VAT case

-overturns decision of Justice Chang

The Grand Coastal Inn will have to pay to the Guyana Revenue Authority (GRA) the more than $31M it owes in value added taxes (VAT) after the Guyana Court of Appeal on Monday ruled that the procedure used by the Revenue Authority to assess its VAT liability was lawful.

In fact, the court noted that it was the process used by the hotel to mount its challenge against the GRA which was unlawful having regard to statutory stipulations which it contravened.

In this regard, the appellate court pronounced that Grand Coastal’s action sought to falsely secure for them the temporary financial respite at the expense of the nation as the case wound its way through the court for over seven years.

The court noted that not only will Grand Coastal now have to pay the full sum of $31,290,473 which it owes in taxes for 20072008, but all consequential interest imposed by the VAT Act.

Having declared GRA’s method of assessing the hotel’s VAT liability to be fair, Justices of Appeal Dawn Gregory, Rishi Persaud and Rafiq Khan discharged the nisi orders which it had previously been granted.

Additionally, the court awarded GRA costs to the tune of $250,000 which has to be borne by the respondents.

Consequent to an audit of Grand Coastal’s VAT affairs for the periods January 2007-December 2008, the GRA said it found that the hotel owed taxes to the tune of $31,290,473.

Advancing, however, that the decision of the Commissioner General of the GRA that it was liable to pay additional VAT for the mentioned periods was ultra vires, Grand Coastal thereafter commenced proceedings in the High Court against the Revenue Authority.

They sought and were granted by former acting Chief Justice Ian Chang, orders nisi which were made absolute against the Commissioner General, in which the latter had to show cause why his decision should not be quashed on grounds that it had been made in excess of the powers conferred on him under the Value Added Tax Act.

They argued that his decision was unreasonable and had been made without or in excess of jurisdiction and in breach of the rules of natural justice.

Grand Coastal had also been granted an order of prohibition against the Commissioner General and agents prohibiting them from demanding or imposing additional VAT for the disputed periods.

From court documents seen by this newspaper, while the hotel had submitted to the GRA selfassessed returns for VAT as required by the Act, the amount computed, which was not disclosed in the court papers, had been disputed by the GRA.

As a result, the Revenue Authority, having conducted its own audit, found the hotel’s additional VAT liability to be $31,290,473.

Grand Coastal argued in the High Court, that the GRA’s VAT assessment was unlawful since it was done by auditors and not the Commissioner General himself, who only merely approved what the auditors had done.

It was against this backdrop they argued in their notice of motion filed on November 15, 2010, that the assessment which was raised by the auditors, was unlawful and ultra vires the VAT Act.

In response, however, the Commissioner General said that the tax officers (auditors) did not raise any assessment, but rather did the additional assessment from the information available, noting that the auditors had not acted outside of their powers to so do in accordance with the Act.

According to GRA, the information provided by Grand Coastal “failed to dislodge the computations made by the tax officers,” and based on the information made available, an estimate of the taxes payable by the hotel was made.

Citing section 33 (1) of the VAT Act 2005, GRA argued that the auditors are authorized to make assessments for “additional taxes,” and in so doing, may consider and utilize the information available consequent upon the examination of the taxpayer’s records.

In his decision, Justice Chang had declared the assessment to be null, void and of no legal effect on the ground that it had been made without legal authority and in contravention of the VAT Act.

He declared that the assessment should have been made by the Commissioner General or an officer engaged in making an assessment under his direction, control or supervision.

As a result, he made the rules nisi of certiorari and prohibition absolute.

Alternative remedies

As the Court of Appeal found, however, Justice Chang did not consider the submissions on alternative remedies made on behalf of the GRA, and as such made no findings thereon.

Finding that two letter notices containing the VAT assessment sent to Grand Coastal emanated from the Audit and Verification section of the GRA, and spoke to an audit investigation, which he said must be distinguished from an assessment, Justice Chang conduced to the finding that