Stay Of Proceedings Granted In Customs’ Dispute

June 16, 2020


On 16 June 2020, the High Court allowed an application for stay of proceedings filed by a taxpayer pending the full and final disposal of the taxpayer’s appeal to the Court of Appeal.


The taxpayer was successfully represented by partner, S. Saravana Kumar, together with associate, Ng Kar Ngai, from the firm’s Tax, SST & Customs Practice.


Brief Facts

The Director-General of Customs (DGC) had issued bills of demand for import duty and sales tax amounting to approximately RM11 million against the taxpayer. When the discussions with the DGC failed, the taxpayer appealed to the Minister of Finance (Minister) for the remission of the disputed import duty and sales tax. However, the Minister rejected the taxpayer’s application for remission. Being aggrieved by the Minister’s decision, the taxpayer filed an application for judicial review at the High Court.


The High Court granted leave to the taxpayer to commence judicial review proceedings and also a stay of proceedings against the payment of the disputed sum. However, at the substantive stage, the High Court ruled in favour of the Minister. The taxpayer then applied for a stay of proceedings pending its appeal to the Court of Appeal.


Taxpayer’s Submission

The taxpayer submitted that the High Court has the jurisdiction to grant a stay even in a tax matter, and even after the dismissal of the judicial review application. The purpose of a stay is to preserve the integrity of the taxpayer’s appeal to the Court of Appeal and for the status quo presently prevailing to be preserved until the correctness of the High Court’s decision has been tested at the next level.


The taxpayer also submitted that the exercise of the High Court’s discretion to grant a stay in the present matter would be well within the perimeter set by the judicial principles as various special circumstances exist. Among others, the taxpayer’s appeal to the Court of Appeal would be rendered nugatory as the imposition of the large amount of import duty and sales tax would result in irreparable damage and irremediable injury to the taxpayer. This will result in a financial crisis, cash flow problems and operational disruptions to the taxpayer that cannot be easily remedied nor reversed.


DGC and Minister’s Submissions

The DGC and the Minister submitted that there are no special circumstances in the present matter as the taxpayer’s appeal to the Court of Appeal would not be rendered nugatory if a stay is not granted. They took the view that the amount of import duty and sales tax charged are quantifiable and therefore, recoverable in the event the taxpayer’s appeal is allowed by the Court of Appeal.


High Court’s Decision

The High Court agreed with the submission by the taxpayer and granted a stay of proceedings pending the disposal of the taxpayer’s appeal to the Court of Appeal.


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