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Court: Sarawak loses Petronas appeal

07 Jan 2020 / 08:29 H.

KUCHING: The Court of Appeal in Putrajaya yesterday dismissed the appeal by the Sarawak government and Comptroller of State Sales Tax against a High Court decision to grant leave for Petronas to apply for judicial review to quash the Notices of Assessment for the company to pay over RM1.3 billion in State Sales Tax (SST).

The court then ordered Petronas’ judicial review to be heard at the High Court on a date to be fixed later.

The sum of RM1.3 billion in unpaid SST and penalties were computed up to June 30, 2019.

On Dec 10 last year, the High Court had granted leave to Petronas to apply for a judicial review to declare certain sections of the Sarawak State Sales Tax Ordinance as ultra vires based on the Federal Constitution.

Separately, the Sarawak government’s civil suit against Petronas for non-payment of SST and penalties will be heard at the High Court here on Jan 14.

However, an officer in the State Legal Department said yesterday that the court will first need to hear an application to have Justice Christopher Chin replaced by another judge, and for Petronas to refer several matters of law to the Federal Court.

The suit filed by the Sarawak government and the SST Comptroller is to determine, among others, whether Section 2(1) of the Petroleum Development Act 1974 (PDA74) is null and void by reason that it contravenes Article 13(2) of the Federal Constitution as being a law which seeks to deprive the second defendant of property, namely petroleum, found on state land within Sarawak, without adequate compensation, and that if the answer to that is in the affirmative, whether any agreement, acts or conduct taken or instrument issued pursuant to Section 2 of PDA74 are void, invalid and/or unconstitutional.

Another question is on whether having regard to the provisions of Section 2 of PDA74, the defendant has to comply with other written laws, including but not limited to the Oil Mining Ordinance 1958 and the Land Code of Sarawak, regulating the exploration, exploitation and mining of petroleum in Sarawak and the use and occupation of land for such purposes.

The other is whether upon proper interpretation of Article 95B(3) of the Federal Constitution, read with Article 74(3) and Article 95B (3), prohibits or disentitles the State Legislature from imposing SST on petroleum products and allows for SST to be imposed on petroleum products where there is already a federal sales tax levied on petroleum products.

Another question is whether Section 28 of the State Sales Tax Ordinance 1998 and the certificate issued is unconstitutional for contravening the guarantees for fair trial access to justice and due process under articles 5 and 8 of the Federal Constitution, or violates the doctrine of separation of power.

These questions have to be decided because Petronas in its defence pleaded that because of the PDA74 and the Vesting Instrument which ‘vested’ ownership of oil and gas in Sarawak territory on Petronas, along with the cash payment of five per cent made to the state since 1976, the company does not have to pay any other taxes, such as SST, to the Sarawak government.

The determination of these questions would decide if the vesting of petroleum under the PDA was constitutional or null and void, and Petronas’ liability to pay SST to the Sarawak government. — Borneo Post

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