The Comptroller of Goods and Services Tax v Ng Keng Cheong (Trading as Cheong Seng Transport & Trading Company) v Tact Chemie S.E.A Pte Ltd

• Jurisdiction: Singapore
• Judge: Loo Ngan Chor
• Judgment Date: 10 July 2014
• Neutral Citation: [2014] SGDC 259
• Court: District Court (Singapore)
• Docket Number: District Court Suit No. 3476 of 2012, District Court Appeal No. 30 of 2014
• Year: 2014
• Published date: 30 July 2014
• Hearing Date: 06 May 2014,29 January 2014,10 July 2014,28 May 2014,26 December 2013
• Defendant Counsel: Mr Chow Weng Weng (M/s Chow Ng Partnership),Mr Lee Ee Yang and Ms Yang Sue Jen(M/s Characterist LLC)
• Subject Matter: GST on purchase price of property,whether recoverable post-completion,merger,waiver,estoppel by convention
• Citation: [2014] SGDC 259

District Judge Loo Ngan Chor : Introduction:

The trial before me was a third party action between the defendant and the third party. The Comptroller of Goods and Services Tax as plaintiff had obtained judgment in default of defence against the defendant for a sum of $148,412.94 for unpaid goods and services taxes (“GST”) with penalties. Of the said sum, $139,075.65 was the amount in GST and penalties which concerned the third party action as stated by the defendant’s statement of claim against the third party.¹

I gave judgment for the defendant as claimed.² I did not order interest as none was pleaded.

On a later date, having heard submissions on costs, I fixed the amount of costs payable by the third party to the defendant at $17,000 including disbursements.³

The third party has appealed my decision. I now set out my reasons.

The defendant, Ng Keng Cheong, testified for himself and Mr Tan Gim Loon (“Tan”), a director of the third party, testified for the latter. A representative of the Comptroller of GST also provided some oral testimony.

Background facts:

The defendant and one Mr Tay Keng Seng (“Tay”), the defendant’s former partner in business, had leased the property at 85 Second Lok Yang Road (“the property”) from the Jurong Town Corporation (“JTC”). The lease of the property was in their individual names and held by them as tenants in common in equal shares.⁴ The property had been used for their partnership business styled Cheong Seng Transport & Trading Co (“Cheong Seng”). Cheong Seng was a GST-registered firm.

The defendant and Tay granted the third party an option to purchase the property for $1,375,000.⁵ The option was dated 30th January 2008. The sale and purchase of the property was completed on 18th July 2008. The defendant’s lawyer’s completion account did not mention anything about GST for the sale and purchase.⁶ On the basis of the completion account of the defendant’s lawyers, the purchase consideration was thus paid by the third party but not the GST.⁷

Tay withdrew from the partnership on 28th July 2008, after completion of the property sale. The defendant carried on with the business in the same name as before, Cheong Seng.⁸

Some documents pertinent to the sale:

A document headed “Sale and Purchase of 85 Second Loyang, Singapore”, which augured the option, was dated 21st January 2008.⁹ This document referred to the third party as buyer and Cheong Seng as the seller. It went on to say in the second paragraph that “The sale price is exclusive of GST which shall be paid by the Buyers on completion of the sale and purchase.” This document was signed by Tan for the third party with the defendant and Tay signing for the Cheong Seng.

A number of documents passing between the lawyers acting for parties in the sale and purchase contained references to the assignor of the lease as being Cheong Seng. One was the JTC’s letter dated 10th March 2008 to Cheong Seng.¹⁰ In a letter dated 27th March 2008 from the third party’s lawyer to JTC, the heading of the letter clearly referred to Cheong Seng as being the assignor and the opening paragraph referred to the third party’s purchase of the property from Cheong Seng.¹¹ On the other hand, in an email exchange between the third party’s lawyer and JTC with respect to JTC’s letter of 10th March 2008, the lawyer took the position that, since the lease was in the names of the two individuals rather than their business name, they would use their individual names as vendors in the third party’s documents, if JTC had no objection. JTC’s reply email dated 3rd April 2008 was that they had “no issue with it.”¹² In the defendant’s lawyer’s letter dated 18th July 2008 notifying the Chief Assessor of the completion, the defendant and Tay were referred to as being the vendors of the property to the third party.

By a letter dated 13th March 2009, the Comptroller of GST wrote to Cheong Seng (by then a sole proprietorship of the defendant) concerning the property sale. Among other things, the Comptroller was interested to know “the usage of the property before the sale…” and “whether [Cheong Seng] ha[d] accounted the GST charged as output tax…”¹³ The communications from the defendant or Cheong Seng with GST after this were not in evidence.

The Comptroller’s notice of assessment dated 4th August 2010 for the period 1st July 2008 to 30th September 2008 assessed GST on the sale of the property at $89,953.27. ¹⁴ This notice was forwarded to the third party with the defendant’s lawyer’s letter dated 1st April 2011. ¹⁵According to the defendant in evidence, this amount appeared to have been based on treating the sale consideration of $1,375,000 for the property as having been inclusive of GST, ie, 107% (including 7% for GST). This appeared to be a correct interpretation of the GST demanded by this notice although the intermediate figures stated in the assessment were organised rather differently according to output tax due less input tax claimed as one might expect by reference to the Goods and Service Tax Act (Cap 117A) (“the Act”).

According to the defendant¹⁶, the Comptroller having re-activated the former partnership Cheong Seng’s GST registration reference, he issued a GST invoice dated 26th January 2011 for $96,250 to the third party relying on that GST registration.¹⁷ Unlike the Comptroller’s computation, the GST amount of $96,250 was pegged at 7% of the consideration of $1,375,000 as the base. The tax invoice was sent to the third party by the defendant’s lawyer’s letter dated 28th January 2011.¹⁸

Also in evidence was a three-page computation dated 13th February 2012 from the Comptroller,¹⁹ of the total amounts in GST and late penalties due from the defendant. The starting point of this computation appeared to be the amount of $89,953.27, and the end-point was for March 2011 with an amount of $148,186.17. The defendant explained, as I understood him, that the amount claimed by the Comptroller’s computation and in the main action included the defendant’s other unpaid taxable supplies and that he was claiming the amount of $139,091.33 which he said was “the GST and penalty on the property transaction”.²⁰ The amount that I allowed in the defendant’s favour, ie $139,075.65 (at [1] above), which was slightly different from what the defendant spoke to, was the amount pleaded in the defendant’s statement of claim. I should note that the Comptroller’s certificate annexed to its statement of claim in the main action²¹, which in turn was annexed to the defendant’s third party notice, states for the relevant GST quarter ending September 2008, the amounts of $89,812.27 (for GST), $4373.06 (being 5% penalty pursuant to 60(1)(a) of the Act) and $44,480.01 (being additional 2% penalty pursuant to s60(1)(b) of the Act), which added up to $139,065.34. These three amounts, all being 139-ners, were close but not identical.

In Tan’s affidavit of evidence-in-chief, he referred to what appeared to be two sets of email enquiries by the third party of the Comptroller. One set was in March 2011²² and the other in April 2013.²³ With regard to the first enquiry in March 2011, two emails were disclosed, one from the third party making a general enquiry: “We bought a factory 3 years ago from an individual, now he used his company’s name to bill us 7% gst, may i know, can we pay him this gst 7%? Can we claim back this 7%? Please advise. You may call my mobile at…” In reply, the Comptroller requested for information and a copy of the defendant’s tax invoice. With respect to the second enquiry, the third party’s email was essentially a re-hash of its first-mentioned email except it asked for an appointment to meet with the Comptroller.²⁴ One part of the reply from the Comptroller, in its reply email dated 18th April 2013, may be pointed to: “… It is important to first determine whether this factory is held or used in the course or furtherance of the partnership’s business. Below are some indicators… Therefore, if the factory is used as a business asset for the partnership business of Mr Tay Keng Seng and Mr Ng Keng Cheong, they are required to charge GST on the sale of the property if the partnership is GST registered. Please note that it is a business decision on whether [the third party] wants to pay the GST amount. You may wish to know that in the event that [the third party] chose to pay the GST amount to Cheong Seng Transportation & Trading Company, [the third party] will be allowed to claim the GST on the purchase of the property if all the conditions for the input tax claim are satisfied.”²⁵

Material terms of the parties’ contract:

Some relevant terms of the parties’ option may now be usefully set out: The sale and purchase herein is subject to the conditions of sale known as “The Singapore Law Society’s Conditions of Sale 1999” so far as the same are applicable to a sale by private treaty and are not varied by or inconsistent with the special conditions herein contained. The Purchaser shall pay the GST on or before the completion, if applicable. The Vendor hereby confirms that the Vendor’s solicitors have been appointed as the Vendor’s agents for the collection of the balance of the purchase price and any other moneys due under this Option. The Vendor acknowledges that payment to the Vendor’s solicitors or payment as directed by the Vendor’s solicitors shall constitute a full discharge of the payment obligations of the Purchaser to the Vendor.

Condition 7 of The Singapore Law Society’s Conditions of Sale 1999 provides the respective obligations pertaining to property tax, income tax and GST arising out of the sale and purchase. With respect to GST, Condition 7.3 states: The Purchaser (whether of freehold or leasehold property) shall pay all Goods and Services tax, if any, which may be payable in respect of the sale price of the property under [the Act] on completion or earlier as required by the Comptroller. These...