Comptroller of Customs loses case as importer appeals hefty tax

GAVE RULING: Tax Appeal Board chairman Anthony Gafoor. FILE PHOTO -

A LOCAL importer has won a major tax dispute against the Comptroller of Customs and Excise after the Tax Appeal Board ruled that the customs authority wrongfully reclassified a shipment of paint ingredients which led to a hefty tax bill.

Automotive and Industrial Supplies Ltd challenged the reclassification of its imported product, Auto Resurfacing Components, which are used to make paint but are not deemed as paint themselves. Customs had changed the classification code, resulting in additional duties and taxes of $57,475.42.

The company argued that the product should be categorised as “other pigments dispersed in colourant,” which carries no extra duty. Customs classified it instead as “automotive paint,” which has a 15 per cent tax.

In a ruling that sets an important precedent for importers and customs officials, and offering clarity on tariff classification for automotive industry goods, the board agreed with the company.

In a 76-page ruling delivered May 14, chairman Anthony Gafoor stated that Customs failed to provide any real evidence or documents justifying the reclassification. He said the decision appeared to rely only on officer impressions, informal Google searches, and undocumented assumptions.

"The exercise of statutory power must rest on disclosed, rationally evaluated material," the ruling said. “The court has no basis to find that the assessment was correctly made.”

The decision was based on strong evidence from the importer, including testimony from company managing director Dr Lakhan Ramgoolam and sales manager Scarlett Tung of the Hong Kong-based supplier.

A letter from the manufacturer confirmed the product was not a finished paint, but a tint used in paint manufacturing. The Board ordered the Comptroller to refund the full tax amount and on July 28, the board further ordered the Comptroller to pay the company’s legal costs of $23,000.

In deciding the case, the Board noted, “It is a foundational principle of administrative justice and of tax adjudication under the provisions of the Customs Act, Chap. 78:01, that where a customs authority issues an assessment, it must be able, when challenged, to identify and disclose the actual information or material upon which that assessment was based.

“The authority to reassess and to alter an established tariff classification is a coercive power, and the law requires that such decisions be anchored in objective, verifiable material, not mere suspicion,visual inference, or procedural formalism.”

The Court added, “The respondent's case, in our view, rested on informal impressions,

procedural reference, and undocumented assumptions, none of which meet the legal requirement of establishing the actual material upon which the decision was based.

“This failure is not a mere procedural irregularity; it renders the respondent's decision administratively defective and legally unsustainable. The exercise of statutory power must rest on disclosed, rationally evaluated material. In its absence, the Court has no basis to find that the assessment was correctly made.

“In civil proceedings, the burden on the Appellant is not to establish its case beyond reasonable doubt, but to satisfy the court that its position is more probable than not.

“That burden is evidential, not speculative. It requires the appellant to adduce credible, relevant, and coherent material capable of displacing the legal presumption in favour of the assessment. On the totality of the evidence, and having regard to the respondent's failure to produce or identify any substantiating material, the court is satisfied that the appellant has met this burden.

“This is not a case in which the Tax Appeal Board is called upon to weigh competing scientific opinions or to exercise a discretionary choice between plausible classification pathways.

“It is a case in which the respondent failed to demonstrate the material upon which it acted, and the appellant succeeded in producing clear, uncontested, and logically consistent evidence that supports a more precise and lawful tariff classification.

“The court,therefore, finds that the assessment issued by the respondent was incorrect in both law and fact, and that the product imported is properly classifiable under Tariff Heading 3212.90.90. The assessment is accordingly set aside in its entirety.”

Also presiding on the panel were members Cheryl Phillip and Roland N. Hosein. Attorney Chanka RL Persadsingh of Dipnarine Rampersad & Co. represented the company. Attorney Sheldon Prescott appeared for the Comptroller.