Corporate Criminal Liability on Sales and Service Tax ACT 2018

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Corporate Criminal Liability on Sales and Service Tax ACT 2018.

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THANGANATCHYA A/P SATIYA P111062 Universiti Kebangsaan Malaysia

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Corporate Criminal Liability could be imposed upon any corporation for any criminal act done by its employee or agent. According to Section 78 of the Service Tax Act 2018 and Section 93 of the Sales Tax Act 2018, the director or a person who was in any manner responsible for the management may be charged severally or jointly in the same proceedings with the company..

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This “deeming clause” is that where the offence is committed by a body corporate then it is deemed that every director is guilty of the offence and may be charged severally or jointly in the same proceedings with the body corporate or firm. Although this is a “deeming clause”, the law provides that it is rebuttable and this is seen from the phrase “unless he proves that the offence was committed without his consent or connivance and that he exercised all due diligence to prevent the commission of the offence..

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OBJECTIVE:. To critically analyse whether to select the personnel or bodies corporate as the targets of the prosecution, or which among them are the more appropriate party to stand as the accused for enforcement purposes.? To examine when the burden of proof will be shifted to the defendant? To determine what is the burden or standard of proof?.

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METHODOLOGY. This research is a comparative legal research using the qualitative methodology. Qualitative methodology is exploratory by nature. It is done by collecting textual data and analyzing it. Therefore for the purpose of this research the SST will be compared with case law and acts with similar provisions and also with Singapore’s GST act...

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Solomon v Solomon & Co [1927] AC 22, conceptually allows a company to be liable criminally for offences committed by the company. The principle established by this watershed case namely that a company is a legal entity separate from its corporators , and that as a matter of law these parties are divided by a ‘corporate veil’ continues to represent the common law position in many jurisdictions . The offences committed by a company will not be possible without the wrong doing by its directors. Hence, in tax evasion offences the actual culprits are the directors. But the fine imposed on the company will also penalise bona fide shareholders..

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The real culprits should be punished and this can only be done when the directors or the person responsible to the management punished severally. Therefore in some cases, both the personnel and the body corporate may be held liable jointly or severally as under Section 78 of the Service Tax Act 2018 and Section 93 of the Sales Tax Act 2018 ..

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Next question is when does this burden of proof will shift to the accused? Although generally in criminal cases, the prosecution bears the burden of proof but there are exceptions to this rule. The onus of proof could be shifted on the accused when only the accused has the knowledge and could provide that particular evidence. But before the burden can be shifted on the defendant the prosecution must prove that the offence against the company has been established prima facie. Then only the directors will be deemed liable..

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According to the case of Extreme Design & Associates Sdn Bhd v Ministry of Domestic Trade and Consumer Affairs ( Kluang Branch) [2021] MLJU 163 the real accused or mastermind of an offence involving company is always the directors or the person responsible for its management . But it is the duty of the prosecution to prove that the offence against the company has been established prima facie ..

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What is the standard of proof for the defendant once the burden is shifted to him to rebut the presumption? Once established that the burden of proof should be shifted to the accused the next question is does the defendant needs to rebut the presumption on a balance of probabilities or merely has to raise a reasonable doubt. As to the case of PP v Yuvaraj [1969] 2 MLJ 89 the burden on the defendant in rebutting a statutory presumption is on balance of probabilities..

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Comparison of sst with singapore’s gst. In the case of Loon Wai Yang v PP [2020] SGHC 34 (“ the Appellant”) was convicted by a Magistrate’s Court on five charges for offences under s 62(1)( b ) read with s 74(1) of the Goods and Services Tax Act (“ GSTA” or “the Act”) relating to false goods and services tax (“GST”) returns submitted by a company known as Web Weaver Fusion Pte Ltd (“the Company”) between May 2006 and April 2008. The District Judge (“DJ”) sentenced the Appellant to a total of eight weeks’ imprisonment. was also ordered to pay a penalty ( ie , three times the amount of GST overstated). The Appellant appealed against both his conviction and sentence. The court found that the Appellant had proven on a balance of probabilities that he had not consented to or connived in the commission of the offences by the Company. There was no evidence that the Appellant was aware of the false entries in the GST F5 returns..

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CONCLUSION. . Therefore, in tax related offences it is important that the offence against the company been proved prima facie so that the presumption could be invoked against the directors to rebut it. It is important the real culprits be punished for the offence committed.