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Customs Is Not Allowed To Take Advantage of Its Own Wrong Doing

Recently, the High Court in Broadway Metal Sdn Bhd v Ketua Pengarah Kastam Dan Eksais [2022] MLJU 2005 had allowed the Taxpayer’s judicial review application and held, amongst others, the Customs is not allowed to take advantage of its own doing.

The brief facts of the case are as follows:

  1. a. The Taxpayer made an application for exceptional claims for input tax on GST paid on the purchase of raw material and capital goods (“Application”) on 10.5.2018.
  2. b. The Taxpayer had met all the conditions under the provisions on exceptional claims.
  3. c. Subsequently, the Taxpayer followed up on the Application via emails on 6.7.2018, 12.7.2018 and 18.7.2018.
  4. d. On 18.7.2018, the Customs’ officer informed the Taxpayer that the Application was under review.
  5. e. On 1.9.2018, the GST Act 2016 was repealed.
  6. f. On 24.1.2019, the Customs’ officer requested for further documents and the Taxpayer had promptly furnished the same.
  7. g. Subsequently, the Taxpayer made a few follow-ups on 26.8.2019, 4.2.2020 and 3.3.2020 respectively.
  8. h. Finally, on 4.3.2020, the Customs’ officer informed the Taxpayer that the Application was pending Head of Division’s approval.
  9. i. On 2.6.2020, the Taxpayer received the Customs’ letter dated 14.2.2020 approving only part of the exceptional claim (“Letter”).
  10. j. As the Letter provides no explanation on how Customs arrived at the partial approval, the Taxpayer sought an explanation from Customs.
  11. k. Customs explained although the Applicant met all the conditions but only part approval can be given because:
    1. i. Customs’ Formula (“Formula”) for the Application is not applicable to raw material; and
    2. ii. The Formula restricts the amount of GST claimable on capital goods up to the abolishment of GST on 1.9.2018.
  12. l. Being unsatisfied with Customs’ explanation, the Taxpayer filed a judicial review application to challenge the Customs’ decision in the form of Letter.

The High Court agreed with the Taxpayer that the Customs’ decision in the form of Letter is tainted with error of law, irrationality and/or unreasonable because the Customs had acted ultra vires by imposing its own Formula which was not prescribed by law in assessing the Application.

Although there is a Federal Court’s decision that in favour of the Customs’ imposition of the Formula, but the High Court is not bound by such decision under the doctrine of stare decisis as there is no written judgement given by the Federal Court. Without the written judgement, the ratio decidendi cannot be unequivocally ascertained. Any attempt to reply on such decision is just based on speculation. Thus, the Court of Appeal’s decision (with written judgement provided) which is in favour of the Taxpayer is still good authority to be followed (see Petronas Penapisan (Terengganu) Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri (2014) MSTC 30-078 and Lee Koy Eng v Pemungut Duti Setem & Another Appeal [2020] 7 AMR 296).

It is also worth noting that the High Court reiterated the well-established legal principle that Customs as a public decision-making authority is required to provide reasons for its decision at the time the decision is conveyed. Any reason given subsequently is clearly an afterthought on part of the Customs (see Uniqlo (Malaysia) Sdn Bhd v Ketua Pengarah Kastam dan Eksais [2020] AMR 109).

Notably, the High Court placed a strong emphasis on the inordinate long time taken by the Customs to process the Application. Looking at year 2018 alone, the Customs had at least seven months to process the Application, yet the Application was only approved in February 2020. The delay on part of the Customs had directly cause loss and damages to the Taxpayer to claim the entire amount of the exceptional claim. Further, the Customs is unjustly enriched by its own wrongdoing (i.e. the inordinate delay) and the Formula (imposed by Customs arbitrarily). Thus, the Customs is not allowed to take advantage of its own wrong doings.



This case demonstrates the importance of following up with Customs and keeping record keeping of the same. Taxpayers are advised to monitor closely of all their applications submitted to the Customs and keep proper record of all follow-ups. Taxpayers should refrain from informal follow as proper record keeping could assist the taxpayers by evidencing that there was no delay on part of the taxpayers.

Taxpayers are also advised to always check whether the Customs’ decision is in accordance with the legislation and whether any reasons were given. Taxpayers are encouraged not to blindly accept the Customs’ decision. Always seek legal consultation immediately should any of the abovementioned irregularities are observed.

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This article is intended to be informative and not intended to be nor should be relied upon as a substitute for legal or any other professional advice.

About the Author

Desmond Liew Zhi Hong
Partner, Tax
Halim Hong & Quek

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