Submitting at the hearing of Petronas’ judicial review application against the state sales tax in the High Court here, Fong said Article 95B(3) did not restrict or limit the range of goods that may be subject to state sales tax.
“It is not for the judges who are not legislators to make the law or rewrite the constitutional provision,” he said.
Yesterday, Petronas’ lawyer Malik Imtiaz Sarwar had said the state’s power to impose sales tax over its petroleum products was “narrow” and “confined by certain restrictions in the constitution”.
However, Fong argued that it would have been stated in Article 95B(3) if the state sales tax could only be imposed on matters in the state list.
“Any restrictions or conditions for imposition of the state sales tax must be only those spelt out by Article 95B(3), which must also be given a purposive interpretation in recognition that this article was incorporated in the Federal Constitution as one of the special constitutional arrangements agreed upon before the formation of Malaysia,” he said.
In fact, Fong said, Article 95B(3) authorised the state legislature to pass laws to impose state sales tax.
“Article 95B(3) was incorporated into the constitution by the Malaysia Agreement 1963 as special constitutional arrangements to provide for adequate revenues for Sabah and Sarawak,” he said.
Therefore, he said, Petronas could not dispute the validity of the notices of assessment issued by the comptroller to the national oil company at the request of its group chief financial officer.
“Petronas is estopped from denying that the notices were validly issued and the amount computed was done by the comptroller based on data of the export volumes of petroleum projects recorded by Bintulu Port and Miri Port.
“The comptroller acted legally and an argument would be illogical as it would not be possible to yield additional revenue needed for Sabah and Sarawak as envisaged by the Cobbold Commission,” he said.
Malik had submitted yesterday the state’s power to impose sales tax over Petronas’ petroleum products was “narrow” and “confined by certain restrictions in the constitution”.
“Our argument is that it should be narrowed but the state government said the state sales tax can be imposed on anything that it considers to be appropriate,” he said.
Malik also said Sarawak’s power to impose state sales tax was only applicable to matters that are in the state list. He said petroleum was under the federal list.
However, Fong argued that although petroleum was in the federal list, the law was about the state sales tax.
“The power to pass laws on the state sales tax by the state legislature was deemed to be a power in the state list and not the federal list.
“Even though Petronas is an important organisation and enjoys special status, it must obey the law, especially the Petroleum Development Act (PDA) 1974.
“Reading sections 2,6 and 8 of the PDA 1974, Petronas must comply with state laws like the Oil Mining Ordinance 1958 and tax laws like the State Sales Tax Ordinance 1998,” he said.
High Court judge Azhahari Kamal Ramli will make his decision on March 13.
On Jan 1 last year, Sarawak had imposed a 5% sales tax on Petronas’ petroleum products under its Sales Tax Ordinance 1998.
However, Petronas had failed to pay the tax and penalties amounting to RM1.3 billion, resulting in the Sarawak government taking action against the national oil company.