CASE NO.5 Lembaga Minyak Sawit Malaysia v. Arunamari Plantations Sdn Bhd

[CONSTITUTIONAL LAW-CESS]

Constitutional Law : Legislation – Validity of impugned legislation – Malaysian Palm Oil Board (Cess)(Oil Palm Fruit) Order 2007 – Order made by Minister pursuant to s 35(1) Malaysian Palm Oil Board Act 1998 – Whether s 35 a valid taxing statute empowering Minister to impose cess via order – Whether selection criteria for imposition of cess arbitrary or discriminatory – Whether collected cess used for purposes outside scope of s 33 of Act rendering order invalid – Federal Constitution, arts 896

Statutory Interpretation : Taxing statute - Components of tax law - Whether specifically stated in s 35 Malaysian Palm Oil Board Act 1998 - Whether Malaysian Palm Oil Board (Cess)(Oil Palm Fruit) Order 2007 issued under s 35 covered tax law components - Governing principles - Whether approach taken by Federal Court in Palm Oil Research And Development Board Malaysia & Anor v. Premium Vegetable Oils Sdn Bhd to be adopted

Statutory Interpretation : Construction of statutes - Purposive approach -Section 33 Malaysian Palm Oil Board Act 1998 - Imposition of cess for purposes of subsidising price of cooking oil not within listed purposes under s 33 - Whether statute to be read as a whole - Whether broad objectives of Act to be taken into consideration Trade And Industry: Agriculture - Palm oil cess - Validity of impugned legislation - Malaysian Palm Oil Board (Cess)(Oil Palm Fruit) Order 2007 - Order made by Minister pursuant to s 35(1) Malaysian Palm Oil Board Act 1998 - Whether s 35 a valid taxing statute empowering Minister to impose cess via order - Whether selection criteria for imposition of cess arbitrary or discriminatory - Whether collected cess used for purposes outside scope of s 33 of Act rendering order invalid - Federal Constitution, arts 896

 

RAUS SHARIF PCA:

Introduction

 

[1]  These two appeals concerned the constitutionality of the Malaysian Palm Oil Board (Cess) (Oil Palm Fruit) Order 2007 (2007 Order), made by Minister of Plantation, Industries and Commodities pursuant to s 35(1) of the Malaysian Palm Oil Board Act 1998.

 

[2]  The High Court struck down the 2007 Order as invalid. The Court of Appeal upheld the judgment of the High Court. The 2007 Order was declared invalid by the High Court on the ground as mentioned below in this judgment (see para 14) that the cess collected was used for purposes outside the scope of s 33, thus rendering the 2007 Order void and illegal.

 

[3]   The appellants (defendants) in these appeals are the Malaysian Palm Oil Board, the 1st appellant ("the Board"), the Minister of Plantation, Industries and Commodities, the 2nd appellant ("the Minister") and the Government of Malaysia, the 3rd appellant ("the Government").

 

[4]  The respondents are the oil palm owners who were subjected to the 2007 Order. They were the plaintiffs in the High Court and had instituted proceedings against the defendants to have the 2007 Order declared null and void, and an order for the refund of the cess collected from them.

 

[5]   Leave to appeal was granted by this court to the appellants on two questions of law, namely:

 

"(a) Whether s 35 of the Malaysian Palm Oil Board Act 1998 which empowers the 2nd appellant to impose cess via subsidiary legislation is ultra viresart 96 of the Federal Constitution; and

 

(b)    Whether the imposition of cess on a class of parties/individual under s 35 of Malaysian Palm Oil Board Act 1998 and the exclusion of certain parties/individual from the same class is a form of discrimination and in breach of art 8 of the Federal Constitution."

 

[62]  We are of the view that in construing a taxing statute, the function of the court is to discover the true intention of the Parliament. In that process, the court is under a duty to adopt an approach that produces neither injustice nor absurdity. In other words an approach that promotes the purpose or object underlying the particular statute albeit that such purpose or object is not expressly set out therein. This sentiment was echoed by this court in Premium's case. Steve LK Shim CJ (Sabah & Sarawak) had this to say:

 

"Undoubtedly, in the United Kingdom, there is currently a more pronounced shift from the strict literal interpretation of taxing statute. The Ramsay Principle of statutory interpretation seems to have entrenched itself. In Malaysia, that Principle should apply and it must be applied in consonance with s 17A of the Interpretation Acts 1948/1967... It is pertinent to note that s 17A was a recent amendment under the Interpretation (Amendment) Act 1997 (Act A996) and became effective on 25 July 1997. This would be after the National Land Finance Co-Operative (supra). In my view, the law is now clear beyond doubt. Section 17A above enjoins the purposive approach to statutory interpretation. This applies to all statutes including taxing statutes."

 

[63]  In his concurring judgment His Lordship Haidar FCJ (as he then was) also took a similar view in stating that:

 

"I would, in addition, like to expressly state that I agree with the reasons advanced by my learned brother, Chief Judge (Sabah and Sarawak) in answering the questions posed for our consideration. It is clear beyond doubt that in view of s 17A of the Interpretation Acts 1948 and 1967 there is now a statutory recognition for the courts to take a purposive approach in the interpretation of statutes including taxing statutes."

 

[64]  We are also of the similar view that in considering the proper statutory construction of a taxing statute, one which would promote the purpose of the Act in question must be adopted. In our judgment the Minister's power to impose cess as was done in this case for the purpose of subsidising the price of cooking oil must be viewed against the background, scheme and circumstances under which the 2007 Order was promulgated. In this regard we find that the Act has given the Minister enough guidance in the use of his discretion to decide whether cess can be collected to subsidise the price of cooking oil.

 

[65]  To illustrate the above point, we wish to highlight here that under the Act, the Minister is empowered to appoint members of the Board; the power to give general directions where the Board shall be responsible to the Minister as stipulated under s 15(1) and (2) of the Act; to determine the contribution to such organisations related to the oil palm industry (s 33(d)); to approve making contributions to any organisation whether within or outside Malaysia for the purpose of promoting the marketing of oil palm products (s 33(i)); to make order for the imposition, variation or cancellation of cess on oil palm products after consultation with the Minister of Finance (s 35(1) of the Act); to approve borrowing money and investment by the Board (ss 38 and 39); to exempt any person or class of persons or any oil palm product from all or any of the provisions of the Act and may impose any terms and conditions as he thinks fit on any exemption (s 77(1) and (2)); and to make regulations for all or any of the purposes listed in the Act as stated in s 78(1)(a)-(n) of the Act.

 

[66]  The Board's objectives are based on the nature of the primary commodity, on which the Board is responsible. This is stipulated under s 3(2) of the Act which provides:

 

"(2) The objectives of the Board are:

(a) To promote and develop the oil palm industry of Malaysia; and

(b) To develop national objectives, policies and priorities for the orderly development and administration for the oil palm industry of Malaysia."

[67] The functions and powers of the Board are stated under s 4(a)-(q) and s 5(a)-(j) as follows:

 

Functions of Board

4. The functions of the Board shall be: a. to implement policies and developmental programmes to ensure the viability of the oil palm industry of Malaysia; b. to conduct and promote research and development activities relating to the planting, production, harvesting, extraction, processing, storage, transportation, use, consumption and marketing of oil palm and oil palm products; c. to plan, coordinate, implement and monitor all research and development activities on oil palm and oil palm products; d. to regulate, register, coordinate and promote all activities relating to the planting, supply, sale, purchase, distribution, movement, storage, surveying, testing, inspecting, brokering, export and import of oil palm products, and the milling of oil palm fruit; e. to develop and commercialise research findings for the benefit of the oil palm industry and to promote the use of the research findings commercially; f.  to provide technical, advisory and consultancy services to the oil palm industry; g. to promote the efficient marketing and handling of oil palm products; h. to develop and maintain markets for oil palm products; i. to promote, control and monitor measures towards attaining a high quality for oil palm products; j. to plan and implement training programmes and human resource development in line with the needs of the oil palm industry; k. to liaise and coordinate with other bodies within or outside Malaysia to further enhance the oil palm industry of Malaysia; l. to conduct research and development on oil seeds and other oils and fats other than palm oil where such research and development are for the enhancement of the oil palm industry m. to  gather information and maintain records of all relevant matters relating to the oil palm industry; n. to be the resource and information centre of the oil palm industry; o. to publish or sponsor the publication of journals, periodicals, booklets and other publications and to collect, collate and disseminate information relating to oil palm, oil palm products and other vegetable and animal oils and fats; p. to conduct research and development in any other area where the results of the research and development are intended to benefit the oil palm industry; and r. to do such other things as it deems fit to enable it to perform its functions effectively or which are incidental to the performance of its functions."   Powers of Board 5. The Board shall have power:  a. to undertake and coordinate activities relating to research and development into the planting, production, harvesting, extraction, processing, storage, transportation, use, consumption and marketing of oil palm and oil palm products including oil palm and oil palm product wastes, and services related there to b. to impose fees or any other charges it deems fit for the use of any facility relating to research, investigation, testing, advisory services or any other service provided by the Board; c. to enter into such negotiations and agreements or arrangements as it deems fit for the discharge of its functions; d. to acquire, hold, dispose of or grant rights in connection with the results of any research conducted by or for the Board or in connection with the results of any research undertaken by any person or organisation; e. to commission any person or body to carry out research or development, or both; f. to award certificates of proficiency in respect of training and accredited programmes; g. to undertake and coordinate such activities as it deems necessary for the purpose of protecting and furthering the interests of the oil palm industry of Malaysia; f. to regulate the oil palm industry, including by the implementation of registration and licensing schemes; h. to prescribe the standards or grades of oil palm and oil palm products; and i. to do such other things as it deems fit to enable it to perform its functions effectively or which are incidental to the performance of its functions.

 

[68]  As can be seen from the above, the Board is a statutory body which not only regulates oil palm industry including its end product, palm oil, as defined, it also functions as the promoter, marketing and distributer of palm oil. A closer scrutiny of s 4 would connote that the Board plays a pivotal role in implementing policies and development. The rationale for imposition of the cess for stabilising the price of cooking oil can be inferred from the broad array of Ministerial powers and powers of the Board as prescribed by the Act which we have discussed above. Thus, we have no hesitation to hold that the 2007 Order issued under s 35 of the Act for the purposes of subsidising the cooking oil is valid. Given the wide scope of powers endowed upon the Minister and the Board, prima facie it can be concluded that the power to impose cess for the purpose subsidising price of cooking oil is found to be inherent in the Act itself.

 

[69]  In this regard we should stress here that s 35 of the Act cannot be read in isolation from the rest of the provisions of the Act to understand the purpose behind the imposition of cess on oil palm product to stabilise the price of cooking oil. This has been elucidated earlier but deserves to be reiterated. As stated earlier one of Board's functions is to regulate and promote all activities relating to, planting, supply, sale, purchase, distribution, movement, storage and also the powers to undertake and coordinate such activities as it deems necessary for the purpose of protecting and furthering the interests of the oil palm industry of Malaysia, following s 4(d) and s 5(g) of the Act as stated above.

 

[70]  Our careful examination in interpreting the whole of the Act finds that the Board is not only to regulate but also to promote all activities in the oil palm industry. Therefore we find that the payment of subsidy to reduce the production costs suffered by the millers and packers as decided in the Board runs in tandem with Parliament's intention to reduce production costs in the upstream activity as well as to continually improve the output on palm oil products. We agree with the submission advanced by the appellants in that when one speaks of the objectives, role and functions of the Board, one cannot view them in the narrow sense but must be viewed in the context of the industry, inclusive of the interest and welfare of the consumer public. Collection of cess for subsidising the price of cooking oil as was done in this case was to alleviate the losses suffered by the millers and packers.

 

[71]  In these circumstances we find that the cess collected under the Cess Order 2007 can be utilised to subsidise the price of cooking oil. We are of the view that the Minister had the authority to stabilise the price of cooking oil resulting from the increase of the price of the Crude Palm Oil through imposition of the cess which was well within the objectives, role and function of the Board as prescribed in the Act.

 

Conclusion

 

[72]  To sum up, our findings based on the issues canvassed and argued before us are as follows:

  1.           section 35(1) of the Actis a valid tax statute which empowers the Minister to impose cess via subsidiary legislation and is not ultra viresart 96 of the Constitution;
  2.          The imposition of cess on a class of parties/individual unders 35 of the Act and the exclusion of certain parties/individual from the same class is not a form of discrimination which is in breach of art 8 of the Constitution; and
  • the collection of cess via 2007 Order for the purposes of subsidising the price of cooking oil was within the listed purposes ofs 33 of the Act, after taking into consideration the broad objectives of the Act, ie for the orderly development and administration of the oil palm industry of Malaysia.

For the aforesaid reasons we allow the appellants' appeals with costs. The orders of the courts below are hereby set aside.

 

Counsel:

 

For the 1st appellant: Zainur Zakaria (Helmi Hamzah, Wan Ahmad Dzaffarn Wan Kamaruddin & Nur Khairunnisa Zainal Abidin with him); M/s Hisham Sobri & Kadir

 

For the 2nd & 3rd appellants: Samsul Bolhassan (Muzila Mohamed Arsad with him) SFC

 

For the respondents: Cyrus V Das (T Sudhar with him); M/s Shook Lin & Bok

 

NOTE:

For full report, please refer to Lembaga Minyak Sawit Malaysia v. Arunamari Plantations Sdn Bhd & Ors And Another Appeal [2015] 5 MLRA 1

 

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