The Court of Appeal, in its inferior jurisdiction, yesterday upheld an appeal filed by Alfred Caruana and ruled that a demand for payment made by the Inland Revenue Department was time-barred.
Mr Caruana had filed an application before the Magistrates' Court against the Commissioner of Inland Revenue (CIR). He told the court that in April 2005, the CIR had called upon him to pay the sum of Lm1,885, allegedly due by way of income tax for the years 1987 to 1990. But Mr Caruana had objected to this saying that he had always paid tax.
He added that the request for payment was barred by lapse of time. The Magistrates' Court had dismissed Mr Caruana's application and deemed the CIR's claim validly filed.
Mr Caruana appealed to the Court of Appeal presided over by Mr Justice Philip Sciberras.
Mr Justice Sciberras declared that the issue before the appellate court was fundamentally important for it dealt with the power of the government to pass laws with retroactive effect. Mr Caruana had, in effect, asked the Court of Appeal to find that the CIR was not justified in making claims for payment of tax after the legal time limit for so doing had elapsed.
On his part, the CIR submitted that he had acted in accordance with the law as amended.
Mr Justice Sciberras declared that the simple fact that a law was retroactive did not automatically render such law unconstitutional. It was only if a law violated specific principles of the Constitution or of the rule of law, such as the principle of reasonableness, that a law would be considered unconstitutional.
It was not acceptable, the court said, for the rules of prescription (the barring of actions by lapse of time) to be circumvented by supervening legislation for no sound reason and in so doing for the CIR to be given an extension to the period during which he can file claims.
The court added that the Inland Revenue Department had raised an estimate of tax due by Mr Caruana in 1994 and it was only in 2005, after the lapse of 11 years, that the CIR had acted to collect the tax due.
Such action, the court ruled, was barred by lapse of time.
The amendment to the law, allowing the CIR an extension to the period within which to file a claim, could be viewed, in the light of the facts of this case, as an effort to make good for the inertia of the Inland Revenue Department in collecting taxes. This was not reasonable nor acceptable.
In light of the facts of this case, the court concluded that the action taken by the CIR had been barred by lapse of time.