Cruise Solutions Ltd Discovery Expeditions Ltd v The Commissioner of Genreal Sales Tax and The Attorney General

• Jurisdiction: Caribbean States
• Judge: ‘Hayton, J.’,Mr Justice Saunders,Justices Wit,Anderson,Hayton,Mr Justice Hayton,Rajnauth-Lee
• Judgment Date: 12 October 2018
• Neutral Citation: [2018] CCJ 27 AJ
• Court: Caribbean Court of Justice (Appellate Jurisdiction)
• Docket Number: Suit No.: CCJ Appeal No. BZCV2018/001; BZ Civil Appeal No 19 of 2014,CCJ Appeal No BZCV2018/001
• Date: 12 October 2018

Caribbean Court of Justice

Saunders, P.CCJ, Wit, J.CCJ, Hayton, J.CCJ, Anderson, J.CCJ, Rajnauth-Lee, J.CCJ

Suit No.: CCJ Appeal No. BZCV2018/001; BZ Civil Appeal No 19 of 2014

Cruise Solutions Limited Discovery Expeditions Ltd

and

The Commissioner of Genreal Sales Tax and The Attorney General

Appearances:

Mr Eamon H. Courtenay, SC for the Appellant

Mr Nigel Hawke, Ms Briana Williams and Ms Agassi A. Finnegan for the Respondent

Statute - Interpretation — General Sales Tax Act — Whether cruise lines or their passengers were to be regarded as recipients of services that attracted a zero-rated general sales tax — Definition of international transport.

EXECUTIVE SUMMARY

1 Under the Belize General Sales Tax Act (GSTA), ‘a supply of services that are provided directly in connection with the operation or management of a ship or aircraft engaged in international transport’ is subjected to a zero-rated general sales tax (GST), so that no GST is payable.

2 The Appellants, Cruise Solutions Limited and Discovery Expeditions Limited, are local tour companies that entered into contracts with the international cruise lines that visit the shores of Belize. Passengers onboard the cruises are able to contract with the cruise lines for the cruise lines to arrange with the Appellants, as independent contractors, to take the passengers to various tourist destinations in Belize. Passengers interested in such tours would pay for the tours directly through the cruise lines, most in advance of the cruise, some during the cruise at an excursion office maintained on the ship, such tours being an integral part of the package holiday provided by the cruise lines. Some intrepid passengers, exceptionally, might independently arrange tours from local tour operators where the ships docked and would clearly have to pay GST on the supply of tours to them by the tour operators.

3 In the normal case the cruise lines would contract with their passengers to supply them with the services of arranging tours for them in Belize, such ranking as an integral aspect of a “supply of international transport” as covered by paragraphs (a)(i) and (c) of the definition of “international” transport in s 2 of the GSTA and ranking as an exempt supply under the Fourth Schedule to the GSTA. Thus, the cruise lines did not charge their passengers GST for the supply to them of such services. It followed that the cruise lines did not have an accountability for GST which could offset any liability that they might have if the tour operators that contracted with the cruise lines to supply the tours could charge them GST. The cruise lines considered that what the legislature had given them with one hand would not have been taken away with the other hand. Thus, the cruise lines refused to pay any GST to the tour operators, considering the contracts to be zero-rated, thereby keeping the cruise lines outside the GST net. However, the Commissioner for GST insisted that GST was payable so that the tour operators had to absorb the GST.

4 A question arises whether in the normal case it was the cruise lines or their passengers that were to be regarded as the recipients of the services supplied by the tour operators when zero-rating applied to “a supply of services that are provided directly in connection with the operation or management of a ship engaged in international transport.” However, this did not need to be resolved because, as will be shown, whichever may be the correct analysis, there is a supply of services provided directly in connection with the operation of the cruise ships.

5 The Appellants sought declarations that the supply of their services to international cruise lines fell within the statutory zero-rating and that they had been unlawfully charged GST. They therefore sought orders for an account to be taken of the unlawfully charged GST and the repayment of the total sums found due, with interest.

6 The judge at first instance dismissed the claim. She held that the services supplied to the cruise lines did not fall within the “operation and management of a ship”, overlooking that the statute referred to “operation or management”. Treating “management” as restricting the meaning of “operation”, she held that the operation and management of a ship concerned matters relating to the ship itself and nothing to do with the business of the ship's operators. She also noted that the subheading preceding the exemption read “Services Connected with Exported Goods” and therefore the transportation of passengers, as opposed to the transportation of goods, was implicitly not included in the category of zero-rated services. The Appellants appealed her decision but, essentially for the same reasons given by her, the Court of Appeal dismissed the appeal. The Appellants thereafter appealed to the C.C.J.

7 In a majority decision delivered by Mr. Justice Hayton, the Court re-iterated the principle stressed in its prior decision of Speednet Communications Ltd v. Public Utilities Regulator [2016] C.C.J. 23 that where more than one construction of a provision of an Act is possible, a construction which promotes the general legislative purpose underlying the provisions was to be preferred, as also a meaning more favourable to the subject if a tax provision were reasonably capable of two alternative meanings. On this basis, the Court held that the courts below had taken too narrow an approach to the interpretation of matters covered by the “operation or management” of a ship engaged in international transport. That narrow approach would not have been intended by Parliament.

8 In considering the concepts of the “management” or “operation” of a ship, one had to take into consideration the special characteristics of the relevant ship, such as whether it was a freighter, a container ship, an oil tanker, an oligarch's luxury motor yacht or a cruise liner. [ Port of Geelong Authority v. The Ship Bass Reefer (1992) ALR 505,519] When one takes this approach, it was clear that an integral part of the experience in the package provided by the operators of cruise lines for passengers is the opportunity taken by most of its passengers to experience shore excursions arranged by the cruise lines. It was an integral part of the holiday package provided to passengers by the operator of the ship to make a profit for the operator as part of the commercial operation of the ship. Indeed, the Oxford English Dictionary 2 ^nd ed 2003 defines ‘operator’ as ‘a person or company that runs a business’ and ‘operation’ as covering ‘a business organisation’. A local tour operator's supply of tour services, purchased for its passengers’ enjoyment by an international cruise line to benefit the cruise line by enabling it to fulfil its contractual obligation to passengers who had paid it for arranging the tours, would therefore be a supply of services (whether to the cruise line or to its passengers) that was provided directly in connection with the operation of a ship engaged in international transport. Thus, zero-rating applied to such services for passengers unless excluded by the statutory sub-heading, covering such services amongst a range of services, being restrictively titled, “Services Connected with Exported Goods.”

9 The majority said that while a heading needed to be considered in construing a provision of an Act, “due account is taken of the fact that its function is merely to serve as a brief guide to the material it governs and that it may not be entirely accurate.” Moreover [ibid p 444, being a passage endorsed in Liebert Corp Australia Pty Ltd v. Collector of Customs [1993] FCA 525, [24]], “a heading can only be an approximation, and may not cover everything falling within the provision to which it is attached.” Indeed, a section's heading was “a poor guide to the scope of a section, for it can do no more than indicate the main subject with which the section deals.” [ Per Lord Reid in DPP v. Schildkamp [1971] AC 1, 10] Therefore, one must particularly focus on the precise items within the heading as the legislators must do, since they do not specifically consider and vote on the headings.

10 The majority also found that since the definition of “international transport” in section 2 of the GSTA expressly concerned “transporting passengers or goods by road, water or air”, and with passengers perhaps foremost in the drafter's mind, the reference to “international transport” in the provision exempting “a supply of services that are provided directly in connection with the operation or management of a ship or aircraft engaged in international transport” clearly covered services connected with passengers or goods. If the framers of the legislation in referring to “goods” in their heading had intended only to cover “goods” and so discriminate against passengers, then it would have simply limited the exception to the “international transport of goods.” There was also a justified purpose for implying such a limitation when it appears that the business of the international transport of passengers was to be encouraged by favourable treatment under the GSTA. The natural presumption was that the legislature would not intend to take away with the one hand what it had given with the other except very clearly as by expressly restricting the exception to “international transport of goods” which it had not done.

11 In his dissenting judgment, the President, Mr. Justice Saunders, noted that throughout the proceedings the issue for determination was always whether the relevant service supply was or was not directly connected to the operation or management of a ship engaged in international transport. In his opinion, the majority's conclusions introduced, for the first time, the notion that the relevant service supply is not a local transport service but rather a part of international transport. He did not accept this position as he felt it was clear...