Kuching High Court orders Petronas to settle RM1.3 bln owed to Sarawak govt

A file photo of Samarang Offshore Complex oil and gas platform, Labuan. — Photo credit: Sangu Nelus

KUCHING, May 6: The Kuching High Court today ordered Petronas to pay the State Sales Tax (SST) Order 2018 on petroleum products amounting to RM1.3 billion to the Sarawak government following the dismissal of Petronas’ application to stay the implementation of execution of the said tax and the Notices of Assessment issued by the Comptroller of State Sales Tax.

Petronas had wanted proceedings relating to enforcement of payment of the tax assessed against Petronas to the sum of over RM1.3 billion suspended until the hearing of its appeal against the High Court decision delivered on March 13 dismissing Petronas’ application to quash the Notices of Assessment.

The Court of Appeal has fixed June 17, 2020 to hear Petronas’ appeal in Putrajaya.

In asking for a suspension of proceedings to enforce the State Sales Tax order and payment of the sums under the Notices of Assessment, Petronas pleaded that it would suffer financial hardship if forced to pay over RM1.3 billion to the Sarawak government whilst its appeal is pending.

Petronas argued that its revenues and ability to pay dividends to the federal government would be affected if forced to make the payment due to current low oil prices caused by falling global demand for petroleum and the Covid-19 pandemic.


The Comptroller of the State Sales Tax and the state government opposed the application to suspend proceedings to recover the outstanding payment.

State Legal Counsel Datuk Seri JC Fong appearing for the State Attorney-General Datuk Talat Mahmood Abdul Rashid, argued that Petronas’ application must fail because there are no special circumstances for the Court to grant Petronas a stay or suspension of the proceedings to recover the outstanding State Sales Tax of over RM1.3 billion.

He argued that an application to stay the proceedings should be made in the civil suit commenced by the Comptroller and the state government to recover the State Sales Tax of RM1.3 billion plus late payment penalties and accured interest.

That civil suit which is to be heard before Judicial Commissioner, Christopher Chin is scheduled for case management on May 15.

Justice Azhahari Kamal Ramli in dismissing Petronas’ application to suspend proceedings to enforce the State Sales Tax Order 2018 and the Notices of Assessment ruled that Petronas has failed to prove special circumstances to justify a stay of the enforcement proceedings.

The Court ruled that financial hardship of a taxpayer is not grounds to justify a stay or suspension of the enforcement proceedings. The established legal principle is that a stay or suspension is not granted to give anyone time to settle its taxes or what it owes.

Additionally, Azhahari ruled that what Petronas pays to the Sarawak government may be refunded to Petronas if Petronas should win its appeal as the Court noted that according to the Report of the Auditor-General for the year ending Dec 31, 2018, the state has accumulated reserves of more than RM27 billion in its account, and thus has the financial capability to refund.

Azhahari also decided that Petronas’ argument that its appeal would be rendered nugatory or futile if Petronas has to pay the State Sales Tax before the appeal is disposed of, had no merit.

The hearing of this case on April 29, 2020, lasting more than two hours, was the first major case in Kuching that was heard online via a social media platform and the ruling today was also delivered via the same medium.

Datuk Malik Imtiaz Sawar and Alvin Chong represented Petronas in this matter. — DayakDaily