Petronas not above PDA74, state laws: JC Fong

Petronas Twin Towers, a major tourist attraction — DayakDaily.com file pic. // Photo: Pixabay

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KUCHING, Feb 4: State Legal Counsel Datuk Seri JC Fong holds that even though Petronas is an important organisation and enjoys special status, it must obey the law, especially the Petroleum Development Act 1974 (PDA74).

“Reading sections 2,6 and 8 of the Act, Petronas must comply with State laws like Oil Mining Ordinance (1958) and tax laws like the State Sales Tax Ordinance (1998),” said Fong in a statement today.

He said the power to pass laws on State Sales Tax (SST) by the state legislature is deemed to be a power in the State list and not the federal list.

“This legislative power ought to be given the widest amplitude.

“As such, there is no restriction in Article 95B(3) to limit the powers of the State Legislature on the type of goods to be subjected to SST,” said Fong.

He stressed Article 95B(3) did not restrict or limit the range of goods that may be subject to SST.

“It is not for the judges who are not legislators to make the law or re-write the constitutional provisions.

“So because there is no restriction in Article 95B(3) on petroleum products being charged SST, imposition of SST on petroleum products is not in contravention of Article 95B(3).

Fong further pointed out that the power to impose SST is conferred specially by Article 95B(3) and not under Article 74(2) and therefore not subject to restrictions placed on subject matter by reason Article 74(3).

“Any restrictions or conditions for imposition of SST must be only those spelt out by 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 arrangement agreed upon before the formation of Malaysia,” said Fong.

He held that any interpretation of Article 95B(3) which would in any way erodes or diminished this constitutional arrangement must be avoided.

“The High Court was told that it has no jurisdiction to declare state laws like the State Sales Ordinance ultra vires the Federal Constitution as Petronas filed its application more than three months after Petronas was entitled to do so and had not explained the delay to the Court,” said Fong, who is representing Sarawak in Petronas’ non-payment of State Sales Tax (SST) amounting to RM1.3 billion.

The case was heard on Feb 3 and 4. Judgement will be delivered on Friday, March 13, 2020.

He said Petronas cannot dispute the validity of the Notices of Assessment issued by the Comptroller to the Petronas 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 rationally and not in bad faith when she issued the assessment notices. Petronas however still maintains it is exempted from SST.

“The State Government denied that the State was using SST to strengthen it bargaining to secure more rights during meetings on the implementation of the Malaysia Agreement (1963) saying the imposition is a State right which is non negotiable,” said Fong. —DayakDaily