CPG Group Pty Ltd v FC of T

Members:
FD O'Loughlin KC DP

Tribunal:
Administrative Appeals Tribunal, Melbourne

MEDIA NEUTRAL CITATION: [2024] AATA 199

Decision date: 5 January 2024

FD O'Loughlin KC (Deputy President)

REASONS FOR DECISION[1] The tribunal’s decision in HNMF and Commissioner of Taxation [2023] AATA 4067 was given on 30 November 2023. The events underlying that decision were of a similar nature to the events presently under review. There is a commonality in the reasoning in this decision and the HMNF decision. To avoid cluttering, the commonality is not footnoted.

BACKGROUND AND CONTEXT

The dispute

1. These reasons[2] Annexure 1 to these reasons is a table of defined terms and acronyms used in these reasons. When used for the first time, a defined term or acronym is also footnoted. concern the operation of the GST Act[3] A New Tax System (Goods and Services Tax) Act 1999 (Cth). Unless otherwise indicated, all references to legislation are references to this Act. in the context of purchases and sales of gold in the different forms in which it is recognised for GST[4] Goods and Services Tax. purposes. More specifically, these reasons concern whether the applicant, a refiner of precious metal,[5] Section 195-1, definitions of ‘refiner of precious metal’ and ‘precious metal’. who contends that during Disputed Tax Periods[6] The five-monthly tax periods that ended on 31 July, 31 August, 30 September, 1 October, and 30 November 2016 respectively. it made creditable acquisitions[7] As defined in ss 195-1 and 11-5. of scrap gold[8] Gold metal of any fineness that is not in investment form. The terms scrap and refining materials, which are sometimes used by the parties, have the same meaning. in a series of transactions which were taxable supplies:[9] Sections 9-5, 78-50, 84-5 and 105-5 as affected by the provisions listed beneath the definition of taxable supply in s 195-1(1).

Gold and the GST system

2. In the ordinary course, the GST system treats:

3. Three further features of Australia's GST system need to be appreciated:

4. It might be observed that there is a structural collection weakness in such a system that gives a refund or credit entitlement to one taxpayer on the basis that another taxpayer has GST obligations which may or may not be satisfied. Where that other taxpayer's obligations are not satisfied, after a GST-informed price has been paid for whatever has been supplied, the defaulting taxpayer in a sense is dipping into community financial resources indirectly without interface with community (ATO[17] Australian Taxation Office. ) systems that are designed to detect and prevent abuses, necessarily

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occurring. And the community neither expects nor requires the recipient of a supply from a defaulting taxpayer to act as a GST system compliance agency to fill that gap.

5. In 2017, these features of the GST system were somewhat altered for taxable supplies of valuable metal.[18] GST Act, s 195-1, gold, silver or platinum; or any other substance specified for the purposes of paragraph (d) of the definition of ‘precious metal’. Through a reverse charging process, the purchaser of these supplies, rather than the supplier, is now liable for GST on these supplies (and entitled to any applicable ITCs). This change was said to prevent 'sellers of precious metals from phoenixing without remitting the GST owed'.[19] The Hon Kelly O’Dwyer, ‘Strengthening the integrity of GST on precious metals’ (Media Release, 20 June 2017).

The applicant's business[20] Further details of the trading activities that make up the applicant’s business are provided later in these reasons. The description here is to provide context.

6. On the applicant's case, the applicant's business can be simply described. That business entailed acquiring scrap gold, refining them and selling the refined gold. The scrap gold acquired were mostly of less than 95% gold content purity and were mostly acquired from unrelated parties. The applicant used the aqua regia refining process to refine that material so that it became gold in investment form, or precious metal, and referred to by the applicant as gold bullion or bullion. The applicant sold the refined gold bullion to a related party precious metal dealer, Galaxy[21] Galaxy Coins and Bullion Pty Ltd. who sold the majority of that gold to unrelated parties.

7. Consistent with [2(b)] above, the applicant's sales of bullion, i.e., sales of precious metal, namely gold in investment form, to a dealer, were GST-free; and consistent with [3(c)] above, the applicant was entitled to claim and claimed ITCs on acquisitions of the scrap gold.

8. GST considerations aside, the applicant's profit came from the difference between the values at which it bought scrap gold, and then after refinement sold, the gold bullion (reduced by the costs borne in the refining process and overhead costs). Excluding GST considerations, the applicant bought the scrap gold at a small discount from the prevailing spot price for gold and sold refined gold bullion at or slightly above the spot price. Adding GST considerations, the price at which the applicant bought scrap gold was that discount to spot price plus 10% and the applicant claimed an ITC for that 10% amount. Adding GST considerations, the applicant's profit and the drivers of it were not altered. Table 1 shows the applicant's profitability as reported before any adjustments are made to accommodate what the Commissioner says is the proper GST effect on that business.


Table 1
Applicant's reported profitability
2017 2016
Sales income $111,752,105.91 $36,038,070.04
Other income $1,308,526.70 $109,247.65
Total income $113,060,632.61 $36,147,317.69
Profit before income tax $4,507,736.04 $1,572,031.35
Profit before income tax as a % of total income 3.99% 4.35%

THE COMMISSIONER'S AUDIT

9. During an audit, the Commissioner received information from the applicant and other sources and concluded that the applicant was not entitled to the ITCs it had claimed for the Disputed Tax Periods.

10. In summary the Commissioner's audit conclusions were:

11. The eight Direct Suppliers to the applicant were:

12. The 12 Indirect Suppliers to the applicant were:

13. The 11 Supply Chains[51] For some of the Supply Chains the Commissioner did not identify the ultimate source of gold during his audit, but in her forensic analysis of financial records of a wide range of entities Ms Wright was able to do that. The Supply Chain descriptions and diagrams below include Ms Wright’s ultimate supplier identification. have been described in both narrative and diagrammatic form in the Commissioner's evidence. They are as follows.

14. The Golden Angel Supply Chain entailed sales of gold products (in various forms) by Galaxy to Golden Touch, by Golden Touch to Golden Angel, and by Golden Angel to the applicant. Diagrammatically, the Golden Angel Supply Chain was as follows:[52] This diagrammatic representation is an adaptation of the diagram at [8.1.1] of the Report of Ms Dawna Wright dated 1 June 2021 (the ‘First Wright Report’).


15. The HA Exchange Supply Chain entailed sales of gold products (in various forms) by Galaxy to PH Gold, by PH Gold to HA Exchange, by HA Exchange to the applicant. Diagrammatically, the HA Exchange Supply Chain was as follows:


16. The Gold Dust Supply Chain entailed sales of gold products (in various forms) by Galaxy to Universal Distribution Australia, by Universal Distribution Australia to Gold Dust, by Gold Dust to the applicant. Diagrammatically, the Gold Dust Supply Chain was as follows:[53] This diagrammatic representation is an adaptation of the diagram at [10.1.1] of the First Wright Report.


17. The Cash for Gold (CFGA) Supply Chain entailed sales of gold products (in various forms) by Galaxy to CFGA, CFGA to various suppliers[54] Including Mr Niyazi Candag trading as NC Jewellery, Diamond Moment and Infinity Jewellers. , by various suppliers to CFGA (or PMR), and by CFGA (or PMR) to the applicant. Diagrammatically, the CFGA Supply Chain was as follows:[55] This diagrammatic representation is an adaptation of the diagram at [11.1.1] of the First Wright Report.


18.

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The Blanco Supply Chain 1 entailed sales of gold products (in various forms) by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap and/or AX Traders, by AU Scrap and/or AX Traders to Sell Your Gold, by Sell Your Gold to the applicant. Diagrammatically, the Blanco Supply Chain 1 was as follows:[56] This diagrammatic representation is an adaptation of the diagram at [12.1.1] of the First Wright Report.


19. the Blanco Supply Chain 2 entailed sales of gold products (in various forms) by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap, by AU Scrap to GB Traders, by GB Traders to Sell Your Gold, by Sell Your Gold to the applicant. Diagrammatically, the Blanco Supply Chain 2 was as follows:[57] This diagrammatic representation is an adaptation of the diagram at [13.1.1] of the First Wright Report.


20. The Butt Supply Chain 1 entailed sales of gold products (in various forms) by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap and/or AX Traders, by AU Scrap and/or AX Traders to GB Refiners, by GB Refiners to the applicant. Diagrammatically, the Butt Supply Chain 1 was as follows:[58] This diagrammatic representation is an adaptation of the diagram at [14.1.1] of the First Wright Report.

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21. The Butt Supply Chain 2 which entailed sales of gold products (in various forms) by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap and/or AX Traders, by AU Scrap and/or AX Traders to GB Traders, by GB Traders to the applicant. Diagrammatically, the Butt Supply Chain 2 was as follows:[59] This diagrammatic representation is an adaptation of the diagram at [15.1.1] of the First Wright Report.


22. The Butt Supply Chain 3 entailed sales of gold products (in various forms) by Galaxy to GB Traders and R&N Metals, by GB Traders to R&N Metals, by R&N Metals to Manila, by Manila to GB Refiners, by GB Refiners to the applicant. Diagrammatically, the Butt Supply Chain 3 was as follows:[60] This diagrammatic representation is an adaptation of the diagram at [16.1.1] of the First Wright Report.


23. The Butt Supply Chain 4 entailed sales of gold products (in various forms) in two combinations. The first combination entailed sales of gold by Galaxy to GB Traders, by GB Traders to R&N Metals, by R&N Metals to Manila, by Manila to GB Traders, by GB Traders to GB Refiners, by GB Refiners to the applicant. The second combination entailed

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sales of gold by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap and/or AX Traders, by AU Scrap and/or AX Traders to GB Traders, by GB Traders to GB Refiners, by GB Refiners to the applicant. Diagrammatically, the Butt Supply Chain 4 was as follows:[61] This diagrammatic representation is an adaptation of the diagram at [17.1.1] of the First Wright Report.


24. The Quality Gold Supply Chain entailed sales of gold products (in various forms) by Galaxy to Quality Gold, by Quality Gold to the applicant. Diagrammatically, the Quality Gold Supply Chain was as follows:[62] This diagrammatic representation is an adaptation of the diagram at [18.1.1] of the First Wright Report.


THE AUDIT OUTCOME - DENIED ITCS AND PENALTY - ASSESSMENTS

25. At the conclusion of the audit, the Commissioner denied the applicant's input tax credit claims to the extent of $9,457,634, as set out in Table 2, and issued assessments to give effect to that denial.


Table 2
Denied ITCs
Tax Period - 2016 Denied ITCs
July $2,986,386
August $3,922,672
September $2,545,286
October $2,335
November $955
Total $9,457,634

26. There were two bases upon which the Commissioner contended that ITCs were not allowable.

27. As a consequence of the absence of input tax credits entitlements, the Commissioner said there were shortfalls for the Disputed Tax Periods, and the Commissioner imposed shortfall penalties totalling $5,371,390.40 pursuant to Subdivision 284-B of Schedule 1 to the Administration Act.[67] Taxation Administration Act 1953 (Cth). There were two bases on which penalty was imposed.

28.

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The ITCs denied are related to a significant majority of the applicant's business and cause a significant financial impact.

29. For each of the July to September tax periods, and for the five months from 1 July 2016 to 30 November 2016 as a whole, the non-capital purchases[75] Non-capital purchases as reported at label G11 in periodical Business Activity Statements (BAS). underlying the Denied ITCs represent almost all of the applicant's non-capital purchases as shown in Table 5.


Table 5
Tax period 2016 Non-capital purchases
(as shown in BAS filed) 		Denied ITCs
(Table 2) 		Implied purchases referrable to Denied ITCs (Denied ITCs × 11) Implied purchases referrable to Denied ITCs as a % of non-capital purchases
July $34,244,080 $2,986,386 $32,850,246 95.93%
August $44,810,002 $3,922,672 $43,149,392 96.29%
September $29,386,198 $2,545,286 $27,998,146 95.28%
October $2,067,336 $2,335 $25,685 1.24%
November $650,391 $955 $10,505 1.62%
Totals $111,158,007 $9,457,634 $104,033,974 93.59%

30. For the July to September tax periods, the Denied ITCs materially reduce or eliminate any trading margin the applicant otherwise enjoyed from its refining activities as shown in Table 6.[76] Amounts rounded.


Table 6
Tax period 2016 Amounts reported in BAS Denied ITCs Trading margins
Sales [77] Ignoring the aggregate $13,806 GST payable reported on sales for the July to November (inclusive) tax periods which does not materially alter the differentials in the margins. Non-capital purchases ITCs allowed [78] Sales – (non-capital purchases *10/11). ITCs denied [79] Sales – (non-capital purchases *10/11) – Denied ITCs.
July $31,124,035 $34,244,080 $2,986,386 -$6,947 - $2,993,333
August $43,566,824 $44,810,002 $3,922,672 $2,830,459 - $1,092,213
September $29,585,168 $29,386,198 $2,545,286 $2,870,443 $325,157
October $2,459,568 $2,067,336 $2,335 $580,172 $577,837
November $708,669 $650,391 $955 $117,404 $116,449
Totals $107,444,264 $111,158,007 $9,457,634 $6,391,530 -$3,066,104

POST ASSESSMENT STEPS AND EVENTS

31. When the assessments to give effect to the ITC denials were issued, the Commissioner was still to finalise and/or communicate his views as to Division 165 and its operation to the applicant's circumstances.

32. On 22 December 2017, the applicant objected to the amended GST and penalty assessments.

33. On 21 February 2018, through its lawyers the applicant gave a notice pursuant to s 14ZYA of the Administration Act, and on 17 July 2018, the Commissioner informed the applicant that, pursuant to s 14ZYA of the Administration Act the Commissioner was taken, on 23 April 2018, to have disallowed the applicant's objections and the present applications to the Tribunal were subsequently made.

34. The Commissioner's consideration and/or administration of Division 165 had not altered by the time the applicant's

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objections were deemed to have been disallowed by operation of s 14ZYA.

35. Following the deemed disallowance of the applicant's objections the Commissioner's consideration of the applicant's circumstances has developed in three respects. First, the Commissioner has additional contentions that the supplies made to the applicant by Sell Your Gold were supplies of precious metal that were not taxable supplies with the effect that the s 11-5(b) condition for ITC entitlements is not satisfied.[80] Commissioner’s Amended Statement of Facts, Issues and Contentions (ASOFIC) [35A]. Second, the Commissioner no longer presses the contention that re-refined adulterated bullion (returning it to a precious metal state) cannot be the subject of a first supply as precious metal after refining. Finally, and in relation to all of the Denied ITCs, the Commissioner contends that Division 165 applies, and the Tribunal should make the requisite direction.[81] Commissioner’s ASOFIC [44] and [48]. The Division 165 basis is an alternative basis for denial of the $1,854,316 Golden Angel and $2,609,347 Sell Your Gold Supply Chain ITCs and a substitute contention for all other Denied ITCs.

36. The Commissioner now contends ITCs as set out in Table 7should be denied.


Table 7
Tax Periods 2016 Golden Angel Denied ITCs
ss 11-5(a) or 11-5(b) 		Sell Your Gold Denied ITCs
s 11-5(b) 		ITCs to be disallowed - Division 165
July $661,020 $965,490 $2,986,386
August $706,141 $1,088,126 $3,922,672
September $487,156 $555,731 $2,545,286
October     $2,335
November     $955
Totals $1,854,317 $2,609,347 $9,457,634
$4,463,664

37. There are two bases on which the Commissioner says the applicant is not entitled to input tax credits totalling $9,457,634.

38. Table 8 gives more detail of the ITCs disallowed.

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Table 8
Denied ITCs by Direct Supplier
Tax Period 2016 Direct Supplier - Denied ITCs **1 Total
Sell Your Gold Golden Angel GB Traders GB Refiners CFGA **2 Gold Dust HA Exchange Quality Gold
July $965,490 $661,020 $595,870 $533,580. $230,426       $2,986,386
August $1,088,126**3 $706,141   $1,539,253 $276,237 $183,833 $129,083   $3,922,672
September $555,731 $487,156   $796,255 $192,930 $162,416 $302,421 $48,376 $2,545,286
October         $2,336       $2,336
November         $955       $955
Total $2,609,347 $1,854,317 $595,870 $2,869,088 $702,884 $346,249 $431,504 $48,376 $9,457,634

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39. With the revised contentions, including adopting the Division 165 case, the Commissioner now says that penalty ought be imposed differently, again on two bases, and in some respects ought be increased.

POST HEARING

40. After the present matter was reserved, the Full Federal Court gave its decision in Complete Success Solutions.[85] Federal Commissioner of Taxation v Complete Success Solutions Pty Ltd ATF Complete Success Solutions Trust [2023] FCAFC 19 . Because of the similarities between the issues raised in Complete Success Solutions and the present application as remitted, the Tribunal gave the parties an opportunity, if they wanted it, to provide further written submissions on the application of the Full Court's judgment. Both parties did so.

THE PRINCIPAL ISSUES TO BE DECIDED

41. Adopting the Commissioner's formulation of the issues as a guide, there are two substantive liability and two penalty issues to be determined by the Tribunal.

THE SCHEME ALLEGED

42. As noted above, whether Division 165 applies is issue three. As such the scheme posited by the Commissioner provides the context for the facts found. The Commissioner has formulated the relevant scheme to which he contends Division 165 applies, as the following steps:

THE PARTIES' POSITIONS IN SUMMARY

The Commissioner's case

43. The essence of the Commissioner's s 11-5 case concerning the Golden Angel related ITC claims is that, first, the applicant has not established that there were any acquisitions from Golden Angel at all, and second, if any gold was acquired by the applicant from Golden Angel, that gold was in precious metal form and an input taxed supply.[91] GST Act, s 40-100. For two reasons the Commissioner says ITCs are not available:

44. The essence of the Commissioner's ss 11-5 case concerning the Sell Your Gold related ITC claims is the second of the propositions applicable for the Golden Angel related ITCs, namely that any gold acquired was in precious metal form and an input taxed supply.

45. Implicit in the Commissioner's ss 11-5 case is that the applicant's records of its purchases, its assays of gold content of its purchases, its invoices and other documentary evidence associated with these acquisitions, and the evidence of the applicant's director and the courier used to transport this gold (the applicant's director's nephew) are either all false, or not sufficient to displace contradictory evidence leaving the applicant having failed to discharge its burden in the circumstances.

46. The essence of the Commissioner's Division 165 case is that gold bullion

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supplied to the applicant had its origins in gold bullion acquired from the applicant and other sources which was artificially and uneconomically adulterated so that it became scrap gold, and then was sold to the applicant as taxable supplies at a GST-informed price to be refined to become bullion again. Those who sold the adulterated bullion to the applicant did not meet their GST obligations to the Commissioner and retained all of the GST informed prices paid to them by the applicant for the adulterated bullion.

47. Viewed holistically, the Commissioner's review of the applicant's and others business and financial records reveals purchases and sale of gold product suggesting a direction in the movement of that product. The applicant, almost exclusively, sold the refined gold bullion it produced to its related party, Galaxy. Galaxy exclusively purchased from the applicant. Galaxy sold to three groups of purchasers: entities who sold gold to the applicant directly (the Direct Suppliers) and entities who sold gold to direct suppliers (the Indirect Suppliers) and other entities who did not sell any gold to either the applicant or Direct or Indirect Suppliers. The applicant acquired gold product from both Direct Suppliers and other suppliers. The Direct Suppliers to the applicant acquired gold from Galaxy, Indirect Suppliers and other suppliers.

48. Figure 1 is an adaptation of the diagrammatic presentation of the directional gold sales transactions prepared my Ms Wright.[92] Ms Dawna Wright, Senior Managing Director, Australia Leader, Forensic Accounting and Advisory Services of FTI Consulting.

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The applicant's case

49. The essence of the applicant's is a denial of the Commissioner's case and that the supplies to it were taxable supplies and Division 165 does not apply.

THE EVIDENCE AND OTHER MATERIALS BEFORE THE TRIBUNAL

50. The evidence and other materials before the Tribunal include the statements, affidavit and expert and/or other reports set out in Table 11 and other documents tendered as exhibits or filed as required by s 37[93] Collectively these documents are referred to a “T Documents” and individual documents are referred to as ‘T(followed by a number)’ for the documents initially filed, and as ‘ST(followed by a number)’ for the supplementary filings. of the AAT Act.[94] The Administrative Appeals Tribunal Act 1975 (Cth).


Table 11
Expert Report of Mark Ellis dated 20 November 2020 and Appendix (the 'Ellis Report')
Statement of Michil Salib dated 24 May 2019 and Annexures (the 'First Salib Statement')
Statement of Michil Salib dated 10 May 2021 and Annexures (the 'Second Salib Statement')
Statement of Adam Saad dated 10 May 2021 and Annexures (the 'Saad Statement')
The First Wright Report
Supplementary Expert Report of Dawna Wright dated 26 February 2021 and Annexures (the 'Second Wright Report')
Affidavit of Yi Deng dated 10 December 2019 (the 'Deng Affidavit')

51. Each of Messrs Salib, Saad, Ellis and Deng, and Ms Wright also gave oral evidence in cross examination and some of them in re-examination. In addition, Mr Salib had previously given evidence in an examination conducted pursuant to s 353-10 of Schedule 1 to the Administration Act. The T Documents included the transcript of that interview.

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52. The Commissioner had also conducted s 353-10 interviews with others connected in some way with Direct and Indirect Suppliers. A small proportion of the content of those interviews is relied on by the Commissioner to support his contentions and another small proportion of that content contradicts the Commissioner's assertions and the Commissioner seeks to discredit that content. These reasons extract such of the content of the s 353-10 interview transcripts, and the circumstances in which it was provided, as is necessary to deal with the contentions advanced. Similarly, some content of T Documents is referred to or extracted.

T Document evidence

53. During the audit, the Commissioner gathered information from multiple sources, including from the applicant. By a letter addressed to the applicant dated 16 December 2016[95] ST 109 , p 4900 and following. the Commissioner asked a series of questions concerning the applicant's business and the suppliers to it. Questions 34 and following were directed to obtaining information concerning each Direct Supplier individually, and were answered on that basis. Mr Salib accepts that the applicant's tax agent only partly completed the response on his instruction,[96] Transcript 13 May 2021, p82, l 38. and that he provided factual material to the tax agent,[97] Transcript 13 May 2021, p82, l 47-48. and that he checked the response before being sent.[98] Transcript 13 May 2021, p83, l 2. The language used in the content of the responses suggests that the responses were written by Mr Salib. The responses to 16 December 2016 questions 40, 41, and 72 concerning dealings with Golden Angel, which can be attributed to Mr Salib need to be included in the body of evidence to deal with golden Angel related Disputed ITCs contentions. Those questions, together with questions 38 and 39 which give some context, and their answers are as follows.

Supplier - Golden Angel Australia Pty Ltd

…

38. How did CPG Group physically obtain the products from each supplier?

The supplier sends the metals using a courier

39. At what address were the purchases delivered?

To [the applicant's] refinery at ….. Oakleigh South Vic 3167

40. Which person from each supplier usually delivered the purchases?

Unknown

41. How were the purchases presented and/or packaged when delivered?

In a sealed cardboard box

…

72. Why was [the applicant] confident it could sell the final gold products produced from the melted bars/scrap jewellery/scrap gold and silver purchased from each supplier via associated entity Galaxy Coins and Bullion Pty Ltd?

CPG Group's supply is contingent on Galaxy's demand. Galaxy is a well-established business and has a strong market position. As such, CPG can sell to Galaxy with the confidence that Galaxy can sell to the public. If the position changed and

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Galaxy was not able to sell to the public as it does now, then the demand from Galaxy would not be as great and therefore the supply from CPG would be diminished.[99] ST 281 , p 8419 and following.

54. The questions to which the applicant responded were asked of each supplier on an individual basis. Having regard to Mr Salib's relationship with Mr Saad, and the sett-off agreement with Golden Angel and Golden Touch, and acknowledging the possibility of inadvertent error, the answer to question 40 is plainly false and the answer to question 72 is misleading by omission. For Golden Angel, the applicant knew who the courier was, and the applicant had reservations about being capable of servicing the prospective demand and only purchased from Golden Angel in the context of having the offset agreement in place that offset purchase prices payable for supplies from Golden Angel against sale prices receivable by Galaxy from Golden Touch.

55. The response to question 41 may well be correct. It is, however, contrary to Mr Saad's evidence and reflects on the findings sought concerning whether supplies were made by Golden Angel or if they were what was supplied.

Mr Candag's s 353-10 evidence

56. One of the people connected to the Direct and Indirect Suppliers to the applicant who had participated in a s 353-10 interview was Mr Candag, the proprietor of the NC Jewellery manufacturing business. That business was conducted from Mr Candag's garage, and he did not sell the jewellery he made direct to the public. The equipment used in that business included a rolling machine and mixed gas and oxygen (which is assumed to be oxy-acetylene equipment) capable of and used for (among others) melting gold.

57. Mr Candag's interview was conducted by three ATO employees with the assistance of an interpreter. The interview was conducted as a joint interview of Mr Candag, Ms Candag (a husband-and-wife couple) and Ms Candag's mother, Ms Kenan. At times multiple questioners spoke over each other.

58. Informed by the transcript, some observations are required.

59. Parts of the interview content bear upon some of the factual findings the Commissioner asserts, and the applicant denies.

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ATO1 Did the girl in the shop know that you were bringing back melted bullion?
Interpreter Well, I don't know that she knew or not, but I would melt it and take it back.
ATO2 Did you buy the bullion off this lady?
Interpreter Yes, they would give it to me.
ATO2 So you would buy it off this lady?
Interpreter Yes. Buy it, melt it, take it back.
ATO1 How did you pay for it?
Interpreter They would give me the gold, I would melt it, take it back and they would give me a percentage by cheque. Then they would give me the gold at the same time, then I would leave.
…  
ATO1 Did they ask you what you would be doing with the bullion?
Interpreter Well, it's obvious what I do. I melt the gold and take it back.
ATO3 You said a few minutes ago you said to them, "If I melt the gold and bring it back, will you buy it?" Is that correct?
Interpreter Yes, that's right. They said they would buy it if I melted it.[100] Candag et al s 353-10 interview, ST4, p 18
…  
ATO2 Yes. In terms of your conversations with Michael, did Michael tell you what to do with the gold?
Interpreter You've only got to melt it and take it back, it's simple.
ATO2 So is this Michael telling you this, or you telling Michael this?
Interpreter I knew that I was going to melt it, and I asked him whether he would buy it off me. He knew that I was melting it, and he said he would - he would sell me the gold, one or two kilos, then I would take it back.[101] Candag et al s 353-10 interview, ST4, p 40-41
…  
ATO1 Okay. Is there anyone else that you bought gold from?
Interpreter No, mainly that company at that time. Now it's mainly silver.
ATO1 Yes. Have you ever dealt with a firm named Gold Stackers?
Interpreter Gold Stackers, yes, we ….. I have heard of them.
ATO1 Have you bought from them?
Interpreter I think some amount a long time ago.
ATO1 Are we talking one year, two years ago? 2016 or?
Interpreter No, before then. 2015.
ATO1 Yes, and was that bullion?
Interpreter I think so, yes.
ATO1 And did you do the same for Gold Stackers as you're doing now for Cash for Gold?
Interpreter No, I did not.
ATO1 So what did you do with the bullion then?
Interpreter I melted them and sold it to these people.
ATO1 To - so you - - -
Interpreter For cash.
ATO1 So you've melted the bullion from … Gold Stackers?
Interpreter Yes. And I sold it to them …..cash.
ATO1 Sold it to Cash for Gold
Interpreter Cash for Gold I sold it to, and that's how I started the business.[102] Candag et al s 353-10 interview, ST 4 p 35 – 36.

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…  
ATO1 Okay. Have you melted gold for anyone else outside of Cash for Gold? At any time prior to starting your business?
Interpreter No, just this one.[103] Candag et al s 353-10 interview, ST 4 p 36.
…  
ATO1 Okay. Did you tell Michael that you're coming in for an interview?
Interpreter I had an appointment a month ago
ATO1 Yes.
Interpreter I told him. Then I called - I asked him why are they calling me. I didn't do anything wrong.
ATO1 And what did he say?
Interpreter He told me that there are lots of other people they are calling in like you.
ATO1 Is that all?
Interpreter Well, he told me not to tell you guys that he bought gold off you to melt and I asked him, well, what am I going to say. He said that just tell them you bought it off the streets.
ATO1 Okay.
Interpreter That's ridiculous. How could I?[104] Candag et al s 353-10 interview, ST 4 p 42. A similar passage appears at p43.

60. The transcript presents Mr Candag as a man who had once engaged in activities of buying gold bullion, melting it and then selling the melted product to CFGA, presumably keeping for himself the cash margin on the buying and selling ignoring the GST imposts, who did not disclose that fact until he was asked, who professed innocence and naivety generally in relation to his business affairs and the GST imposts associated with them, and was astute enough to reply to critical questions in a deflecting way without strictly answering the question. The deflections are significant. It is somewhat ironic that the Commissioner relies on Mr Candag's evidence in relation to critical questions asked of him that was given in the way that it was, and sharply criticises Mr Salib's evidence of a similar type. As noted above, one possibility that motivates deflective answers is a preference not to disclose the proper answer. That explanation is a stark possibility here.

61. Given that neither party has called Mr Candag to give evidence, the conduct of the s 353-10 interview was less than perfect, and Mr Candag displayed sufficient insight into the process of examination to be crafty in his responses to critical questions by asserting what Mr Salib knew, unlikely to constitute admissible evidence if those rules applied, the Tribunal has had neither the benefit of observing Mr Candag first hand nor the benefit of observing Mr Candag's evidence tested by cross-examination process, the Tribunal affords the content of Mr Candag's section 353-10 interview no weight in so far as it purports to throw light on what Mr Salib knew of Mr Candag's activities, and of communications with Mr Salib.

62. Mr Candag's evidence of what Mr Salib told Mr Candag to say in response to ATO questions suffers a different burden to any reliance on it. That evidence was directly rebutted by Mr Salib in his s 353-10 interview in quite logical testimony, and Mr Salib he was cross-examined.

63. Mr Candag's evidence of his business, what he did, in buying, and then melting bullion, and selling scrap produced through that process, and his evidence of having done it before purchasing bullion from a different source, and the manner in which he did it, including accounting for the cash flow profit element to him, is accepted.

Mr Gubolov's and Mr Blanko's s 353-10 interview evidence.

64. Mr Gubolov and Mr Blanko gave evidence of delivering to and receiving adulterated gold. That is eyewitness evidence, procured under affirmation by the Commissioner using his coercive powers.

Mr Salib's evidence

S 353-10 interview

65. As noted above, Mr Salib had given evidence before the hearing in a s 353-10 interview and the transcript of that interview is included in the T Documents. In that interview Counsel assisting the Commissioner with the examination asked questions which in some

ATC 12551

respects could be characterised as questions in search of evidence and information to support a thesis, particularly the thesis advanced ultimately in the Commissioner's Division 165 case that the profitability for the applicant lay in the ITCs. During that interview Mr Salib perceived the pursuit of a thesis and in some respects these features of the interview in combination could be seen as a less than helpful game of cat and mouse between interviewer and interviewee.

66. Some extracts of that transcript are reproduced below as they form the basis of factual contentions to be addressed.

67. In his section 353-10 interview, Mr Salib was asked questions concerning courier arrangements for Golden Angel and Golden Touch dealings which became the source of robust cross examination.[105] Mr Salib s 353-10 interview, ST 1 , p333 to 335


Counsel R Which courier did Golden Angel use?
Salib I honestly can't remember. There was - there was a few different couriers, a few different - every client had his own, sort of, people or couriers or staff or …
…  
Counsel R Well, it's just I'm only interested in your memory, but is it the case that someone from Golden Touch would come to Victoria to acquire the bullion?
Salib Yes.
Counsel R And they would travel from the airport, what, to your office, to get the bullion?
Salib. Yes
Counsel R And then what would they - - -
Salib Or someone comes to the refinery, take the stock and meet him in the airport, whether a courier or - I can't remember exactly. We don't get involved in the arrangement of the customer for picking up or delivery because we don't want to carry the responsibility of the stock getting stolen on the road or someone mug them and steal 10 kilos of gold or five kilos of gold or two kilos of gold, so why we don't get - we keep ourselves away from the shipment, the delivery, the pickup, the drop off. They take it from my refinery. They drop it at our refinery. Once it's in our refinery we take responsibility. Once it's out the door we don't know - we don't want to know about it.
Counsel R But this entity, Golden Touch, if the gold is being delivered at the airport or picked up at your facility, are you saying, what, they would fly back to Sydney with gold on their person?
Salib Sorry?
Counsel R Would they fly back to Sydney with gold on their person or in their luggage?
Salib It happens, yes.
Counsel R They put it in, what, carry-on luggage?
Salib Yes. In your briefcase you can put 10 kilos of gold and take it with you. We usually put it in a box, package it. I don't know how they take it through the airport, whether they take it out of the box or they leave it in the box. That's not our business.
Counsel R Well, did you ever speak to them about that?
Salib It's none of my concern, I don't get involved in that.

68. This evidence was soon contradicted.[106] Mr Salib s 353-10 interview, ST 1 , p 336/7


Counsel R Sir, we've got some information that Golden Angel in the books and records of CPG that there was a deduction of $220 for freight for Golden Angel - - -
Salib Yes.
Counsel R - - - from time to time. Tell us about that?
Salib They want us to pay for the freight.
Counsel R And did you?
Salib. We did, yes.

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Counsel R I thought you gave evidence a moment ago that that was something you left up to the clients - the customers.
Salib Yes, yes, they ….. who does the delivery, we don't take responsibility for it.
Counsel R But isn't this an example of you taking responsibility for freight?
Salib They wanted us to pay on their behalf to the delivery guy or whatever who was there, so we paid the guy, and we charged them that money on invoice; is that illegal?
Counsel R And what was the freight service that you used?
Salib I didn't use it.
Counsel R Well, that your company used?
Salib They appointed the driver, it was Ottoman or something like that?
Counsel R Who was it?
Salib Ottoman or something like that.
Counsel R That's the name of the person, Ottoman?
Salib No, no, the company
Counsel R Ottoman, and you say it's a delivery or a freight service, was it?
Salib It wasn't a professional courier, it was just a buy that they knew, they sent to pick up. They trusted him. The deal was I would pay him the money from our pocket and we charge them on invoice
Counsel R Well, do you -
Salib They were in Sydney, that guy's in Melbourne
Counsel R Do you have any records of a payment that your company made for this freight service?
Salib Yes, we do. I'm sure we do
Counsel R What would be the nature of that record, sir?
Salib An invoice, and it must be in your paperwork.
Counsel R Did you meet anyone from Ottoman?
Salib Yes, we met the guy, of course, he used to come to the factory and pickup.

69. And continued in a similar vein:[107] Mr Salib s 353-10 interview, ST 1 , p 349


Counsel R Who put you in touch with this Ottoman outfit?
Salib The guys from Sydney
Counsel R Okay. We've got information, sir, that this Ottoman entity or outfit is a mechanics operation. Do you know anything about that?
Salib Yes. Yes. Yes.
Counsel R What - what is a mechanics operation doing collecting or delivering gold?
Salib I - I don't know. It's not my business. They said, "We send you that guy. We trust him. We know him. You give him the gold." I said, "That's fine."
Counsel R It doesn't strike you as curious, sir, that a mechanic is involved in collecting valuable - - -
Salib It - it could be - - -
Counsel R - - - gold for your operation?
Salib - - - his brother, his cousin, his nephew, his[108] Mr Salib is adamant the transcript is in error and the word ‘his’ each time should be ‘he’s’. - whatever. I - - -
Counsel R But you don't know who it is, do you?
Salib I - I basically follow customer instruction.

70. On the topic of Mr Salib's knowledge of practices in his industry, the s 353-10 interview evidence was as follows.


Counsel R Well, it's not a question of whether it's weird. You understand that one of the things the Commissioner is investigating in the gold trading space … - is the idea … that some participants in gold trading are acquiring bullion, affecting it, altering it, melting it, and then on selling it as scrap..
Salib Yes
…  

ATC 12553

Counsel R are you aware, Mr Salib, of that occurring in the industry?
Salib Yes. I am.
Counsel R And who are you aware of doing it?
Salib I don't know
Counsel R Well -
Salib It's not for me to determine
Counsel R Well, when you
Salib with that.
Counsel R say you are aware of it occurring, who is involved that you know in that occurring?
Salib I can think whatever I think. It's not for me to determine or decide who's dodging the system. Who's doing this -
Counsel R Well -
Salib sort of transactions. That's a - that's a police work I'm not interested in. I've got a business to run.
I don't care what other people do
Counsel R Mr Salib, a minute ago, you indicated you're aware that that was going on, didn't you?
Salib Yes. I am aware
Counsel R And I'm asking you - where: are you aware? Who - are you involved - who are you aware is involved in doing this?
Salib I heard lots of them in industry. That's all I hear.
Counsel R You're not prepared to say?
Salib It's not for me to say, because it's gossip. It could be right: it could be wrong. Why should I get involved in that? Why should I take responsibility of accusing someone of doing something wrong when they're not, or when they are? That's not for me
Counsel R You know, sir, that NC Jewellery was doing exactly that, don't you?
Salib No.
Counsel R And you know it because NC Jewellery was acquiring bullion from a company you controlled; correct?
Salib Yes
Counsel R And you know it was altering or melting that bullion, and then selling it back to
Salib That's your opinion. I didn't know that. If I'd known that, I would never dealt with him, and I will stop dealing with him immediately

71. Also in that interview Mr Salib denied allegations as to his communications with Mr Candag. Mr Salib denied he told Mr Candag to tell the ATO that he bought gold on the street.[109] Mr Salib s 353-10 interview, ST 1 , p 283


Counsel R If you don't mind, Mr Salib, I'll finish the question and then I'll listen to - - -
…..
[Salib] Yes.
Counsel R - - - the answer. I'm putting to you that you told Mr Candag not to tell the ATO that he was buying gold from Cash for Gold, because you were worried that that would indicate the circular flow of gold from Cash for Gold to NC Jewellery and back to - - -
Salib That's incorrect
Counsel R - - - Cash for Gold.
Salib Because Mr Candag, or whatever his name is, he was buying gold from Cash for Gold and selling scrap to Cash for Gold on the invoice, so no matter what he tried to imply, it's incorrect because it's on the invoices that were supplied to the ATO

Witness statement evidence

72. In the first Salib Statement, Mr Salib gave evidence:

73. Mr Salib appended a copy of a tax ruling obtained on behalf of the applicant, Galaxy and the Salib Family Trust (CFGA being the trustee). One critical part of the ruling that the applicant relies on are:

Question 7

For Transaction 7, what is the GST classification of finished products sold by [the applicant]:

  • (a) to traders, including Galaxy?
  • (b) to GST-registered entities, such as jewellers?

Answer

A supply of products that are precious metals as defined in section 195-1 of, the GST Act will be subject to the special rules for precious metals. That is, a supply of precious metal is GST-free, if it is the- first supply of that precious metal after refining by, or on behalf of the- supplier and the entity that refined the precious metal is a 'refiner of precious metal' and the recipient of the supply is a _'dealer in precious metal'. All other supplies of precious metal will be input taxed.

74. The ruling contained the usual caveat that the transactions actually entered need to conform to the arrangement ruled upon. The ruling also said it did not deal with, meaning rule out, Division 165.

75. In the second Salib Statement, Mr Salib gave evidence of:

Cross examination

76. Mr Salib was also extensively cross-examined addressing topics that included the evidence her gave in his s 353-10 interview.

77.

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In a lengthy cross examination of this evidence at the hearing Mr Salib maintained stridently that he had not lied under oath and was keen to protect his nephew who was young and starting his career from the ATO and didn't want him dragged into Mr Salib's business affairs vis-à-vis the ATO. In maintaining that he had not lied under oath, Mr Salib took points of fine distinction illustrated by the passage:


[Counsel] And then you're asked, "But you don't know who it is, do you?" And you say, "I basically follow customer information"?---
[Salib] Yes, I didn't deny it, I didn't say, "I don't know who he is."
[Counsel] Mr Salib, it's a stunning answer, isn't it?---
[Salib] No, it's not.[110] Transcript, 13 May 2021 p109.
…  
[Counsel] But he was your nephew, Mr Salib?---
[Salib] Yes, that's why I didn't want to mention his name.
[Counsel] You knew who he was?---
[Salib] Yes.
[Counsel] And you were asked - - -?---
[Salib] Did I say here, "I don't know who he is"?
[Counsel] You were asked a direct question, but you don't know who it is, do you?---
[Salib] And what did I say?
[Counsel] You said, "I basically follow customer instruction"?---
[Salib] And that's what happened. I didn't say I don't know him. He's my nephew.[111] Transcript, 13 May 2021 p110.
…  
[Counsel] And so when you were asked after line 35, so three lines down at line 38, "But you don't know who it is, did you?" you did know and you didn't say?---
[Salib] Is that a question?
[Counsel] Yes?---
[Salib] What's the question?
[Counsel] You knew who the mechanic was?---
[Salib] Yes.
[Counsel] And you didn't say who it was?---
[Salib] Did I lie under oath, is that what you're trying to say?
[Counsel] Listen to my questions and we'll get to - - -?---
[Salib] I didn't lie under oath.
[Counsel] I'm not asking you that at the moment, Mr Salib?---
[Salib] My answer was, "The guys don't see me introduce him to me", and that was not a lie either.
[Counsel] They didn't introduce your nephew to you, Mr Salib?---
[Salib] Yes, they did, as a courier.[112] Transcript, 13 May 2021 p111.
…  
[Counsel] You were required to answer questions?---
[Salib] I did answer the question. I've never been asked, "Is he your nephew?" and I said no. "Is he related to you?" and I said no; never been asked that question. You asked do I know him, I said, "Yes, I know him, he's a brother, he's a nephew, he's a friend."[113] Transcript, 13 May 2021 p112.

78. In cross examination concerning the name of Mr Saad's business, Mr Salib said:


[Counsel] And then you were asked again: Well, that your company used?
And your answer was: They appointed the driver, it was Ottoman or something like that. ?

ATC 12556

[Salib] Yes
[Counsel] Now the Ottoman that you - - -?--
[Salib] It's actually Autumn but I joke with my nephew on that, call them Ottoman - - -[114] Transcript 13 May 2021, p 108 l 5 to l 16.

Conclusions regarding Mr Salib's evidence

79. There are some notable features or aspects of Mr Salib's evidence.

80.

ATC 12557

Not all of these matters concern masking Mr Saad's identity. Mr Salib is not in any position to say this evidence was an isolated instance and that he should be regarded as generally reliable. To the contrary, Mr Salib's asserted explanations give wider insights into the care required in receiving answers to any questions asked of him, and to voluntary self-serving statements and explanations.

81. For two reasons Mr Salib's evidence needs to be examined critically, as in closely, and received with great caution. First, Mr Salib was not a disinterested witness. Mr Salib was the controller of three entities in the Supply Chains under review, one of which, the applicant, paid GST-informed prices for gold in the knowledge of the entitlements to the ITCs associated with those payments. And Mr Salib was financially interested in the applicant through his shareholding.[116] Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149 , 176 [82] (Ryan, Jessup and Perram JJ) and Pascoe v Federal Commissioner of Taxation (1956) 30 ALJR 402 , 403 (Fullagar J). Second, the proven deceptive or knowingly false aspects of Mr Salib's evidence in this application compel a close examination of all of his evidence with a fine eye to its reliability. Any uncorroborated and self-serving evidence given by a witness in this position requires critical review. Evidence that logic suggests is likely to be true, might be received uncorroborated as can evidence contrary to Mr Salib's interests which ought to be treated as reliable.

82. Mr Salib's evidence of what he knew is clearly self-serving. In this regard the proper inference to draw is that Mr Salib adopts a similar technical meaning to what he knows, and would not admit knowledge of something that happens to be true unless a high threshold is reached.

83. On the most generous view available, and influenced by the particular industry in which Mr Salib is involved, the inference to be drawn concerning Mr Salib's knowledge is that because it suited his purposes, he consciously turned a blind eye, consciously took no step to learn and did not want to learn whether any of the Intermediaries in the Supply Chains were involved in problematic activities.

84. Mr Salib's denial of Mr Candag's evidence in his s 353-10 interview (that Mr Salib told him not to reveal his purchases of bullion from CFGA) is has a logic to it and is credible. The fact of sales of bullion by CFGA to Mr Candag was a matter of record in CFGA's financial records. It would make no sense for Mr Salib to encourage somebody to say anything to the contrary when those records speak for themselves and are available to the ATO. In relation to suggestions that Mr Salib knew that Mr Candag was buying bullion from CFGA and melting it and selling it back as scrap, the evidence from Mr Candag and his family members is not conclusive, and in particular Mr Candag did not answer that question when it was asked of him in his s 353-10 interview. Mr Candag was deflective in his evidence. That question should be treated consistently with other knowledge evidence.

85. Mr Salib's evidence concerning Golden Angel supplies of scrap gold as contended for needs to be considered in the whole matrix of evidence concerning those acquisitions as contended for.

Mr Saad's evidence

86. Mr Saad is Mr Salib's nephew who had previously worked for CFGA.

87. Mr Saad's evidence was provided late and outside directed time frames. The explanations for its lateness are inconsistent.

88. During a lengthy exchange in cross examination directed to whether Mr Salib had been honest in his s 353-10 interview the lateness of the filing of Mr Saad's affidavit was explained in the following terms:


[Counsel] I want to be fair to you?---

ATC 12558

[Salib] Well, you haven't because you keep pressing the same point and I gave you the same answer five times already and we're still going back to the same point. He's my nephew and I didn't want him to be implicated in my interview with the ATO because he's a young guy, he's a business analyst just starting his career and I don't want to be responsible for him having problems with the ATO.
[Counsel] Why would he have problems with the ATO?---
[Salib] Because the ATO seems to be lashing at everybody at that time so he still had fear if he came today and gave evidence that the ATO will target him, and he has raised that issue with both [the applicant's counsel and solicitors]. He didn't want to come and give evidence, and that's why he was very, very hesitant, and that's why [the applicant's counsel] managed to get that statement in the last minute.

89. No evidence from the applicant's lawyers was filed concerning lateness. When explaining the lateness of Mr Saad's affidavit, the applicant's counsel advised the Tribunal in the following terms:


DEPUTY PRESIDENT: Well, the Commissioner hasn't said anything yet in response to the forecast application for leave to file further statements. I'm interested to know the basis of the leave application, and notwithstanding directions that have provided for all the evidence to be filed a long time ago, hearing yesterday that we are to be invited to receive two further witness statements from people who would presumably have been readily available to provide a witness statement a long time ago.
[COUNSEL]: (Audio malfunction) ignore your observations, however my instructor had been working assiduously over quite a period of time with each of the two witnesses, and encouraging him that she can't make them go and get the documents that are annexed to and form part of those witness statements. That wasn't something that's been done in the last little while, it's something that obviously is needed by the applicant; each of the materials are needed. I can't explain it and I don't believe my instructor could explain even if she was asked as to why clients take so long to gather material when they're asked to do it.
DEPUTY PRESIDENT: That might explain one aspect of it but until yesterday there's no communication to anybody forecasting additional evidence. People have been allowed to prepare for this hearing on the basis of an expectation of what's been filed is the material before the tribunal.
[COUNSEL]: Sir, I don't have instructions about that but I do understand my instructor was somewhat distracted on Friday with the parallel matter (audio malfunction).
DEPUTY PRESIDENT: it might explain Friday, it doesn't explain the months leading up to it.
[COUNSEL]: I appreciate that, sir.

90. Recognising that an explanation from Counsel addressing the Tribunal is not evidence, the Tribunal ordinarily proceeds on the basis that such explanations are not untrue. Consequently, it is somewhat difficult to reconcile the explanations for the delay and timing of Mr Saad's witness statement.

91. Mr Saad gave evidence that:

92. This evidence is at odds with answers to ATO questions by the applicant provided to the

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ATO by the applicant's accountant in February 2017 noted above. It is noteworthy that there was no re-examination to clarify this inconsistent evidence that can only be assumed to have been known.

93. All of Mr Saad's evidence concerns activities associated with contended for Golden Angel supplies of scrap gold. This evidence needs to be considered in the whole matrix of evidence concerning those acquisitions.

Mr Ellis's evidence

94. The applicant relies on the Ellis Report. Mr Ellis said he received instructions to address 17 questions[122] Ellis Report, [1.1]. in "the emails dated 13 and 14 August 2020 [from the applicant's lawyers] and further letter [again from the applicant's lawyers] dated 5 November 2020, copies of which are included at Appendix A " to his report. It is noteworthy that if there was an original preceding the 5 November 2020 letter, it was not included in the Appendix A to Mr Ellis's report and any email of August 2020 was not included in the Appendix A. Those questions and Mr Ellis's summary conclusion are set out below.

3.1. What gold refining process is used by CPG (also provide a short description of the refining process used by CPG)?

Dissolving scrap gold in Aqua Regia and passing sulphur dioxide through the solution to precipitate gold.

3.2. What feedstock (if any) does that gold refining process require

Aqua Regia (nitric acid and hydrochloric acid mixture), sulphur dioxide and scrap gold.

3.3. Whether Ms Wright (in her report dated 31 January 2020) identified, described and considered the gold refining process used by CPG?

It does not appear that Ms Wright considered the refining process.

3.4. Whether Ms Wright (in her report dated 31 January 2020) identified, described and considered the feedstock used in the gold refining process used by CPG?

It does not appear that Ms Wright considered the feedstock.

3.5. Whether Ms Wright in her report dated 31 January 2020 identified the amount of refined gold produced by CPG during the Audit Period?

Ms Wright identified the amount of gold for the period 1 July 2016 to 30 September 2016 but not October or November 2016.

3.6. Whether Ms Wright (in her report dated 31 January 2020) identified and considered the feedstock required to produce a specified amount of gold in the refining process used by CPG?

It does not appear Ms Wright considered the feedstock.

3.7. Whether, at the commencement of the Audit Period, CPG held a quantity of feedstock for the refining process used by CPG and, if so, what quantity was held at that date? (Please ensure that your consideration addresses record keeping, storage capacity and storage methods etc.)

The records did not allow Mr Ellis to determine the quantum of feedstock held at the start and the end of the period.

3.8. Whether, during the Audit Period, CPG acquired feedstock for the refining process and, if so, what quantity of feedstock was acquired? (Please ensure that your consideration includes invoices and bank statements.)

In the period January to November 2016:

  • • 2602kg of nitric acid were purchased;
  • • 7010kg of hydrochloric acid were purchased; and
  • • 1890kg of sulphur dioxide were purchased.

3.9. Whether, at the conclusion of the Audit Period, CPG held a quantity of feedstock for the refining process used by CPG and, if so, what quantity of feedstock was held at that date? (Please ensure that your consideration addresses record keeping, storage capacity and storage methods etc.)

The records did not allow Mr Ellis to determine the quantum of feedstock held at the end of the Audit Period.

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3.10. Whether during the audit period, CPG produced gold that it had refined and, if so, what quantity of gold did it produce?

CPG refined 2077.33kg of gold and recovered 1839.85kg of gold during the audit period.

3.11. Whether during the audit period, CPG produced more refined gold than it sold? (Please ensure that your consideration addresses opening stock of refined gold, closing stock of refined gold and secure storage capacity for gold.)

CPG refined more gold than it sold.

3.12. Whether there is a generally accepted correlation between the amount of feedstock used and the amount of gold refined and, if so, explain that correlation?

There appears to be a correlation.

3.13. If there is a generally accepted correlation between the amount of feedstock used and the amount of gold refined, whether the amount of gold produced by CPG mount of feedstock used during the audit period?

3.5-4.0L of Aqua Regia is used per 1kg of scrap gold refined.

3.14. Whether there is any other indicia that tends to support or to contradict your conclusions (if any) reached in paragraphs 5.10 and 5.13 above?

Electricity and Kiln usage is consistent with quantum of gold refined during the January to November 2016 period.

Waste Acid disposal is above the level required for the quantum of gold refined during the July to November 2016 period.

3.15. To what extent (and where in her report) did Ms Wright consider evidence of the gold being received by CPG?

It appears Ms Wright considered evidence of scrap gold being received by CPG but did not conduct analysis of evidence of the physical transportation of gold to CPG's refinery.

3.16. Whether there is evidence that CPG received scrap gold? I.e. gold delivered to and acquired by CPG for refining. (Please consider receiving procedures)

There is evidence of CPG receiving scrap gold.

3.17. Whether, if there is evidence that CPG acquired scrap gold, that evidence is broadly supportive of the conclusions reached in paragraph 5.11 above

The evidence is broadly supportive of the conclusion reached in question 11

95. Mr Ellis's letter of instructions dated 5 November 2020 did not include any paragraphs 5.10, 5.11 or 5.13 and the questions asked of Mr Ellis appeared as questions with numbers as shown above. The references to paragraphs 5.10, 5.11 and 5.13 are taken to mean references to paragraphs 3.10, 3.11 and 3.13. No explanation was provided for the numbering discrepancy, and the Tribunal assumes the numbering had its origins in an earlier draft of the letter of instructions, or an earlier letter to Mr Ellis that has not been disclosed, or was a typographical error. In any event the Commissioner has not taken issue with the discrepancy or the apparent non-disclosure of the 13 August 2020 email to Mr Ellis.

96. To address these questions Mr Ellis:

97. There are some necessary observations concerning Mr Ellis' evidence.

98. The Commissioner resists Mr Ellis's evidence, although it is difficult to understand the extent of the Commissioner's criticisms, particularly in circumstances where the Commissioner does not deny that the applicant undertook some refining activity. Some elements of Mr Ellis's evidence are unremarkable, for example it is difficult to conceive that there would not be any correlation between feedstocks and outputs in any process of manufacture or refinement. Similarly, it is difficult to conceive that electricity use would not track consistently with activity undertaken in a commercial refining premises. The evidence given as to purchases of materials not being sufficient to refine all gold asserted to have been refined is consistent with the Commissioner's contentions that the applicant did not acquire scrap gold from Golden Angel and Sell Your Gold and refine it. This evidence is also consistent with Mr Salib's evidence concerning the amount of time that would be required to buy bullion, adulterate it and return it. Mr Salib said that it would have been impossible to have converted the bullion purchased from Galaxy and to have returned it in the form in which the applicant contends it purchased gold product in the timeframe that the applicant's records suggest. To the extent Mr Ellis's evidence was derived from information supplied to him by Mr Salib, the Commissioner's contention that it should not be accepted for that reason should not be accepted. Mr Salib was a witness who was cross-examined without restriction, and the Tribunal can presume he was cross-examined to the extent that the Commissioner considered appropriate.

99. To a significant degree Mr Ellis' evidence was directed to establishing that refining using the aqua regia process had occurred in relation to the treatment or refinement of all gold product purchases during the Disputed Tax Period, including gold products contended to have been purchased from Golden Angel and Sell Your Gold. Part of that analysis was founded on estimating the quantity of aqua regia that would be required to refine the gold products contended to have been purchased and analysing whether the applicant had by purchases or otherwise that quantity available. Relying on advice from Mr

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Salib, and the efficiencies in the applicant's plant Mr Salib claimed, which does not appear to have been disputed, Mr Ellis noted that aqua regia is made principally from nitric acid and hydrochloric acid, mixed in a ratio of one-part nitric acid and three parts hydrochloric acid[126] Ellis Report, [7.52]. and it could have been expected that the applicant would have used between 3.5 and 4.0 litres of aqua regia per kg of scrap gold refined.[127] Ellis Report, [7.55].

100. Mr Ellis's concluded that from records available and the quantity of scrap gold contended to have been refined, purchases of Nitric Acid and Hydrochloric acid appear to have been less than required to undertake the refining contended for; with between 63% and 72% of expected Nitric acid purchased and between 66% and 75.4% of expected Hydrochloric acids purchased.[128] Ellis Report, [7.68] and [7.80]. Table 12 reproduces Mr Ellis's tables tabulating these conclusions.


Table 12
Acid purchase shortfalls
High Use Low Use
Hydrochloric Acid    
Scrap Gold Refined Kg 2,950.18 2,950.18
Expected Hydrochloric Use Litres 8,851 7,744
Hydrochloric Acid Purchased Litres 5,842 5,842
Cover 66.0% 75.4%
Deficiency 3,008.86 1,902.54
Nitric Acid    
Scrap Gold Refined Kg 2,950.18 2,950.18
Expected Nitric Use Litres 2,950 2,581
Nitric Acid Purchased Litres 1,859 1,859
Cover 63.0% 72.0%
Deficiency 1,091.60 722.83

101. The shortfall is not explained reliably, and Mr Ellis speculates as to possibilities. The shortfall in purchases would be larger if the applicant's asserted efficiencies are optimistic and understate aqua regia usage in fact experienced.

102. Mr Ellis also gave evidence of electricity usage. He noted

7.97 The following graph shows the amount of pure gold refined each month in the period January to November 2016 by CPG and CPG's approximate monthly energy usage:

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103. In these circumstances Mr Ellis' report can be received as an unequivocal analysis that electricity use had parallels with refining activity and that there was a shortfall of purchases of refining consumable materials against what would be expected to refine the quantities of scrap gold the applicant contends it purchased and refined, and otherwise only be received by way of supplemental submission. Beyond these matters, Mr Ellis' report is no evidentiary weight.

Ms Wright's evidence

104. The Commissioner relies heavily on Ms Wright's evidence in relation to the connectivity of transactions through the Supply Chains.

105. Ms Wright is an established forensic accounting expert with more than 20 years' experience, in Australia, France, Canada and the United States in a broad variety of matters, who was retained by the AGS[129] Australian Government Solicitor. to prepare a report which has been led on behalf of the Commissioner.

Preliminary matters

106. Before going to what Ms Wright did, some preliminary matters need to be addressed.

107. The applicant levelled three broad complaints about Ms Wright's evidence:

108. In her report, Ms Wright disclosed as follows:[130] First Wright Report, [1.5].

1.5 DISCLOSURE OF INTERESTS

  • 1.5.1 I am independent of the parties. FTI Consulting may also undertake work from time to time on instructions from AGS in relation to other matters. Each professional engagement undertaken for AGS in relation to other matters is conducted separately and has no bearing on my capacity to act as in independent expert in the Proceeding.
  • 1.5.2 I have made all enquiries that I believe are desirable and appropriate.
  • 1.5.3 My professional fees are not contingent upon the final outcome in this matter.

109. Ms Wright also gave the usual declarations of an expert including that she understood her duty to the Tribunal, she had read and understood the Tribunal's guidelines for expert witnesses and that she had made all inquiries she believed were desirable and appropriate, and that no matter of significance that she regarded as relevant had, to her knowledge, been withheld.[131] First Wright Report, [20].

110. Possibly fuelled by perceptions of reluctance to disclose and of usurping the Tribunal's role in determining what assists the tribunal as revealed in the exchanges below:


[Counsel A] How many discussions would there have been with AGS to request those documents?--
Ms Wright -I would have to check my records as to any notes from any discussion
[Counsel A] Can you check all those notes tonight?---
Ms Wright Yes.
[Counsel A] And bring them in tomorrow please?
[Ms Wright] Yes.
[Counsel A] Thank you. If I scroll down that page you'll see there are two annexures
[Counsel R] Could I just raise to just clarify for the witness's benefit exactly what it is that my learned friend wishes for Ms Wright to check, is it how many requests the documents were made by one party or another, is that what Ms Wright is to inform the tribunal of?
Deputy President The number of discussions
[Counsel R] Yes, Ms Wright can do that, but it's not clear why she needs to bring in many notes of those discussions. Of course Ms Wright can check that information.
Deputy President He's asked her to and she's agreed to do it.[132] Transcript 17 May 2021, p153, l 44 to p 154, l 18.
and  
Deputy President Well, I'm wondering whether - this whole issue might be resolved by people producing notes of the meeting.
[Counsel A] Well, it would be, sir.
[Counsel R] I can take instructions about that. The question is to what end. I don't - I've got no objection to taking instructions about it, I just don't understand where it goes and how it assists the tribunal
Deputy President Well, I'm a little bit mystified about what the expert has been told …
[Counsel R] All right. I will seek instructions
Deputy President And Mr Wallis has laboured the point that the Tribunal is unaware of what directions or factual material Ms Wright has been given in that meeting and if - the notes of the meeting could make that uncertainty just go away …- and if anything arises … then an application to reopen can sensibly be made out of whatever is revealed …. But … - if the minutes of the meeting or notes of the meeting simply reveal what Ms Wright recalls, that she gave an update on her progress, well - -
[Counsel R] Thank you.
Deputy President - - - it seems to me, Mr Wallis, you can expect that would be the end of the matter.
[Counsel R] It's just it's - and I'm sorry to labour the point myself, but I do wish to understand whether - and sorry, I will make this clearer as well. I will seek instructions to have those notes produced to the tribunal, of course, but is it an enquiry at large about what factual material Ms Wright was given, if any, because if the enquiry is, "What were you told about this particular supplier?" The identity of which was then clarified in a later letter, I just don't understand. But I will seek instructions and perhaps that will clear it up, sir.
Deputy President Well, at the moment there's this vacuum, as I see it. There has been a discussion about what happened at a meeting … - and whether it's important or not I don't know, but if it is important and it's not reflected in the report, well then I think we should know about it. If it's unimportant that explains why it's not in the report and it goes no further.
[Counsel R] Very well. Thank you.[133] Transcript 18 May 2021, p212, l 18 to p 213, l 18.
the applicant went to great lengths to discredit Ms Wright's evidence in a sustained attack on disclosure of all of the communications with Ms Wright before her report was finalised.

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111. In cross examination concerning disclosure of communications Ms Wright left the Tribunal with the impression that she had no agenda in concealing communications, she had

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a complete preparedness to accommodate the applicant's counsel's request to locate and provide whatever material existed and that it was possible that inconsequential communications might not be documented, certainly be her. This assessment is illustrated by the following remark in cross examination on this topic:

I don't have a file note from that meeting because the purpose was for me to give an update to the AGS about the status of my work. So I didn't need to take notes at the meeting.[134] Transcript 18 May 2021, p204, l 38 to l 40.

112. When coupled with Ms Wright's declarations, her demeanour and openness left no doubt there was anything untoward or concealed.

113. Ms Wright was extensively cross-examined. Ms Wright's reports are accepted as reliable, comprehensive and based on careful analysis of the material before her. Ms Wright's evidence and report reveal that she undertook objective and detailed forensic analysis of the data, and reached conclusions based on the empirical data. She gave no appearance of advancing any thesis or views about the transactions or opinions about compliance with the GST Act. She also made appropriate concessions, including when cross-examined readily conceded there were gaps and inconsistencies in the documents she was required to review.

114. As to whether Ms Wright's report should be received as a summary or as an expert's report, there is clear authority[135] Quick v Stoland (1998) 87 FCR 371 382-3 Finkelstein J. to the effect that forensic skills deployed in organising and presenting significant volumes of business and financial data is a field recognised as expertise, and opinions given post that forensic examination and organisation are received as expert opinions. This is particularly so when the evidence does much more than state what is otherwise obvious from such records. Where the analysis of the books and records is required in order to draw the inferences that are sought to be made or an analysis of those books and records might prove to be a difficult task, then the reports are receivable as expert opinion evidence. The organisation of the material, which is all available to the parties and the Tribunal, is also a helpful a summary of it.

115. In matters such as these where there is vast material from multiple sources, if the Tribunal did not receive reports of the style prepared by Ms Wright, the Tribunal would be left in the hands of people, and some barristers might be included in this group, potentially ill-equipped to present vast volumes of material and draw together the implications and inferences that arise from that material in a digestible way. The material provided by Ms Wright allows large quantities of material from multiple sources to be understood and implications and inferences to be drawn from it. It ought not be forgotten that in a somewhat similar setting in HMHF,[136] HNMF and Commissioner of Taxation [2023] AATA 4067 . Ms Wright's work demonstrated that prior understandings of the factual setting were wrong.

116. The Tribunal accepts and receives Ms Wright's material as a useful, and thoughtfully and thoroughly prepared summary of vast volumes of financial data from multiple sources, and as an expert opinion of the implications that can be drawn from that material. Without assistance like this, hearings in matters such as these have the potential to be unmanageable. There is a significant public interest in receiving this sort of evidence in merits review proceedings in the Tribunal. Ms Wright's work can appropriately be regarded as expert opinion and well as a summary. Independently of these two bases for reception, not being bound by formal rules of evidence, the Tribunal can, and does, receive the work and conclusions because they are reliable and helpful.

117. As to Ms Wrights conclusions, the applicant says that it does not dispute that the transactions recorded in the documents analysed by Ms Wright occurred, or the particulars as to parties and amounts etc in those transactions. The Applicant accepts that other than the benchmarking conclusions reached by Ms Wright by reference to her use of the KITCO reported pricing for gold, the applicant has no complaint about the calculation accuracy of Ms Wrights work. The applicant accepts the calculations are all transparent, and that the data extracted into Ms Wright's spread sheets and data bases is accurate. In relation to Ms Wrights use of KITCO information, the applicant contends it is not transparent and is therefore problematic. Beyond

ATC 12567

having a theoretical problem with this circumstance, it is difficult to understand why the applicant complains in the circumstances. In the conduct of its business, the applicant relied on the KITCO reported pricings for gold to determine its trading prices. As a source of pricing information there cannot be a problem in relying on KITCO information. Broadly, Ms Wright's conclusions were that Galaxy sold bullion at slightly higher than what she perceived to be the market price for gold based on her KITCO averaging processes, and that, ignoring the GST effect on price the applicant bought scrap gold at slightly less than what she perceived to be the market price for gold, again relying on her KITCO extracted data. That pricing structure was Mr Salib's evidence in any event. His evidence noted at [207] below[137] Based on Mr Salib’s s 353-10 interview, ST1, p 335 and 336. was quite clear the applicant sought to buy scrap gold at between 96 and 98% of the spot price for gold and Galaxy sought to sell it at 100.5 to 101% of that spot price. Having regard to Table 1 above, it is highly likely that both the applicant and Galaxy achieved precisely what Mr Salib said were their goals. A spread between purchase and selling prices that generated a profit was achieved, and having regard to the commodity being traded the spread was likely to have been above and below the market spot price.

118. The sustained complaint about the underlying basis for Ms Wright's benchmarking conclusions that corroborate the applicant's own evidence in any event has the appearance of pettifogging. The Tribunal is not troubled by the criticisms directed to Ms Wright's KITCO information based conclusions. Those conclusions are highly reliable.

Ms Wright's assignment

119. Ms Wright was asked two questions.

120. Ms Wright was provided with the following information to prepare her report:[138] First Wright Report, section 4.2.2.

121. In preparing her analysis and report of it, Ms Wright assumed or proceeded on the basis that:[139] First Wright Report, section 4.

122. To address the questions asked of her, Ms Wright:

Ms Wright's conclusions

123. Ms Wright's formed conclusions concerning the applicant's business viz a viz the Supply Chain transactions in gold on a wholistic basis and on a Supply Chain by Supply Chain basis.

124. Those conclusions are incorporated in the relevant facts section below.

Mr Deng's evidence

125. Mr Deng's evidence concerned the tax compliance status of the Supply Chain entities. His evidence told a tale of tax non-compliance of or by the Intermediaries who were independent of the applicant. Table 15 gives an insight into the extent of it for the Direct Suppliers.


Table 15
Illustrative Direct Supplier tax compliance
Direct Suppliers Compliance indicator Commentary
O/S running balance account Ostensible GST liability not paid
Sell Your Gold $38,578,105.39   Outstanding balance as a group
GB Traders
GB Refiners
Gold Dust
Quality Gold
Golden Angel   $1,854,317.09 Now deregistered - reported no taxable supplies, no acquisitions and no GST payable or refundable
HA Exchange   $431,504.06 Now deregistered and did not lodge BAS

126. The Indirect Suppliers' tax compliance tells a similar tale

FACTS

The entities

CFGA

127. CFGA was registered on 19 September 1996.[141] ST16, p 1904. From around 2002,[142] ST1, p 237 line 15. in its capacity as trustee of the Salib Family Trust,[143] First Salib Statement [3(a)(ii)]. CFGA traded as a licensed second hand dealer[144] ST1, p 317 lines 31-35. from premises in Swan St, Richmond (Victoria)[145] ST1, p 237 lines 38-39. as King of Seconds.[146] ST1, p 236 lines 15-19. In 2009, after finding that "jewellery is probably more what [Mr Salib] wanted to do"[147] ST1, p 237 lines 16-17. changed its business[148] ST1, p 236 lines 9-15. by introducing the concept of a "gold party"[149] ST1, p 237 lines 17-20. , akin to a "Tupperware party"[150] ST1, p 237 line 20. by acquiring scrap gold[151] ST1, p 237 line 15 to p 238 line 10. from the "General public and businesses, jewellers and pawn brokers and the like"[152] ST1, p 240 lines 15-16. expanding in 2010 to Clayfield in Brisbane[153] ST1, p 238 line 19 to p 239 line 20. and in 2012 to Sydney[154] ST1, p 239 lines 20-22. and selling the scrap gold "to the refiners"[155] ST1, p 240 line 10 and First Salib Statement [8(f)]. specifically Focus Metals[156] ST1, p 240 lines 12-14. to eliminate the need to deal with a middleman.[157] ST1, p 241 lines 5-14.

Galaxy

128. Galaxy was registered on 19 February 2016,[158] ST20. acquired an ABN and registered for GST from 19 February 2016. Mr Salib's intention was that Galaxy become registered as a bullion dealer with Austrac[159] ST1, p 284 lines 34-39. and carry on an enterprise as a bullion dealer[160] ST1, p 284 lines 7-19. and operate from the factory and office in South Oakleigh.[161] ST1, p 317 line 14. Almost all of the enterprise conducted by Galaxy during the Disputed Tax Periods involved buying and selling gold bullion.

The applicant

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129. On 14 June 2013, the applicant was registered and, from September 2013, was registered for GST under the GST Act on an accruals and monthly reporting basis.[162] ST18.

Mr Salib

130. Throughout the Disputed Tax Periods Mr Salib was the sole director and shareholder of the applicant,[163] ST18, p 1913. CFGA[164] ST16, p 1905. and Galaxy.[165] ST20, p 1916.

Intermediaries

131. HA Exchange, Gold Dust and other Intermediaries[166] The term Intermediaries is used in these reasons because it has been used in the evidence and submissions. Its use does not mean that transactions between Supply Chain entities involve in all cases the same gold in a physical sense or the same metal. (R&N Metals, Manila Exchange and AX Traders) were incorporated shortly after or shortly before 1 July 2016, being the commencement of the relevant tax periods in which the scheme was carried out.[167] ASIC company extracts of: HA Exchange: ST24; Gold Dust: ST27; AX Traders: ST34; R&N Metals: ST38; and Manila Exchange: ST40.

Non-intermediary entities with a connection to the gold flows to the applicant's business

132. Baird & Co supplied bullion GST-free to QN Traders during the Disputed Tax Periods at or around the spot price for gold.[168] Baird & Co Invoices: ST87; QN Traders’ bank statements: ST130; and First Wright Report, [15.3.11]. A number of Intermediaries acquired gold bullion from Galaxy and bullion bearing the Baird & Co hallmark from QN Traders. These Intermediaries also sold gold to the applicant or to others who sold gold to the applicant.[169] First Wright Report at: [5.21.3.] – [5.21.4] regarding QN Traders’ bank statements; [14.3.18] regarding the source of gold supplied to the applicant by GB Refiners; and [15.3.16] regarding the source of gold supplied to the applicant by GB Traders.

The applicant's business

Refining origins

133. Mr Salib established the applicant to refine his own gold from his other entity to save money and to grow the business if he could.[170] ST1, p 256 lines 10-17. The applicant prepared forecasts and budgets for the proposed enterprise of refining scrap gold to produce and sell gold bullion.

134. The applicant met Mr Balant,[171] Mr Les Balant. who conducted a refinery trading as LB Metals in Melbourne, and over several months of regular meetings came to trust him enough to retain him to organise a trip to Italy for Mr Balant and Mr Salib to further his knowledge and to choose and acquire the aqua regia equipment.[172] First Salib Statement [8(l)] ST1, p 245 line 29-p 246 lines 32 and p 249 lines 5-15.

135. The applicant paid Mr Balant $10,000 to do organise the trip and meetings.[173] First Salib Statement [8(k)] ST1, p 246 lines 33-39.

136. On and or following the trip to Italy the applicant acquired the plant and equipment from sources in Italy and Spain to melt gold to facilitate sample testing.

137. The applicant installed the plant and equipment for the aqua regia process to produce "precious metal" from scrap gold.[174] ST1, p 249; p 343 & Mark Ellis Report [7.1].

138. The applicant secured, from CFGA, the right to apply the registered C4G hallmark[175] ST108 p 4790-4791 and First Salib Statement [5(a)(x)]. to the "precious metal" it produced.

139. The funds to enable the applicant to acquire the necessary plant and equipment for the aqua regia process were sourced from distributions of income from the Salib Family Trust[176] ST1, p 254 lines 19-20 & p 255 lines 5-9 and First Salib Statement [5(a)(vi)]. .

140. Mr Salib invested $935,000 in the applicant,[177] ST1, p 255 lines 11-15 and p 315 lines 34-39. sourced from the sale of an East Bentleigh, property to enable the applicant to acquire scrap gold to carry on its proposed refining enterprise.[178] ST1 p 255 lines 9-11.

The Applicant's trading

141. The Applicant traded during the Disputed Tax Periods as a:

142. During the Disputed Tax Periods, Mr Salib was the sole director and shareholder, and the secretary, of the applicant, Galaxy and CFGA.

143. The Applicant and Galaxy shared the same principal place of business in Melbourne's South-East during the Disputed Tax Periods.

144. The applicant's records on their face imply that during the Disputed Tax Periods the applicant inspected, weighed and sampled each acquisition of scrap gold and recorded details of the scrap gold on assay reports, including date of acquisition, invoice number, manner of delivery, CPG reference/job number, entity from which acquisition made, incoming weight (g), treated weight (g), and XRF analysis. After refining the applicant completed the details about purity, pure weight incl samples (AU) spot price, value inc GST, determined the amount it was liable to pay for the scrap gold and issued an RCTI for the acquisition.[182] First Salib Statement [9(a)(iii)] and [9(d)]; for July 2016 – ST57 pp 2170-2234; for August 2016 ST58 pp 2235-2330; for September 2016 ST59 pp 2231-2405.

145. The applicant determined the price for gold by reference to the KITCO spot price at 0930 AEST each day for 1 kg of bullion and only changed its price if the KITCO spot price moved more than 20 cents.[183] Second Salib Statement, section 6. KITCO is a Canadian based metals dealer that maintains a website on which it publishes spot prices for a range of valuable metals throughout each trading day in real time and maintains a spot price archive.

146. The times on the applicant's RCTI's and other records are not reliable indicators of the time events occurred. The applicant contends they at least reflect the order in which the documents were created but not necessarily the time of day at which the document was created or to the time the spot price was derived.[184] Second Salib Statement, section 7.4. The evidence given during cross examination of Mr Salib concerning time recording was unsatisfactory, and resorts to sarcasm was unhelpful. No conclusions as to the reliability of these aspects of these records can be reached as a consequence. The dates recorded on RCTIs are accepted as reliable.

147. During the Disputed Tax Periods the applicant retained, and paid staff as required to operate the plant and equipment to carry out the aqua regia process and to apply the hallmark to precious metal[185] ST1 p 289 and ST108 pp 4790-4792, ST248 pp 7796-7797, ST249 pp 7827-7828 and ST250 pp 7852-7853. and recorded the wages paid for staff in Ledger Account 6-2340.

148. The applicant's use of electricity use consistent with activity undertaken at the applicant's premises that consumes electricity. Between June and August 2016, power use was both consistent and above January to April levels.[186] Ellis Report, [7.104].

149. There was a correlation between the feedstock required by the applicant to refine scrap Gold the period January to November 2016 and the feedstock that the applicant ordered, recycled and potentially on hand in 2016.[187] Ellis Report, [7.88]. There was a shortfall of purchases of acids required to refine the quantity of scrap gold the applicant contends it refined as outlined in Mr Ellis's evidence above with no reliable evidence of how that shortfall may have been met.

150. The applicant used Bradbury to dispose of the waste chemicals resulting from the aqua regia process and recorded the acquisition of services from Bradbury in its "Waste Removal" Ledger Account 6-2950 forming part of its General Ledger.[188] ST248 p 7798, ST249 ps 7829, ST250 p 7855, ST252 p 7867 and ST252 p 7878.

151. On their face, the applicant's records reveal acquisitions of scrap gold and refining activities.

152. During the Disputed Tax Periods the applicant made GST free supplies of approximately 99.93%[189] First Wright Report [7.3.2]. of the precious metal it refined to Galaxy, at a price determined by reference to, and marginally higher than, the KITCO spot price.[190] Second Salib Statement of Michil, [6.4].

153. During the Disputed Tax Periods Galaxy made GST free supplies of " precious metal " to entities in weights including[191] ST65 July 2016; ST66 AuguST2016; ST67 September 2016. 1 ounce, 2 ounces, 5 ounce, 10 ounce, 100 grams, 200 grams, 500 grams and 1 kg bars ingots together with some minted products.[192] ST65 July 2016; ST66 AuguST2016; ST67 September 2016

154. Generally, the smaller weight sales, which numerically outnumbered the larger weight sales, are recorded as cash sales while the sales of 1 kg bars were made by way of EFT transfer for cheque.[193] ST65 July 2016; ST66 AuguST2016; ST67 September 2016.

155. Ms Wright reached conclusions concerning sales and purchases of gold through

ATC 12571

the Supply Chains on a whole of business analysis and a Supply Chain basis.

156. On a wholistic view, Ms Wrights conclusions which are accepted as reliable were that during the Disputed Tax Period:

157. A substantial part of the difference between the value of gold purchased and the amount paid to Intermediaries most likely lies in the offset agreement between the applicant, Galaxy, Golden Angel and Golden Touch.

158. Viewed holistically, treating sales and purchases to and from all sources in an aggregate way, Wright's conclusions are to the effect that

159. Ms Wright concluded that there was a degree of circularity of movement of gold as shown in Figure 2.

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160. Ms Wright reached conclusions concerning Supply Chain transactions which are dealt with below in the context of each Supply Chain.

Golden Angel related business

161. In mid-2016 a Mr Kendi[208] Mr Alex Kendi. approached Mr Salib with a request that CPG buy scrap gold from Golden Angel.[209] ST1, p 331 lines 24-44.

162.

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Mr Salib had never met Kendi previously and requested Kendi come to meet him at the South Oakleigh premises and Mr Salib believes that at the first meeting with Kendi he declined to buy gold from Kendi.[210] ST1, p 331 line 29. Mr Salib was concerned that the quantities of gold Kendi said he could sell to CPG might be beyond CPG's financial capacity and he did not want to be embarrassed by refusing a purchase.[211] ST1, p 333 lines 23-28.

163. Kendi requested another meeting with Mr Salib and presented a new option involving an offset arrangement and an unnamed business associate, that Kendi said was a bullion dealer.[212] ST1, p 332 lines 4-9.

164. Mr Salib listened to the new proposal and indicated he needed advice.[213] ST1, p 332 lines 9-14. After meetings with his accountant and lawyers Mr Salib arranged for an offset agreement to be prepared and after further discussions and revisions that agreement was executed by the four parties on 1 June 2016.[214] Second Salib Statement, section 5. There is no corroborating evidence of having consulted lawyer regarding the offset agreement. The document[215] ST41, p 1979 and following. on its face does not reveal any lawyer involvement and is rudimentary in its terms and not suggestive of the product of too many, if any, discussions and revisions.

165. The applicant contends that:

166. The applicant's records are consistent with the contentions that Golden Angel supplied gold to the applicant.

167. Assuming Golden Angel Supply Chain transactions[223] The transactions underlying the denial of ITCs of $1,854,317.09 as shown in Table 8. involving the applicant and Galaxy happened in accordance with the applicant's and Galaxy's records of them:

168. Invoices and bank statements referable to each of the Golden Angel Supply Chain parties are consistent with a sale of gold between each of those parties.[235] First Wright Report, [8.6.1(b)-(d)].

HA Exchange related business

169. The HA Exchange Supply Chain transactions[236] The transactions underlying the denial of ITCs of $431,504.06 as shown in Table 8. occurred in August and September 2016 by which supplies of gold were recorded as having been made by the applicant to Galaxy, by Galaxy to PH Gold, by PH Gold to HA Exchange, and by HA Exchange to the applicant.

170. Ms Wright observed "I may not have a complete set of invoices for sales from PH Gold to HA Exchange, as the volume of gold sold from HA Exchange to [the Applicant] is greater than the volume purchased by HA Exchange [from Galaxy]."[237] First Wright Report, [9.2.3(e)]. Depending on the reason for the difference in volumes, it is possible that the gold sold to the applicant by HA Exchange did not have its origins in gold sold by Galaxy to HA Exchange.

171. Excluding the GST effect on prices, HA Exchange purchased gold from PH Gold at a higher price than it obtained by selling gold to the applicant.[238] First Wright Report, [9.5.8].

172. Invoices and bank statements referable to each of the HA Exchange Supply Chain parties are consistent with a sale of gold between each of those parties.[239] First Wright Report, [9.6.1(a)-(d)].

Gold Dust related business

173. The Gold Dust Supply Chain transactions[240] The transactions underlying the denial of ITCs of $346,249.15 as shown in Table 8. occurred in August and September 2016 by which supplies of gold were recorded as having been made by the applicant to Galaxy, by Galaxy to Universal Distribution by Universal Distribution to Gold Dust, and by Gold Dust to the applicant.[241] First Wright Report, [10.1.2] and [10.2.1]-[10.6.1].

174. Such invoices as were available and bank statements referable to each of the Gold Dust Supply Chain parties are consistent with a sale of gold between each of those parties.[242] First Wright Report, [10.6.1(a)-(d)]. Invoices were not available for any dealings between Gold Dust and Universal Distribution. Ms Wright's "… analysis of Gold Dust and Universal Distribution bank statements [which] identified that they did not transact with any party other than the Gold Dust Supply Chain Parties, from which they may have purchased the quantity of gold sold to CPG Group … [led her to the] opinion that the gold sold by Gold Dust to CPG Group was ultimately sourced from Galaxy."[243] First Wright Report, [10.3.7]. Her reasons for the conclusion follow. The conclusion is compelling.

175. Gold Dust made purchases of gold worth $3.7 million from Universal Distribution and the applicant made purchases of gold worth $3.8 million (a GST Informed price) from Gold Dust.[244] First Wright Report, [10.3.7] and [10.6.1(d)].

176. Excluding the GST effect on gold prices, the price at which Gold Dust sold gold to the applicant was less than the price at which Galaxy sold gold to Universal Distribution.[245] First Wright Report, [13.5.3] and Figure 68.

Cash for Gold related business

177. The Cash for Gold Supply Chain transactions[246] The transactions underlying the denial of ITCs of $702,882.88 as shown in Table 8. occurred from July to September 2016 by which supplies of gold were recorded as having been made by the applicant to Galaxy, by Galaxy to Cash for Gold Australia, by Cash for Gold Australia to various entities, (including Diamond Moment, Infinity Jewellers and NC Jewellery), by those various entities to Cash for Gold Australia, and by Cash for Gold Australia to the applicant.[247] First Wright Report, [11.1.2] and [11.2.1]-[11.6.1].

178. Sales from Galaxy to CFGA and then onto Diamond Moment, Infinity Jewellers and NC Jewellery were sales of precious metal.[248] First Wright Report, Table 50 [11.3.11].

179. The quantity of gold sold by Galaxy to CFGA, and the amount invoiced for it was materially less than the quantity of gold sold by CFGA to the applicant and the amount invoiced for it.

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180. Excluding the GST effect on prices, CFGA purchased gold from each of Diamond Moment, Infinity Jewellers and NC Jewellery at a price higher than the price for which it sold gold to The applicant.[249] First Wright Report, Figure 59 and [11.5.4].

181. Prior to the relevant tax periods, in 2015, Mr Candag who was the proprietor of NC Jewellery, purchased bullion from another supplier, melted and transformed it to become either 9 or 18 carat gold and sold it in scrap form to CFGA.[250] Mr Candag et al s 353-10 interview on August 2017, pages 35-37 During the Disputed Tax Periods he purchased from CFGA and then did the same.

Sell Your Gold related business

182. Assuming the Blanco Supply Chain 1 transactions[251] The transactions when aggregated with the Blanco Supply Chain 2 transactions, underly the denial of ITCs of $2,609,347.16 as shown in Table 8. involving the applicant and Galaxy happened in accordance with the applicant's and Galaxy's records of them:

183. While timing of transactions was rapid, there is evidence that same day purchases and sales were a feature of Cash Pal's operations:


ATO Okay. So the pan was just - am I right in saying this - the plan was just on a small scale - -
Cefala Yes. Just - - -
ATO: - - - buying bullion and then doing what with it?
Cefala: Selling bullion. So, like, for example - sorry - buying bullion from Vicky. I say, "Look, do you want to - do you want - sell them to you as bullion?" …..picking them up, selling to you. Picking it up, selling it to you.
ATO Okay

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ATO Did you ever - when you bought the bullion, where did you used to keep it?
Cefala Never did
ATO: Did you sell it straight away?
Cefala: Straight away. I didn't want to - I didn't want to leave nothing at home. Right? So if I didn't have the sale on that day, like, if I didn't have a customer, I wouldn't buy it. If I knew I had a customer ….. and I bought it
ATO How - - -
ATO So - sorry. So can you walk us through that then. So did you have a customer - -
Cefala Yes
ATO - - - before you went to buy?
Cefala Yes. So what happened is - say I'd go up to you ….. the day before and I say, "Do you want - do you need anything for tomorrow?" and you say, "No. nothing." So I'd go up to Vick and say, "Vicky, can I buy things from you?" So if you said to me on the previous day, "Anthony, I want to buy one kilo," I'd go, "No problems. I'll chase that up for you. Vicky, do you have one kilo for sale?" If you say yes, then that's it.[259] Mr Cefala s353-10 Interview ST14 p 20, l 21-to l 45.

184. There is also evidence that gold transacted by Sell Your Gold was not bullion. Mr Blanko, who ran the Sell Your Gold business gave evidence of purchases from AU Scrap and AX Traders and evidence of the trend in the gold trading industry to secrecy:[260] Mr Blanko s353-10 Interview ST9 p 24, l 28-to p 25 l 19.


ATO Okay. So when they come in, how do they bring in the gold?.- - -
Blanco They bring it with them, all themselves.
ATO In what - bags? Is that what you said?
Blanco Well, depends. I think sometimes they had, like, a messenger bag - you know, like, those bags. Sometimes they have backpacks. I can't remember
ATO Okay. And in what form does that scrap come in?
Blanco It comes in as gold bars.
ATO As bars?
Blanco Yep
ATO Okay. Did these bars - - -
Blanco. They're deformed
ATO have any hallmark on them?
Blanco No. No. No. They're just deformed and ugly and with, like, trace - you know, with the little Borax and stuff.
ATO A little bit of what, sorry?
Blanco. Borax
ATO Borax?
Blanco Yep.
ATO Okay. So they bring in the bars. Do you ever ask them - or do you know where they come from?
Blanco No. I can't ask them this. It's insulting to them.
ATO Is it?
Blanco Yes. Because - think about it.
ATO But if - okay.
Blanco ….. say I sell to a refiner, right. Say Saz is the refiner, just for the argument's sake - "Saz, can I sell you some gold?" and you say, "Yes." Now, I'll get pissed off if you ask me, "Alex, who is your client? Who are you getting your gold from?" because that means that Saz wants to - Saz wants to screw me over.
ATO Yeah
ATO [ATO officer] got it.
Blanco It's - it's pure business ethic. I cannot ask my guys where - my customers, I can't …. I'd be - I'd be an - an ###### to do it. So I can't ask. I would love to know, because then I'll take their clients, but they're not stupid, either. They're not going to tell me. They're not going to tell me.

185. No contention is made that any gold needed to travel interstate and return on the same day for sales through this Supply Chain.

186.

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Drawing paragraphs [182(b)] to [182(e)] together, while a somewhat similar volume of gold was sold by Galaxy to Cheap Bullion to that purchased by the applicant from Sell Your Gold, it is not possible to conclude that it was the same metal or the extent to which it was the same metal given the additional volumes available to the Intermediaries and the additional source of gold. Even if it was the same gold, absence of interstate movement removes one significant difficulty in the proposition of purchase, adulteration and return in one day.

187. Assuming the Blanco Supply Chain 2 transactions[261] The transactions underlying the denial of a portion of the ITCs of $2,609,347.16 (apportioned with Blanco Supply Chain 2) as shown in Table 8. involving the applicant and Galaxy happened in accordance with the applicant's and Galaxy's records of them:

Butt related business

188. The Butt Supply Chain 1 transactions[268] The transactions underlying the denial of a portion of the ITCs of $2,869,088.44 (apportioned with Butt Supply Chains 3 and 4) as shown in Table 8. occurred in July and August 2016 by which supplies of gold were recorded as having been made by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap and / or AX Traders, by AU Scrap and / or AX Traders to GB Refiners, and by GB Refiners to CPG Group.[269] First Wright Report, [14.1.2] and [14.2.1]-[14.6.1]. The Commissioner originally described the sources to AU Scrap and/or AX Traders as ‘undocumented’. Ms Wright’s work identified the sources as Cash Pal, Cheap Bullion, and Galaxy.

189. QN Traders' and GB Refiners' bank statements reveal that QN Traders received funds from GB Refiners and GB Refiners paid QN Traders. However, no invoices from QN Traders for the sale of gold to GB Refiners were identified.[270] First Wright Report, [14.3.11]. It is possible that QN Traders was another source of gold supply to GB Refiners.

190. Excluding the GST effect on prices, GB Refiners purchased gold at a price higher than that for which it sold gold to CPG Group.[271] First Wright Report, [14.5.3].

191. Invoices and bank statements referable to each of the Butt Supply Chain 1 parties are consistent with a sale of gold between each of those parties,[272] First Wright Report, [14.2.3], [14.6.1(a)]. however it is not possible to conclude that all of the gold sold by GB refiners to the applicant was sourced in gold sold by Galaxy to Cheap Bullion.[273] First Wright Report, [14.1.2] and Figure 70.

192. The Butt Supply Chain 2 transactions[274] The transactions underlying the denial of ITCs of $595,870.10 as shown in Table 8. occurred in July 2016 by which supplies of gold were recorded as having been made by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap, by AU Scrap to GB Traders, and by GB Traders to the applicant.[275] First Wright Report, [15.1.2] and [15.2.1]-[15.6.1]. The Commissioner originally described the sources to AU Scrap and/or AX Traders as ‘undocumented’. Ms Wright’s work identified the sources as Cash Pal, Cheap Bullion, and Galaxy.

193. The 106kg of gold supplied to the applicant by GB Traders was mainly sourced from Baird & Co (through QN Traders) and from Cheap Bullion (through AU Scrap and Cash Pal).[276] First Wright Report, [15.3.1]-[15.3.14]. Only part of the 106kg had its origins in gold sold by Galaxy to Cheap Bullion.[277] First Wright Report, [15.1.2] and Figure 76.

194. Excluding the GST effect on prices GB Refiners sold gold to the applicant at a price lower than the market price.[278] First Wright Report, [15.5.4].

195. The Butt Supply Chain 3 transactions[279] The transactions underlying the denial of a portion of the ITCs of $2,869,088.44 (apportioned with Butt Supply Chains 1 and 4) as shown in Table 8. occurred in August 2016 by which supplies of gold were recorded as having been made by the applicant to Galaxy, by Galaxy to R&N Metals and to GB Traders), by GB Traders to R&N Metals, by R&N Metals to Manila, by Manila to GB Refiners and by GB Refiners the applicant.[280] First Wright Report, [16.1.2], [16.2.3].

196. Some of the gold sold by GB Refiners to the applicant had its origins outside the supply Chain.[281] First Wright Report, [16.1.2] and Figure 81.

197. Excluding the GST effect on prices, GB Refiners sold gold to the applicant at a price lower than market price.[282] First Wright Report, [16.5.2].

198.

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Invoices and bank statements referable to each of the Butt Supply Chain 3 parties are consistent with a sale of gold between each of those parties.[283] First Wright Report, [16.3.3], [16.3.4], [16.6.1(a)].

199. The Butt Supply Chain 4 transactions[284] The transactions underlying the denial of a portion of the ITCs of $2,869,088.44 (apportioned with Butt Supply Chains 1 and 3) as shown in Table 8. occurred in in September 2016 by which supplies of gold were recorded as having been made by the applicant to Galaxy, by Galaxy to:

200. Invoices and bank statements referable to each of the Butt Supply Chain 4 parties are consistent with a sale of gold between each of those parties with the exception of Manila to GB Traders.[286] First Wright Report, [17.6.1(a)].

201. It is possible that some of the gold sold by GB Refiners to the applicant had its origins outside the Supply Chain.[287] First Wright Report, [17.1.1] and Figure 85.

202. Excluding the GST effect on prices, GB Refiners sold gold to the applicant at a price lower than market price.[288] First Wright Report, [17.5.1] and Figure 89.

Quality Gold related business

203. The Quality Gold Supply Chain transactions[289] The transactions underlying the denial of ITCs of $48,357.81 as shown in Table 8. occurred in in September 2016 by which supplies of gold were recorded as having been made by the applicant to Galaxy, by Galaxy to Quality Gold, and Quality Gold to the applicant.[290] First Wright Report, [18.1.2].

204. Quality Gold purchased 6.5kg of gold from Galaxy and sold 8.9kg to the applicant. The gold Quality Gold purchased from Galaxy represents 73% of the gold it sold to the applicant.[291] First Wright Report, [18.2.3(c)]. Quality Gold also made payments to another entity with a name that suggests it was a bullion dealer (possibly matching the 2.4kg volume differential), and to unidentified entities and it is not known if these payments represent purchases of gold by Quality Gold in addition to the 6.5kg of gold purchased from Galaxy.[292] First Wright Report, [18.4.1].

205. Invoices and bank statements referable to each of the Quality Gold supply chain parties are consistent with a sale of gold between each of those parties.[293] First Wright Report, [18.1.3], [18.6.1(a)].

206. Excluding the GST effect on prices, GB Refiners sold gold to the applicant at a price lower than market price.[294] First Wright Report, [18.5.1] and Figure 93.

Gold trading generally

207. The applicant supplied gold bullion GST-free to Galaxy throughout the Disputed Tax Periods.[295] Witness Statement of Michil Salib dated 24 May 2019, [10(a)]. The prices payable for these sales were not affected by GST and were determined by reference to the spot price for gold, plus a small margin.[296] First Wright Report, [7.4.1] and Figure 39; [7.4.2]; CPG invoices from July, August and September 2016: ST54-56. The gold sold by the applicant to Galaxy included all of the 1kg hallmarked bullion bars which the applicant produced.[297] First Wright Report, [8.2.4.]; CPG invoices for July, August and September 2016: ST54-56; Mr Salib s 353-10 interview on 18 September 2017, p 85 lines 8-11; p 111 lines 4-20: ST1, p318; ST1, p344.

208. From July 2015 to December 2015, the applicant's non-capital acquisitions did not exceed $50,000 in any one month.[298] ST274, 8357-8369. ‘Non-capital purchases (G11)’ in each monthly BAS is as follows: July 2015 = $16,740; August 2015 = $47,783; September 2015 = $35,880; October 2015 = $35,552; November 2015 = $17,300; December 2015 = $15,603; January 2016 = $1,481,274.

209. The applicant's acquisitions from all Intermediaries (except CFGA) ceased within a day of receiving notice[299] ST97, 4439. Notice dated 22 September 2016. of the retention of its GST refund for the August 2016 monthly tax period.[300] ST243. Galaxy's bullion sales decreased sharply after the applicant was notified of the refund retention.[301] Annexure I to the First Wright Report; Business Activity Statements ( BAS ) lodged by Galaxy during the period 1 July 2016 to 31 December 2016: ST52; Galaxy General Ledger Details July to September 2016: ST236; and Galaxy GST Detail Report October to November 2016: ST235.

210. On the applicant's case, the Direct Suppliers sold scrap gold to the applicant. There is no dispute that six of the Direct Suppliers did that. While the applicant disputes knowledge of it, at least to some degree, the Direct Suppliers sourced the scrap gold sold to the applicant by purchasing either:

211. A considerable proportion of the scrap gold acquired by the applicant was already of a high percentage fineness. Accepting momentarily the applicant's case that all of its acquisitions were of scrap gold as it contends:

212. To the extent the Direct Suppliers or their connected Intermediaries in a Supply Chain:

213. As noted, the Direct Suppliers paid more to acquire the gold as bullion from Galaxy (and QN Traders) than the consideration receivable for their subsequent sale of the gold as scrap gold[306] The applicant’s RCTIs for July, August and September 2016: ST60-62; Galaxy invoices for July, August and September 2016: ST65-67; R&N Metals Purchase records: ST81; Baird & Co invoices from 1 June 2016 to 30 September 2016: ST87; Ellis Report [7.38] & [7.72]. ignoring the GST effect on that consideration. All other things being equal, the Direct Suppliers or other Intermediaries who bought bullion at prices not affected by GST, because those purchases were, first, GST free, and then input taxed supplies, and who adulterated the bullion and sold scrap gold as taxable supplies can be presumed to have traded at a loss. Properly calculated, either their sales revenue should not include the GST effect on the sale prices, or both the GST effect and the GST liability are properly recognised. The actual consideration received by the Direct Suppliers was higher than what was paid to acquire bullion because the actual consideration was a GST-informed price. While the Direct Suppliers charged, and collected, a GST-informed price, and thereby received or recovered from the applicant money with which their GST liabilities could be expected to have been met, they failed to pay their GST liabilities to the ATO. In other words, the Direct Suppliers made a loss on the transactions but their failure to pay GST meant that in a cash flow sense they profited. The Intermediaries who made taxable supplies of gold were dependent on receiving consideration for those supplies which was affected by the GST effect on the price paid.

214. Having regard to the effect of GST on the price paid for scrap gold, and ignoring ITC entitlements of like amount arising, the applicant paid more to purchase the scrap gold from the Direct Suppliers than what it received for selling the gold to Galaxy (bullion) after refining.[307] First Wright Report, [2.1.10]; CPG invoices for July, August and September 2016: ST54-56; the applicant’s RCTIs for July, August and September 2016: ST60-62; Ellis Report [7.38] & [7.72]; First Wright Report, [2.1.10]; CPG invoices for July, August and September 2016: ST54-56; the applicant’s RCTIs for July, August and September 2016: ST60-62; Ellis Report [7.38] & [7.72]. It is unlikely that the applicant would have paid a GST informed price for the scrap gold had they not been taxable supplies because it would have been uneconomic for the applicant to pay that price without the flow on of the legal effect of the supplies being taxable, the input tax credit entitlement.

215. Payment of a GST-informed price for scrap gold and the ITC entitlements that, at least economically, off-set part of the price for the scrap gold were incidents of a business model and series of transactions that increased the turnover the applicant enjoyed from its involvement in the scheme. It can be accepted that the volume of scrap gold available was enhanced by Intermediaries uncommercially transforming the bullion into scrap gold. The continuation of the applicant's refining operations depended upon the applicant having a supply of scrap gold.

216. If the scheme had not been carried out, the applicant would not have been entitled to the input tax credits for gold acquisitions from the Direct Suppliers. In this regard the GST net amounts refundable to the applicant for the Disputed Tax Periods were, because of those input tax credits, larger than they would have

ATC 12581

been but for from the scheme. Other consequences are that ownership of gold of vastly greater value than the Disputed ITCs would not have changed, and the applicant would not have paid enhanced prices for scrap gold of amounts equal to the Disputed ITCs. The evidence does not suggest whether that there was an alternative source of supply of scrap gold available to the applicant. The drop off in trading volumes suggests that if there was an alternative source, the applicant was not aware of it or was otherwise prevented from exploiting it.

217. In each of its BAS lodged for the Disputed Tax Periods, the applicant characterised its sales of gold to Galaxy as supplies of "precious metal" (bullion) within the meaning of s 195-1 of the GST Act, that were GST-free under s 38-385 of that Act.[308] T3-T7 – the applicant’s BAS July-Nov 2016; the applicant’s GST Detail Reports July – Nov 2016: ST241-246; the applicant** GST Detail Report for July 2016: ST246, p7773; the applicant’s GST Detail Report for August 2016: ST242, p7768; the applicant’s GST Detail Report for September 2016: ST243, p7769; the applicant’s GST Detail Report for October 2016: ST244, p7771; the applicant’s GST Detail Report for November 2016: ST245, p7772.

218. In all cases, the GST obligations of the Direct Suppliers from which the applicant's entitlement to ITCs flowed, informed the price the applicant paid for scrap gold. To an unascertained, but nevertheless significant, extent, those GST obligations of the Direct Suppliers, arose because one or more of the Intermediaries altered or adulterated bullion such that it became scrap gold that was sold to the applicant.

219. The applicant claimed input tax credits for the GST payable by Intermediaries to it on the supplies of the scrap gold they made to the applicant, because they were creditable acquisitions. Some of these claims led to refunds and others to prospective refunds that were retained by the Commissioner under s 8AAZLGA of the Administration Act.

220. Galaxy treated its supplies of the gold bullion as input taxed under s 40-100 of the GST Act on the basis that they were supplies of "precious metal" (bullion) as defined in s 195-1 of the GST Act such that no GST was payable.[309] Galaxy GST Detail July-Sep 2016: ST234; Galaxy GST Detail Report Oct-Nov 2016: ST235. First Wright Report It's sales were at prices not informed by GST considerations.

221. Several Intermediaries failed to lodge a BAS for the Disputed Tax Periods or lodged a BAS that understated the net amount of GST payable on supplies. The Commissioner amended Intermediaries' assessments of net amount when he detected that they had lodged an understated BAS.[310] BAS lodgement history of the Intermediaries: Affidavit of Yi Deng Affidavit [10].

ISSUE ONE - NO CREDITABLE ACQUISITIONS

Purported movement of gold in the Golden Angel Supply Chain transactions

222. The Commissioner's submission is that if the applicant dealt with Golden Angel at all, it dealt only in bullion and that records of the contrary are false. He says the transactions contended for did not happen or, if they did, the gold never left the refinery and was never adulterated and traded as scrap gold. The burden here, in circumstances where the Commissioner puts the existence or character of a transaction in issue, lies with the applicant to demonstrate that the outcome it seeks is more likely.

223. Whether there were supplies as contended for calls for an evaluation of the evidence and whether the applicant has established that it is more likely that there were transactions as recorded in the applicant's records and as outlined in the applicant's evidence.

224. In this regard, business records are not always conclusive. In Bayconnection[311] Bayconnection Property Developments Pty Ltd and Ors and Commissioner of Taxation [2013] AATA 40 . Deputy President S E Frost and Senior Member G Lazanas said:

86 …. tax invoices are documents of considerable importance; indeed they can represent cash to those seeking to claim ITCs on creditable acquisitions. However, the reality is that a tax invoice does not create a taxable supply; it records one. If a taxable supply did not take place, then a "tax invoice" is meaningless. In other words, documents that are so called "tax invoices" cannot substantiate a creditable acquisition, if in fact there was no supply or acquisition. It must follow that scrutiny of transactions is always essential, particularly transactions between related parties.

225. The same can be said of any business records.

226. The present circumstances call for balancing contradictory evidence.

Golden Angel Supply Chain and Golden Angel related ITC claims

227. For Golden Angel related ITC claims the facts at [167] above are pertinent. Key

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features of the evidence concerning Golden Angel related supplies are set out below.

228. Effectively the applicant makes two bald contentions in the following terms that do not address the evidence in any meaningful way.

229. While something happened concerning Golden Angel, Golden Touch, Mr Saad the applicant and Galaxy, it is not possible to say what that something was. Against the backdrop of the apparent impossibility of the transactions having occurred in the manner consistent with the applicant's accounting records, and money not passing through bank accounts that might corroborate the business records, it is not possible to conclude that the transactions occurred consistent with the records, either at all or that the transactions were purchases of scrap gold.

230. In the balancing exercise required, the Tribunal cannot reach a conclusion that the applicant has established the contended for transactions happened as asserted.

Sell Your Gold

231. The Commissioners contentions concerning the Sell Your Gold Supply Chain are largely circumstantial.

232. There are same day transactions. Blanco 1 Supply Chain transactions occurred on the same day except for 4 and 5 July. An invoice was issued by Galaxy to Cheap Bullion for a bullion sale on days matching an invoice issued by Sell Your Gold to the applicant for supply of (contended for scrap gold) on each respective day. Invoices through the chain were similarly matched. Similar features of transactions are observable through the Blanco 2 Supply Chain. The Supply Chain entities independent of the applicant and Galaxy had connections in ownership and control.

233. An asserted sequence of purchases of bullion by the applicant in earlier periods does not necessarily suggest that purchases which are recorded as scrap gold purchases for the Disputed Tax Periods, which eyewitness accounts say had the appearance of scrap gold, were in fact the same as earlier period purchases.

234. The short time frames within which gold moved in the present circumstances do not create an impossibility that ownership of gold passed through several hands and was adulterated at some point in the process. There is no suggestion of the need for interstate movement.

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235. In addition, and unlike Golden Angel Supply Chain, for the Sell Your Gold sales to the applicant (Blanco Supply Chains 1 and 2) there is gold from outside the chain introduced. As noted at [182(b)] and [187(b)] there was more gold available to Intermediaries than introduced at the start of the chain. This makes the challenge of the timing of transactions and adulterating the bullion on the way through not so limiting.

236. Each of Mr Golubov's and Mr Blanco's evidence was of an eyewitness account, given under affirmation, of what each of them saw. Each account is consistent with purchases of scrap gold by the applicant from Sell Your Gold. If there were contradictory invoices in the chain as referred to in the Commissioner's written submissions, that fact should not come as a surprise. Where Intermediaries are engaging in activities to facilitate illegal retention of money they receive through payment of the GST-informed price for gold, false records somewhere in the chain are hardly surprising events. Mr Golubov's evidence ought be accepted. Just because a person may have been involved in dishonest events in the past, as has been asserted in relation to Mr Blanco, does not make that person universally dishonest or unreliable. In the present circumstances, Mr Blanco's evidence is corroborated by documentary evidence and Mr Golubov's evidence. It would be inappropriate not to accept it in the absence of Mr Blanco having been called by either party and his credibility tested.

237. Finally, in this regard, there is no dispute that actual refining using the aqua regia process occurred at the applicant's premises. The extent of it is, for practical purposes, in issue.

238. For these reasons the weight of evidence supports a finding that gold sold by Sell Your Gold to the applicant was not bullion or precious metal.

239. The Sell Your Gold related ITCs need to be considered as part of the Division 165 analysis.

ISSUE TWO: SUBDIVISION 284-B ADMINISTRATIVE PENALTIES CONSEQUENT UPON THE ISSUE ONE SHORTFALL

240. Because the applicant has not demonstrated an entitlement to ITCs in connection with the contended for supplies made by Golden Angel and Sell Your Gold, there is a shortfall and penalty is a live issue.

241. Mr Salib's witness statement evidence was that:

242. Three immediate observations need to be made about Mr Salib's witness statement evidence. This evidence:

leaving it best characterised an ipse dixit that cannot provide any foundation for the asserted conclusions.

243. Assuming there was tax agent involvement in the process, the applicant did not lead any:

244. In re-examination Mr Salib gave quite contradictory evidence when explaining the process by which the applicant's BAS were prepared and filed. He said:


[Counsel] Can you explain the roles performed, or the division of work, between your bookkeeper and your accountant, please?--
[Salib] My bookkeeper does all the entries of data into MYOB, including sales, purchases, supply invoices, anything that the business spends, the invoices, that goes to the bookkeeper for entry into the accounting software that we use. And in this instance, it's MYOB. And also, all the sales invoices gets emailed to the bookkeeper so she can also enter all the sales records. Her job is to reconcile bank accounts against invoices paid or received, and preparing everything for the accountant. The accountant will go through everything again, and finalise everything for the purpose of lodging our tax return. We do our own BAS's. The accountant doesn't do the BAS's for us. And the account do the overall check-up every quarter and every end of financial year.[315] Transcript, 17 May 2021, p 125, l 26 to 37.

245.

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The BAS documents in evidence do not reveal any involvement of a tax agent.

246. The re-examination evidence was given without assistance, and contradicts his witness statement which has the hallmarks of it not being entirely his own evidence. For the purpose of determining who did what in resolving disputed penalty questions, the re-examination evidence is preferred.

247. The applicant's submissions do not develop the applicant's case in any substantive way. Rather what these submissions do is reassert the conclusionary propositions in Mr Salib's witness statement evidence. They do not address the contradictory evidence given in re-examination at all. In addition, the applicant's submissions refer to:

248. None of the three additional submissions assist fact finding. The contended for absence of puttage and reliance on a ruling need comment.

249. When penalty has been imposed for a false statement, and the challenge to that penalty is based on an asserted absence of a false statement, it is necessary to show that statements made were not false. That is not achieved by contending for an absence of puttage. Puttage rules are concerned with ensuring fairness and avoiding unfair surprises. Even if there were an absence of puttage, the Commissioner's penalty assessment is founded on a contention that there was a false statement. With or without puttage, any contention that there was a false statement in the present circumstances cannot be regarded as a surprise to any relevant party. To the contrary, it was clearly expressed to the applicant in the 5 December 2017 "Notice of assessments of shortfall penalty" where the Respondent said: "You have been assessed with administrative penalties because you or your agent made false or misleading statements and you have shortfall amounts because of those statements".[316] T 9. In response, the applicant objected on grounds which asserted entitlements to ITCs[317] T 10. Grounds 1 to 16. and denied existence of a shortfall amount.[318] T 10. Ground 17. It follows that the applicant was fully aware of the Commissioner's false statement contention.

250. For a ruling to be binding, the facts as they transpire (i.e., the proven reality) need to replicate the facts of the scheme ruled upon. Reliance on a ruling requires proof of this replication. That proof is not established by assertion alone.

251. Recognising that the Tribunal is not bound by the rules of evidence and can inform itself as it sees fit,[319] AAT Act, s 33(1)(c). the Tribunal is nevertheless required to have regard to evidence and other materials before it and to make findings of fact.[320] Implicit in the requirements of AAT Act, s 43(2)(b). Merits review in and by the Tribunal does not displace government agencies' decisions merely on the basis of ipse dixit styled assertions as to preferred conclusions that differ from those reached in the decision under review. The implications of a system of administrative review that gave determinative weight to those types of assertions as to preferred conclusions are obvious. While the material referred to at [241] above has been led as evidence the Tribunal cannot make contended for findings of fact based on it.

252. Penalty has been imposed on the basis of intentional disregard of the law. That is the highest level of base penalty intended to be imposed in more serious cases of tax shortfall amounts, namely where taxpayers or their agents make statements knowing them to be false. Actual knowledge of the falsity is required.[321] Buzadzic v Federal Commissioner of Taxation [2023] FCA 954 , Moshinsky J at [146] referring to Price Street Professional Centre Pty Ltd v Federal Commissioner of Taxation [2007] FCA 345 ; 66 ATR 1 , at [43]. This imposition sits on a spectrum

ATC 12586

that includes recklessness and failure to take reasonable care in making statements. Each of these penalty foundations are directed to shortcomings of lesser gravity. Such a penalty system requires conclusions to be drawn as to the level of seriousness of the shortcoming that produced the shortfall.

253. The Applicant's submissions concerning penalty are as noted above. In summary they are:

51.15 The Applicant is not liable to an administrative penalty in relation to any of the Relevant Periods.

51.16 There was no shortfall amount for any of the Relevant Tax Periods.

51.17 There is no base penalty amount.

51.18 If in the alternative the Tribunal finds that the Applicant or its registered tax agent did make a false or misleading statement the appropriate base penalty amount is 25% remitted to the maximum extent permitted by law to 20%.

254. The only substantive addition to what has already been noted is the [51.18] contention that if there is to be a penalty the relevant rate is 25%, presumably on the footing that there was an absence of reasonable care by either the applicant or 'its agent', with a remission. The 25% rate and remissions contentions are neither developed nor explained.

255. The applicant's contended for penalty outcomes must be rejected on either of two bases.

256. First, there isn't an evidentiary foundation to find facts that support the penalty contentions made on behalf of the applicant.

257. Second, the present context concerns a substantive dispute over entitlements to ITCs which, having regard to the evidence as a whole, have been claimed in circumstances where the applicant has failed to prove either that the relevant transactions occurred at all, or that the transactions occurred in the manner asserted. On either view, the applicant's records and contentions in evidence led from the applicant's director Mr Salib and from Mr Saad are necessarily contradicted and have not been found sufficient to determine the matters in dispute. Not having discharged the burden required in relation to the substantive ITC entitlement, the applicant is left in the situation that there isn't a foundation to suggest that penalty should be imposed differently. In circumstances such as these, the applicant's burden being as it is, namely, to show that penalty on the intentional disregard of the law basis is excessive, it is incumbent on the applicant to show that there was not knowledge of falsity in the statements made in its BAS as filed with the Commissioner. In failing to demonstrate it had acquired scrap gold as asserted, the applicant has failed to establish that its statements in its BAS as filed with the Commissioner were not false and therefore, by necessary implication, that the applicant's records and evidence were not likewise false. In those circumstances the burden of establishing that the penalty assessment is excessive cannot be seen to be discharged. Where penalty arises for multiple tax periods, the 20% increase is an additional imposition available. For like reasons, the applicant has not established that this ought not have been imposed.

258. The present circumstances have a parallel with the facts and principles espoused in Ngyuen[322] Nguyen v Federal Commissioner of Taxation [2018] FCA 1420 ; (2018) 265 FCR 355 Kenny J, at [2018] FCA 1420 [149] to [157] . where the burden of proof concerning the fraud or evasion opinion under review (and earlier, the appropriate base penalty) was linked to the underlying substantive issue concerning the burden of proving that deposits to certain accounts and other moneys at the taxpayer's disposal were not assessable. Adopting the approach taken in Nguyen leads to the outcome noted above.

ISSUE THREE - DIVISION 165

259. At the outset, it is important to note that the Commissioner does not contest that refining activity was carried on at the applicant's refinery premises. In assuring the Tribunal that there was no advantage to be gained in visiting the applicant's refinery the Commissioner confirmed that it was only in respect of two Direct Suppliers and three Supply Chains that the Commissioner denied there was refining activity undertaken, and in doing so noted that there were a number of other Supply Chains where refining activities were not contested. Further, electricity usage and purchases of chemicals used to undertake the aqua regia refining process are entirely consistent with refining of at least part, if not the

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substantial part, of what the applicant contends were acquisitions of scrap gold.

260. Further, the Division 165 analysis proceeds on the footing that absent Division 165 ITC entitlements arose. That requires an acceptance that there were taxable supplies to the applicant, without which there is no relevant GST benefit, that the gold product purchased by the applicant was not in precious metal or investment form, that refining took place, and that the end product sold was gold in precious metal form (or bullion) that was sold in furtherance of an enterprise that involved creating tax-free, as opposed to input taxed, supplies.

261. At least in respect of acquisitions from other than Golden Angel, the relevant transactions revealed by the applicant's records are taken and accepted to have happened in accordance with how the records suggest. The business records showing purchases of scrap gold and sales of precious metal are to be accepted as representing the transactions that they purport to represent.

262. It is in this context that Division 165 considerations arise.

263. A number of general observations are needed in relation to the Commissioner's division 165 case.

264. Some of the Commissioners contentions are not strictly how the legislative system works and at times inconsistent in that regard. For example, the Commissioner sought as findings of fact (among others) in terms:

The GST that [the applicant] incurred in acquiring the gold from the Intermediaries, resulted from the uncommercial transformation of that gold from bullion into a non-bullion form (from here on referred to as scrap gold or scrap ), and was essential to the efficacy of the scheme.

And

One or more of [the applicant], Galaxy, CFGA and the Intermediaries entered into or carried out a scheme for the sole or dominant purpose of [the applicant] obtaining a GST benefit from the scheme.

265. The applicant did not incur any GST. That factual finding sought is misconceived. The second finding above is not one called for by Division 165. What is called for by Division 165 are conclusions to be reached having regard to prescribed factors which are addressed below.

266. The Commissioner correctly states where GST liability lies in acknowledging and contending that:

The GST that was evaded by the Intermediaries and claimed as input tax credits by CPG Group only found its way into the gold price by the uncommercial act of bullion adulteration …[and] it was an evasion of GST purposefully created so as to generate the GST benefits for CPG Group, which benefits gave financial efficacy to the otherwise loss-making gold trades under the scheme

THE LEGISLATIVE SCHEME IN WHICH DIVISION 165 SITS

267. The general scheme of the GST Act is that a supply is taxable if, relevantly, it is made for consideration in the course of an enterprise carried on by a person who is registered, or is required to be registered, for GST and the supply is neither GST-free nor input taxed.[323] Section 9-5. The supplier is entitled to claim ITCs equal to the amount of GST liability that arises for the supplier in respect of taxable supplies by others to it that are creditable acquisitions.[324] Division 11. To be a creditable acquisition, the supply must be a taxable supply.[325] Section 11-5.

268. The GST system is said to be a practical business tax.[326] Saga Holidays Ltd v Federal Commissioner of Taxation (2006) 156 FCR 256 , [30] . Among other things, much reliance is placed on the provision of a tax invoice. Importantly, provided the supply is a taxable supply, the system does not call for or require a party intending to claim ITCs in calculating its periodical net amount to undertake any investigation of the legitimacy of its suppliers. While Australian taxation systems have outsourced assessment processes to the taxpaying community through self-assessment systems, they have not, at least to date, outsourced audit or investigation functions. The Commissioner's contentions directed to this topic are of little moment.

269. The general scheme is varied by Division 165 where it applies.

270. It is readily apparent that the scheme of the GST anti-avoidance provisions is very

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similar to the scheme of the anti-avoidance provisions in Part IVA of the 1936 Assessment Act.[327] Income Tax Assessment Act 1936 (Cth). Neither party disputes that the principles from the Part IVA authorities inform the construction of Division 165.

The legislation

271. Division 165, in particular s 165-40, allows the Commissioner to make a declaration negating the benefits obtained from a scheme where the Division operates. For Division 165 to operate, it is necessary that there be a scheme, that there be a GST benefit from the scheme and that either the sole or dominant purpose of a person who entered into or carried out the scheme, or part of it, was to get or obtain the GST benefit or the principal effect of the scheme, or part of it, was that the avoider got or obtained the GST benefit.

272. The Division operates where each of the four matters specified in s 165-5(1) are satisfied. They are:

  • (a) an entity (the avoider) gets or got a *GST benefit from a *scheme; and
  • (b) the GST benefit is not attributable to the making, by any entity, of a choice, election, application or agreement that is expressly provided for by the *GST law, the *wine tax law or the *luxury car tax law; and
  • (c) taking account of the matters described in section 165-15, it is reasonable to conclude that either:
    • (i) an entity that (whether alone or with others) entered into or carried out the scheme, or part of the scheme, did so with the sole or dominant purpose of that entity or another entity getting a *GST benefit from the scheme; or
    • (ii) the principal effect of the scheme, or of part of the scheme, is that the avoider gets the GST benefit from the scheme directly or indirectly; and
  • (d) the scheme:
    • (i) is a scheme that has been or is entered into on or after 2 December 1998; or
    • (ii) is a scheme that has been or is carried out or commenced on or after that day (other than a scheme that was entered into before that day).

(Emphasis as in original)

273. The substantive aspect of the present task is to answer the question posed by s 165-5(1)(c). Recognising undeveloped propositions to the contrary, which have not been ignored, the parties have largely conducted the dispute on the footing that the battle ground lies in whether the requisite dominant purpose or principal effect ought to be found. That said, it is still necessary to identify the relevant scheme and GST benefit because without them any test of purpose or effect cannot be undertaken in the required way.

Scheme

274. The applicant does not contend that the scheme particularised at [42] above is not a scheme as defined or a scheme against which the purpose and effect tests can be considered. It is not necessary to reproduce the definition of a scheme here as a consequence.

The GST benefit

275. Section 165-10(1) sets out the circumstances in which an entity gets a GST benefit from a scheme. Only paragraph (b) is relevant, and it is in the following terms:

  • (b) an amount that is payable to the entity under this Act apart from this Division is, or could reasonably be expected to be, larger than it would be apart from the scheme or a part of the scheme;

The purpose or effect of the scheme

276. There are two limbs to the test, one of which, at least, must be satisfied before Division 165 can apply; the sole or dominant purpose limb (s 165-5(1)(c)(i)) and the principal effect limb (s 165-5(1)(c)(ii)).

277. The matters to be taken into account in determining purpose or effect are set out in s 165-15(1) of the GST Act in the following terms:

  • (1) The following matters are to be taken into account under section 165-5 in considering an entity's purpose in entering into or carrying out the *scheme from which the avoider got a *GST benefit, and the effect of the scheme:
    • (a) the manner in which the scheme was entered into or carried out;
    • (b) the form and substance of the scheme, including:

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        (i) the legal rights and obligations involved in the scheme; and
      • (ii) the economic and commercial substance of the scheme;
    • (c) the purpose or object of this Act, … and any relevant provision of this Act … (whether the purpose or object is stated expressly or not);
    • (d) the timing of the scheme;
    • (e) the period over which the scheme was entered into and carried out;
    • (f) the effect that this Act would have in relation to the scheme apart from this Division;
    • (g) any change in the avoider's financial position that has resulted, or may reasonably be expected to result, from the scheme;
    • (h) any change that has resulted, or may reasonably be expected to result, from the scheme in the financial position of an entity (a connected entity ) that has or had a connection or dealing with the avoider, whether the connection or dealing is or was of a family, business or other nature;
    • (i) any other consequence for the avoider or a connected entity of the scheme having been entered into or carried out;
    • (j) the nature of the connection between the avoider and a connected entity, including the question whether the dealing is or was at arm's length;
    • (k) the circumstances surrounding the scheme;
    • (l) any other relevant circumstances.

The scheme articulated

278. The scheme articulated is as set out at [42] above. Notably, that scheme does not identify any evasion or illegal non-payment of GST liabilities on the part of the Intermediaries upon which their profitability depended. Nothing turns on this. That circumstance is undoubtedly a relevant consideration. The Commissioner did not submit otherwise. To the contrary, the Commissioner led significant evidence from Mr Deng concerning the incorporation and compliance status of the Intermediaries and acknowledged that:

The Deng Affidavit establishes that the liability for GST created by the supply of the gold to [the applicant] was invariably unpaid, whether because of fraud, evasion, understatement or a failure by Intermediaries to lodge a BAS reporting any GST payable.

The parties' positions in summary

279. As noted above, the principal issue is whether it is reasonable to conclude that:

The applicant's case

280. Other than that the scheme was entered into after the critical date of 2 December 1998, the applicant resists every element required to be satisfied for Division-165 to apply. And given what follows, it is not clear that the start date condition is conceded.

281. The applicant:

Scheme

282. The contention that the applicant was not a participant in the scheme articulated by the Commissioner, or any other scheme, is misconceived. The proposition is not supported by the evidence which the applicant doesn't contest. The scheme articulated includes transactions in which the applicant was involved, transactions that the applicant doesn't dispute occurred. Ms Wright's evidence shows transactions whereby gold moved between entities at particular values etc. The applicant does not dispute this evidence, nor can it having not lead any evidence to contradict it. The applicant's argument is not further explained or advanced and cannot be accepted.

GST benefit

283. The contention that the applicant did not become entitled to an amount greater than otherwise would be the case had it not participated in scheme is not developed, or even explained.

284. The bald proposition as put, fails to have regard to what the High Court said in Unit Trend Services[329] Federal Commissioner of Taxation v Unit Trend Services Pty Ltd (2013) 250 CLR 523 at p 543 [59] French CJ, Crennan, Kiefel, Gageler and Keane JJ. that in determining whether there is a GST benefit it is necessary to compare GST obligations and/or entitlements with and without the scheme and here, a reduced amount payable or an increased amount refundable arises from the very entitlements that the applicant is pursuing.

285. This contention too is misconceived.

Choices under the GST law

286. The apparent s 165-5(1)(b) contention also fails to have regard to what the High Court said in Unit Trend Services that

s 165-5(1)(b) … is concerned with whether the GST benefit in question, which (ex hypothesi) has been got from the scheme, is not one to which the exercise of a statutory choice has entitled the taxpayer.[330] Unit Trend Services at 250 CLR 541 [50] French CJ, Crennan, Kiefel, Gageler and Keane JJ.

and

s 165-5(1)(b) is not concerned to identify another relationship of cause and effect which might or might not proceed on a different level of cause and effect from that expressed by "got … from". Rather, the expression is, in its context, concerned with the absence of a statutory entitlement to the GST benefit in question.[331] Unit Trend Services at 250 CLR 541 [51] French CJ, Crennan, Kiefel, Gageler and Keane JJ.

287. A choice of a particular type of customer, even creating a particular type of customer as happened here, and selling to that customer with a known outcome of a lower GST liability or larger refund is not a choice contemplated by s 165-5(1)(b).

288. The applicant's GST law choices argument, therefore, cannot be accepted.

Dominant purpose and principal effect

289. The present dispute turns on an analysis of the principal effect of the scheme and/or the dominant purpose of the applicant or any other entity that entered into or carried out scheme or any part of it.

290. The applicant takes a rather varied approach to the s 165-15 factors some of which don't inform the appropriate outcome. Examples follow.

291. It is difficult to see how any of these propositions assist. In a matter such as the present, a favourable outcome for the applicant flows from a finding that it is not reasonable to conclude that the dominant purpose of the applicant or any person who entered into or carried out the scheme or any part of it was to enable the applicant to get the GST benefit, and that the principal effect of the scheme was not that the applicant got the GST benefit. And there are prescribed factors to be addressed to test for that finding.

292. As to procedural fairness contentions, the Commissioner has disclosed all transcripts of the s 353-10 interviews conducted, so their content comes as no surprise. The Commissioner doesn't rely on all of the transcripts in any event. The applicant had the opportunity to cause people to be summonsed to appear if it wanted to. And if the applicant had called any s 353-10 interviewee whose s 353-10 interview included evidence that conflicted with the applicant's case theory, the applicant could expect to have been permitted to test that evidence. In the Tribunal there isn't a prohibition on cross examination styled testing of evidence that has been procured by respondents having previously used coercive powers such as s 353-10 of Schedule 1 to the Administration Act which is provided to the Tribunal. To the contrary, procedural fairness considerations would arise if applicants were not allowed to test such evidence. The Tribunal doesn't see any denial of procedural fairness in these circumstances.

293. In any event some of that material is consistent with the findings of fact that the applicant contends should be made and helps the applicant.

294. The applicant's approach to the s 165-15 factors is that all of them lead to a conclusion that the dominant purpose of the applicant or any party that entered into or carried out the scheme was not to get the tax benefit and that the principal effect of the scheme was not that the applicant got the tax benefit. Among propositions that don't advance any case at all, for example the Commissioner publishing Taxpayer Alerts to warn taxpayers of risky transactions, and having intelligence and being tardy which have no bearing on the s 165-15 factors, the applicant points to matters which fall for consideration under one or more of the factors:

295. The Tribunal interprets[332] Permissibly stated in an organised way having regard to the role and function of the Tribunal and what was said in Brownlie v Minister For Immigration, Citizenship, Migrant Services & Multicultural Affairs [2023] FCA 436 , Feutrill J at [46] and [52], while not going beyond the outer limits of dealing with the evidence led and the issues advanced as they have been, see the caution given by Mortimer J in National Disability Insurance Agency v Davis [2022] FCA 1002 at [188] . the applicant's contentions as:

The Commissioner's case

296. The Commissioner makes assertions both at a whole of scheme level and at a s 165-15 test by test level, the latter naturally directed to the whole of scheme conclusion the Commissioner contends for. Recognising a recurring theme in them, and paraphrasing to an extent, the Commissioner contends that;

297. The propositions advance by the Commissioner were put, and tested, robustly. Reproducing a passage of that putting and testing exposes the issue to be determined:


Deputy President Which leads to the conclusion, if the GST was intended to be paid, this would never have happened
Mr Davies No, that's right. Couldn't have been. Couldn't have happened. Exactly.
Deputy President Why doesn't that [make] the absconding, the goal?
Mr Davies Because the not paying the liability isn't being achieved by not entering into the scheme. If the aim is not to have a liability -
Deputy President That's not what I asked
Mr Davies It is
Deputy President No, it's not. It's not paying the liability and absconding, and having the cash to abscond with
Mr Davies Let me just put it back to the tribunal. With the greatest of respect, to suggest that the goal is to abscond is a nonsense. The goal is to get the money from [the applicant], and then abscond. The goal is not to abscond. With the money. With the money. That's the whole explanation. "I want the money, that involves me getting it from [the applicant]. That's it.
Deputy President If that were the goal, solely, then it's a goal to lose money. Because getting it from [the applicant] and on-paying it to the Commissioner means the Intermediaries lose money.
Mr Davies Well, that's true, but it's the one and the same - the not on-paying doesn't remove the point that the objective - dominant objective purpose is to get the money. The fact that you're not going to pay it onto the Commissioner is completely consistent with that. "I want the money and I'm not going to give it to anybody else." It's just like profit. There's no dichotomy between the goal of absconding with the money once you've got it, and the goal of getting the money. It's just not - not a distinction. But the critical thing for the participants in this scheme is to end up with the money. And that involves not paying it, of course, but that's just a feature. Not paying the liability is not something that gives the participant a benefit. Getting the money is what gives the participant the benefit, and keeping it
Deputy President Keeping it is the same as not paying it, isn't it?
Mr Davies No. No, not at all.
Deputy President I think it is. How can you keep it and pay it? You keep it, you haven't paid it
Mr Davies That may be. But the [goal] is not going into this - it's not a goal of not paying a liability. It cannot be - it cannot be an explanation for the pursuit of what they're doing
Deputy President Well, if the explanation for the pursuit of what they were doing is to get the money and deal with it lawfully, it makes no sense.
Mr Davies Well, I accept "and deal with it lawfully" is not - that's - no, they're going to deal with it unlawfully. I accept that.
Deputy President And getting the money out of [the applicant] is a step in that process, isn't it?
Mr Davies No. With the greatest of respect that is the critical step, because unless you've got the money, whether you're acting lawfully or not is irrelevant. Absolutely irrelevant.

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Deputy President Well, you're getting the money from [the applicant]
Mr Davies That's the critical point. That's it. That's what it's all about
Deputy President And if a necessary step in that is creating an apparent entitlement to a reimbursement from the government, does that change the goal?
Mr Davies Getting the money?
Deputy President A necessary step in getting the money is creating an apparent entitlement to a refund from the government for somebody else
Mr Davies That's part - that's the step. That's how you get the money.:
Deputy President So does the necessary step become the dominant purpose or does the goal become the dominant purpose
Mr Davies It's the same thing. With the greatest of respect, the tribunal is trying to make a distinction between things that are ultimately the same way of expressing the same goal. That's why the High Court in Ludekens …….

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298. The activities of buying bullion at above spot price, adulterating it, and selling it as scrap or scrap gold at below spot price +10% were not ordinary commercial dealings. Evading tax liabilities rarely, if ever, are such dealings. And it is not surprising, possibly even to be expected, that non-ordinary steps are to be found in a sequence of events executing a plan to deliver cash to the evader who absconds or otherwise evades payment of tax liabilities. Accordingly, identifying transactions as uncommercial does not assist greatly, if at all, to determine the present matter. Critically in the circumstances, but for the scheme the Direct Suppliers would not have had a GST liability and would not have received the cash referrable to the evaded GST liability that they did not pay.

Was the applicant an informed participant in arrangements that included sale of deliberately defaced bullion to the applicant and if so does it matter?

299. On the basis of the evidence before it, the Tribunal infers and finds that the applicant through the agency of Mr Salib turned a blind eye to, the activities of the Intermediaries. The Commissioner does not contend that turning a blind eye makes a difference in the analysis. The Tribunal agrees.

300. No inference is drawn, however, from absence of evidence from the Intermediaries or those who controlled them. These individuals concerned were not "in the applicant's camp" and, to the contrary, may have been the architects of illegal behaviour exposing the applicant to the cost of their exploits.

Circularity of transactions and connectedness and co-ordination

301. The Commissioner's reference to connectedness, co-ordination, circularity and the like is ambiguous.

302. There is clear evidence that there was co-ordination between the Direct Suppliers and the applicant, and the applicant and Galaxy, and Galaxy and its customers. Given common ownership and control, any coordination of activities involving Galaxy can be regarded as within the knowledge of the Applicant. The evidence falls short, however, of co-ordination of all parties in a Supply Chain in each step of a Supply Chain and all activities of all of those parties.

303. The extent to which there were in fact circular transactions involving the applicant was also unclear. The evidence on which a specific finding in that regard could be made is neither conclusive nor sufficient to draw that conclusion or make that inference. The Intermediaries had more gold acquisitions in total than the amount of gold refined by the applicant and sold to Galaxy. There was a degree of circularity which must have been significant, but the proportion cannot be established.

304.

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The evidence does not trace particular gold through the transactions and the Commissioner does not contend that the same metal necessarily passed.

The applicant's compliance checks of suppliers

305. The Commissioner's submissions level criticism at the applicant's hap hazard due diligence in relation to its suppliers coupled with a do not want to know attitude.

306. That criticism is levelled in a context where it is not in contest that compliance activities in relation to Intermediaries was not a requirement of the system and that the supplies to the applicant by the Direct Suppliers were taxable supplies in a practical business tax system where tax invoices or recipient created tax invoices are significant. Once it is established that a supply to an entity is a taxable supply, and where, as here, a tax invoice is supplied or a recipient created tax invoice is created, there is no part of the GST law that makes the recipient's entitlement to an ITC dependent upon the activities of the supplier.

307. The GST system, said to be a "a practical business tax" - "one that is designed, where practical, to quarantine business from the ultimate burden of the tax"[333] Saga Holidays Limited v Federal Commissioner of Taxation (2006) 156 FCR 256 , 264 [29]-[30] . - would break down if that were a burden placed on taxpayers.

Division 165 jurisprudence

308. The Part IVA authorities, and more recently Division 165 authorities, inform the correct purpose and effect analysis. As relevant to the present setting, they are as follows.

Division 165 and commercial transactions

309. The sales of scrap gold by the Direct Suppliers to the applicant were transactions which changed ownership of very valuable commodities and at least in that sense can be regarded as commercial transactions. However, even if a transaction might be described as a commercial transaction, that fact, assuming it can be made out, does not, of itself, put the transaction beyond the reach of Division 165.[334] See Federal Commissioner of Taxation v Spotless Services (1996) 186 CLR 404 . Accordingly, even if the ultimate objective of the transaction is not a tax objective or the transaction producing the GST benefit also delivers a desired non-tax outcome, Division 165 may still operate. Adopting and adapting reasoning from the High Court decision in Hart, Division 165 might apply if there is enough in the way in which a transaction is entered into or carried out, viewed through the prism of the matters listed in s 165-15(1), that it would reasonably be concluded that the purpose of obtaining the GST tax benefit is properly regarded as dominant. Similar conclusions can be drawn if the way the transaction has been entered has "no explanation other than … fiscal consequences … contrived by the particular form of the … transaction"[335] Federal Commissioner of Taxation v Hart (2004) 217 CLR 216 at [18] , per Gleeson CJ and McHugh J. .

Whose purpose?

310. The question posed by s 165-5 in conjunction with s 165-15 is whether, having regard to all[336] Federal Commissioner of Taxation v Hart (2004) 217 CLR 216 at [70] , per Gummow & Hayne JJ. of the twelve factors to be considered, it is reasonable to conclude that any of the persons who entered into or carried out the scheme or any part of the scheme did so for the sole or dominant purpose of enabling the relevant taxpayer to obtain the GST benefit. In this regard:

A single composite purpose or non-dominant incidental purposes facilitating a dominant purpose?

311. Following the Full Court ACN and Complete Success Solutions decisions, it is

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necessary to address whether purposes of a supplier creating a taxable supply and therefore creating (or creating and not paying) a GST liability and for the recipient of the supply of a corresponding ITC entitlement are effectively different sides of the one coin, so to speak, such that they could be regarded as a single composite purpose. Both decisions involved Division 165 declarations negating ITCs where taxable supplies of gold materials were made after defacing gold bullion and the suppliers failed to pay the GST on those supplies.

312. The Full Court ACN decision expressed the principle in this way:

Insofar as ACN 154 submits that the dominant purpose of the scheme was for the Direct Suppliers to obtain the GST (which they would fail to remit to the Commissioner), rather than for ACN 154 to obtain input tax credits, this submission seems to go to the merits of the Tribunal's conclusion. In any event, we consider that it was open to the Tribunal to view the obtaining (by ACN 154) of the input tax credits and the obtaining (by the supplying entities) of the GST as comprising one purpose, in circumstances where the two were inextricably linked: cf
Federal Commissioner of Taxation v Ludekens (2013) 214 FCR 149 at [243].[340] ACN 154 520 199 Pty Ltd (in liquidation) v Federal Commissioner of Taxation [2020] FCAFC 190 , [224] .

313. The cited passage from Ludekens included:

In assessing the purpose and evaluating its importance, and whether it is dominant, one must appreciate that it is the scheme in question to which the enquiry is directed, not a general state of affairs other than the scheme. Persons engaged in trade and commerce do so for personal gain. The purpose of all commercial arrangements is, in a broad sense, the making of profit … Here the respondents undoubtedly wished to make profits from the purchase of woodlots and from running a foreign exchange business. They chose the Plan to effect that. Integral to the Plan was that the entities acquiring woodlots on 30 June 2007 … would obtain scheme benefits from the GST refunds from the purchase of the woodlots and that the Secondary Investors would obtain scheme benefits from tax deductions and tax refunds from their participation. Those are not two purposes: they comprise one purpose - that scheme benefits in terms of lowered tax-related liabilities and increased amounts that the Commissioner must pay or credit (s 284-50(1)(a) and (b)) would flow to them and others. Those two streams of funding, together with the commission from Gunns, were to be used to prop up the foreign exchange business …

314. It is, perhaps, not difficult to contemplate purposes of creation of a taxable supply, a GST liability and a corresponding ITC entitlement, in appropriate circumstances, being regarded as a single purpose. But that, of course, would not exclude the possibility of non-payment of the GST liability and retaining the relevant cash being the dominant purpose. The first three events, so to speak, might be seen as a means to an end. However, Complete Success Solutions takes the matter a little further:

Indeed, it would be open to conclude that the purpose of obtaining (and not remitting) GST and the purpose of obtaining input tax credits for CSS were one purpose if the facts showed them to be inextricably linked: ACN FC at 513 [224]. Such a conclusion might be open, for example, if it were concluded that it was important to Manila Exchange that the scheme end with a GST-free supply by an entity that would be refunded input tax credits, so that the scheme as a whole would work by being sufficiently funded.

(Emphasis added.)

315. There, the Full Court contemplates the possibility of the obtaining and not remitting amounts referrable to GST and the obtaining of ITCs being collectively a single purpose. The Court did not mandate that there was such a purpose.

316. Recognising the analysis is focused on a different statutory setting and test, Gageler J's comments in Mills[341] Mills v Commissioner of Taxation (2012) 250 CLR 171 at p 202-203 Gageler J regarding the standing of facilitative steps toward an ulterior and ultimate goal inform the characterisation of steps in a linked chain of events. There his Honour said:

64 There is, in the Explanatory Memorandum for s 177EA as originally

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inserted into the ITAA 1936 in 1998, already quoted, a very clear statement that "[a] purpose is an incidental purpose when it occurs fortuitously or in subordinate conjunction with another purpose, or merely follows another purpose as its natural incident." The statement, repeated in the Supplementary Explanatory Memorandum, employed the word "or" disjunctively because a purpose may be in subordinate conjunction with another purpose or may do no more than follow another purpose as the natural incident of that other purpose without necessarily being fortuitous. The statement accords with standard definitions of the word "incidental" to be found in mainstream dictionaries and with a natural reading of the statutory text, "an incidental purpose", in the context of s 177EA(3)(e). The adoption of the meaning conveyed by the statement as the proper construction of the statutory text produces the result that a purpose of a person, in entering into or carrying out the scheme for the disposition of equity interests, of enabling a holder to obtain a franking credit is "an incidental purpose" outside the scope of s 177EA(3)(e) if that purpose does no more than further some other purpose or follow from some other purpose. ….(Emphasis added)

…

66 [A] purpose can be incidental even where it is central to the design of a scheme if that design is directed to the achievement of another purpose. Indeed, the centrality of a purpose to the design of a scheme directed to the achievement of another purpose may be the very thing that gives it a quality of subsidiarity and therefore incidentality. That is not impermissibly to confine the scope of s 177EA(3)(e) to a dominant purpose: the categories of "dominant" and "incidental" are not exhaustive. The parenthesised words in s 177EA(3)(e) make clear that a dominant purpose of enabling a holder to obtain a franking credit is sufficient but not necessary for the requisite jurisdictional fact to exist, but it does not follow that a purpose which does no more than further or follow from some dominant purpose is incidental. Second, counterfactual analysis is not antithetical to the statutory inquiry mandated by s 177EA(3)(e). Purpose is a matter for inference and incidentality is a matter of degree. Consideration of possible alternatives may well assist the drawing of a conclusion in a particular case that a [requisite] purpose … does or does not exist and, if such a purpose exists, that the purpose is or is not incidental to some other purpose.

The s 165-15(1) factors

317. Viewed holistically as is permitted the s 165-15(1) factors lead to a conclusion that the dominant purpose in principal effect of the scheme was to create a taxable supply, a GST informed price, payment of that price to the Direct Suppliers to facilitate the Direct Suppliers receiving and retaining that price for their own use, uses that include further participation in repeat efforts of the same scheme, and evading their GST liabilities to the Commissioner. An incidental and facilitative part of the scheme and achievement of that purpose was that taxable supplies would be made creating input tax credit entitlements for the applicant.

318. The matters relevant to the tests to be addressed and their analysis are set out below. References to a "part" of a scheme focus in particular on those parts of the scheme comprising the Direct Suppliers defacing bullion and then selling it as scrap gold to the applicant. If the requisite purpose and effect cannot be made out in relation to these parts of the scheme as posited, the Tribunal cannot see how the requisite purpose or effect can be shown in relation to any other parts of that scheme.

Manner of execution (para (a))

319. In a case where the relevant competition or comparison is between pursuit of commercial ends and pursuit of a GST benefit with no illegal evasion involved, the existence of steps that are uncommercial or extraordinary in the manner or execution of the scheme might suggest pursuit of the GST benefit is dominant. However, where the relevant comparison is between pursuit of a dishonest end and pursuit of a GST benefit, extraordinary, or irrational or uncommercial

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steps might be expected in the sequence of events. In that setting such steps might more appropriately indicate, as part of the analysis of the manner of execution of a scheme, that that other goal was either the sole or dominant purpose of a participant in the scheme.

320. Absent adulteration of gold bullion, in many respects the relevant transactions were carried out in the way of ordinary transactions. The steps taken were largely as would be expected in arm's length sales of scrap gold and gold bullion. Indeed, aside from the one respect noted immediately below, but for the non-payment of GST by the Direct Supplier the transactions would likely have been regarded as unremarkable from a fiscal perspective.

321. It was extraordinary that the Direct Suppliers adulterated bullion, destroyed some of its value and then, ignoring GST effects on prices, sold what had become scrap gold at prices that were less than their acquisition costs. But those prices at which they transacted were not remarkable as a bargain struck between the suppliers and the applicant for scrap gold.

322. The applicant paying dollar for dollar amounts as components of GST-informed purchase prices, in a setting where for the applicant, only refining profits were generated, suggests the manner of execution test does not point to a dominant purpose of the applicant or any other participant in entering into or carrying out the scheme that the applicant obtain ITC entitlements.

323. The pricing issue is, of course, linked to the adulteration of bullion which is certainly out of the usual. However, in the Tribunal's view that part of the scheme is explicable by the Direct Suppliers' purpose of securing a GST-informed amount of money and its retention through evading GST liabilities. It does not suggest a separate dominant purpose of the applicant obtaining ITCs.

324. For these reasons, the manner in which the scheme was entered into or carried out does not support a conclusion that any entity entered into the scheme or any part of the scheme with the dominant purpose of the applicant obtaining the Denied ITCs. Even with the applicant turning a blind eye to others' activities, the manner in which it was carried out supports a conclusion that the Direct Suppliers had a dominant if not sole purpose of securing a GST-informed amount of money and its retention through evading GST liabilities. It would not support a conclusion that any entity had a dominant purpose of the applicant obtaining the Denied ITCs. The applicant would still have obtained refining profits only.

325. Similarly, the Tribunal does not identify any aspect of the manner in which the scheme was entered into or carried out that supports a conclusion that the principal effect of the scheme or any part of the scheme was the applicant obtaining ITCs. The principal effects of the scheme as a whole were the change of ownership of very high values of gold and after that securing a GST-informed amount of money and its retention through evading GST liabilities. The principal effect of the adulteration aspect of the manner of execution was to transform the character of the relevant gold and to devalue it.

Form and substance test (para (b))

326. The legal form of the transactions was not consistent with the economic and commercial substance. What was precious metal in investment form was altered so that it no longer conformed to the "in investment form" standard. It was an alteration that facilitated a different attribute in the marketplace that attracted a different trading price structure which in turn facilitated a receipt of money that the Direct Suppliers would keep. Where an actual purpose is to effectuate illegal GST evasion, it can be expected that trickery or facades may be involved, and that form and substance might differ.

327. The Tribunal does not consider the form and substance of the scheme support a conclusion that any entity entered into or carried out the scheme or a part of the scheme with the dominant purpose of the applicant obtaining ITCs.

328. Similarly, the Tribunal does not consider that the difference between the form and substance of the scheme leads to a conclusion that the principal effect of the scheme or any part of the scheme was for the applicant to obtain ITCs.

329. The system of levying GST on dealings in gold substances is very much form driven. Metal in substance, i.e., chemically and

ATC 12599

atomically, identical, may be treated differently depending on its presentation or its form. Producing something that is in form different to its substance and transacting in it, as has happened here, transformed the character and its sale transferred the ownership of the highly valuable commodity. This was the principal effect to be recognised.

Purpose or object of Act etc (para (c))

330. So far as the applicant obtained the Denied ITCs on the acquisition of taxable supplies in the course of its enterprise, that is an unremarkable outcome under the GST Act. It is well-known that, with limited exceptions, GST on acquisitions is intended to have a neutral impact on a GST-registered taxpayer's costs. That is a fundamental feature of value-added taxation systems throughout the world. It does not support a conclusion that any entity entered into the scheme or a part of the scheme with the dominant purpose of the applicant obtaining ITCs.

331. The artificial creation of a GST liability, and corresponding ITC entitlement, by defacing bullion may be seen as not an object of the GST Act. However, a liability arising on a taxable supply is an intended outcome under GST law regardless of the circumstances giving rise to the liability. Even illegal supplies may be taxable supplies.[342] Section 9-10(3). Once the gold was no longer precious metal its subsequent supply being taxable was unremarkable and an intended outcome under the GST Act.

332. The purpose or object of the GST Act includes, fundamentally, to create a liability for GST on taxable supplies. That is what occurred here. It is the failure to pay the GST that departs from the object of the GST Act, not the allowance of ITCs on business-to-business acquisitions which is the standard and intended object of value-added taxation.

333. This factor does not suggest a conclusion that producing the GST benefit was the dominant purpose of the scheme for these supplies.

334. Nor is there anything in the object of the GST Act that suggests the principal effect of the scheme, or a part of the scheme was for the applicant to obtain ITCs.

Timing of the scheme (para (d))

The period over which the scheme was entered into or carried out (para(e))

335. The two tests can be considered together.

336. There does not appear to be any timing aspect of the scheme that suggests a dominant purpose or principal effect of securing the ITCs for the applicant. If anything, the timing aspects suggest the contrary.

337. To the extent it happened, the round robin nature of the movement of the same gold from the applicant to and through the Direct Suppliers and back to the applicant, and the repetition of the cycle of transactions, and the timing of those steps suggest that the scheme was structured to be, to the extent of this circularity, self-contained and possibly self-perpetuating. The timing of the circular steps suggests, if anything, pursuit of securing a GST-informed amount of money and its retention through evading GST liabilities.

338. These factors do not suggest a conclusion that producing the GST benefit was the dominant purpose of any entity entering to or carrying out the scheme or any part of the scheme.

339. Effective discontinuance after the Commissioner stopped refunds goes to affordability. The applicant could no longer afford to pay market prices for scrap gold so stopped paying them. That prevented continued enjoyment of a normal refining profit.

340. The Tribunal is unable to identify any basis on which timing matters could support a conclusion that the principal effect of the scheme or a part of the scheme was the applicant obtaining ITCs.

The effect of the Act on the scheme apart from Division 165 (para (f))

341. The conventional analysis is that this test necessarily reveals that, absent the operation of Division 165, less GST would be payable, or a bigger refund would ensue. Just because a transaction has an effect of lowering tax liability or increasing a credit does not necessarily attract an inference that the parties to the transaction entered into it or carried it out for the sole or dominant purpose of obtaining that tax consequence.[343] Federal Commissioner of Taxation v Hart (2004) 217 CLR 216 at [15] per Gleeson CJ & McHugh J; [65] per Gummow & Hayne JJ. This is particularly so

ATC 12600

when other benefits and taxation liabilities are also produced by the scheme identified. Under this conventional analysis, little weight would be attached to this factor. This is so because the mere fact of a GST benefit cannot lead to the result that the dominant purpose of the relevant scheme was to secure that benefit. If it did there would be no need for the other factors to be assessed.

342. An alternative approach rests on a premise that any test ought be capable of pointing in either a positive or negative way in the analysis required and should be capable of supporting or contradicting the requisite conclusion in different settings. There seems little point in having a test factor which can only point in one direction. Under the alternative approach, it is necessary to look to whether the outcome of the scheme transactions absent Division 165 applying is consistent with the operation as intended by the GST Act.

343. Here, the GST Act intends to allow an ITC to an entity carrying on an enterprise that has paid for an acquisition, and paid dollar for dollar for it, in a business-to-business transaction under a practical business tax system that places great reliance on the use and acceptance of tax invoices. On that footing, absent the operation of Division 165, the outcome in the present circumstances is entirely consistent with an intended outcome of the GST Act. This factor, analysed this way, suggests that the dominant purpose of participants in the scheme was not to secure a GST benefit. This is not a case where, by some artifice on the part of the taxpayer, a GST benefit ensues without the full cost of securing it having been paid.

344. The Tribunal considers that either little weight ought to be given to this factor, or it should suggest a non-GST benefit purpose.

345. It is true that if one considers only the part of the scheme that is the defacing of bullion before its sale to the applicant, that part of the scheme causes a change in the GST status of the commodity and its subsequent sale. But that is a change that causes GST to become payable where it would not otherwise have been payable. And, more importantly, the economic impact is neutral because of the applicant's entitlement to ITCs. That supports a conclusion that the dominant purpose of the Direct Suppliers was to secure for themselves money and to evade payment of GST rather than for any entity to obtain ITCs. It does not support a conclusion that the principal effect of the scheme or a part of the scheme was for the applicant to obtain ITCs.

346. The Commissioner's propositions to the effect that the scheme made no sense without the Disputed ITC entitlements, and an inability to trade viably without them, in respect of this test seem misplaced. However, the Commissioner's proposition under this test that:

After the Intermediaries obtained a GST inclusive price that depended on [the applicant's] GST refunds for input tax credits (the GST benefits), many evaded their obligation to remit GST that [the applicant] paid them in the price of its scrap acquisitions.

The Tribunal ought to find that such evasion would not have occurred but for the creation of [the applicant's] entitlement to GST refunds under the scheme, as it was uneconomical for the Intermediaries to acquire bullion, supply scrap and pay the GST on their scrap supplies to [the applicant].

reveals the facilitative nature of the payment of a GST-informed price and the taxable supplies that lead to it and any ITC entitlement associated with it in a scheme to acquire and keep money in an illegal evasion scheme.

Change in the avoider's financial position (para (g))

347. It is difficult to dispute the Commissioner's contention that the applicant's net asset position and cash flow depended on entitlements to the Disputed ITCs. Two observations are self-evident: first, in any arrangement where prices are paid for inputs equal to the ITCs claimed, net asset positions will be affected by ignoring half of the money flows or entitlements to money flows, and second, if margins are very tight, denying an entitlement to 10% of the revenue flows to a business without ignoring 10% of the expenses of the business is likely to affect profitability in a material way.

348.

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However, the test and necessary comparison is not:

any change in the avoider's financial position that has resulted, or may reasonably be expected to result, from the GST benefit

349. Inviting a comparison of balance sheets with and without the GST benefits recognised might be permissible if the test were as stated. The test has to have regard to the scheme. Here the scheme includes payment of a GST-informed price.

350. From the applicant's perspective, namely an enterprise that produced precious metal and sold it thus making GST-free supplies:

351. Viewed globally, the only potentially measurable financial benefit was enhanced profitability from enhanced trading.

352. The Full Court ACN decision made clear that availability of ITCs has a neutral effect on profit[344] At [206]. which is determined net of GST considerations. Mere availability of ITCs cannot be regarded as a source of profit.

353. The Tribunal also considers this factor does not support a conclusion that the principal effect of the scheme or a part of the scheme was the applicant obtaining the Denied ITCs. The obtaining of the ITCs had a neutral impact on the applicant since it was matched by the obligation, which it met, to pay a price for the scrap gold that was informed by a corresponding GST amount.

Change in financial position of connected entities (para (h))

354. There is no question that the Direct Suppliers were financially disadvantaged by the scheme if the non-payment of GST, which does not form part of either of the Commissioner's articulated schemes, is ignored. That is because their sales prices for the scrap gold were less than they paid for bullion in investment form.

355. The Commissioner's submission, which stops there, analyses half the story, and ignores the facts revealed by the evidence he led.

356. It is artificial to ignore the non-payment of the evaded GST when that is undeniably the end goal of the scheme. It is objectively clear that without that non-payment the Direct Suppliers Intermediaries participation in the scheme would have made no sense, and would not have happened. The artificiality in ignoring the non-payment by the Direct Suppliers probably explains the extensive evidence led by the Commissioner[345] The Deng affidavit. of the financial affairs of the Intermediaries and their lack of GST compliance.

357. The Direct Suppliers were, if outstanding liabilities are not taken into account, enriched in a cash sense by not paying the GST they were liable to pay. That enrichment exceeded the spot price differential between what they paid for bullion and what they sold the scrap gold for. That suggests those entities had a dominant purpose of enriching themselves by collecting money but not paying GST - that was the sole source of their enrichment.

358. There are no identifiable financial changes for any other entity that could be regarded as supporting a conclusion that an entity had a dominant purpose of the applicant obtaining the Denied ITCs. It may be the case, that entities enjoyed an enhanced turnover and profitability from the scheme, but they continued to enjoy refining styled profits.

359. Accordingly, the Tribunal concludes that any changes in the financial position of the other parties would not support a conclusion that any entity entered into or carried out the scheme or a part of it with the dominant purpose of the applicant obtaining the ITCs.

360. Similarly, this factor does not support a conclusion that the availability of the ITCs was the principal effect of the scheme or a part of the scheme. A financial effect of ITCs would be illusory when, as here, matched by a liability to

ATC 12602

pay a price that includes a corresponding amount of GST.

Other consequences for the avoider or connected entities (para (i))

Nature of connection between entities (para (j)).

361. There is no suggestion that the dealings between the Direct Suppliers other than CFGA and the applicant were other than at arm's length in both the relationship sense and in the sense that commercial prices were paid for the relevant supplies. The latter is not surprising since there is no common ownership between the Direct Suppliers and the applicant or Galaxy.

362. This factor does not support a conclusion that any entity entered into the scheme or a part of the scheme with the dominant purpose of, or that the principal effect of the scheme or any part of the scheme was, the applicant obtaining the Denied ITCs.

363. Any knowledge of activities of transacting parties as contended for by the Commissioner could be attributed to pursuit of the end goal of the GST evasion in any event.

Circumstances surrounding the scheme (para (k)) and other relevant circumstances (para (l))

364. One such circumstance, excluded by the Commissioner from his articulated scheme, is the illegal evasion by non-payment of the Direct Suppliers' GST liabilities.

365. That circumstance points in favour of a conclusion that the dominant purpose of the Direct Suppliers participating in the scheme or a part of the scheme was those suppliers enriching themselves by evading liabilities to the Commonwealth. It does not support a conclusion that any entity entered into the scheme or a part of the scheme with the dominant purpose of, or that the principal effect of the scheme or any part of the scheme was, the applicant obtaining the Denied ITCs.

366. Creating a structure of separate refining company and bullion dealing company pointed to by the Commissioner is quite equivocal in what it suggests. The Commissioner's private ruling suggests that that is a normal event. The GST system of taxing transactions in gold specifically provides for two types of sale by a refiner, input taxed and GST free, both of which do not involve a GST impost to the refiner. Creation of the GST free sale pathway is the measure intended so as to allow ITCs to be claimed by a refiner. Creating that structure does not of itself, as the Commissioner's ruling suggests, involve any GST mischief.

Purpose or effect - further observations

367. Some further observations are called for.

A single composite purpose or non-dominant incidental purposes facilitating a dominant purpose?

368. The passages from Ludekens and Complete Success Solutions extracted above indicate that a single purpose may appropriately be found in some circumstances. They did not go on and consider whether those purposes were facilitative of an ultimate purpose in the sense contemplated by Gageler J in Mills also noted above. The Mills analysis is apposite in the present circumstances for two reasons: first, creating taxable supplies that also produced GST-informed prices being paid and ITC entitlements to arise, was a necessary preliminary to an ulterior and ultimate goal as contemplated by His Honour's analysis, and second because His Honour suggests that the text of the Explanatory Memorandum under discussion confirmed the ordinary meaning of language and natural reading of statutory text. Thus, the hierarchy of incidental and dominant purposes to which His Honour refers can and should have wider application. This analysis informs how facilitative steps in a wider design ought to be characterised. Viewed through this lens, any purpose of obtaining ITCs in the present circumstances, assuming there was one, was a purpose properly regarded as central to the design of a scheme directed to achieving an ulterior and ultimate purpose, and therefore any purpose of obtaining ITCs was incidental and not dominant.

369. In the present case, what was essential for the scheme to operate was the creation of a product that the marketplace traded at a GST-informed price, and the Direct Suppliers receiving that price and not paying the GST to the Commissioner, or more fundamentally, for the Direct Suppliers not to pay their GST liability having received a market driven price that assumed they would. As already noted, without that feature there would not have been

ATC 12603

ongoing sales by the suppliers, as they would have traded at a loss. The availability of the ITCs was an ordinary incident of a purchase of a taxable commodity on commercial terms by a GST-registered entity in the course of its enterprise.

370. In those circumstances, the non-payment of amounts referrable to GST stands aside from the creation of the GST liability and the entitlement to corresponding ITCs. The applicant's entitlement to ITCs was dependent only upon the acquisition of gold in a taxable supply for which it paid a full commercial price for what it acquired.

371. In short, even if it would be correct to view the making of taxable supplies and obtaining of ITCs as a single purpose, that single purpose was a step in a wider process. The Tribunal sees the Direct Suppliers' non-payment of GST as a separate and ulterior and ultimate purpose to any purpose of making taxable supplies and the applicant obtaining ITCs.

Collection failures

372. On the Division 165 case as advanced in its entirety, the Commissioner seeks to uphold an assessment disallowing ITCs of approximately $9m, and a penalty of over $5m, in circumstances where, accepting the applicant's financial statements (and ignoring the findings regarding Golden Angel supplies):

373. The Commissioner would not be seeking to deny the Denied ITCs if he had been able to recover the unpaid GST from the suppliers. There is nothing in the text of Division 165, or extraneous materials, or in the jurisprudence relating to Division 165 or Part IVA of the1936 Assessment Act upon which it was plainly modelled, to indicate Division 165 was intended to be invoked, where it would not otherwise be applied, as an alternative to recovery of liabilities owed by other entities.

374. These observations are, of course, not part of the Tribunal's task in determining whether Division 165 applies which must be approached according to the terms in which the Division is cast. And they have not been treated as if they are. However, these observations suggest careful and close scrutiny of the statutory considerations relevant to whether Division 165 applies is required. That is especially so in a case where the result of applying Division 165 strikes the Tribunal as both surprising, in terms of visiting extraordinarily severe consequences on the applicant, who did not participate in the evasion, rather than the Direct Suppliers who were the perpetrators that benefited directly from their evasion, and out of all proportion to any benefit that, on any view, could have been enjoyed by the applicant from participation in the scheme.

Knowledge or blind eye

375. As noted, the applicant is regarded as having turned a blind eye to the activities of the Intermediaries, but did not participate in or co-ordinate any transactions not involving any of the applicant, Galaxy or CFGA.

376. Ultimately, the Intermediaries entered into the arrangements to profit, and did profit in precisely the way they intended to profit, by failing to pay GST on the taxable sales they made to the applicant. In this regard, the term profit is used in a cash flow profit sense only. Properly calculated, they made no profit from their scheme because profit ought be determined net of the impact of GST.[346] An alternative profit calculation would recognise both the GST effect on the sales price received and the liability to the ATO producing the same effect. To make their profit, the Direct Suppliers needed to create or procure a system or process where

ATC 12604

they outlaid less money than they received. In the present setting that entailed two steps: first, they needed to acquire the goods they sold at a price not informed by GST, and second, they needed to sell those goods at GST-informed prices. It can be accepted that the applicant would not rationally have paid GST-informed priced for the scrap gold in question had there not been an entitlement to ITCs. In those circumstances, is it reasonable to conclude that the dominant purpose of any entity entering into the scheme or a part of the scheme, or the principal effect of the scheme or part of the scheme, was for the applicant to obtain, or that the applicant did obtain, the Denied ITCs?

377. While a search for an alternative purpose is not the Division 165 test, the existence of such a purpose throws light on whether the requisite GST benefit purpose conclusion should be reached. When looking at a scheme, or a part thereof, if there is an alternative dominant purpose of any participant, or an alternative principal effect, then it is unlikely that the dominant purpose test will be satisfied in respect of that participant or that the principal effect test will be satisfied. If that alternative dominant purpose of a participant in, or alternative principal effect of, a scheme or a part thereof was that the Direct Suppliers benefit from their evasion, or to place an inflated, GST-informed, price or amount of money into the hands of the Direct Suppliers so as to set up the possibility of the evasion being executed profitably, it is unlikely that it would be reasonable to conclude that that participant had the requisite dominant purpose or that the scheme had the requisite principal effect.

378. In summary, in the Tribunal's view, the proper conclusion is that the dominant purpose of the Direct Suppliers was to execute their scheme to profit by first obtaining and then retaining the GST-informed prices they charged the applicant. Their participation in the transactions made no sense unless they did that.

379. Even if the creation of the taxable supplies to the applicant and the applicant's entitlement to ITCs are viewed as a single purpose, that would, in itself, achieve no benefit for either the applicant or the Intermediaries. As already noted, for the Intermediaries, it would achieve a loss because they were selling gold at a price (before GST considerations) that was less than they paid for it. It was only by failing to pay their GST liabilities that the Intermediaries were able to profit in any way that explains the scheme. While it is not the statutory question to be addressed, an alternative purpose suggested by the weighing of the requisite factors assists the requisite process. In the present circumstances there is an alternative purpose suggested by the requisite factors. It is reasonable to conclude that evading debts due to the Commonwealth was the Intermediaries' dominant purpose. Taking into account the required factors, it is not reasonable to conclude that the dominant purpose of any entity was for the applicant to obtain the Denied ITCs.

380. The conclusion does not change dependent upon the applicant's knowledge of the arrangements. Little if anything concerning purpose conclusions and the testing for them changes with the applicant's relevant knowledge.

Conclusion and disposition

381. For the reasons indicated in the foregoing consideration of the s 165-15 factors, it would not be reasonable to conclude any entity entered into either scheme or a part of either scheme identified by the Commissioner with the sole or dominant purpose of, or that the principal effect of either scheme or any part of either scheme was, the applicant obtaining the Denied ITCs.

382. It follows that the power to make the declarations under s 165-40 negating the GST benefit being the Denied ITCs is not enlivened. That being the only basis contended for the remaining Disputed ITCs to be disallowed, the assessments of net amount are excessive.

ISSUE FOUR

383. Because of the outcome for Issue three, Issue four does not arise.

DECISION

384. The decision under review is set aside and in substitution there for:

385. The panel below contains details for the usual topics concerning, among others, hearing dates and representation. The details shown are not the product of misfortune. The framers of the coming Administrative Review Tribunal may wish to contemplate the new body having discretionary costs order powers, exercisable by exception, to address exceptional circumstances in an appropriate way.


Annexure 1
Term Definition
AGS Australian Government Solicitor
ATO Australian Tax Office
AU Scrap Au Scrap Pty Ltd
AX Traders AX Traders Pty Ltd
Baird & Co Baird & Co Pty Limited
BAS Business Activity Statements
Blanco Supply Chain 1 Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap and/or AX Traders, by AU Scrap and/or AX Traders to Sell Your Gold, by Sell Your Gold to the applicant
Blanco Supply Chain 2 Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap, by AU Scrap to GB Traders, by GB Traders to Sell Your Gold, by Sell Your Gold to the applicant
Butt Supply Chain 1 Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap and/or AX Traders, by AU Scrap and/or AX Traders to GB Refiners, by GB Refiners to the applicant
Butt Supply Chain 2 Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to Cheap Bullion, by Cheap Bullion to Cash Pal, by Cash Pal to AU Scrap and/or AX Traders, by AU Scrap and/or AX Traders to GB Traders, by GB Traders to the applicant
Butt Supply Chain 3 Supply Chain comprising the following: sales of gold products (in various forms) in two combinations. The first combination by Galaxy (via GB Traders or directly) to R&N Metals, by R&N Metals to Manila, by Manila to GB Refiners, by GB Refiners to the applicant, and the second combination

ATC 12606

Butt Supply Chain 4 Supply Chain comprising the following: sales of gold products (in various forms) in two combinations. The first combination: by Galaxy to GB Traders, by GB Traders to R&N Metals, by R&N Metals to Manila, by Manila to GB Traders, by GB Traders to GB Refiners, by GB Refiners to the applicant. The second combination; by
Cash for Gold Australia or CFGA Cash for Gold Australia Pty Ltd, collectively Cash For Gold Victoria, Cash For Gold Queensland and Cash For Gold NSW
Cash For Gold Supply Chain Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to CFGA, CFGA to various suppliers, by various suppliers to CFGA (or PMR), and by CFGA (or PMR) to the applicant
Cash Pal Cash Pal Holdings Pty Ltd
Cheap Bullion Cheap Bullion Pty Ltd
CPG The applicant, CPG Group Pty Ltd
Creditable Acquisitions As defined in ss 195-1 and 11-5 of the GST Act
Dealer in Precious Metal As defined in ss 9-30, 38-385 and s 195-1(1) of the GST Act.
Diamond Moment Diamond Moment Pty Ltd
Denied ITCs Input tax credits of $9,457,634.69
Direct Suppliers Entities the applicant contends supplied gold to CPG directly:
• Golden Angel
• HA Exchange
• Gold Dust
• CFGA
• Sell Your Gold
• GB Refiners
• GB Traders
• Quality Gold
Disputed Tax Periods The five monthly tax periods that ended on 31 July, 31 August, 30 September, 1 October, and 30 November 2016 respectively.
Galaxy Galaxy Coins and Bullion Pty Ltd
GB Refiners GB Refiners Pty Ltd
GB Traders GB Traders Pty Ltd
Gold Dust Gold Dust Buyers and Sellers Pty Ltd
Gold Dust Supply Chain Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to Universal Distribution Australia, by Universal Distribution Australia to Gold Dust, by Gold Dust to the applicant
Golden Angel Golden Angel Australia Pty Ltd
Golden Angel Supply Chain Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to Golden Touch, by Golden Touch to Golden Angel, and by Golden Angel to the applicant
Golden Touch Golden Touch International Pty Ltd
GST Goods and Services Tax
GST Act A New Tax System (Goods and Services Tax) Act 1999 (Cth)

ATC 12607

HA Exchange HA Exchange Pty Ltd
HA Exchange Supply Chain Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to PH Gold, by PH Gold to HA Exchange, by HA Exchange to the applicant
Indirect Suppliers Entities who supplied gold to Direct Suppliers:
• Golden Touch;
• PH Gold;
• Universal Distribution Australia;
• Cheap Bullion;
• Cash Pal;
• AU Scrap;
• AX Traders;
• R&N Metals; and
• Manila;
• Niyazi Candag trading as NC Jewellery (NC Jewellery)
• Diamond Moment; and
• Infinity Jewellers
Infinity Jewellers Infinity Jewellers Pty Ltd
Intermediaries Direct Suppliers and Indirect Suppliers as a group.
Input Taxed As defined in ss 9-30 and 40-100 of the GST Act.
ITC Input Tax Credit
Manila Manila Exchange Pty Ltd
Mr Balant Mr Les Balant
Mr Salib Mr Michil Salib
NC Jewellery A trading name for Mr Niyazi Candag
Infinity Jewellers Infinity Jewellers Pty Ltd
PH Gold PH Gold Pty Ltd
PMR A name under which Cash For Gold Australia traded
Precious Metal Precious metal within the meaning of the s 195-1 definition of that term.
The terms gold bullion and bullion used by the applicant have the same meaning.
QN Traders QN Traders Pty Ltd
Quality Gold Quality Gold Pty Ltd
Quality Gold Supply Chain Supply Chain comprising the following: sales of gold products (in various forms) by Galaxy to Quality Gold, and by Quality Gold to the applicant
scrap gold Gold metal of any fineness that is not in investment form. The terms scrap and scrap gold, which are sometimes used by the parties, have the same meaning

ATC 12608

R&N Metals R&N Metals Pty Ltd
RCTI Recipient Created Tax Invoice
Sell Your Gold Sell Your Gold Pty Ltd
Supply Chains Bullion Dealers or Intermediaries that sell gold to each other and/or the applicant. The 11 Supply Chains are the:
• Golden Angel Supply Chain
• A Exchange Supply Chain
• Gold Dust Supply Chain
• Cash For Gold Supply Chain
• Blanco Supply Chain 1
• Blanco Supply Chain 2
• Butt Supply Chain 1
• Butt Supply Chain 2
• Butt Supply Chain 3
• Butt Supply Chain 4
• Quality Gold Supply Chain
Supply Chain Parties Entities that form part of each of the Supply Chains
Taxable Supplies Sections 9-5, 78-50, 84-5 and 105-5 as affected by the provisions listed beneath the definition of taxable supply in s 195-1(1) of the GST Act.
Universal Distribution or UDA Universal Distribution Australia Pty Ltd
Valuable Metal See s 195-1 of the GST Act - gold, silver or platinum; or any other substance specified for the purposes of paragraph (d) of the definition of 'precious metal'
Indirect Suppliers • Golden Touch
• PH Gold
• UDA
• AU Scrap
• Manila
• GB Traders
• Cash Pal
• Cheap Bullion
• NC Jewellery, Diamond Moment, Infinity Jewellers
• R&N Metals

DECISION

The decision under review is set aside and in substitution there for:

Footnotes

[1] The tribunal’s decision in HNMF and Commissioner of Taxation [2023] AATA 4067 was given on 30 November 2023. The events underlying that decision were of a similar nature to the events presently under review. There is a commonality in the reasoning in this decision and the HMNF decision. To avoid cluttering, the commonality is not footnoted.
[2] Annexure 1 to these reasons is a table of defined terms and acronyms used in these reasons. When used for the first time, a defined term or acronym is also footnoted.
[3] A New Tax System (Goods and Services Tax) Act 1999 (Cth). Unless otherwise indicated, all references to legislation are references to this Act.
[4] Goods and Services Tax.
[5] Section 195-1, definitions of ‘refiner of precious metal’ and ‘precious metal’.
[6] The five-monthly tax periods that ended on 31 July, 31 August, 30 September, 1 October, and 30 November 2016 respectively.
[7] As defined in ss 195-1 and 11-5.
[8] Gold metal of any fineness that is not in investment form. The terms scrap and refining materials, which are sometimes used by the parties, have the same meaning.
[9] Sections 9-5, 78-50, 84-5 and 105-5 as affected by the provisions listed beneath the definition of taxable supply in s 195-1(1).
[10] As defined in ss 195-1, 11-20 and 15-15. The term ITC has the same meaning.
[11] Paragraphs [36] to [39] below detail the Disputed ITCs and penalty.
[12] Investment form within the meaning of that term as used in the definition of precious metal in s 195-1(1).
[13] Section 195-1(1), definition of precious metal. The terms gold bullion and bullion used by the applicant have the same meaning.
[14] Sections 9-30, 38-385; s 195-1(1) definitions of ‘precious metal’ and ‘dealer in precious metal’.
[15] Sections 9-30, 40-100.
[16] Section 9-5.
[17] Australian Taxation Office.
[18] GST Act, s 195-1, gold, silver or platinum; or any other substance specified for the purposes of paragraph (d) of the definition of ‘precious metal’.
[19] The Hon Kelly O’Dwyer, ‘Strengthening the integrity of GST on precious metals’ (Media Release, 20 June 2017).
[20] Further details of the trading activities that make up the applicant’s business are provided later in these reasons. The description here is to provide context.
[21] Galaxy Coins and Bullion Pty Ltd.
[22] Entities being bullion dealers or Intermediaries that sell gold to each other and/or the applicant. See [12] below.
[23] Entities that, on the applicant’s case, supplied gold to the applicant. See [10] below.
[24] Entities that supplied gold to Direct Suppliers, or a supplier to a Direct Supplier. See [11] below.
[25] ATO Audit Reasons, T2.2, p 27 [44].
[26] ATO Audit Reasons, T2.2, p 27 [45].
[27] ATO Audit Reasons, T2.2, p 27 [43] & [46].
[28] ATO Audit Reasons, T2.2, p 27 [46].
[29] ATO Audit Reasons, T2.2, p 27 [47].
[30] ATO Audit Reasons, T2.2, p 160 [338(a)].
[31] ATO Audit Reasons, T2.2, p 160 [338(b)].
[32] Golden Angel Australia Pty Ltd.
[33] HA Exchange Pty Ltd
[34] Gold Dust Buyers and Sellers Pty Ltd
[35] Cash for Gold Australia Pty Ltd, collectively Cash For Gold Victoria, Cash For Gold Queensland and Cash For Gold NSW.
[36] Sell Your Gold Pty Ltd.
[37] GB Refiners Pty Ltd.
[38] GB Traders Pty Ltd.
[39] Quality Gold Pty Ltd.
[40] Golden Touch International Pty Ltd.
[41] PH Gold Pty Ltd.
[42] Universal Distribution Australia Pty Ltd.
[43] Cheap Bullion Pty Ltd.
[44] Cash Pal Holdings Pty Ltd.
[45] AU Scrap Pty Ltd.
[46] AX Traders Pty Ltd.
[47] R&N Metals Pty Ltd.
[48] Manila Exchange Pty Ltd.
[49] Diamond Moment Pty Ltd.
[50] Infinity Jewellers Pty Ltd.
[51] For some of the Supply Chains the Commissioner did not identify the ultimate source of gold during his audit, but in her forensic analysis of financial records of a wide range of entities Ms Wright was able to do that. The Supply Chain descriptions and diagrams below include Ms Wright’s ultimate supplier identification.
[52] This diagrammatic representation is an adaptation of the diagram at [8.1.1] of the Report of Ms Dawna Wright dated 1 June 2021 (the ‘First Wright Report’).
[53] This diagrammatic representation is an adaptation of the diagram at [10.1.1] of the First Wright Report.
[54] Including Mr Niyazi Candag trading as NC Jewellery, Diamond Moment and Infinity Jewellers.
[55] This diagrammatic representation is an adaptation of the diagram at [11.1.1] of the First Wright Report.
[56] This diagrammatic representation is an adaptation of the diagram at [12.1.1] of the First Wright Report.
[57] This diagrammatic representation is an adaptation of the diagram at [13.1.1] of the First Wright Report.
[58] This diagrammatic representation is an adaptation of the diagram at [14.1.1] of the First Wright Report.
[59] This diagrammatic representation is an adaptation of the diagram at [15.1.1] of the First Wright Report.
[60] This diagrammatic representation is an adaptation of the diagram at [16.1.1] of the First Wright Report.
[61] This diagrammatic representation is an adaptation of the diagram at [17.1.1] of the First Wright Report.
[62] This diagrammatic representation is an adaptation of the diagram at [18.1.1] of the First Wright Report.
[63] ATO Audit Finalisation Letter dated 5 December 2017, T2.1, p 7.
[64] ATO Audit Reasons, T2.2, p 10 [1] and p 166 [361].
[65] ATO Audit Reasons, T2.2, p 166 [362].
[66] ATO Audit Reasons, T2.2, p 178 [416] – [419].
[67] Taxation Administration Act 1953 (Cth).
[68] ATO Audit Reasons, T2.2, p 188 [440].
[69] ATO Audit Reasons, T2.2, p 188 [453].
[70] ATO Audit Reasons, T2.2, p 195.
[71] ATO Audit Reasons, T2.2, p 188 [452].
[72] ATO Audit Reasons, T2.2, p 188 [453].
[73] ATO Audit Reasons, T2.2, p 188 [457] & [458].
[74] ATO Audit Reasons, T2.2, p 195.
[75] Non-capital purchases as reported at label G11 in periodical Business Activity Statements (BAS).
[76] Amounts rounded.
[77] Ignoring the aggregate $13,806 GST payable reported on sales for the July to November (inclusive) tax periods which does not materially alter the differentials in the margins.
[78] Sales – (non-capital purchases *10/11).
[79] Sales – (non-capital purchases *10/11) – Denied ITCs.
[80] Commissioner’s Amended Statement of Facts, Issues and Contentions (ASOFIC) [35A].
[81] Commissioner’s ASOFIC [44] and [48].
[82] Golden Angel Australia Pty Ltd.
[83] Sell Your Gold Pty Ltd.
[84] Fletcher v Federal Commissioner of Taxation (1988) 19 FCR 442 , pp 452-454 .
[85] Federal Commissioner of Taxation v Complete Success Solutions Pty Ltd ATF Complete Success Solutions Trust [2023] FCAFC 19 .
[86] At paragraphs 34 to 35A.
[87] At paragraphs 216 and 217.
[88] Baird & Co Pty Ltd.
[89] QN Traders Pty Ltd.
[90] Direct Suppliers and Indirect Suppliers as a group.
[91] GST Act, s 40-100.
[92] Ms Dawna Wright, Senior Managing Director, Australia Leader, Forensic Accounting and Advisory Services of FTI Consulting.
[93] Collectively these documents are referred to a “T Documents” and individual documents are referred to as ‘T(followed by a number)’ for the documents initially filed, and as ‘ST(followed by a number)’ for the supplementary filings.
[94] The Administrative Appeals Tribunal Act 1975 (Cth).
[95] ST 109 , p 4900 and following.
[96] Transcript 13 May 2021, p82, l 38.
[97] Transcript 13 May 2021, p82, l 47-48.
[98] Transcript 13 May 2021, p83, l 2.
[99] ST 281 , p 8419 and following.
[100] Candag et al s 353-10 interview, ST4, p 18
[101] Candag et al s 353-10 interview, ST4, p 40-41
[102] Candag et al s 353-10 interview, ST 4 p 35 – 36.
[103] Candag et al s 353-10 interview, ST 4 p 36.
[104] Candag et al s 353-10 interview, ST 4 p 42. A similar passage appears at p43.
[105] Mr Salib s 353-10 interview, ST 1 , p333 to 335
[106] Mr Salib s 353-10 interview, ST 1 , p 336/7
[107] Mr Salib s 353-10 interview, ST 1 , p 349
[108] Mr Salib is adamant the transcript is in error and the word ‘his’ each time should be ‘he’s’.
[109] Mr Salib s 353-10 interview, ST 1 , p 283
[110] Transcript, 13 May 2021 p109.
[111] Transcript, 13 May 2021 p110.
[112] Transcript, 13 May 2021 p111.
[113] Transcript, 13 May 2021 p112.
[114] Transcript 13 May 2021, p 108 l 5 to l 16.
[115] Mr Salib s 353-10 interview, ST 1 , p 334, l 28 to 36.
[116] Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149 , 176 [82] (Ryan, Jessup and Perram JJ) and Pascoe v Federal Commissioner of Taxation (1956) 30 ALJR 402 , 403 (Fullagar J).
[117] Transcript 17 May 2021, p 129 l 43.
[118] Transcript 17 May 2021, p 131 l 12 to l 42.
[119] Transcript 17 May 2021, p 140 l 5 to 9.
[120] Transcript 17 May 2021, p 139 l 8.
[121] Transcript 17 May 2021, p 140 l 39 to 47 to p141 l1 to 5
[122] Ellis Report, [1.1].
[123] Ellis Report, section 6.1
[124] Ellis Report, section 6.2.
[125] Ellis Report, section 3.4.
[126] Ellis Report, [7.52].
[127] Ellis Report, [7.55].
[128] Ellis Report, [7.68] and [7.80].
[129] Australian Government Solicitor.
[130] First Wright Report, [1.5].
[131] First Wright Report, [20].
[132] Transcript 17 May 2021, p153, l 44 to p 154, l 18.
[133] Transcript 18 May 2021, p212, l 18 to p 213, l 18.
[134] Transcript 18 May 2021, p204, l 38 to l 40.
[135] Quick v Stoland (1998) 87 FCR 371 382-3 Finkelstein J.
[136] HNMF and Commissioner of Taxation [2023] AATA 4067 .
[137] Based on Mr Salib’s s 353-10 interview, ST1, p 335 and 336.
[138] First Wright Report, section 4.2.2.
[139] First Wright Report, section 4.
[140] First Wright Report, Annexure G.
[141] ST16, p 1904.
[142] ST1, p 237 line 15.
[143] First Salib Statement [3(a)(ii)].
[144] ST1, p 317 lines 31-35.
[145] ST1, p 237 lines 38-39.
[146] ST1, p 236 lines 15-19.
[147] ST1, p 237 lines 16-17.
[148] ST1, p 236 lines 9-15.
[149] ST1, p 237 lines 17-20.
[150] ST1, p 237 line 20.
[151] ST1, p 237 line 15 to p 238 line 10.
[152] ST1, p 240 lines 15-16.
[153] ST1, p 238 line 19 to p 239 line 20.
[154] ST1, p 239 lines 20-22.
[155] ST1, p 240 line 10 and First Salib Statement [8(f)].
[156] ST1, p 240 lines 12-14.
[157] ST1, p 241 lines 5-14.
[158] ST20.
[159] ST1, p 284 lines 34-39.
[160] ST1, p 284 lines 7-19.
[161] ST1, p 317 line 14.
[162] ST18.
[163] ST18, p 1913.
[164] ST16, p 1905.
[165] ST20, p 1916.
[166] The term Intermediaries is used in these reasons because it has been used in the evidence and submissions. Its use does not mean that transactions between Supply Chain entities involve in all cases the same gold in a physical sense or the same metal.
[167] ASIC company extracts of: HA Exchange: ST24; Gold Dust: ST27; AX Traders: ST34; R&N Metals: ST38; and Manila Exchange: ST40.
[168] Baird & Co Invoices: ST87; QN Traders’ bank statements: ST130; and First Wright Report, [15.3.11].
[169] First Wright Report at: [5.21.3.] – [5.21.4] regarding QN Traders’ bank statements; [14.3.18] regarding the source of gold supplied to the applicant by GB Refiners; and [15.3.16] regarding the source of gold supplied to the applicant by GB Traders.
[170] ST1, p 256 lines 10-17.
[171] Mr Les Balant.
[172] First Salib Statement [8(l)] ST1, p 245 line 29-p 246 lines 32 and p 249 lines 5-15.
[173] First Salib Statement [8(k)] ST1, p 246 lines 33-39.
[174] ST1, p 249; p 343 & Mark Ellis Report [7.1].
[175] ST108 p 4790-4791 and First Salib Statement [5(a)(x)].
[176] ST1, p 254 lines 19-20 & p 255 lines 5-9 and First Salib Statement [5(a)(vi)].
[177] ST1, p 255 lines 11-15 and p 315 lines 34-39.
[178] ST1 p 255 lines 9-11.
[179] First Salib Statement [8(n)]; ST1, p 276 lines 29-34; ST41 pp 1976-1978 Golden Angel ST43 pp 1983-1988 HA Exchange; ST44 Gold Dust Buyers & Sellers pp 1989-994 ST45 Sell Your Gold 1995-2000; ST46 GB Refiners 2001-2006; ST47 Quality Gold ps 2007-2010 ST48 Niyazi Candag pp 2011-2017; ST49 Infinty Jewellers pp 2026-2034; ST50 Diamond Moment pp 2035--2043.
[180] Mark Ellis Report, sections 7.1-7.8.
[181] Mark Ellis Report, sections 7.1 -7.7.
[182] First Salib Statement [9(a)(iii)] and [9(d)]; for July 2016 – ST57 pp 2170-2234; for August 2016 ST58 pp 2235-2330; for September 2016 ST59 pp 2231-2405.
[183] Second Salib Statement, section 6.
[184] Second Salib Statement, section 7.4.
[185] ST1 p 289 and ST108 pp 4790-4792, ST248 pp 7796-7797, ST249 pp 7827-7828 and ST250 pp 7852-7853.
[186] Ellis Report, [7.104].
[187] Ellis Report, [7.88].
[188] ST248 p 7798, ST249 ps 7829, ST250 p 7855, ST252 p 7867 and ST252 p 7878.
[189] First Wright Report [7.3.2].
[190] Second Salib Statement of Michil, [6.4].
[191] ST65 July 2016; ST66 AuguST2016; ST67 September 2016.
[192] ST65 July 2016; ST66 AuguST2016; ST67 September 2016
[193] ST65 July 2016; ST66 AuguST2016; ST67 September 2016.
[194] First Wright Report, Tables 1 and 3.
[195] First Wright Report, Table 2 and section 2.1.14.
[196] First Wright Report, [2.1.15(a)].
[197] First Wright Report, [2.1.15(b)].
[198] First Wright Report, [2.1.15(c)].
[199] First Wright Report, [2.1.10].
[200] First Wright Report, [2.1.11(a)].
[201] First Wright Report [2.1.6(a)].
[202] First Wright Report, [2.1.6(c)-(e)].
[203] First Wright Report, [2.1.6(c) and (e)]
[204] First Wright Report, [8.1.3] [8.6.1] (Golden Angel Supply Chain), [9.1.3], [9.6.1] (HA Exchange Supply Chain), [10.1.3], [10.6.1] (Gold Dust Supply Chain), [11.6.1] (Cash For Gold Supply Chain), [12.1.3], [12.5.3], [12.6.1], (Blanco Supply Chain 1), [13.6.1] (Blanco Supply Chain 2), [14.6.1], [15.1.3], [16.1.3], [16.6.1], [17.2.4], [17.4.2], [17.6.1] (Butt Supply Chains 1-4) and [18.6.1] (Quality Gold Supply Chain).
[205] First Wright Report, [2.1.6(b)].
[206] First Wright Report, [2.1.6(b)].
[207] First Wright Report, Figure 38.
[208] Mr Alex Kendi.
[209] ST1, p 331 lines 24-44.
[210] ST1, p 331 line 29.
[211] ST1, p 333 lines 23-28.
[212] ST1, p 332 lines 4-9.
[213] ST1, p 332 lines 9-14.
[214] Second Salib Statement, section 5.
[215] ST41, p 1979 and following.
[216] Elis Report, Annexure Q, pp 7 and 9.
[217] Saad Statement, [l]-[p].
[218] ST278.
[219] Saad Statement, [l]-[p].
[220] Saad Statement, [l]-[p].
[221] Saad Statement, [n].
[222] Saad Statement, [q] and Ellis Report Annexure Q.
[223] The transactions underlying the denial of ITCs of $1,854,317.09 as shown in Table 8.
[224] Given an absence of invoices, by inference – see below.
[225] First Wright Report, [8.1.2] and [8.2.1.]-[8.6.1].
[226] First Wright Report, [8.3.5].
[227] First Wright Report, [8.2.4]., Table 38 and Figure 41.
[228] First Wright Report, [8.2.3] and [8.4.3].
[229] First Wright Report, [8.3.9(b)].
[230] First Wright Report, [8.6.1(b)].
[231] First Wright Report, Table 40: 339,485.1g/355,820.6g
[232] Ms Wright draws similar conclusions: First Wright Report, [8.3.9(a)-(c)].
[233] First Wright Report, Figure 44, [8.5.4] and [8.6.1(d)].
[234] First Wright Report, [8.3.9(c)].
[235] First Wright Report, [8.6.1(b)-(d)].
[236] The transactions underlying the denial of ITCs of $431,504.06 as shown in Table 8.
[237] First Wright Report, [9.2.3(e)].
[238] First Wright Report, [9.5.8].
[239] First Wright Report, [9.6.1(a)-(d)].
[240] The transactions underlying the denial of ITCs of $346,249.15 as shown in Table 8.
[241] First Wright Report, [10.1.2] and [10.2.1]-[10.6.1].
[242] First Wright Report, [10.6.1(a)-(d)].
[243] First Wright Report, [10.3.7]. Her reasons for the conclusion follow.
[244] First Wright Report, [10.3.7] and [10.6.1(d)].
[245] First Wright Report, [13.5.3] and Figure 68.
[246] The transactions underlying the denial of ITCs of $702,882.88 as shown in Table 8.
[247] First Wright Report, [11.1.2] and [11.2.1]-[11.6.1].
[248] First Wright Report, Table 50 [11.3.11].
[249] First Wright Report, Figure 59 and [11.5.4].
[250] Mr Candag et al s 353-10 interview on August 2017, pages 35-37
[251] The transactions when aggregated with the Blanco Supply Chain 2 transactions, underly the denial of ITCs of $2,609,347.16 as shown in Table 8.
[252] First Wright Report, [12.1.2] and [12.2.1]-[12.6.1].
[253] First Wright Report, [12.1.2] and Figure 60, [12.2.2] and Table 53.
[254] First Wright Report, [12.1.2] and Figure 60.
[255] First Wright Report, [12.5.6].
[256] First Wright Report, [12.6.1(a)].
[257] First Wright Report, [12.5.2] and [12.5.3].
[258] First Wright Report, [13.4.3] and Figure 64.
[259] Mr Cefala s353-10 Interview ST14 p 20, l 21-to l 45.
[260] Mr Blanko s353-10 Interview ST9 p 24, l 28-to p 25 l 19.
[261] The transactions underlying the denial of a portion of the ITCs of $2,609,347.16 (apportioned with Blanco Supply Chain 2) as shown in Table 8.
[262] First Wright Report, [13.1.2] and [13.2.1]-[13.6.1].
[263] First Wright Report, [13.2.3(a)-(d)].
[264] First Wright Report, [13.1.4] and Figure 65.
[265] First Wright Report, [13.1.4] and Figure 65.
[266] First Wright Report, [13.5.3] and Figure 68.
[267] The same day sales identified in First Wright Report, [13.5.1] and Table 72 indicate that some sales occurred on the same day but not through the whole chain.
[268] The transactions underlying the denial of a portion of the ITCs of $2,869,088.44 (apportioned with Butt Supply Chains 3 and 4) as shown in Table 8.
[269] First Wright Report, [14.1.2] and [14.2.1]-[14.6.1]. The Commissioner originally described the sources to AU Scrap and/or AX Traders as ‘undocumented’. Ms Wright’s work identified the sources as Cash Pal, Cheap Bullion, and Galaxy.
[270] First Wright Report, [14.3.11].
[271] First Wright Report, [14.5.3].
[272] First Wright Report, [14.2.3], [14.6.1(a)].
[273] First Wright Report, [14.1.2] and Figure 70.
[274] The transactions underlying the denial of ITCs of $595,870.10 as shown in Table 8.
[275] First Wright Report, [15.1.2] and [15.2.1]-[15.6.1]. The Commissioner originally described the sources to AU Scrap and/or AX Traders as ‘undocumented’. Ms Wright’s work identified the sources as Cash Pal, Cheap Bullion, and Galaxy.
[276] First Wright Report, [15.3.1]-[15.3.14].
[277] First Wright Report, [15.1.2] and Figure 76.
[278] First Wright Report, [15.5.4].
[279] The transactions underlying the denial of a portion of the ITCs of $2,869,088.44 (apportioned with Butt Supply Chains 1 and 4) as shown in Table 8.
[280] First Wright Report, [16.1.2], [16.2.3].
[281] First Wright Report, [16.1.2] and Figure 81.
[282] First Wright Report, [16.5.2].
[283] First Wright Report, [16.3.3], [16.3.4], [16.6.1(a)].
[284] The transactions underlying the denial of a portion of the ITCs of $2,869,088.44 (apportioned with Butt Supply Chains 1 and 3) as shown in Table 8.
[285] First Wright Report, [6.1.2(j)], [17.1.1] and [17.2.1]-[17.6.1].
[286] First Wright Report, [17.6.1(a)].
[287] First Wright Report, [17.1.1] and Figure 85.
[288] First Wright Report, [17.5.1] and Figure 89.
[289] The transactions underlying the denial of ITCs of $48,357.81 as shown in Table 8.
[290] First Wright Report, [18.1.2].
[291] First Wright Report, [18.2.3(c)].
[292] First Wright Report, [18.4.1].
[293] First Wright Report, [18.1.3], [18.6.1(a)].
[294] First Wright Report, [18.5.1] and Figure 93.
[295] Witness Statement of Michil Salib dated 24 May 2019, [10(a)].
[296] First Wright Report, [7.4.1] and Figure 39; [7.4.2]; CPG invoices from July, August and September 2016: ST54-56.
[297] First Wright Report, [8.2.4.]; CPG invoices for July, August and September 2016: ST54-56; Mr Salib s 353-10 interview on 18 September 2017, p 85 lines 8-11; p 111 lines 4-20: ST1, p318; ST1, p344.
[298] ST274, 8357-8369. ‘Non-capital purchases (G11)’ in each monthly BAS is as follows: July 2015 = $16,740; August 2015 = $47,783; September 2015 = $35,880; October 2015 = $35,552; November 2015 = $17,300; December 2015 = $15,603; January 2016 = $1,481,274.
[299] ST97, 4439. Notice dated 22 September 2016.
[300] ST243.
[301] Annexure I to the First Wright Report; Business Activity Statements ( BAS ) lodged by Galaxy during the period 1 July 2016 to 31 December 2016: ST52; Galaxy General Ledger Details July to September 2016: ST236; and Galaxy GST Detail Report October to November 2016: ST235.
[302] In the factual findings and analysis that follow, a reference to a Direct Supplier who adulterated bullion and/or evaded GST liabilities includes an Intermediary in the respective Supply Chain who adulterated bullion that was passed either directly or in a number of steps to the Direct Supplier who then passed the adulterated bullion to the applicant and/or who evaded GST liability.
[303] Mr Salib s 353-10 interview, ST1, p 335 l 31 to 35.
[304] Mr Salib s 353-10 interview, ST1, p 335 l 31 to 35.
[305] First Wright Report [7.4.3]; the applicant’s July to September 2016 RCTIs: ST60-62.
[306] The applicant’s RCTIs for July, August and September 2016: ST60-62; Galaxy invoices for July, August and September 2016: ST65-67; R&N Metals Purchase records: ST81; Baird & Co invoices from 1 June 2016 to 30 September 2016: ST87; Ellis Report [7.38] & [7.72].
[307] First Wright Report, [2.1.10]; CPG invoices for July, August and September 2016: ST54-56; the applicant’s RCTIs for July, August and September 2016: ST60-62; Ellis Report [7.38] & [7.72]; First Wright Report, [2.1.10]; CPG invoices for July, August and September 2016: ST54-56; the applicant’s RCTIs for July, August and September 2016: ST60-62; Ellis Report [7.38] & [7.72].
[308] T3-T7 – the applicant’s BAS July-Nov 2016; the applicant’s GST Detail Reports July – Nov 2016: ST241-246; the applicant** GST Detail Report for July 2016: ST246, p7773; the applicant’s GST Detail Report for August 2016: ST242, p7768; the applicant’s GST Detail Report for September 2016: ST243, p7769; the applicant’s GST Detail Report for October 2016: ST244, p7771; the applicant’s GST Detail Report for November 2016: ST245, p7772.
[309] Galaxy GST Detail July-Sep 2016: ST234; Galaxy GST Detail Report Oct-Nov 2016: ST235. First Wright Report
[310] BAS lodgement history of the Intermediaries: Affidavit of Yi Deng Affidavit [10].
[311] Bayconnection Property Developments Pty Ltd and Ors and Commissioner of Taxation [2013] AATA 40 .
[312] First Salib Statement, [5(a)(xi)].
[313] First Salib Statement, [9(d)].
[314] First Salib Statement, [15].
[315] Transcript, 17 May 2021, p 125, l 26 to 37.
[316] T 9.
[317] T 10. Grounds 1 to 16.
[318] T 10. Ground 17.
[319] AAT Act, s 33(1)(c).
[320] Implicit in the requirements of AAT Act, s 43(2)(b).
[321] Buzadzic v Federal Commissioner of Taxation [2023] FCA 954 , Moshinsky J at [146] referring to Price Street Professional Centre Pty Ltd v Federal Commissioner of Taxation [2007] FCA 345 ; 66 ATR 1 , at [43].
[322] Nguyen v Federal Commissioner of Taxation [2018] FCA 1420 ; (2018) 265 FCR 355 Kenny J, at [2018] FCA 1420 [149] to [157] .
[323] Section 9-5.
[324] Division 11.
[325] Section 11-5.
[326] Saga Holidays Ltd v Federal Commissioner of Taxation (2006) 156 FCR 256 , [30] .
[327] Income Tax Assessment Act 1936 (Cth).
[328] GST law within the meaning of s 195-1
[329] Federal Commissioner of Taxation v Unit Trend Services Pty Ltd (2013) 250 CLR 523 at p 543 [59] French CJ, Crennan, Kiefel, Gageler and Keane JJ.
[330] Unit Trend Services at 250 CLR 541 [50] French CJ, Crennan, Kiefel, Gageler and Keane JJ.
[331] Unit Trend Services at 250 CLR 541 [51] French CJ, Crennan, Kiefel, Gageler and Keane JJ.
[332] Permissibly stated in an organised way having regard to the role and function of the Tribunal and what was said in Brownlie v Minister For Immigration, Citizenship, Migrant Services & Multicultural Affairs [2023] FCA 436 , Feutrill J at [46] and [52], while not going beyond the outer limits of dealing with the evidence led and the issues advanced as they have been, see the caution given by Mortimer J in National Disability Insurance Agency v Davis [2022] FCA 1002 at [188] .
[333] Saga Holidays Limited v Federal Commissioner of Taxation (2006) 156 FCR 256 , 264 [29]-[30] .
[334] See Federal Commissioner of Taxation v Spotless Services (1996) 186 CLR 404 .
[335] Federal Commissioner of Taxation v Hart (2004) 217 CLR 216 at [18] , per Gleeson CJ and McHugh J.
[336] Federal Commissioner of Taxation v Hart (2004) 217 CLR 216 at [70] , per Gummow & Hayne JJ.
[337] Federal Commissioner of Taxation v Spotless Services (1996) 186 CLR 404 at 423 ; Hart at [63] per Gummow & Hayne JJ.
[338] Federal Commissioner of Taxation v Hart (2004) 217 CLR 216 at [65] per Gummow and Hayne JJ.
[339] Federal Commissioner of Taxation v Mochkin (2003) 127 FCR 185 at [45] ; Vincent v Federal Commissioner of Taxation (2002) 124 FCR 350 at 372-373 ; CPH Property Pty Ltd v Federal Commissioner of Taxation (1998) 88 FCR 21 at 42 .
[340] ACN 154 520 199 Pty Ltd (in liquidation) v Federal Commissioner of Taxation [2020] FCAFC 190 , [224] .
[341] Mills v Commissioner of Taxation (2012) 250 CLR 171 at p 202-203 Gageler J
[342] Section 9-10(3).
[343] Federal Commissioner of Taxation v Hart (2004) 217 CLR 216 at [15] per Gleeson CJ & McHugh J; [65] per Gummow & Hayne JJ.
[344] At [206].
[345] The Deng affidavit.
[346] An alternative profit calculation would recognise both the GST effect on the sales price received and the liability to the ATO producing the same effect.

 

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