50 The present case is different from the Hoare Bros case in one respect. There the debt claimed by the Commissioner was for unpaid income tax, governed by ss 204 and 208 of the Assessment Act (as well as s 177, had it been invoked), and Part IVC of the TAA (including ss 14ZZM and 14ZZR) applied comprehensively to any dispute about the assessments. In the present case ss 221YHH, 221YHJ and 221YHN(1) have a combined effect equivalent to ss 204 and 208 in the case of income tax (except that penalties fall due and payable without any process of assessment or time for payment). But Part IVC of the TAA applies only to a dispute which arises about the exercise of the Commissioner's discretion to remit the 'principal' penalties. It is arguable that if the taxpayer contests his liability to pay a PPS penalty for a reason which does not bring into question a decision of the Commissioner with respect to remission of a 'principal' penalty, then there is no exclusive procedure for dealing with the objection and consequently the reasoning in the Hoare Bros case is inapplicable. If the taxpayer's grounds for challenge would lead to the conclusion that the amount claimed by the Commissioner does not fall within the statutory provisions which render a penalty due and payable, then arguably there is a dispute with respect to the existence of the penalty debt, which the taxpayer could raise as a basis for setting aside the Commissioner's statutory demand. But this is not so in the present case. The first three of the plaintiff's grounds for contending that there is a genuine dispute with respect to the existence of the debt have not been made out on the facts, for reasons which I have given. The fourth ground relates to the Commissioner's decision regarding remission of penalty, objection to which is governed by Part IVC of the TAA. To the extent that the plaintiff relies on this fourth ground, it must fail upon the application of the decision in the Hoare Bros case."
17 However, the plaintiff submitted that the statements made by Austin J in para [50] overlooked the decision of Hill J in Trylow v Commissioner of Taxation (2004) ATC 4406; (2004) 55 ATR 408; [FCA] 446 which was not brought to his Honour's attention. In Trylow Hill J stated at [4]:
"Section 221EEA [sic] forms part of the provision of the Act concerned with Group Tax popularly then called 'Pay As You Earn' tax ('PAYE'). A person ('an employer') who paid salary or wages as defined to an employee was required to deduct a prescribed amount from the salary or wages and pay it to the Commissioner. The legislative scheme is the subject of a fuller discussion in Stergis v Commissioner of Taxation (1989) 86 ALR 174. Failure to deduct the prescribed amount brought with it the consequence that the Act imposed upon the employer a penalty. The penalty was not imposed by the Commissioner. It arose not as a consequence of any process of assessment. It was a consequence of the Act itself."
18 Section 221EAA(1) of the ITAA relevantly reads:
"Where an employer … refuses or fails, at the time of paying salary or wages to an employee, to deduct from the salary or wages the amount required to be deducted under this Division, the employer is liable to pay to the Commissioner, by way of penalty…"
19 Section 221EAA(1) of the ITAA relates to PAYE whereas s 221YHH(1) of the ITAA relates to prescribed payments. Similarly s 221YHH(1) of the ITAA reads:
"If an eligible authority makes a prescribed payment to a payee and does not deduct from the payment the amount required to be deducted under this Division the eligible paying authority is liable to pay the Commissioner by way of penalty."
20 The plaintiff submitted that the penalty arises from the ITAA itself and that there is no discretion to be exercised by the Commissioner in imposing the penalty. It is the next step that brings into play the Commissioner's discretion, namely the application to remit the penalty. It is unlike s 177 of the ITAA where the Commissioner is called upon to exercise discretion in making an assessment.
21 Ms Susanne Vihm of the tax office deposed that she believes the defendant is indebted to the plaintiff in the sum of $4,145,650.64 in respect of the cause of action that was commenced in the amount of $3,750,567.89 plus further general interest charge calculated since the date of commencement of proceedings of $416,899.85, and that since commencement of this action credits have accrued to the amount of $21,817.10 reducing the amount owing to $4,145,650.64.
22 It is my view the same reasoning as in Trylow, is applicable to s 221YHH(1) of the ITAA and the failure to deduct the prescribed amount brings with it the consequence that the ITAA imposes upon an eligible paying authority a penalty. The penalty was not imposed by the Commissioner but rather as a consequence of the ITAA (s 221YHH(1)). That being so, the plaintiff is liable to pay the penalty and interest. However, this does not accord with the view expressed by Austin J referred to below.