COMMISSIONER GENERAL UGANDA REVENUE AUTHORITY V AIRTEL (U) LTD
SUPREME COURT (CORAM: ALFONSE OWINY – DOLLO, CJ, FAITH MWONDHA, JSC, MIKE CHIBITA, JSC, ELIZABETH MUSOKE, JSC & STEPHEN MUSOTA, JSC
CIVIL APPEAL NO. 032 OF 2020
SEPTEMBER 12, 2023
(Appeal and cross appeal from the decision of the Court of Appeal in Civil Appeal No. 40 of 2013 dated November 12, 2019 (Kakuru, Muhanguzi and Madrama, JJA))
Revenue and Taxation – Payment of taxes - Effect of not voluntarily remitting tax to URA when it is due – Section 65(3) of the Value Added Tax Act, Cap. 349.
Revenue and Taxation – Objection to tax assessed - Payment of a deposit of portion of tax pending determination of objection – Effect of payment of the deposit –Whether payment of 30% of the tax in dispute suspends the penal tax - Section 15 (1) of the Tax Appeals Tribunal Act, Cap. 345.
Constitutional Law - Interpretation of tax statutes – Whether the Court of Appeal gave the proper import of the relevant legal provisions on penal tax as they applied to the respondent's circumstances.
The respondent is a company engaged in telecommunication services which it acquired from Celtel Uganda Ltd thereby acquiring all assets and assuming liability. The appellant had served Celtel with a tax assessment consisting of excise duty, VAT and penal tax all amounting to UGX.1,024,209,566/= (One billion twenty four million two hundred nine thousand five hundred sixty six Uganda shillings). Celtel objected this before the Tax Appeals Tribunal, however was not successful and subsequent appeals to the High Court and Court of Appeal were also dismissed upholding the decision of the Tax Appeals Tribunal. Celtel had earlier on paid 30% of the tax debt and when the respondent acquired it in 2010 paid the balance of 70% of the disputed tax. However, the appellant informed the respondent that during the pendency of the tax objection proceedings, the unpaid tax had been accruing interest and that its tax liability had increased to Ugx shs. 1,555,836,915 (One billion five hundred fifty five million eight hundred thirty six thousand nine hundred fifteen shillings).
The respondent disputed this assessment but went on pay it and challenged the validity of the assessment in High Court which found no merit in the suit and dismissed it. On appeal, the Court of Appeal raised among others a question as to whether a tax payer who objects to a tax assessment in the Tax Appeals Tribunal ought to be subject to a penal tax in the event that the payer’s objection is dismissed. Court of Appeal allowed the appeal and set aside the decision of High Court.
The appellant being dissatisfied with the decision of the Court of Appeal filed an appeal in the Supreme Court which the respondent opposed and also filed a cross-appeal. The Court guided that the key issue to be determined by it was whether the Court of Appeal gave the proper import of the relevant legal provisions on penal tax as they applied to the respondent's circumstances.
The appellant’s counsel faulted Court of Appeal for finding that the penal tax imposed under section 65 (3) of the Value Added Tax Act, Cap. 349, is suspended when the taxpayer objects to the VAT tax by filing a court action. Counsel submitted that that finding was not supported by the literal interpretation of the highlighted provision which does not explicitly state so. Counsel further persuaded the Supreme Court to find that the penal tax was rightly assessed pursuant to section 65 (3) and ought to stand. Counsel submitted that exemption from tax including penal tax can only be granted by Parliament and not a court of law as the Court of Appeal purported to do. Counsel further argued that the rationale for the interest imposed under section 65 (3) is to address a situation where a defaulting tax payer has kept the Uganda Revenue Authority and the entire Uganda public from tax he/she owes.
Counsel prayed that court allows the appeal, sets aside the judgment and orders of the Court of Appeal and reinstate the judgment and orders of the High Court; court grants the appellant the costs in this court and the costs below.
In response, counsel for the respondent contended that the justices of appeal were justified in overturning the decision of the High Court and that the respondent was not liable to pay the interest of Ugx Shs. 1,555,836,915/= as imposed by the appellant. He also argued that a person who objects to a tax assessment is not liable to penal tax under section 65 (3) of the Value Added Tax Act. Counsel submitted that section 65 (3) imposes criminal liability on a person who fails to pay VAT by the due date and that a person who lodges an objection in the Tax Appeals Tribunal does not attract such liability.
HELD:
1. Section 65 (3) of the Value Added Tax Act, Cap. 349 imposes a penal tax where a tax payer defaults in paying tax on or before the due date. The consequence of failure to clear one's debt is obviously that further penal tax will accrue and the person will be required to pay a higher tax debt.
2. Payment of 30 percent of the tax assessed or that part of the tax assessed not in dispute, whichever is greater pursuant to section 15 (1) of the Tax Appeals Tribunal Act, Cap. 345 is mere procedural requirement which gives the tax payer the right of audience in the Tax Appeals Tribunal in relation to the tax objected. This does not suspend penal tax during the pendency of tax objection proceedings.
3. According to Uganda Revenue Authority V Kajura, Civil Appeal No. 09 of 2015 citing Cape Brandy Syndicate v IRC [1921] 2 KB 64, the guiding principle of interpretation of tax statutes is that clear words are necessary in order to tax the subject. One has merely to look at what is clearly said. There is no room for an intendment. There is no equity about tax. There is no presumption as to a tax. Nothing is to be read in it nothing is to be implied. One can only look fairly at the language used. The failure of Parliament to legislate expressly on the suspension of penal tax in those circumstances meant that no such suspension was intended by Parliament.
Appeal succeeds. Cross appeal dismissed. The decision of the Court of Appeal is set aside. The decision of the High Court dismissing the respondent's suit in the High Court is reinstated. The respondent is not entitled to a refund of Ug. Shs. 1,555,836,915/= as the same was lawfully collected. The appellant is granted the costs in this Court and the Courts below.
Legislation considered:
1. The Constitution of the Republic of Uganda, 1995, Article 44 (c)
2. Value Added Tax Act, Cap. 349, sections 4, 31, 32, 34, 65(3) & 66(6)
3. Tax Appeals Tribunal Act, Cap. 345, Sections 14 & 15 (1)
Cases cited:
1. Uganda Revenue Authority V Kajura, Civil Appeal No. O9 of 2015 citing Cape Brandy Syndicate V IRC [1921] 2 KB 64
2. Uganda Revenue Authority V Stephen Mabosi, Supreme Court Civil Appeal No. 1 of 1996 (unreported)
3. Income Tax Commissioner V Roshanali Nazeraly Merali and Another [1964] 1 EA 95
4. Uganda Revenue Authority V Siraje Hassan Kajura and Others, Supreme Court Civil Appeal No. 9 of 2015 (unreported)
Mr. Baluku Ronald Masamba, Ms. Barbra AjamboNahone, Mr. Aliddeki Ssali Alex and Mr. Agaba Edmond for appellant
Mr. Albert Byamugisha for respondent
