Commissioner General, Uganda Revenue Authority v Airtel (U) Limited (Civil Appeal 32 of 2020)

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Supreme Court held that penal tax under Section 65(3) of the Value Added Tax Act accrues from the due date until the outstanding tax is paid in full, and is not suspended merely because the taxpayer lodges an objection in the Tax Appeals Tribunal and pays 30% of the disputed tax under Section 15(1) of the Tax Appeals Tribunal Act. Tax statutes are construed strictly; any suspension of penal tax must be expressly stated by Parliament and cannot be read in by intendment. The Court of Appeal therefore erred in finding suspension. The appeal was allowed, the Court of Appeal's judgment set aside and the High Court's dismissal reinstated; the respondent was not entitled to a refund and the cross-appeal failed.

Outcome

Appeal allowed; Court of Appeal decision set aside and High Court dismissal of the suit reinstated; refund of Ug. Shs. 1,555,836,915 denied; cross-appeal dismissed

Facts

The respondent acquired the assets and liabilities of Celtel Uganda Ltd, including a tax debt. In 2004 the Uganda Revenue Authority assessed Celtel for VAT, excise duty and penal tax following an audit revealing unremitted VAT for April 2000 to July 2003. Celtel disputed part of the debt and lodged objections in the Tax Appeals Tribunal, paying 30% of the disputed tax. The Tribunal, High Court and Court of Appeal upheld the assessment. When the respondent later sought to pay the 70% balance, the appellant informed it that penal tax had accrued during the objection proceedings, raising the liability to Ug. Shs. 1,555,836,915. The respondent paid under reservation, then sued for a declaration that the interest was unlawful and for a refund. The dispute turned on whether lodging an objection suspends accrual of penal tax under Section 65(3) of the VAT Act.

Issues

1. Whether the Court of Appeal correctly interpreted Section 65(3) of the Value Added Tax Act as suspending the accrual of penal tax during the pendency of tax objection proceedings before the Tax Appeals Tribunal and on appeal.
2. Whether the respondent was entitled to a refund of the penal tax/interest of Ug. Shs. 1,555,836,915 paid to the appellant.
3. Whether, on the cross-appeal, interest at the statutory rate ought to have been awarded on the sum claimed for refund.

Orders

• The decision of the Court of Appeal is set aside.
• The decision of the High Court dismissing the respondent's suit 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.
• The cross-appeal is dismissed.

Rules and key headnotes

Legislation cited (12)

• Value Added Tax Act, Cap. 349 s.4
• Value Added Tax Act, Cap. 349 s.31
• Value Added Tax Act, Cap. 349 s.32
• Value Added Tax Act, Cap. 349 s.34
• Value Added Tax Act, Cap. 349 s.34(3)
• Value Added Tax Act, Cap. 349 s.34A
• Value Added Tax Act, Cap. 349 s.65(3)
• Value Added Tax Act, Cap. 349 s.66(6)
• Value Added Tax Act, Cap. 349 Fifth Schedule
• Tax Appeals Tribunal Act, Cap. 345 s.14
• Tax Appeals Tribunal Act, Cap. 345 s.15(1)
• Constitution of the Republic of Uganda 1995 Article 44(c)

Cases cited (4)

• Uganda Revenue Authority v Stephen Mabosi (Civil Appeal No. 1 of 1996)
• Income Tax Commissioner v Roshanali Nazeraly Merali and Another [1964] 1 EA 95
• Uganda Revenue Authority v Siraje Hassan Kajura and Others (Civil Appeal No. 9 of 2015)
• Cape Brandy Syndicate v Inland Revenue Commissioners [1921] 2 KB 64

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