Wakilii

Jazz Supermarkets Limited v Uganda Revenue Authority (Application 115 of 2021)

Tribunal · [2023] UGTAT 31 · 2023 Application Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application challenging penal tax assessments for failure to use Electronic Fiscal Receipting and Invoicing Solution (EFRIS)
Decision
Application dismissed. Assessment of Shs 84,000,000 set aside. Applicant ordered to pay reduced penal tax of Shs 6,000,000.

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Holding

The Tribunal held that the applicant was liable to pay penal tax for failure to issue EFRIS invoices from 1 to 14 November 2021, but the assessment of Shs 84,000,000 was set aside as improperly computed. Applying the literal rule of statutory interpretation, the Tribunal found that the Tax Procedure Code Act does not provide for penal tax to be charged per invoice or per day. The penalty should be imposed per tax period (one calendar month under the VAT Act). The Tribunal ordered the applicant to pay penal tax of Shs 6,000,000, being 300 currency points for one omission in the tax period.

Outcome

Application dismissed. Assessment of Shs 84,000,000 set aside. Applicant ordered to pay reduced penal tax of Shs 6,000,000.

Facts

Jazz Supermarkets Limited operates a supermarket and is a VAT registered taxpayer. In November 2021, Uganda Revenue Authority issued two penal tax assessments totaling Shs 84,000,000 for the applicant's failure to issue Electronic Fiscal Receipting and Invoicing Solution (EFRIS) invoices to customers from 1 to 14 November 2021. The applicant objected, citing challenges in implementing EFRIS including product coding system corruption, multiple codes for related products, software incompatibility, limited staff, and government curfew restrictions. The respondent had published General Notice 595 of 2020 in the gazette on 23 June 2020 making it mandatory for all VAT registered taxpayers to issue e-invoices or e-receipts, with implementation effective from 1 January 2021 after an extension. The respondent trained the applicant on EFRIS use and instituted a technical working group to assist Uganda Supermarket Owners Association members. Between 15 January 2021 and 20 September 2021, no enforcement measures were taken. On 20 September 2021 and 7 October 2021, the respondent wrote to the applicant requesting compliance. The applicant admitted it did not issue e-invoices between 1 and 14 November 2021, with approximately 1,313 invoices issued without being fiscalised. The value of goods for which invoices were not issued was Shs 500,200.

Issues

  1. Whether the applicant is liable to pay the penal tax assessed of Shs 84,000,000 for failure to issue EFRIS invoices.
  2. Whether the respondent exercised its discretion rationally when it penalized the applicant.
  3. Whether the penal tax assessment was illegally determined and applied.
  4. Whether the penalty should be imposed per invoice, per day, or per tax period.
  5. What remedies are available to the applicant.

Orders

  • The assessment of Shs 84,000,000 is set aside.
  • The applicant is liable to pay penal tax of Shs 6,000,000.
  • The respondent is awarded half the costs of the application.
  • Application dismissed.

Rules and key headnotes

Tax Law — EFRIS — Statutory Obligation — Mandatory Compliance
Where the Commissioner publishes a notice in the Gazette under section 73A(2) of the Tax Procedure Code Act specifying taxpayers for whom it is mandatory to issue e-invoices or e-receipts, VAT registered taxpayers falling within that category are bound to comply with the law and must issue EFRIS invoices for all business transactions.
Administrative Law — Exercise of Discretion — Rationality Test
A taxpayer challenging the exercise of administrative discretion by a revenue authority must prove that there was gross unreasonableness in the decision taken, such that no reasonable authority addressing itself to the facts and law would have made such a decision. The taxpayer bears the burden of proving that the authority did not exercise its discretion rationally.
Tax Law — Penal Tax — Computation — Continuing Offence
A continuing offence of failure to implement EFRIS can be committed only once for the purpose of penalty assessment in a tax period. Under the VAT Act, a tax period is one calendar month. Penal tax for failure to issue EFRIS invoices should be imposed per tax period (per month), not per invoice or per day.
Statutory Interpretation — Literal Rule — Taxing Statutes
When the words of a taxing statute are clear and unambiguous, they should be given their plain meaning. Courts should not read into the sections of a taxing statute words that are not there so as to meet the minds of the legislators. Where the law does not specify that penal tax should be charged per invoice or per day, such words cannot be inserted by interpretation.
Tax Law — Tax Appeals — Grounds of Objection — Legality of Assessment
While the Tax Appeals Tribunal is limited to the grounds stated in the taxation objection under section 16(4) of the Tax Appeals Tribunal Act, it cannot ignore legal arguments raised by a party regarding the legality of an assessment, as doing so would create a miscarriage of justice. There is a difference between factual grounds stated in the objection and legal arguments raised. Questions of legality and proper computation of tax go to the validity of the assessment and must be addressed by the Tribunal.
Tax Law — Penal Tax — Proportionality
A penalty imposed for tax non-compliance must be proportional to the offence committed. Where the value of goods for which EFRIS invoices were not issued is Shs 500,200, a penal tax assessment of Shs 84,000,000 computed on a per-invoice or per-day basis is disproportionate and not supported by the statutory provisions.

Legislation cited (7)

  • Tax Procedure Code Act s.73A
  • Tax Procedure Code Act s.73B
  • Tax Procedure Code Act s.73A(2)
  • Tax Procedure Code Act s.73B(2)
  • Tax Procedure Code Act (Amendment) Act 2018 s.1
  • Tax Appeals Tribunal Act s.16(4)
  • VAT Act

Cases cited (15)

  • Farid Meghani v Uganda Revenue Authority (Civil Appeal No. 6 of 2021)
  • Century Bottling Company Limited v Uganda Revenue Authority (Miscellaneous Application No. 32 of 2020)
  • Makula International Ltd v His Eminence Emmanuel Cardinal Nsubuga and Rev. Fr. Dr. Kyeyune (CACA No. 4 of 1981)
  • United States v Bajakajian 24 US 321 (1998)
  • Cape Brandy Syndicate v IRC (1921) KB 64
  • Uganda Revenue Authority v Hassan Kajura
  • Kampala Nissan v Uganda Revenue Authority (HCCA No. 7 of 2009)
  • Okello Okello v. The Commissioner General, Uganda Revenue Authority
  • Radio Pacis Limited v Uganda Revenue Authority (HCCS No. 8 of 2013)
  • Connie Kekiyonza Watuwa and 2 others v Attorney General (Civil Miscellaneous Application No. 544 of 2020)
  • ICEA General Insurance Company Limited v Uganda Revenue Authority (Application No. 100 of 2019)
  • Re Snow-Appeal from the Third Judicial District Court, Salt Lake County Utah. 1887 p. 282
  • Embassy Supermarket v Uganda Revenue Authority (Application No. 114 of 2021)
  • Breen v Amalgamated Engineering Union [1971] 2. Q.B 1
  • Twinomuhangi Pastoli V Kabale District Local Government Council, Katarishangwa Jack & Beebwajuba Mary [2006] HCB Vol. 1 p. 30

Full judgment

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Jazz Supermarkets Limited v Uganda Revenue Authority (Application 115 of 2021) 2023 UGTAT 31 (8 May 2023)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.