Wakilii

Rose of Sharon Enterprises Limited v Uganda Revenue Authority (Application 8 of 2018)

Tribunal · [2021] UGTAT 27 · 2021 Application Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application challenging additional tax assessment following post-clearance customs audit
Decision
Additional tax assessment of Shs. 284,745,623 set aside; applicant found to have paid all taxes due

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Tribunal held that although the applicant and its suppliers were inconsistent in their use of incoterms, the respondent failed to demonstrate how this resulted in loss of taxes. The Tribunal found that the applicant had paid all taxes due under the East African Community Customs Management Act. The respondent's evidence on transport charges was hearsay and the imposition of penalty tax was unjustified. The application was allowed with costs to the applicant.

Outcome

Additional tax assessment of Shs. 284,745,623 set aside; applicant found to have paid all taxes due

Facts

The applicant, a manufacturer of hair products, imported raw materials from China, South Korea, and South Africa between May 2016 and June 2017. In November 2017, the respondent conducted a post-clearance customs audit and found inconsistencies in the applicant's import documents regarding the use of incoterms. The respondent alleged that the applicant under-declared the customs value by using incoterms such as 'Cost and Freight (CFR) Kampala' or 'Delivered at Place (DAP) Kampala' instead of 'Free on Board (FOB)'. The respondent adjusted the invoices to account for ocean freight and insurance, computing an additional tax liability of Shs. 284,745,623. The applicant contended that it had paid the proper taxes due and that the suppliers had confirmed no tampering with documents. The applicant challenged the assessment before the Tribunal.

Issues

  1. Whether the applicant under-declared the customs value of its imports by using incoterms such as 'Cost and Freight (CFR) Kampala' or 'Delivered at Place (DAP) Kampala' instead of 'Free on Board (FOB)'.
  2. Whether the respondent's additional assessment of Shs. 284,745,623 was lawful and justified.
  3. What remedies are available to the parties.

Orders

  • Application allowed.
  • Costs awarded to the applicant.

Rules and key headnotes

Customs Valuation — Incoterms — Proper Application in Computing Customs Value
Incoterms are standardized shipping terms that apportion costs and liabilities of international shipping between buyers and sellers. A revenue collection body cannot dictate which incoterms a buyer and seller should use. A tax collector should comprehend incoterms and use them to compute the customs values of goods for taxation purposes.
Customs Valuation — Computation of Taxable Value Under EACCMA
Under section 122 and Paragraph 9 of the Fourth Schedule of the East African Community Customs Management Act, the customs value for duty purposes shall be the transaction value (price actually paid or payable) adjusted to include the cost of transport to the port or place of importation, loading, unloading and handling charges, and the cost of insurance. Taxes under the EACCMA are paid similar to the use of CIF (Cost, Insurance and Freight) incoterms.
Burden of Proof — Tax Disputes — Requirement to Demonstrate Tax Loss
Where a revenue authority alleges under-declaration of customs value, it must demonstrate how the purported misuse of incoterms resulted in actual loss of taxes. Mere inconsistency in the use of incoterms, without proof of tax loss, is insufficient to justify an additional assessment.
Hearsay Evidence — Admissibility in Tax Disputes
Evidence on transport charges that is not based on direct knowledge or disclosed sources constitutes hearsay and is not reliable for purposes of computing additional tax assessments.
Penalty Tax — Lawfulness — Requirement of Unlawful or Fraudulent Conduct
Where the law does not dictate which incoterms should be used on imports, inconsistent use of incoterms by an importer and its suppliers does not constitute unlawful or fraudulent conduct. The imposition of penalty tax in such circumstances is unjustified.

Legislation cited (9)

  • East African Community Customs Management Act s.122
  • East African Community Customs Management Act s.233
  • East African Community Customs Management Act s.34
  • East African Community Customs Management Act s.41
  • East African Community Customs Management Act Fourth Schedule Paragraph 2(1)
  • East African Community Customs Management Act Fourth Schedule Paragraph 9
  • East African Community Customs Management Act s.203
  • Tax Appeals Tribunal Act s.18
  • Evidence Act s.101

Cases cited (2)

  • Francis Lukooya Mukoone and another v The Editor in Chief of Bukedde Newspaper, New Vision Printing and Publishing Limited and another CS 351 of 299
  • Auto Express Limited v Commissioner Customs and Border Control Appeal 119 of 2018

Full judgment

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Rose of Sharon Enterprises Limited v Uganda Revenue Authority (Application 8 of 2018) 2021 UGTAT 27 (28 June 2021)
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.