Wakilii

Rose of Sharon Enterprises Limited v Uganda Revenue Authority (Application No TAT 8 of 2018)

Tribunal · [2021] UGTAT 22 · 2021 Application Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application challenging additional tax assessment arising from alleged misuse of incoterms on imports
Decision
Additional tax assessment of Shs. 284,745,623 set aside; applicant's taxes as declared and paid found to be proper and lawful

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Tribunal held that despite inconsistencies in the use of incoterms on import documents, the applicant paid the proper taxes due on all fourteen consignments. The respondent failed to demonstrate how the alleged misuse of incoterms resulted in actual tax loss. The Tribunal computed the correct CIF values for each transaction by removing inland transport costs and adding insurance, and found that the taxes declared and paid by the applicant matched the amounts properly due under the East African Community Customs Management Act. The additional assessment of Shs. 284,745,623 was set aside.

Outcome

Additional tax assessment of Shs. 284,745,623 set aside; applicant's taxes as declared and paid found to be proper and lawful

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 audit and issued an additional assessment of Shs. 284,745,623, alleging that the applicant misused incoterms (CFR, DAP, FOB) on import documents, resulting in under-declaration of taxes. The respondent contended that by declaring consignments using CFR Kampala or DAP Kampala instead of FOB, the applicant under-valued imports by failing to account for inland freight from Mombasa to Kampala. The applicant objected, arguing that it paid proper taxes based on CIF values and that suppliers had clarified the incoterms used. The dispute concerned fourteen import entries. The respondent's audit focused particularly on three consignments (C20418, C31098, C45121) and claimed inland freight charges were understated.

Issues

  1. Whether the taxes paid by the applicant on the import of the goods were proper and lawful?
  2. What remedies are available to the parties?

Orders

  • Application allowed.
  • Costs awarded to the applicant.

Rules and key headnotes

Customs Valuation — Incoterms — Proper Use and Interpretation
A revenue collecting body cannot dictate which incoterms a buyer and seller should use in international trade. The tax collector's role is to comprehend the incoterms used and apply them to compute the customs value of goods for taxation purposes under the East African Community Customs Management Act.
Customs Valuation — CIF Value Computation — Inland Transport Costs
Under the East African Community Customs Management Act, the customs value for taxation purposes is computed on a CIF basis (Cost, Insurance, and Freight to port of importation). Where goods are declared using incoterms that include inland transport costs beyond the port of importation (such as CFR Kampala or DAP Kampala), those inland costs must be removed and only ocean freight and insurance to the port of entry included in the taxable value.
Additional Tax Assessment — Burden of Proof — Demonstrating Tax Loss
Where a tax authority alleges that an importer's use of incoterms resulted in under-declaration of taxes, the authority must demonstrate how the alleged misuse resulted in actual loss of revenue. Inconsistency in the use of incoterms alone, without proof of resulting tax loss, does not justify an additional assessment.
Hearsay Evidence — Transport Charges — Reliability
Evidence of transport charges based on undisclosed sources and not supported by documentary proof constitutes hearsay and carries little weight on a balance of probabilities, particularly where the taxpayer has provided detailed documentary evidence of actual charges paid.

Legislation cited (12)

  • East African Community Customs Management Act s.31(1)
  • East African Community Customs Management Act s.34(2)
  • East African Community Customs Management Act s.41
  • East African Community Customs Management Act s.122
  • East African Community Customs Management Act s.122(4)
  • East African Community Customs Management Act s.203
  • East African Community Customs Management Act s.233
  • 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 Fourth Schedule Paragraph 9(2)
  • Tax Appeals Tribunal Act s.18
  • Evidence Act s.101

Cases cited (3)

  • Francis Lukooya Mukoone and another v The Editor in Chief of Bukedde Newspaper, New Vision Printing and Publishing Limited and another CS 351 of 2997
  • Noorbrook Uganda Ltd. v URA TAT Application no. 18 of 2918
  • Auto Express Limited v Commissioner Customs and Border Control Appeal 119 of 2018

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

Rose of Sharon Enterprises Limited v Uganda Revenue Authority (Application No TAT 8 of 2018) 2021 UGTAT 22 (14 December 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.