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Tembo Steels (U) Ltd v Uganda Revenue Authority (Civil Appeal No. 77 of 2011)

Court of Appeal · [2020] UGCA 155 · 2020 Appeal Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Second appeal from a decision of the High Court (Commercial Division) exercising its appellate jurisdiction over a decision of the Tax Appeals Tribunal
Decision
Appeal dismissed by majority with costs; the High Court order remitting the matter to the Tax Appeals Tribunal for reassessment stands

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Court of Appeal divided on the meaning of section 32(3) of the VAT Act. The majority (Musota JA, Owiny-Dollo DCJ concurring in result) dismissed the appeal, holding that the appellant had misquoted the trial judge and that the Tax Appeals Tribunal, having set aside the assessment under section 19(1)(c) of the Tax Appeals Tribunals Act, was required either to substitute its own decision or remit the matter. Kakuru JA (in the minority) would have allowed the appeal, holding that 'best information' is an objective test distinct from 'best judgment', that the input/output method is nonetheless a legal method, and that the Tribunal could make a final order without remitting. The preliminary objection was struck out for want of leave.

Outcome

Appeal dismissed by majority with costs; the High Court order remitting the matter to the Tax Appeals Tribunal for reassessment stands

Facts

Tembo Steels (U) Ltd, a steel producer registered for VAT, was subjected to audits by Uganda Revenue Authority. A 2004 audit based on power (electricity) consumption relative to steel output led URA to issue a VAT assessment, initially of about UGX 681,500,089, later revised to about UGX 491,742,042. The company objected, contending the input/output ratio method used to determine under-declared sales was not legally tenable. It applied to the Tax Appeals Tribunal under section 16 of the Tax Appeals Tribunals Act. The Tribunal found in the company's favour, holding the input/output ratio method non-existent under the VAT Act and the assessment without merit, and set the assessment aside. URA appealed to the High Court (Commercial Division), where Madrama J held that the Commissioner was entitled to assess under section 32(3), affirmed the setting aside of the assessment, and remitted the matter to the Tribunal for reassessment under section 19(1)(c). The company appealed to the Court of Appeal challenging the trial judge's interpretation of 'best information' and section 19.

Issues

  1. Whether the preliminary objection to grounds 1, 2 and 3 was competently raised without leave of court under Rules 82 and 102(b) of the Court of Appeal Rules.
  2. Whether the term 'best information' in section 32(3) of the VAT Act means the same as 'best judgment' used under English law.
  3. Whether the input/output ratio method used in the VAT assessment is a legal method of assessment under the VAT Act.
  4. Whether the input/output method of assessment is the same as 'input tax' and 'output tax' defined in section 1 of the VAT Act.
  5. Whether, on setting aside a taxation decision under section 19(1)(c) of the Tax Appeals Tribunals Act, the Tribunal must either substitute its own decision or remit the matter, and whether it may make a final order disposing of the matter.

Orders

  • Preliminary objection struck out as incompetent for being raised without leave of court.
  • Grounds 1, 2 and 3 of the memorandum of appeal dismissed as misconceived (per Musota JA).
  • Ground 4 dismissed (per Musota JA).
  • By majority decision, the appeal fails and is dismissed with costs.

Rules and key headnotes

Civil Procedure — Preliminary Objections — Requirement of Leave under Court of Appeal Rules
A respondent who wishes to raise an objection to the competence of an appeal that could have been raised by application under Rule 82 must obtain leave of the court under Rule 102(b) of the Court of Appeal Rules; an objection raised without such leave is incompetent and will be struck out.
Tax Law — VAT Assessment — Meaning of 'Best Information' under Section 32(3) VAT Act
The Commissioner General may, based on the best information available, estimate tax payable under section 32(3) of the VAT Act; the majority accepted the trial judge's view that 'best information' and 'best judgment' are approximately the same, while the minority held that 'best information' imposes an objective, quantitative test distinct from the subjective 'best judgment' standard used in English legislation.
Tax Law — VAT Assessment — Input/Output Ratio Method of Assessment
The input/output method of assessing tax is a legal method under section 32(3) of the VAT Act; where proper sales or accounting records are absent the Commissioner General may use available information, including power consumption, to determine production and the relevant tax, and this method is distinct from 'input tax' and 'output tax' defined in section 1 of the VAT Act.
Tax Law — Tax Appeals Tribunal — Powers on Review under Section 19 TAT Act
Under section 19(1)(c) of the Tax Appeals Tribunals Act, on setting aside a taxation decision the Tribunal must either make a decision in substitution or remit the matter for reconsideration; the majority held that a decision of substitution is required and mere quashing is insufficient, while the minority held that the substituted decision may include a final order that no tax is payable, disposing of the matter without remitting to the Commissioner General.
Civil Procedure — Second Appeals — Restriction to Questions of Law
On a second appeal from a decision of the High Court exercising appellate jurisdiction, the Court of Appeal may appraise inferences of fact but is restricted to issues of law under section 72 of the Civil Procedure Act and Rule 32(2) of the Court of Appeal Rules.

Legislation cited (15)

Cases cited (7)

  • Argosy Co Ltd v Inland Revenue Commissioner [1971] 1 WLR 514
  • Beatrice Kobusingye v Fiona Nyakana (Supreme Court Civil Appeal No. 18 of 2001)
  • Mukisa Biscuit Manufacturing Co Ltd v West End Distributors Ltd [1969] EA 696
  • Hindle v Customs and Excise Commissioners [2004] STC 412
  • Customs and Excise Commissioners v Pegasus Birds Ltd [1998] STC 826
  • Public and Commercial Services Union v. Customs and Exercise Commissioners [2004] STC
  • Van Boeckel v Customs and Excise Commissioners [1981] 2 All ER 505

Full judgment

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Tembo Steels (U) Ltd v Uganda Revenue Authority (Civil Appeal No. 77 of 2011) [2020] UGCA 155 (28 August 2020)
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.