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

Court of Appeal · [2020] UGCA 2177 · 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) sitting in its appellate jurisdiction over a decision of the Tax Appeals Tribunal
Decision
Appeal dismissed by majority; High Court orders upheld, including remission of the tax dispute to the Tax Appeals Tribunal for reassessment

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

By majority the Court of Appeal dismissed the appeal and upheld the High Court's orders, including remitting the matter to the Tax Appeals Tribunal for reassessment. The majority (Owiny-Dollo DCJ, Musota JA) held that 'best information' in section 32(3) of the VAT Act and 'best judgment' under English law may be used interchangeably, and that grounds attacking the trial judge's findings misquoted him. On section 19 of the Tax Appeals Tribunals Act, the Tribunal, having set aside the Commissioner's assessment, was obliged to either substitute its own decision or remit the matter with directions. Kakuru JA dissented, finding the two phrases distinct, the input/output method legal, and the Tribunal empowered to make a final order.

Outcome

Appeal dismissed by majority; High Court orders upheld, including remission of the tax dispute to the Tax Appeals Tribunal for reassessment

Facts

Tembo Steels (U) Ltd, a manufacturer of steel products registered for VAT, was audited by Uganda Revenue Authority based on power consumption. URA issued a VAT assessment (revised to Ushs 491,742,042) derived from an input/output ratio linking electricity consumed to steel output. The company objected, contending the method was not legally tenable. On review, the Tax Appeals Tribunal found in the company's favour, holding the input/output ratio was not prescribed under the VAT Act and the assessment had no merit. URA appealed to the High Court (Commercial Division), where Madrama J held the Commissioner was entitled to assess under section 32(3) on the best information available, that the assessment though arbitrary was valid, and that the Tribunal, having set aside the assessment under section 19(1)(c) of the Tax Appeals Tribunals Act, ought to have substituted its own decision or remitted the matter. The judge affirmed the setting aside but remitted the dispute for reassessment. Tembo Steels brought this second appeal challenging the interpretation of 'best information', the validity of the arbitrary assessment, the input/output method, and section 19.

Issues

  1. Whether the term 'best information' in section 32(3) of the VAT Act means the same thing as 'best judgment' used in English tax law.
  2. Whether an arbitrary assessment could still be a valid assessment.
  3. Whether the input/output method used in the assessment is legal and whether it is the same as 'input tax' and 'output tax' defined in the VAT Act.
  4. Whether, under section 19 of the Tax Appeals Tribunals Act, the Tribunal upon setting aside a decision must substitute its own decision or remit the matter, and whether it may make a final order disposing of the matter.

Orders

  • By majority, appeal dismissed with costs.
  • The decision and orders of the first appellate Court (High Court) upheld.

Rules and key headnotes

Value Added Tax — Assessment under VAT Act s.32(3) — Meaning of 'best information available'
Under section 32(3) of the Value Added Tax Act, where the Commissioner General is not satisfied with a taxpayer's return, the Commissioner may estimate tax payable based on the best information available; the majority held the phrase 'best information available' may be used interchangeably with the English 'best judgment' since best judgment is informed by the best information.
Value Added Tax — Methods of assessment — Legality of input/output ratio method
The input/output method of assessing tax is a recognised mathematical method of arriving at output from input in a production process; it is legal and distinct from the statutory terms 'input tax' and 'output tax' defined in section 1 of the VAT Act, and the Commissioner may use it where proper records are unavailable, applying it objectively to the facts of each case.
Tax Appeals Tribunal — Powers on review under s.19(1)(c) of the Tax Appeals Tribunals Act
Under section 19(1)(c) of the Tax Appeals Tribunals Act, where the Tribunal sets aside a taxation decision under review, it must either make a decision in substitution or remit the matter to the decision maker with directions or recommendations; a bare setting aside without such further order is not permitted.
Court of Appeal — Preliminary objections — Requirement of leave under rules 82 and 102(b)
A respondent who seeks to raise a preliminary objection to the competence of an appeal, which could have been raised by application to strike out under rule 82, must obtain leave of court under rule 102(b); a preliminary objection raised without such leave is incompetent and will be struck out.
Second appeal — Powers of the Court of Appeal under s.11 Judicature Act and rule 32(2)
On a second appeal from a decision of the High Court sitting in its appellate jurisdiction, the Court of Appeal is confined to questions of law and may appraise inferences of fact drawn by the trial court but has no discretion to hear additional evidence.

Legislation cited (15)

Cases cited (7)

  • Argosy Co Ltd v Inland Revenue Comr [1971] 1 WLR 514
  • Hindle v Customs and Excise Commissioners [2004] STC 412
  • Customs and Excise Commissioners v Pegasus Birds [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
  • Mukisa Biscuit Manufacturing Co Ltd v West End Distributors Ltd [1969] EA 696
  • Beatrice Kobusingye v Fiona Nyakana (Civil Appeal No. 18 of 2001)

Full judgment

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

Tembo Steels (U) Ltd v Uganda Revenue Authority (Civil Appeal No. 77 of 2011) [2020] UGCA 2177 (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.