Kasese Cobalt Company Limited v Uganda Revenue Authority (Application 21 of 2020) [2021] UGTAT 25 (27 May 2021)

Full Case Text

## THE REPUBLIC OF UGANDA IN THE TAX APPEALS TRIBUNAL OF UGANDA AT KAMPALA **APPLICATION NO. 21 OF 2020**

## KASESE COBALT COMPANY LIMITED ======================APPLICANT **VERSUS**

**UGANDA REVENUE AUTHORITY ====================RESPONDENT**

## BEFORE: DR. ASA MUGENYI DR. STEPHEN AKABWAY MR. GEORGE MUGERWA

## **RULING**

This ruling relates to an application seeking to challenge agency notices issued on the applicant's accounts removing monies due to a ruling in an application before the Tribunal.

The applicant filed application 28 of 2018 against the respondent. On 21st January 2020, the Tribunal ruled in farvour of the respondent. On 27th January 2020, the respondent issued agency notices on the applicant's banks for Shs. 5,711,545,438 and collected Shs. 585,870,650.

The following issues were set down for determination:

- 1. Whether the respondent lawfully used agency notices after the Tribunal ruling? - 2. What remedies are available to the parties?

The applicant was represented by Ms. Belinda Nakiganda and Mr. Deus Mugaba while the respondent by Mr. Ronald Baluku, Mr. Alex Ssali Aliddeki and Ms. Tracy Basima Senyonjo.

The dispute before the Tribunal revolves around agency notices issued after the Tribunal had delivered a ruling on application before it.

The applicant's witness, Mr. Pradeep Kumar Gupta, its general manager testified that on 21st January 2020, the Tribunal delivered a ruling against the applicant in application 28 of 2018. On the same day, the respondent issued agency notices on the applicant's accounts

in Centenary Bank and Standard Chartered Bank. On 27th January 2020, the respondent issued an agency notice on Uganda Electricity Transmission Company. On the same day, the applicant obtained an interim order against any enforcement measures and served it on the respondent. On the same day the respondent collected US\$ 123,186 and Shs. 141,168,835 from the applicant's accounts in Standard Chartered Bank. The respondent sent agency notices to the applicant on 28th January 2020 and 1st February 2020 after having taken the monies. The other notices were cancelled on 7th February 2020. The witness testified that the applicant was aggrieved because it had already paid 30% of the tax not in dispute. The witness contended that the respondent did not demand for payment as required by law. The agency notices were for more money than what was due. He alleged that the respondent used the wrong law.

The applicant submitted that this matter was rightly brought before the Tribunal. It cited S.3 of the Tax Appeals Tribunal Act that defines a tax decision as any matter that it is left to inter alia, the discretion and the judgment of the Commissioner. The applicant contended that the Commissioner's decision to collect monies without the due process of the law is a tax decision. The applicant cited Fresh Handling Uganda Ltd. v Uganda Revenue Authority 83 of 2019 where the Tribunal noted that the respondent issued an agency notice and later an assessment. It contended that under 14(2) of the Tax Appeals Tribunal Act the Tribunal has powers to review any tax decision in respect of which an application is made. The applicant also cited *Uganda Revenue Authority v Rabbo Enterprise (U) Limited* Civil Appeal 12 of 2004 where the Supreme Court stated that Article 152 of the Constitution empowers the Tribunal to handle tax disputes. The applicant contended the use of an agency notice by the respondent to collect monies was a taxation decision within the jurisdiction of the Tax Appeals Tribunal.

The applicant contended that the respondent without extracting a decree or making a demand to the applicant after reading the ruling in TAT 28 of 2018 issued agency notices on the applicant's accounts. The applicant contended that the right procedure before the Tribunal is stated in the Tax Appeals Tribunal Act, Civil Procedure Act and Civil Procedure Rules. The Tribunal is a court of law and the due process of court should be followed. S. 19 of the Tax Appeals Tribunal Act provides that a decision of the Tribunal shall have effect

as and be enforceable as if it were a decision of a court. Rule 31(1) of the Tax Appeals Tribunal (Procedure) Rules provides that any matter in the Tribunal which the Rules do not provide, the rules of practice and procedure of the High Court shall apply. The applicant submitted that S. 28 of the Civil Procedure Act provides that the provisions of the Act to the execution of decrees so far as they are applicable be deemed to apply to the execution of decrees. S. 30 of the Civil Procedure Code Act provides that a decree may be executed by the court which passed it or sent to another court. Order 22 Rule 7 of the Civil Procedure Rules provide the holder of a decree shall apply to the court which passed the decree. The applicant contended that it was premature for the respondent to flout court procedure.

As regards the agency notice, the applicant contended that S. 31(8) of the Tax Procedure Code Act provides that an agency notice shall be served on the taxpayer. It is a requirement that is served on both the bank and the taxpayer. The applicant contended that it was only after it was served with an interim order that the respondent decided to serve it. The applicant cited Housing Finance Bank Limited v Uganda Revenue Authority 259 of 2014 where it was stated that the agency notice must be served on both the third party and the taxpayer as well. The applicant also cited *Uganda Revenue Authority v Paramount* Insurance Limited CA 97 of 2015 where the court held that agency notices by URA were issued contrary to the law, irregular and unjustified because the appellant did not notify the respondent of its assessment prior to issuing an agency notice.

The applicant submitted that it is entitled to a refund of the money illegally taken by the respondent. It cited S. 25 of the Tax Appeal Procedure Rules which provide that the Tribunal has the power to make any order or relief. The respondent contended that the Tribunal cannot sanction an illegality. It cited *Makula International Limited* $v$ *Cardinal* Nsubuga and another. The applicant prayed for interest of 2% on refunds taken. The applicant also prayed for general and exemplary damages.

The respondent submitted that this application is improperly before this Tribunal and the applicant had no locus to bring it. The respondent argued that the Tribunal had already considered the particular assessment in TAT 28 of 2018. Basing on the interpretation of S. 3 of the Tax Procedure Code Act the Tribunal has no jurisdiction to entertain the application

and the same is improperly filed before this Tribunal. The respondent argued further that the agency notices were not a taxation decision but rather were issued in relation to an already existing and due assessment for which the Tribunal had cemented the rights of each party in application 28 of 2018. The respondent argued further that in application 28 of 2018 at the delivery of the ruling in open Court the Tribunal became functus officio. The respondent argued that any disputes that arise from such operationalisation and implementation fall within the precincts of the reviewing body which is the High Court.

The respondent argued that under S. 28 (2) of the TAT Act, it is clear that the tax in dispute never loses its character of being a tax due and the law never envisaged it as a "decretal" sum". Any decision of the "reviewing body" in tax matters remains in its character as a tax due.

The respondent argued that the Tribunal should take judicial notice that applicant was issued several demands before it filed application 28 of 2018 and got an interim order and subsequently a temporary injunction to stay collection. Therefore, the tax is due on its due date and not the day the Tribunal decides the rights and duties for each party to a dispute in its ruling. The ruling of the Tribunal only determines the rights and duties of the parties but not the due date set by the law.

The respondent argued that S. 31 of the Tax Procedure Code Act allows the Commissioner General to recover tax from taxpayers. In the instant case, the Commissioner General preferred to use agency notices to collect the tax due for which the law allows. The respondent argued that the agency notice was served on the applicant electronically on to the email that is registered on every taxpayers TIN. The respondent argued that the applicant has not disproved service by showing the contents of his email.

The respondent argued that the procedures under the Civil Procedure Rules and would be inapplicable because of the existence of a specific rules for collection of taxes – the Tax Procedure Code Act. The respondent argued that the principle of statutory interpretation espoused in the doctrine of Generalia Specialibus Non Derogant applies. The respondent cited Commercial Tax Officer, Rajasthan v M/s Binani Cement Itd. & another where the

court noted that a subject specific provision relating to a specific, defined and descriptable subject is regarded as an exception to and would prevail over a general provision relating to a broad subject. The respondent argued that if collection of taxes after the decision of a reviewing body was to be through the normal procedures of the High Court then there would be no efficiency at tax collections.

The respondent argued that the long title of the Tax Procedure Code Act is very clear, it states; An Act to provide for a Code to "regulate the procedures for the administration of specified tax laws in Uganda; to harmonise and consolidate the tax procedures under existing tax laws; and to provide for related matters." Therefore, the procedure used to collect the tax due was the right procedure and was lawful in that stance.

Having listened to the evidence and read the submissions of the parties this is the ruling of the tribunal

The applicant filed Kasese Cobalt Company Limited v Uganda Revenue Authority application 28 of 2018 which was ruled in farvour of the respondent. It is not in dispute that around 21st January 2020, the respondent issued agency notices against the applicant's bankers Stanbic Bank and Standard Chartered Bank. The respondent collected Shs. 585,870,650 from the accounts. Around 28th January the applicant obtained an interim order from the High Court halting any enforcement measures.

The first dispute that is before the Tribunal is whether the application is properly brought before it. The respondent contends that the Tribunal is functus officio. The applicant contends that a fresh agency notice was issued creating a new cause.

The Tax Appeals Tribunal was established in line with Article 152 of the Constitution to listen to tax disputes. S. 14 of the Tax Appeals Tribunal Act provides that any person who is aggrieved by a decision made under a taxing act by Uganda Revenue Authority may apply to the tribunal for a review of the decision. S. 14(2) provides that the Tribunal has power to review any taxation decision in respect of which an application is properly made. S. 1(1) defines a taxation decision to mean any assessment, determination, decision or

notice. An agency notice is issued under S. 31 of the Tax Procedure Code Act which is a taxing act. An agency notice is a decision made by the respondent and is subject to review by the Tribunal. At the time the agency notice was issued the Tribunal had completed application 28 of 2018. Instead of the applicant pursuing the enforcement mechanism provided under the Civil Procedure Act involving extraction of a decree, it issued fresh agency notices. The Tribunal has jurisdiction to determine whether the fresh agency notices were issued in accordance with the law as a new dispute on its implementation arose.

The second dispute was that the respondent ought to have followed the enforcement mechanism provided under the Civil Procedure Act and the Rules thereunder to recover the decretal amount. Rule 31(1) of the Tax Appeals Tribunal (Procedure) Rules provides that any matter in the Tribunal which the Rules do not provide, the rules of practice and procedure of the High Court shall apply. The procedure in the High Court requires that a party to extract a decree and issue a warrant or follow execution procedure under the Civil Procedure Act. On the contrary, the respondent issued agency notices under the Tax Procedure Code Act. S. 31 of the Tax Procedure Code Act allows the Commissioner to issue a notice to recover tax through a person owing money to the taxpayer. The Tax Procedure Code Act was enacted "...to provide for a Code to regulate the procedure for the administration of specified tax laws in Uganda; to harmonise and consolidate the tax procedures under the existing tax laws, and to provide for related matters." If the parties had put in more consideration, they would have noted that the Tax Procedure Code Act is an Act of Parliament while the Tax Appeals Tribunal Procedure Rules is a statutory instrument passed under S. 22(3) of the Tax Appeals Tribunal Act. The rules enable the tribunal to dispose of tax disputes. A statutory instrument cannot take precedence over an Act of Parliament. A statutory instrument is subordinate law. In *Bank Mellat v Her Majesty's* Treasure No.2 [2014] A. C. 700 the Court of Appeal of England noted that delegated legislation does not have the status of primary legislation. Where there is a conflict between an Act of Parliament and a statutory instrument, the former takes precedence. In this case, this is no conflict. The Tax Appeals Tribunal Procedure Rules provide that a party may follow the procedure and practice of the High Court. The Tax Appeals Tribunal Rules complement the procedure set out in the Tax Procedure Code Act. The Rules provide for

other mechanisms which may not be in the Tax Procedure Code Act such as taxation of costs etc. They do not conflict but complement each other.

One cannot argue the Tax Procedure Code Act is specific and the Rules are general when there are not of the same status. Both The Tax Procedure Code Act and the Tax Appeals Tribunal Act and the Rules deal with tax matter. A party is obliged to follow an Act before use of a statutory instrument. The Tribunal also cannot dictate which procedure a party should follow if there are other alternatives under the law. The Tax Procedure Code Act provides for quick recovery of taxes as it states that a tax is a debt due to government under S. 29 of the Act. Therefore there is need to collect it expeditiously.

The Tribunal issued a temporary injunction against the respondent to stay all actions until the determination of the application 28 of 2018. As soon as the main application was determined the temporary injunction ceased to have effect. A successful party is free to pursue collection or enforcement measure unless there is an order to the contrary.

In this matter, the respondent issued the agency notice under Tax Procedure Code Act on the applicant's bankers on 21st January 2020. Around 27th January 2020, an interim order was issued by the Registrar Tax Appeals Tribunal. It was served on the respondent on the same day. It is not clear why an agency notice that was served on the bankers on the 21st January 2020 was not complied with for 6 days, that is, from 21st to 27th January the day when the money was recovered by the respondent. On the 29th January 2020, the Commercial court registrar issued another interim order which was served on the respondent. This is where the problem is. Both interim orders bear stamps of the respondent acknowledging receipt but not stamps from the banks. In this application, there is no evidence that the banks were ever served with the interim orders. A prudent taxpayer ought to have served the banks first and not the respondent with the interim order to stay any payments as the former are the ones holding the money. If an interim order is served on the bank before the receipt of an agency notice from the respondent and it releases money, then the bank can be put to task. The aggrieved party may file contempt of court proceedings. If an interim order is not served on a bank there is nothing that prevents the respondent from collecting the monies by an agency notice. An interim order is effective

after service on the banks when monies have not been collected and there is no undue delay by a bank to honour an agency notice. The banks are not party to this application and this is not a contempt of court proceeding. If the applicant had served the banks, they would not have released the monies and this application would not have been filed. Furthermore, no witness was called from the bank to testify that it received an interim order before the receipt of the agency notice. Was the money remitted when an interim order had been served?

Lastly, the applicant contended that the service of the agency notice on it was after the monies had been collected from the bank. The applicant does not deny that it was served. The law does not state when an agency notice should be served. A prudent taxman would not serve an agency notice before it has recovered unless it want to alert the taxpayer to remove the monies from the account. In the event the applicant is aggrieved by the agency notice being served late it should show how it was affected by the service to its detriment. In this case, the respondent already had a ruling in its farvour. It had not recovered the tax due, and the applicant had not paid the decretal amount. The 30% deposit did not quench the decretat amount. There was no interim order served on the bank. It is difficult to understand how the delay in service of the agency notice affected it adversely when there is no evidence that it served its bankers with the interim order and it had not paid up the decretal amount.

In the circumstances, for the reasons stated above, this application is dismissed with costs.

Dated at Kampala this

DR. ASA MUGENYI **CHAIRMAN**

trin

day of

DR. STEPHEN AKABWAY **MEMBER**

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2021.

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