SWT Tanners Limited and 13 Others v Commissioner General Uganda Revenue Authority (Civil Appeal No. 172 of 2019) [2022] UGCA 229 (16 September 2022)

Full Case Text

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## COMMISSIONER GENERAL

| 25 | UGANDA REVENUE AUTHORITY} | RESPONDENT | |----|---------------------------|------------| |----|---------------------------|------------|

(Appeal against the Judgment of WangutusiJ, Judge of the High Court of Uganda (Commercial Division) in HCCS No. 880 of 2014 delivered at Kampala on l7h February 2016)

## JUDGMENT OF CHRISTOPHER MADRAMA, JA

30 The Appettants fited an action in the CommerciaI Division of the High Court in Kampata against the respondent for a decLaration that the Practice Note issued by the respondent which was pubtished in the New Vision newspaper

5 of 19 Novemb er 2011t is not binding on them and apptied onty to rice imports produced tocatty or processed in Uganda. Secondty that the rice imported by the ptaintiffs was not chargeable with VAT of '18% as indicated in the Practice Notice. Thirdty that the imposition of 18% VAT levy on al't imported rice is arbitrary and untawf ut. Fourthty and in the atternative for a dectaration that the vatue added if any was done outside Uganda and therefore not chargeabte to 18% VAT in Uganda or that the vatue-added does not exceed 5% of the totaI value of the suppty. Fourthty for an order of a permanent injunction to be issued restraining the respondent from imposing 18% VAT on the rice imported by the ptaintiffs and last[y for orders of general damages and costs of the suit 10 15

The comptaint of the ptaintiffs who are now the appettants were that they were importers of rice as a major business and income and that the rice imported by them is subjected to import duty of 75%, infrastructure levy of 1.5% and withhotding tax of 6%. At atl. times, the rice imported by the appel.l.ants had not been subject to 18% VAT as it was ctassified as unprocessed produce. ln 2007 the Commissioner Generat Uganda Revenue Authority by practice notice issued on 13 November 2007 gave a directive that unprocessed rice was an exempt suppty that fetL within the Second Schedul.e to the VaLue-Added Tax Act. However, on 19 November 2014, the Commissioner GeneraI issued a Practice Notice imposing VAT of ]85 on the

The respondent averred that the rice, the subject matter of the suit was subject to VAT of 18% which was lawfutl.y assessed against the plaintiffs and prayed that the suit is dismissed with costs.

- The issue as f ramed by the parties for determination of the suit where that: 30 - l. Whether the suit rice is processed or unprocessed?

imported rice.

2. lf it is processed whether the vatue of the added activities such as drying, hul.ting, miLting, potishing, grading, sorting and packaging

5 among others exceed 5% of the total value of the suppty of rice imported by the ptaintiffs?

3. Whether the imported rice is chargeable to 18% VAT in accordance with the VAT Act cap 349?

1.0

4. What remedies are avaitabte to the parties?

The first issue was answered by the triat judge wherein he found that the rice was processed.

0n the second issue of whether the vatue-added of the activities such as drying, hulting, mitl.ing, potishing, sorting, grading and packaging inter atia exceeded 5% of the totaI value of the suppl.y of rice imported by the ptainttffs, the learned triat judge found in the negative. 15

0n the third issue of whether the imported rice is chargeable to 18% VAT, the learned triat judge hetd that for the suppl.y to be considered taxabte, it shoul.d not fat[ within exempt suppl.ies tisted in the Second Schedu[e of the VAT Act. He further considered section 20 of the VAT Act for the def inition of an exempt suppl,y and the question of whether the goods imported were exempt from customs duty according to the Fifth Schedute of the East African Community Customs Management Act. He found that the rice did not 20

- fatt within the confines of the Second Schedute of the VAT Act and it was neither imported rice listed under those exempted imports set out in the Fifth Schedute of the East African Community Customs Management Act and therefore the suit property was not exempt suppty and is chargeabl.e with 18% VAT. The learned triat judge dismissed the ctaim of the ptaintiffs 25 - that the 18% VAT tevy apptied onty to rice products not produced locatty and processed in Uganda. He found that rice produce within Uganda and outside Uganda that goes through the same process from paddy rice to mil. Led rice ready for consumption attracts VAT. 30

ln conclusion the learned triat judge hetd that the rice was processed rice and does not fatl within exempt suppl,ies in the Second Schedul,e of the VAT 5 Act or exempt imports in the Fifth Schedule of the East African Community Customs Management Act and was chargeabte with 18% VAT. He accordingl.y dismissed the suit with costs. The ptaintiffs were aggrieved and appeated to this court on seven grounds of appeal that:

1. The learned and honourable triat judge erred in law and fact when he misconstrued and misapptied the VAT Statute (as amended) to the appel.l.ants imported rice thus coming to a wrong decision of dismissing the suit.

- 2. The learned honourable triat judge erred in law and fact when he construed and apptied the East Af rican Community Customs Management Act and the VAT Act in disregard of other laws, thus comrng to a wrong decision. 15 - 3. The learned honourable triat judge erred in law and fact when in his judgment retied on the respondent's calcu[ations of DW] based on untendered report to show that the rmported rice VAT vatue exceeds 5% thus comrng to a wrong decision in favour of the respondents, thus dismissing the suit. 20 - 4. The learned honourabte triat judge erred in law and fact in hotding that the suit imported ready to eat rice was processed rice subject to VAT and, in the process, ignored the law retating to doubte taxation thus coming to a wrong decrsion of dismissing the appettant's suit. 25 - 5. The learned honourabte triat judge erred in [aw and fact when he faited to address his mind to the dictates of international treaties [ike the General. Agreement on Tariffs and Trade which takes precedence over internal. Law in circumstances of this case thus coming to a decision that the subject imported rice was chargeabte with VAT, whereas not thus wrongl.y dismissing the suit, to the detriment of the appeItants. 30 35

- 5 6. The Learned honourabte trral judge erred in law and fact when he ignored and/or omitted to futty address himsetf to the agreed fact that the suit imported rice was a ready for consumption product requiring no further processing, thus thereby coming to a wrong decision of hotding to the contrary that it was subject to VAT whereas not, thus wrong[y dismissing the appel.l.ant's suit. - 7. The learned triat judge erred in taw hotding that the suit imported rice was subject to VAT of 18% when he relied on information provided by a website which information is outside the reatm of the law governing taxes, thus coming to a wrong decision of dismissing the suit. - 8. The honourabte learned tria[ judge erred in law and fact when he totatity faited to property weigh and eva[uate evidence on record thus coming to a wrong decision, of dismissing the suit. - The appettants prayed that the appeat is al.l.owed and the judgment of the High Court set aside whereupon the court f inds in favour of the appettants that the suit imported rice was not subject to VAT. General.ty, if any tax payments are made in regard to the subject imported ready to eat rice, the money be refunded to the appettants. 20 - At the hearing of the appeal learned counsel Mr Tom Magezi represented the appetlants white [earned counseI Mr Mike Bagenda Muzito represented the first appetlant. Learned counse[ Mr George Oketlo appearing together with Sam Kwerit and Barnabas Nuwaha represented the respondent. With the leave of court, the court was addressed in written submisstons. 25

## 30 Submissions of the appetl.ants' counsel

The appetl.ants' counseI urged the court to take judiciat notice of certain matters within the purview of sections 55 and 56 (1) of the Evidence Act in the circumstances of the case. He submitted that under artictes 123 (1) and 87 of the Constitution of the Repubtic of Uganda, the President or a person authorised by the President may make treaties, conventions, agreements

5 or other arrangements between Uganda and any other country or between Uganda and any international organisation or body in respect of any matter. Further, under articte 287, the Constitution preserves att prior internationaL agreements made by Uganda before the coming into force of the Constitution inc[usive of the General Agreement on Tariffs and Trade (GAfD to which Uganda became a signatory on the 23'd October 1962 and is the post-independence agreement Uganda made within the import of articte 287 (a) of the Constitution. 10

Counsel submitted that the General Agreement on Tariffs and Trade, ]994 (GATT) to which Uganda rs a signatory with effect from 23 October 1962 and that Uganda has been a member of the Worl.d Trade 0rganisation (WTO) since 1 January 1995. The court ought to have taken judiciaI notice thereof under section 55 and 56 (l) of the Evidence Act. With regard to the ctaim on arbitrariness and untawfulness the appettant's counsel submitted that articte lll (4) of the GATT'1994; "member states shatl accordingty import products no less favourabte than that accorded to [ike products of nationaI origin." 15 20

He submitted that there rs littte wonder that section 76 (1) of the VAT Act provides for supremacy of the GATT 1994 which provides that:

,q.

"To the extent that the terms of a treaty or other lnternationaI Agreement to which Uganda is a party are inconsistent with the provisions of this Act, apart from section 75, the terms of the treaty or international agreement prevaiL over the provisions of this Act."

The appellants submitted that section 76 (1) of the VAT Act gives no exceptions to rice imports to Uganda with the locaI rice production in VAT charges. ln other words, the proposition of the GATT read together with section 76 (1) of the VATAct and section 56 (1) of the Evidence Act catts upon the court to take judiciaI notice of GATT incl.usive of section 76 (1) of the VAT Act which makes the GATT take precedence over other VAT provisions in regard to charging or non-charging of rice imports in the circumstances of this case. The appetlant's counseI submitted that under section 56 (1) (a) & 30 35

(b) of the Evidence Act, the court shatl take judiciat notice of Acts and

5 Ordinances enacted or to be enacted and Acts of Partiament of the United Kingdom now or before in force in Uganda and 0rders - ln - CounciL, Laws, statutory instruments or subsidiary legistation. He emphasised that section 56 (i) (a) (b) includes, section 76 (1) of the VAT Act which brings the GATT into pl.ay. Further that articte lll (4) bars discrimination/preference in charging VAT on the same imported products and the same [oca[ products and where any Act permits any discrimination as is in the matter before court, the said Act is deemed to be untawful and arbitrary to GATT1994 and to section 76 (1) of the VAT Act and woutd accordingty trickte down to be irresistibty contrary to articte 21 (1) the Constitution which bars economic d isc rim in at io n. 10 15

Grounds 1,2, l+ of appeat.

The appettant's counseL submitted that these grounds deat with the appticabitity of a[[ laws cited above. Considering the entirety of the lower court judgment, the [earned trial. judge in dissectrng the law and facts of the case made no reference whatsoever to the provisions of the binding laws namety articles 1, 2, 3 (1) and 287 of the Constitution, articte 21(1), (2), (3) and (5) of the Constitution. Section 76 (1) of the VAT Act. sections 55 and 56 (1) (a) & (b) of the Evidence Act and the GATT 1994. He submrtted that in the circumstances of the case, when it comes to the charging of VAT on rtce or not charging VAT on [ocaLty produced rice, the learned triat judge erred in law and fact and omitted to appty the cited laws which ted the triat judge to reach the unjust conctusion hotding the way he did that the Legistature in this country coutd not have promoted rice production outside the country in preference to [ocaI rice producers. 20 25

Further the learned triat judge hetd that "in any case, if there was to be any disparity, then the imported rice woutd be the one to attract more tax in order to protect the Local. farmer". The appeltant's counseI contends that the hotding of the [earned triat judge is contrary to and in disregard of the cited [aws and invited this court to took into the matter and f ind for the appeltant. 30

Further on the question of legatity of the imposition of VAT on import of rice vis-i-vis the nationaI treatment principte, the appet[ant's counseI 35

- submitted that before the VAT (Amendment) Act No 8 of 2014, there was no $\mathsf{S}$ VAT charged by the Uganda government on the rice grown and milled in Uganda and imported rice, since it was classified as zero rated for the rice grown and milled in Uganda and exempt for the imported rice under the then existing law. - Article III (1) of the GATT 1994 stipulates the general principles that members 10 must not apply internal taxes or other internal charges, laws, regulations and requirements affecting imported or domestic product so as to afford protection to domestic production. In relation to internal taxes or other internal charges, article III (2) of the GATT 1994 stipulates that the WTO members shall not apply standards higher than those imposed on domestic 15 products between imported and "like" domestic goods, or between imported goods and "a directly competitive or substitutable product". He submitted that it is a principle of international law that a treaty takes precedence over national legislation of a particular state, which is a party to the treaty. Therefore, where national legislation is in conflict with an international 20 treaty, the latter prevails.

The appellants counsel further submitted that the prevalence of international legislation over domestic legislation is recognised under section 76 (1) VAT Act which stipulates that to the extent that the terms of the treaty or other international agreement to which Uganda is a party is inconsistent with any provisions of the VAT Act, the terms of the treaty or international agreement prevail over the provisions of the VAT Act.

Further, since 2015, the government classified rice grown and milled in Uganda as a zero-rated product, the same treatment ought to be applied to all imported rice into Uganda. The continued imposition of 18% VAT on 30 imported rice, contravenes articles 123, and 87 of the 1995 Constitution of the Republic of Uganda and article III 1, 2 and 4 of the GATT 1994 and the VAT Act. The tax imposed by the Uganda government is illegal and cannot be sustained within the meaning of international treaties and under the Constitution of the Republic of Uganda. 35

5 The appel.l.ant's counsel submitted that it is trite law that a court of law cannot sanction what is itlegat and relied on Makuta lnternational Ltd versus His Eminence Cardinal Nsubuga and Rev Dr father Kyeyune; SCCA No 4 of 198'l where the Supreme Court of Uganda uphetd the hotding in Makuta lnternationat versus Cardinal Nsubuga. He contended that the decision in the cited cases appties square[y to the question before the court. The appettant's counsel contended that there is no doubt that the tax in issue was un[awfuI and therefore itl.egal. and it was the duty of the triaL judge to find that the tax in dispute contravened the law and was unenforceabte. Having estabtished that the Act and the Practice Notes imposing vatueadded tax on imported rice were untawful and ittegat, the Court of Appeat should set aside the decision. 10 15

Further counseL reiterated submissions that it is undisputed that Uganda is a party to GATT 1994 and bound by its provisions. As a matter of fact, the dispute between the appell.ants and the respondent involves matters of international trade and as such both domestic law and international Law had to be apptied in the determination of the dispute. Specificatty, counseI submitted that articte ll (1) of the GATT 1994 prohibits discrimination between imports and tike domestic products. That the VAT (Amendment) Act No 2 of 2015 contravenes this articte because it discriminates between imported rice by the appeltant's by subjecting it to VAT of 18% and zero rating Locatty grown and mil.ted rice in Uganda contrary to the [aw.

The appettant's counseL submitted that the ittegal.rty is manifested by the fact that section 5 of the VAT (Amendment) 20'14, repeated paragraph 1 (f) of Third Schedute of the VAT Act, thereby standardising both local and imported rice. However, section ll of the VAT (Amendment) Act 2 ot 2015, re-enacted the repeal.ed paragraph 1 (f) of the Third Schedule to the Principat Act as paragraph 1 (L), whereby it provided for retated suppty of cereats grown and miU.ed in Uganda. The later Amendment ctearty discriminates imported rice because in effect it makes it standard rated at 18% VAT, which is prohrbited by the GATT 201t1 (199L). 30 35

5 Further counse[ submitted that the GATT 1994 takes precedence over domestic Law within the meaning of section 76 (1). Further, he submitted that section VAT (Amendment) Act No 2 of 20'15 was effective 1't January 2014 white the [earned trial. judge del.ivered his judgment on ]0'h February 2016 Long after the Act that come into force, which the trial' judge faited to take rnto account. He contended that the court in detivering judgment shoutd appty the Law at the time of writing the judgment. He submitted that had the learned triat judge appraised himsetf of the clear provisions of sections 55 and 36 of the Evidence Act, section 76 (1) VAT Act as wetl as section ]l of the VAT (Amendment) Act No 2 of 2015, he would not have reached the erroneous decision. 10 15

The appeLtants contended that the continued imposition of 18% VAT on imported rice by the appeLtants and the instruments retied on by the respondents are not onLy ittegat but not overtaken by events. This ts because the Practice Note of 2014 was based on the VAT (Amendment) Act of 2014 which has since been reptaced with the VAT (Amendment) Act No 2 of 2015. To that extent both the VAT (Amendment) Act of 2014 and the Practice Note of 2014, under which the respondent enforces VAT on imported rice ts without tegal. basis and which this court should not sanction.

Further the appel.l.ant's counseI submitted that the rutes of statutory interpretation on tax laws require that they are strictty apptied (see Uganda Revenue Authority v Siraje Hassan Kajura SCCA No 09 2015). Counsel emphasised the supremacy of treaties and agreements (internationat) as envisaged under section 76 (1) of the VAT Act. 25

Further and without prejudice, he submitted that the imported rice is charged at 10% VAT, it witt strtt be unjust because of incidences of doub|.e taxation with regard to cross-border trade, the initiat VAT imposition in country origin of export, and rn country of import. He submitted that in such a situation, one jurisdiction may impose VAT rutes. lf such rul'es don't appty, doubte taxation or non-taxation is tikety to occur. 30

- 5 CounseI submitted that one of the most important principtes in VAT design is whether tax operates on an origin or destinatron basis. He submitted that this has a significant impact on the avoidance of doub[e taxation and the equal treatment of imports compared with tocatty produced goods or services. The appettants' contend that origin-based VAT, is imposed in the - jurisdiction where the goods or servrces come from. That means that an exporter pays VAT on the same basis and at the same rate as a [oca[ supplier. The principte assumes that imports in the country of destination are not subject to VAT A destination-based VAT is imposed in the jurisdiction where the goods go. lt means that an exporter does not have to 10 - tevy VAT on his or her suppl,y, because it is assumed that the suppty witt be subject to VAT in the country of destination. The converse is atso true. The destination principtes put imports on locatly consumed goods on equal footing and achieves neutratity in cross-border trade. That is how VAT operates in cross-border situations and how that may influence trade. 15 - The appettant's counsel submitted that the destination-based VAT is prey to doubl'e taxation when it comes to imports. In the premises he submitted that grounds 1, 2, 3 (b) and 5 ought to be resolved in favour of the appetLant. 20

Grounds 5, 6, and 7

The appettant's counsel submitted that in paragraphs 4 and 6 of the ptaint, the fact of importation of rice is admitted by the defendant in paragraph 3 of its defence. ln tight of that admission, the pl.eadings in paragraph 4 (c) of the ptaint there is an etement of mul.tipte taxation to the detriment of imported rice which offends the GATT l994. 25

The appellants counseI f urther submitted that the submissions on grounds 1, 2, and 4 effective[y dispose of grounds 3, 5, 6 and 7. For purposes of cl,anty, he submitted that in terms of ground 7, the learned tnaL judge faiLed in his duty to evatuate the law and evidence on record. But the [earned triat judge misdirected himsel.f when he found that the suit rice attracts the same tax yet under the VAT (Amendment) Act No 2 of 2015, the tocatty grown and milted rice is charged at zero tax, not 18% imposed on imported rice. 30 35

- The appellant's counsel invited the court to reappraise the evidence on $\mathsf{S}$ record and come to a proper conclusion in accordance with the law. In the premises the appellants prayed that this court allows the appeal and sets aside the judgment of the High Court with costs to the appellants. Further, he prayed that any tax payments made with regard to the subject matter rice be refunded to the appellants. Further counsel submitted that the 10 - learned trial judge misdirected himself when he found that the suit rice attracts the same tax yet under the VAT (Amendment) Act Number 2 of 2015 this is not so and the court ought to allow the appeal as prayed for.

## Submissions of the respondent's counsel.

- The respondent relied on the conferencing notes which contained skeleton 15 arguments. The respondents counsel submitted that the undisputed facts of the case are that the appellants are engaged in the importation of rice from Pakistan and other parts of the world. The rice, the subject matter of the appeal is imported ready for consumption and undergoes no further processing in Uganda. 20 - In November 2007, the respondent issued the Practice Note clarifying that all imported rice is considered to be unprocessed agricultural produce for purposes of the Value Added Tax Act and it therefore falls under the provisions of the Second Schedule which provides for exempt goods. Following the enactment of the VAT (Amendment) Act 2014, which repealed 25 paragraph 1 (f) of the Third Schedule of the VAT Act, which had zero rated the supply of cereals grown, milled or produced in Uganda. The respondent on 19th November 2014 issued Practice Notes URA/VAT/PN 2/14 subjecting the supply of local or imported rice to VAT of 18%. - Pursuant to the Practice Note, the respondents communicated that from 30 research conducted, it had established that the supply of rice, which is ready for human consumption does not fall within the ambit of paragraph 1 (a) of the Second Schedule of the VAT Act (exempt) nor does it fall under the Third Schedule of the same Act (zero rating) and therefore, the supply attracted VAT at the rate of 18%. The respondent further directed that - 35

imported rice was subject to VAT at the rate of l8% and that it revoked the Practice Note of 14 November 2007. 0n lSth November 201L, the appel.tants fil.ed HCCS No 880 of 2011+ against the respondent seekrng dectaration that the Practice Notes issued by the respondent is not binding and that the 18% Levy appties onty to rice products produced l'ocatty and processed in Uganda and that 18% VAT is not payabte on imported rice. That VAT rmposed of 18% on imported rice was arbitrary and unlawful.. Secondly, the VAT does not exceed 5% of the totaI value of the suppty.0n 1Oth February 2016 the High Court determine the suit in favour of the respondent. 10 5

The respondent objected to the grounds of the appeal. for being too general or narrative offending rul.e 86 (1) of the Judicature (Court of Appeat Rutes) Directions and rel.ied on Attorney General v Florence Baliraine; Court of Appeat Civit AppeaL No 79 of 2003 for the hotding that "the grounds of appeal must concisety specify the points which are atteged to have been wrongty decided... The general grounds which do not concrsety specify the points of objection offend the provisions of rute 86 (1) of the Rutes of this court..." ln the atternative, the respondents counsel submitted without preludice that they woul'd argue grounds one, three, five together in the beginning and grounds two and four together secondty and third[y grounds six and seven. 15 20

## Grounds are 1, 3 & 5.

- The respondents counseI submitted that the [earned triat judge rightty found that the rice is processed and does not fatt within the exempt suppl.ies in the Second Schedute of the VAT Act nor the exempt imports in the Fifth Schedute of the East African Community Customs Management Act and is therefore chargeable to 18% VAT ?q - Counsel submitted that section 4 of the VAT Act Cap 349 provides that a tax to be known as a value-added tax shatl be charged in accordance with the Act on every taxabte suppl.y made by a taxabte person and second[y on every import of goods other than an exempt import. They contended that with regard to importation of goods, the VAT Act imposes Liabitity to pay tax 35 30

the definition of the term "import" under section 1 (j) of the VAT Act to mean $\mathsf{S}$ "to bring, or to cause to be brought, into Uganda from a foreign country or place". The VAT Act provides for exempt supplies and exempt imports. Under section 19 (1) of the Act, it is provided that: "a supply of goods or services is an exempt supply if it is specified in the Second Schedule". Further under section 20 of the VAT Act, it is provided that: 10

"an import of goods is an exempt import if the goods;

(a) are exempt from customs duty under the Fifth Schedule of the East African Community Customs Management Act, 2004 except compact fluorescent bulbs with a power connecting cap at the end, and lamps and bulbs made from light emitting diodes technology for domestic and industrial use; or

(b) would be exempt had they been supplied in Uganda.

The respondent's counsel submitted that on the other hand, the Second Schedule to the VAT Act provides for exempt supplies and in paragraph 1 (a) thereof, certain supplies are specified as exempt supplies for purposes of section 19 this include the supply of livestock, unprocessed foodstuffs and 20 unprocessed agricultural products, except wheat grain...". He submitted that based on the provisions of the VAT Act, a supply or import of goods is chargeable to 18% VAT unless it is specifically exempted under the Act or the East African Community Customs Management Act 2004. In the premises the learned trial judge rightly concluded, based on the evidence 25 of DW2 that the suit rice was processed and he held that the suit rice is not imported in Paddy form. He concluded that the rice had been altered from its natural state through a number of processes to make it ready for consumption. It was also an agreed fact that the rice does not undergo any drying, hulling, milling, polishing, sorting, grading and packing in Uganda 30 and these processes are done before importation.

Further under section 22 of the Evidence Act, cap 6 facts which are admitted need not be proved. It was an agreed fact in the scheduling memorandum paragraph A and B that the suit rice is imported into Uganda ready for consumption and does not go through any further processes in Uganda. This

5 evidence was admitted by PW3. 0n that basis, the respondent submitted that the appeltants admitted the fact that the suit rice is processed and the learned trial. judge right[y apptied the law to the facts and came to the right hotding and conctusion.

Further, the respondent's counseI submitted that the suit rice is a processed product and it cannot quatify to be an exempt suppty within the meaning of section 19 (1) and paragraph I (a) of the Second Schedute to the VATAct. The exemption rn this regard is timited to unprocessed agricultural products which is not the case with the suit rice. Further the respondents counsel submitted that the Honourabte Judge rightty found that the suit rice is not an exempt import within the meaning of section 20 of the VAT Act and the Fifth Schedute to the East African Community Customs Management Act 2004 since it is not Iisted among the items specified therein and as such it is subject to VAT of 18%. 10 15

The respondents counsel atso submitted that it was an agreed fact that fottowing the enactment of the VAT (Amendment) Act, 2004, this repeated paragraph 1 (f) of the Third Schedul.e to the VAT Act that had zero rated the supply of cereals grown, mitLed or produced in Uganda, the respondents issued Practice Note URA/VAf lPN2/1L, admitted as exhibit P2 whereby the suppty of both [oca[ and imported rice was subject to VAT at the standard rate of 18%. The respondent revoked the Practice Note eartier issued in November 2007 ln the premises, the respondents counsel prayed that grounds 1, 3 and 5 ought to fail and be dismissed. 20 25

## Grounds 2 & 4.

The respondent's counsel. submrtted that the suit rice imported by the appetlants was not discriminated upon by the respondent when it imposed 18% VAT. SecondLy, the issue of al.leged discrimination of the suit goods under the GeneraI Agreement on Tariffs and Trade 1994 did not arise in HCCS No 880 of 2014. The appettants cannot therefore raise it in the appeal.. He prayed that the court rejects the submissions. Secondty, that Makuta lnternational v Cardinal Emmanuel Nsubuga n980] HCB 11 was decided on 30 35

- 5 facts whotLy different from the one before court in that it deatt with issues of transactions founded on any rttegal,ity whereas in the instant case, the transaction is the imposition of VAT under the VAT (Amendment) Act 2014 which was lawful as rightl.y hetd by the learned triat judge. - ln the premises, the situation purported by the appel'tant as being discriminated against was taken out of context. Further the VAT (Amendment) Act No 1 of 201L which repealed paragraph 1 of the Third Schedule to the VAT Act thereby imposing 18% VAT on imported rice became effective on l't of Juty 2014 white section ll of the VAT (Amendment) Act No 2 ol 2015 which imposes VAT on imported rice and zero rated [oca[ rice, came into force on 1't January 2015. There was therefore no discrimination or ittegatity in imposing VATon [oca[ and imported rice forthe period'l'tJuty 2014untit 'l't January 2015. The imposition of VAT tax was ctearl'y in conf ormity with the VAT Act and the GeneraI Agreement on Tariff s and Trade 1994and the same is Lawf ul, and payabte by the appeLtants for the retevant period. 10 15 20 - Groundsand6&7.

The respondent's counsel. submitted that the [earned trial' judge property evaluated the evidence on record and came to the right conclusion. Counsel further relied on Kifamunte Henry v Uganda; Supreme Court Criminat Appeal, No l0 of 1997 f or the proposition that once it is estabtished that there is some competent evidence to support a finding of fact, it is not open on second appeal, to go into the sufficiency of the evidence of reasonabteness of the f inding. Even if the court of f rrst instance has wrongty directed itsel.f on some point, the second appettate court cannot take a different view. He prayed that the court uphotd the decision and orders of the High Court, in civiL suit No 880 of 2011+ and dismisses the appeal with costs to the 25 30

respondent.

## Resotution of Appeat

I have carefuLl.y considered the written submissions of counsel for the Appettants and the Respondent respectively. I have atso considered the 35

5 record of appeat, the law and authorities cited by the counsel of the parties and taken them into account. The duty of this court as a first appeltate court is to reappraise the evidence on record and draw its own inferences of fact as provided for rn Rul.e 30(l)(a) of the Judicature (Court of Appeat Rutes) Directions, S.l No. 13-10. Further in Peters v Sunday Post Limited [1958] 1 EA 424the East African Court of Appeat hetd that the duty of a first appettate 10

court is to review the evidence in order to determine whether the conc[usions drawn by the triaI court shou[d stand. ln reappraisaI of evidence, the first appetl'ate court shoutd caution itsetf regarding the shortcoming of not having had the advantage of seeing and hearing the witnesses testify. 15

The appetlants commenced an ordinary suit in the High Court under the rnherent jurisdiction of the High Court. However, in the tax matters, the statutory jurisdiction of the High Court rs an appeltate jurisdiction arising from the Vatue Added Tax Act, cap 349 which deal's with objections and objection decisions of the Commissioner GeneraI pursuant to assessments.

- It envisages a person who is dissatisfied with an assessment to Lodge an objection to the Commissioner General within 45 days under section 33B in writing. Upon making an objection decision, where the taxpayer is dissatisfied with the decision, he or she may appeal to the tax appeats - Tribunal under section 33C of the VAT Act within 30 days upon being served with the notice of the objection decision of the Commissioner Genera[. Final'ty, a party dissatisfied with the decision of the Tax Appeal.s TribunaI may appeal to the High Court on the question of law onLy under section 33D of the VAT Act. 25 - ln this case, it is ctear that the appel. Lants fited an originaI suit in the High Court circumventing the statutory procedures set out in the VAT Act. Article 152 (3) of the Constitution of the Repubtic of Uganda provides that Parliament shatl make laws to establish Tax Tribunats for the purposes of settting tax disputes. lndeed, a Tax Appeats Tribunat was set up under the 30 - Tax Appeal.s Tribunats Act chapter 345 by 1 August 1998 35

- 5 Further the subject matter of the suit in the High Court as contained in the ptaint chaltenge the Practice Note issued by the defendant/respondent to this appeat. The Practice Note entitted URA/VAT/PN 2/14 states that section 5 of the VAT (Amendment) Act, 2014 repeated paragraph I (f) of the Third Schedule to the VAT Act which zero rated the suppty of cereats, where the - cereals are grown and mitted in Uganda. lt exptains that the impiication of the amendment was that the suppty of cereats grown and mitted in Uganda attracted VAT at the rate of 18% with effect f rom 1't of Juty 2014. Secondty it noted that paragraph 1 (a) of the Second Schedule to the VAT Act exempt from VAT the suppty of livestock, unprocessed foodstuff and unprocessed 10 - agricuttural products except wheat grain. Further it noted that paragraph 3 of the same Schedul.e defined "unprocessed" to inctude low value-added activities such as sorting, drying, sal.ting, f itteting, deboning, f reezing, chrtting or buLk packaging, where, except in the case of packaging, the value-added does not exceed 5% of the total vatue of the suppty. 15 - Finatty, the Practice Note exptained that they establ.ished in retation to the suppty of rice that the vatue-added activities such as drying, hutl.ing, miLting, potishing, grading, sorting and packaging among other things exceeds 5% of the totaI value of the suppty. lt impl.ied that the suppLy of rice which is ready for human consumption does not fatl. within the provisions of paragraph 1 (a) of the Second Schedute to the VAT Act and does not fa[[ under the Third Schedute of the same Act and therefore the supplry attracted VAT at the rate of 18% and that meant that the imported rice is subject to VAT at the rate of 18%. 20 ,q

Further The first Schedute to the East African Community Customs Management Act does not anywhere exempt process rice.

The appettants chal,tenged the Practice Note of the respondent and the interpretation therein. The issues that were agreed for determination by the High Court where:

1. Whether the suit rice is processed or unprocessed?

5 2. lf it is processed, whether the vatue of the added activities such as drying, hutting, mitl.ing, poLishing, sorting, grading and packaging among others exceeds 5% of the total vatue of the suppty of rice imported by the ptaintiffs?

3. Whether the imported rice is chargeab[e to 18% VAT in accordance with the VAT Act cap 349?

4. What remedies are avaitabte to the parties?

The learned triat judge considered the issues agreed upon by the parties in the joint scheduling memorandum without any amendment 0n the first issue of whether the suit rice was processed or unprocessed, the learned triat judge found that the suit rice was potished and ready for consumption in Uganda and was therefore processed.

0n the second issue of whether the value-added activities of drying, hut[ing, mitting, potishing, sorting, grading and packaging exceeds 5% of the totat value of the suppty of rice, the learned triat judge found for the respondent and hetd that the rice did not fat[ within paragraph 1 (a) of the Second ScheduLe of the VAT Act neither drd it fatt under the Third ScheduLe of the same Act. The [earned triat judge atso found that imported rice is not Iisted under those exempted imports under the Fifth Schedute of the East African Community Customs Management Act and therefore is not an exempt suppty and is chargeabte with the 18% VAT

The Learned triat judge made a short note on the issue of discrimination between imported rice under processed rice in Uganda when he said:

The cLaim by the ptaintiffs that the 18% VAT Levy apptied only to rice products produced locatly and processed in Uganda cannot be sustained in as much as the [egistature in this country cou[d not have promoted rice production outside the country against the [oca[ rice producers. ln my view, rice produced both within and outside the country that goes through the same process from paddy to mitted rice ready for consumption shoutd therefore attract the same tax.

In any case, if there was to be any disparity, then the imported rice woutd be the one to attract more tax in order to protect the [oca[ farmer.

s The crux of the appeaL is about faiture to evatuate the evidence. Most importantl'y, the appetlant's counsel dealt on al.[ points of the appeal on the issue of whether there was discrimrnation between Ugandan processed rice and imported rice in terms of exempting Ugandan rice suppties from VAT white subjecting imported rice to 18% VAT. However, in the above 10 hotding that they have cited immediatel,y preceding this paragraph, the learned triat judge found that imported rice and Locatl.y supptied rice which is processed attracts 18% VAT. His remarks about whether there coutd have been a disparity was not a hol'ding based on his assessment of the evidence and the law but an observation that legislature may prefer to promote 1s tocatl.y grown rice over imported rice. This was purel'y obiter and not part of the suit. lt cannot form the basis of an appeaI because it was not a matter

in controversy.

I have atready set out the grounds of appeal at the commencement of this judgment. ln handting the grounds of appeat, the appel'tant's counsel invited zo the court to consider sections 55 and 56 (1) of the Evidence Act and the provisions of the Constitution regarding the internationaI treaty obtigations, agreements and other arrangements between Uganda and any other country with particuLar reference to the General Agreement on Tariffs and Trade, 1994 (GATT). He submitted on whether the learned trial' judge ought zs to have taken judicial notice of the GATT under section 76 (1) of the VAT Act so that court would have found that there was discrimination between domestical.l.y produce rice and imported rice. ln arguing grounds 1,2,and 4 counsel for the appel.l.ant dwel.t on obiter remarks of the learned triat judge about any disparity between imported rice and that produced by the tocat 30 farmer. He submitted that the findings of the triat judge were contrary to

- the treaty obtigations under the GATT. He submitted that under the VAT (Amendment) Act No 8 of 201t+, there was no VAT charge by the Uganda government on the rice grown and miLl.ed in Uganda since it was ctassified as zero rated. He submitted that under articte lll and paragraph 1 of the GATT - 3s 1994, there is a general principl'es that members shoutd not appl'y the internat taxes or internal charges, laws and regutations and requirements

5 affecting imported or domestic product so as to afford protection to domestic production.

Ctearty, the case revolves around whether the learned triat judge erroneousty omitted to appty the provisions of the GATT 1994. lt atso ftows from the proposition that the learned triat judge found that the processed rice in Uganda is not tiabte to VAT whereas the [earned triat judge clearty found that the processed rice in Uganda was liable to 18% VAT.

The appeltant's counsel continued with the same submission under att the other grounds of appeal and I woutd therefore conclude this appeal. on the first point as to whether this court can look into the matter afresh. ln the first ptace the learned trial. judge found as fottows:

ln my view, rice produced both within and outside the country that goes through the same process from paddy to miLLed rice ready for consumption shouLd therefore attract the same tax.

Discriminatory tax of 18% VAT cannot be argued on the basis of the judgment of the Hrgh Court and any ground on discrimination is incompetent. The submissions of the appeltant are not based on the judgment but on a fresh understanding or consideration of the law irrespective of the judgment. The jurisdiction of this court is to hear appea[s from a decision of the High Court as clearty provided for under articte 134 (2) of the Constitution of the RepubLic of Uganda which provides that: 20 25

> (2) An appeat shat[ lie to the Court of Appeat from such decisions of the High Court as may be prescribed by Law.

There was no decision of the High Court to the effect that the VAT chargeab[e on imported processed rice is different for localty produced rice and imported rice. 0n that basis the appeal wouLd be incompetent.

Further, the respondent objected to the introduction of a new point based on the GATT 1994 to the effect that the laws of Uganda offended the provisions of the GATT 1994.

The above notwithstanding, in order to understand whether the appellant $\mathsf{S}$ was introducing a new point contrary to law, I will set out the law and the pleadings so as to come to a just conclusion on the issue of the new point of law which was not argued at the High Court.

Section 4 of the VAT Act provides that a tax, to be known as value added tax, shall be charged in accordance with the Act on: 10

- every taxable supply in Uganda made by a taxable person; $(a)$ - every import of goods other than an exempt import; and $(b)$ - the supply of any imported services by any person. $(c)$

Further section 5 defines a person liable to Pay Tax as:

Except as otherwise provided in this Act, the tax payable –

- in the case of a taxable supply, is to be paid by the taxable person making $(a)$ the supply; - in the case of an import of goods, is to be paid by the importer; $(b)$ - in the case of an import of services, is to be paid by the recipient of the $(c)$ imported service.

Further section 18 (1) of the VAT Act *inter alia* defines taxable supply as "(1) A taxable supply is a supply of goods or services, other than an exempt supply, made by a taxable person for consideration as part of his or her business activities". Under section 19 of the VAT Act an exempt supply means:

19 (1) A supply of goods or services is an exempt supply if it is specified in the Second Schedule.

Last but not least section 20 deals with exempt imports and provides that: Exempt Import

20. An import of goods is an exempt import if the goods -

are exempt from customs duty under the Fifth Schedule of the East African $(a)$ Community Customs Management Act, 2004; or

- Would be exempt had they been supplied in Uganda. $(b)$ - 22

5 The relevant provisions of the law inctude ltem 1 (a) of the Second Schedule to the VAT Act which includes among exempt suppLies, unprocessed foodstuffs and unprocessed agricutturaL products and Iivestock. There is ctearly no appeaI from the finding of fact of the [earned triaL judge that the imported rice, the subject matter of the suit was processed and ready for consumption. lt fotlows that processed rice is not exempt suppties from VAT in terms of paragraph 1 (a) of the Second Schedule of the VAT Act. 10

Further the appetlant dwett in the High Court on the issue of the definition of the word "unprocessed" as used under paragraph 3 of the Second Schedute which provides that:

For purposes of paragraph 1 (a) of this ScheduLe, the term "unprocessed" includes low vaLue-added activity such as sorting, drying, saLting, fitteting, deboning, freezing, chiLLing, where, except in case of packaging, the vaLue added does not exceed 5% of the totaI vatue of the suppty. 15

The above paragraph 3 was amended by the VAT (Amendment) Act 2011+ lo inctude "husking". The above definition, notwithstanding the amendment to the Act, does not change the finding of the Learned triaL judge that the rice was processed or in other words it was not "unprocessed" as defined in paragraph 3 of the Second Schedute to the VAT Act. 20

- Last but not Least, the Third Schedul,e of the VAT Act in paragraph 1 (f) Lrsts among zero rated supplies, "the suppty of cereals, where the cereats are grown, mitled or processed in Uganda;" in other words cereaLs which are grown, mitled or processed in Uganda are exempt from VAT or are chargeab[e with 0% VAT. The above notwithstanding, by the VAT (Amendment) Act 2014 paragraph 1 (f) of the Third Schedule to the VAT Act was amended by repeating it. ln other words, the preference to Ugandan cereals in terms of whether the cereats are grown, miLled or processed in Uganda was repea[ed. lt fol.l.ows that the finding of the [earned triaL judge is strongLy supported by the Law which gives no preference after the 2014 Amendment of the VAT Act between rice that is processed in Uganda and imported processed rice. This means that rice imported before the 2014 25 30 35 - amendment of the VAT Act coutd have been discriminatority charged but for

5 the Practice Note of 2007 which treated rice as unprocessed and therefore exempt from VAT.

0n that basis I woutd again find that there is no basis for arguing discrimination based on the GATT 1994.

Finalty, lhave considered the pLeadings of the parties as we[[ as the issue of the GATT 1994 based on the objection that the question cannot be raised for the first time in this appeal'. 10

ln the arguments of the appeLLant's counset, the appell.ant introduced a new point about the judgment of the High Court being made without consideration of the provisions of the GATT 1994. The appel.l.ant submitted that Uganda is a signatory to the GATT 1994 which takes precedence over domestic Legistation on the issue of discrimination. ln essence the appetlant submitted that the [earned triat judge had a duty to take judiciat notice of the General Agreement on Tariffs and Trade, 1994 (GATT) which was binding on Uganda according to certain constitutionaL provisions confirming the continuation in force of treaties and internationaI agreements to which Uganda is a party under article 287 of the Constitution of the Repubtic of Uganda 1995.

The entire submissions of the appetl'ant in the main, dealt with the issue of whether the charging of 18% VAT on imported rice was discriminatory in that the same 18% VAT was not charged on rice that is grown and mitted in

Uganda.

The respondent on the other hand maintained that the appetlant never did raise the issue of the GATT 1994 provisions in the High Court and is prectuded from raising it in this appeat.

I have carefutLy considered the pl.eadings of the parties based on the principte that issues arise from pLeadings in terms of 0rder 15 rute I of the Civil. Procedure Rutes which provides rnter alralhal'. 30

'1. Framing of issues

(1) lssues arise when a materiaI proposition of [aw or fact is affirmed by the one party and denied by the other.

(2) Materiat propositions are those propositions of law or fact which a p[aintiff must atlege in order to show a right to sue or a defendant must allege in order to constitute a defence.

(3) Each materiaI proposition affirmed by one party and denied by the other shat[ form the subject of a distinct issue.

(4) lssues are of two kinds: issues of Law and issues of fact. ...

Rutes I (1) and (2) of Order 15 of the Civil Procedure Rutes are ctear that issues arise when a materiaI proposition of law or fact is affirmed by one party and denied by the other. Those material propositions of law or fact affirmed or asserted in the ptaint are denied in the written statement of defence. Secondty materiaI propositions are defined as the propositions of law or fact which a ptaintiff must attege in order to show a right to sue or a defendant must attege in order to constitute a defence. lt fot[ows that the material propositions must disctose the cause of action of the pl.aintiff and must atso be denied by the defendant so that there is a defence to the retevant materiaI proposition which the ptaintiff asserts. 15 20

Order 15 of the Civit Procedure Rules has to be read together with the rutes on pleadings under Order 7 which give the particutars that have to be contained in a pl.aint. These particutars inc[ude under 0rder 7 rute ] (e), the facts constituting the cause of action and when it arose. ln addition, in 0rder 7 rute I (g) of the CiviI Procedure Rutes, the ptarntiff has to show the reIief which he or she ctaims

These rutes were considered by the East African Court of Appeat in Suttivan v Al.i Mohammed (1959) E. A 239 where they hetd that the pl.aint must attege atl the necessary facts that establ.ish the cause of action. 30

ln the pteadings of the ptaintiff, the ptaint averred certain rel.iefs atteging the cause of actron and the c[aim in paragraph 3 of the ptaint was as fottows:

5 The Ptaintiff's ctaim is joint and severaL and is for dectaration that: (a) the Practice Note issued by the Defendant and pubtished in the New Vision Newspaper of 19th November, 20'14 is not binding on the ptaintiffs and appLies on[y to rice imports produced tocatly and or; processed in Uganda; (b) that the rice imported by the ptaintiffs is not chargeabLe to 18% VAT as indicated in the Practice Note: (c) the imposition of the 1B% VAT tevy on a[L imported rice is arbitrary and unLawfuL; (d) in the atternative but without prejudice to the foregoing, a declaration that the vatue added (if any) is done outside Uganda and is therefore not chargeabte to 18% VAT in Uganda; or that the va[ue-added does not exceed 5% of the totaI value of the suppl.y (e) an order of a permanent injunction be issued restraining the Defendant f rom imposing a tevy of 18% VAT on the ptaintiffs; (f) an order of generaL damages be issued; and (g) costs of the suit. 10 15

After pteading the cause of action as reproduced above, the pl'aintiffs went ahead to give the facts constituting the cause of action as required by the rul.es. Particutarty in paragraph 5 of the piaint, the action of the ptaintiff is based on the fact that they imported the rice when there was no 1B% VAT and thrs is clearl.y what they asserted namety:

5. The pl.aintiffs shaLL aver and contend that they imported severat containers of rice [ong before the imposition of the 1B% VAT Levy and over 600 containers of rice are in transit, others are in Mombasa whiLe others are aLready in the customs bonded warehouses and atl the rice was imported on the understanding that imported rice is exempt f rom'lB% VAT, and so no VAT shouLd woutd be paid. [Some of the copies of the Bitls of Lading for some of the ptaintiffs are attached and marked cotlectivety as "Annexure C" and the copies of the commerciaI lnvoices are attached and marked coLlective[y as "Annexure D"]

This pteading is cl.earl.y based on an understanding of the prevaiLing state of the Law that the imposition of ]8% VAT arose from an amendment to the VAT Act and the Practice Note of the respondent as I shatl set out betow. For purposes of considering the pteadings, the ptaintiffs averred in paragraph 7 of the ptaint that they shatL contend that under section 5 (b) of the VAT Act 30

as amended, the 18% VAT Levy is payabl.e by the pLaintiffs as importers and as such they have to increase the prices of their products by11l+% which in turn makes the rice too expensive and making it impossibte for them to recover it from the customers who are ordinary citizens. Last but not least 35

s in paragraph 9 the pl.aintiffs averred that if the objective of the defendant was to impose 114% taxes on therr products, atbeit arbitrarity, then the defendant ought to have given them notice for them to plan appropriatety and not import rice into the country.

It can be conctuded from the pteadings that the issue arose out of an 10 amendment to the VAT Act in 2014. The question of pteading is whether the issue of conf[ict between the VAT Act and the GATT ]994 arose can be conctuded. There was no materiaI proposition of law or fact atl,eging that the VAT Act was in conftict with GATT 1994. lt foLl.owed that the defendant in the written statement of defence answered the averments in the pLaint and 1s never considered defending any conftrct between the VAT Act and the GATT 1994. ln the defendant's written statement of defence, the defendanl inter aliaaverred that the rice is subject to VAT of l8% and the same was lawfulty assessed agarnst the ptaintiffs.

Ctearty in the written submissions of the appetl.ants, the appetlant's counsel 20 does not dispute the fact that the rice was subject to 18% VAT in accordance with the state of the [aw. ln fact, he submitted that rice imported by the appeltants had not been subject to 18% VAT tevy by the respondent as it was ctassified as an unprocessed agricuttural product which was exempt under the Second Schedute to the VAT Act. Thrs was in accordance with the zs Practice Note issued by the respondent on 18 November 2007. Second[y, the appetlant's counsel submitted that in the 2014 the VAT Act was amended by the VAT (Amendment) Act 2014 because section 5 thereof repeated paragraph 1 (f) in the Third Schedute to the VAT Act which zero rated cereals grown and mitted or produced in Uganda. On account of that, the respondent 30 issued afresh Practice Note number URA/VAT/PN 2I4 subjecting both [oca[ and imported rice to VAT at a standard rate of 1B%. Subsequently the appeltants on ]8th of December 2014 f il.ed HCCS No 880 of 2014.

Ground 4 of the memorandum of appeal does not arise from the decision of the learned trial judge. Ctearty, there was no averment in the ptaint or 3s decision of the High Court regarding the lnternationaI Treaty namety the GeneraI Agreement on Tariffs and Trade (GATT) The fact that the treaty 5 takes precedence in relation to the VAT chargeabte was being raised for the very first time in this appeat.

The question of whether the amendment to the VAT Act confticted with any provision of the GATT 1994 is a new question and is a new material proposition of law that was not pl'eaded in accordance with the rutes of pteading lhave set out above. Secondl.y it was never an issue for consideration by the learned triat judge. Specificatl'y, the issue settted by the learned triat judge were issues contained in a joint schedul'tng memorandum constituting some form of agreement between the ptaintiff and the defendant about the matters for decision by the triat judge. Particutarty the joint schedul.ing memorandum provided in Part 1 which constituted the agreed and undisputed facts as fottows: 10 15

> (a) The pl.aintiffs are engaged in general businesses but mainty dea[ing in the importation of rice from Pakistan and other parts of the world.

b) The rice is imported ready for consumption and undergoes no further processes in Uganda for purposes of vatue addition The rice does not undergo any drying, hutting, mitLing, potishing, sorting, grading and or packaging in Uganda.

c) ln 2007, the Commissioner GeneraL of the Uganda Revenue Authority issued a Practice Notice that "atL imported rice is considered to be unprocessed agricu[turaL produce for purposes of the va[ue Added Tax Act and is therefore falls under the provisions of the Second Schedule which provides for exempt goods".

d) On the 19'h day of November, 2014 the Defendant issued another Practice Notice number URA/VAT/PN 2/]4 stating that: "from research conducted, we have estabtished that in reLation to suppLy of rice, the vaLue-added activities such as drying, hurting, mitting, potishing, grading, sorting and packaging among others exceeds 5% of the totaL vaLue of the suppLy. This impties that the suppty of rice which is ready for human consumption does not fal.l. within the provisions of paragraph 1 (a) of the second schedu[e to the vAT Act nor does it faL[ under the Third ScheduLe of the same Act and therefore the suppty attracts VAT at the rate of 1B%. This also means that imported rice is subject to vAT at the rate of 18%. our Practice Notes issued on 14 November, 2007 on imported rice are hereby revoked.

5 e) The defendant has not been charging and coLtecting VAT on imported untiI sometime in November,2014 which the pLaintiffs have challenged.

ln Part 7 of the joint scheduting memorandum, the parties agreed on the fottowing issues:

- L Whether the suit rice is processed or unprocessed? - 2. lf it is processed whether the value of the added activities such as drying, hutting, mitl.ing, poiishrng, grading, sorting and packaging among others exceeds 5% of the total value of the suppty of rice imported by the ptaintiffs? - 3. Whether the imported rice is chargeable to '18% VAT in accordance with the Vatue Added Tax Act cap 349? - 4. What remedies availabte to the Parties?

ln the judgment of the learned triat judge, the issues that were framed were ctearty those contained in the joint scheduting memorandum of the parties referred to above and the learned triat judge went ahead to resotve onty those issues.

Further, the contents of the memorandum of appeaL under rule 86 (l) of the Judicature (Court of Appeai Rutes) Directions ctearLy provides for appeats against the decision. Decisions arise from the issues which are framed. Rul.e 86 (1) (supra) provides as fottows:

- (1) A memorandum of appeal sha[L set forth conciseLy and under distinct heads, without argument or narrative, the grounds of objection to the decision appeaLed against, specifying the points which are atleged to have been wrongfulty decided, and the nature of the order which it is proposed to ask the court to make, 25 - Ctearl.y the learned triat judge did not deal with, and was not addressed on and never considered the GATT 1994 vis-i-vis the VAT Act. The issue was not raised by the parties and was not the subject matter of the decision. The appe[[ant's counseI wants the court to rest its decision on the proposition that the learned triat judge ought to have taken judiciaL notice of section 76 30 - of the VAT Act whrch provides inter atia that: 35

- 5 ?6. (1) To the extent that the terms of the treaty or other international agreement to whrch Uganda is a party are inconsistent with the provisions of this Act, apart from section 75, the terms of the treaty or international agreement prevai[ over the provisions of this Act. - (2) ln this Section is, "international agreement" means an agreement between Uganda and a foreign government or a public international organisation

The circumstances when a new point of law may be taken by a first appettate court for the first time were considered in Tanganyika Farmers Association Ltd v Unyamwezi Development Corporation Ltd n96011 EA 620 by the East African Court of Appeat at Dar Es Salaam. The matter for consideration was that the issue of law was not argued in the trial court. The East African Court of Appeat stated that:

An appeat court has a discretion to altow a new point to be taken on appeal but it witl permit such a course onty when it is assured that fuLt.iustice can be done to the parties. ln the Tasmania (l), [1890] 15 A. C. 223 at 225 Lord Hersche[[ said:

- -My Lords. I think that a point such as this, not taken at the triat, and presented for the first time in the Court of Appeat. ought to be most jeatousty scrutinised. The conduct of a cause at the triat ts governed by. and the questions asked of the witnesses are directed to, the points then suggested. And it is obvious that no care is exercised in the etucidation of facts not materiaI to them. 20 - ,( 'lt appears to me that under these circumstances a Court of Appeal ought onty to decide in favour of an appettant on a ground there put forward for the first time, if it be satisfied beyond doubt, first, that it has before it att the facts bearing upon the new contention, as compLeteLy as woutd have been the case if the controversy had arisen at the triat; and next, that no satisfactory exp[anation could have been oftered by those whose conduct is impugned it an opportunity for exptanation had been afforded them when in the witness box. " 30

ln Ex parre Firth (2) (1882), 19 Ch. D.419 at 429 JesseL, M. R. said:

"lt is quite true that there is some evidence about that. but the point was not taken in the county court, and the rute is that, if a point was not taken before the tribunal which hears the evidence. and evidence coutd have been adduced which by any possibitity woutd prevent the point from succeeding, it cannot be taken afterwards. You are bound to take the point in the first instance. so as to enable the other party to give evidence.'

5 Clearly where evidence was not adduced on the point and the defendant was not given a change to defend it, it woutd amount to unfair trial of the issue at appeLtate Level without taking evidence.

ln ALwi Abdutrehman Saggaf v Abed Ati Al,geredi n9611 1 EA767 the East African Court of Appeat considered the circumstances in which a point of law which had not been argued in the court below may be taken on appeat. The East African Court of Appeat considered several precedents inctuding the decision of the Privy Councit in Perkowski v. City of Wetlington Corporation [958] 3 Atl. E. R. 368 which they cited with approva[. ln that decision of the Privy CouncrI the Court of Appeal of New Zeatand decided that, the point not having been taken at the trial., it could not be taken on appeal.0n further appeaI to the Privy CounciL the East African Court of Appeal. cited the hotding that: 10 15

> 'But their lordships have no hesitation in hol.ding that the course ought not, in any case, to be fotl.owed, unless the court is satisfied that the evidence upon which they are asked to decide estabIished beyond doubt that the facts. if fuLty investigated, woutd have supported the new ptea.'

The East African Court of AppeaL agreed with the above statement of law and further noted that issues arise from pteadings of which parties must have suff icient notice as a principte of fair trial..

ln conclusion, the VAT (Amendment) Act, repeated paragraph 1 (f) of the Third Schedute to the VAT Act which originatty provided that the suppl.y of cereals, where the cereats are grown, mitted or produced in Uganda are zero rated suppties. This is the provision which is atl.eged to have given preference to Ugandan mitted rice. Because the provision no [onger existed, there is no basis for arguing that the law is contrary to the GATT 1994. Further, notwithstanding this provision prior to 2014, the Practice Note of 2007 treated al.l. imported and [ocalty produced rice as unprocessed foodstuff. Therefore, notwithstanding the wording of the [aw, imported rice was atso exempt from VAT as unprocessed food. 25 30

- 5 SecondLy, the [earned triaL judge found that the VAT (Amendment) Act 2014 was not discriminatory in that it apptred to aL[ processed rice. Last but not least, the issue of the chatlenge to Ugandan laws on the ground that it confticts with the GATT 1994 provisions cannot be raised in this appeat because no evidence was led in the tria[ court as to what the practice of the respondent with regard to processed rice. Secondty the learned triat judge found that there were no discriminatory laws charging 18% VAT on imported rice and not on domestic processed rice. A chattenge to the law cannot be 10 - made originatl.y on appeaL without giving an opportunity to the defendant to address the matter hol.isticalty by cal.ting the retevant evidence as wet[ as deating with the issues of [aw. 15

Last but not [east, as I noted at the beginning of this judgment, an appeal arises from a decision of the High Court. There was no decision indicating that the processed rice in Uganda can be treated differentl'y and discriminatority from processed imported rice. There is no right of appeaI under articte 13L (2) of the Constitution where there is no decision and, in any case, there High Court does not exercise originaI jurisdiction but onty appetl.ate jurisdiction wherever there is an assessment that is objected to on points of law onl.y. ln terms of the chaltenge to the Practice Note of the respondent tn 2011+ pursuant to the VAT (Amendment) Act 2014, the repeal.ing of paragraph 1 (f) of the Third Schedute to the VATAct was not the subject matter of the suit and therefore cannot form the basis of an appeal'. ln any case, the question of fact in the Practice Note deatt with the fact that the vatue-added in the imported rice exceeded5%of the total vatue of the suppty based on the research of the respondent. This is a question of fact. 20 25

- The suit of the plaintiff s was f ited on l8th December 2014. Surprisingty in the submissions in grounds 5, 6 and 7 of the appeaL as wetl as in grounds three, the appetlant's counsel submitted on the VAT (Amendment) Act No 2 of 2015 which he states provides that tocatty grown and mitl.ed rice is charged at zero tax not 18% imposed on imported rice. The VAT (Amendment) Act 30 - number 2/2015 is an Act that came after the f il'ing of the suit and cannot be retied upon to address a suit that was fited on lSth December 2011+ under the 35

5 law which was in force then. ln any case, the court was never addressed as to whether the learned triat judge erred rn Law to find that the vatue-added on imported rice exceeded 5% of the total vatue of the product. This being a question of fact, there is no basis therefore for the court to deat with the rest of the grounds since no submrssions were made fautting the judge about the question of fact. The fact that by the VAT (Amendment) Act 2014, Ugandan processed rice and imported rice became chargeable with VAT until January 2015 when the law was amended is not discriminatory and was a matter for legislature to decide on. 10

ln the premises, I woutd find that the appeal has no merit and I would dismiss it with costs and the injunction issued pending appeat lapses.

Dated at Kampal.a the t6th day of September 2022

Christopher Madrama

Justice of Appeal, 20

## THE REPUBLIC OF UGANDA

## IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

(Coram: Cheborion Barishaki, Christopher Madrama & Irene Mulyagonja, JJA)

### CIVIL APPEAL NO.172 OF 2019

### 1. SWT TANNERS LTD

- 2. GENERAL AGENCIES UGANDA LTD 10 - 3. SSUNAD LIMITED - 4. WILLIEX COMMODITIES LTD - 5. AKHCOM LIMITED - 6. JASSANI GENERAL TRADING LIMITED - $$ - 8. SINGA RICE LIMITED - 9. ARMOUR TRADING COMPANY LIMITED - JAM MOHAMMED INVESTMENTS LIMITED **10.** - 11. GLORRE INTERNATIONAL LIMITED - 12. IMBA FOODS UGANDA LIMITED 20 - 13. ZEN TRADING LIMITED - 14. MABU COMMODITIES LIMITED::::::::::::::::::::::::::::::::::::

### **VERSUS**

**COMMISSIONER GENERAL**

25 UGANDA REVENUE AUTHORITY::::::::::::::::::::::::::::::::::::

#### **JUDGMENT OF CHEBORION BARISHAKI, JA**

$\mathsf{S}$

5 I have had the benel-rt of reading in draft the judgment of my learned brother Christopher Madrama, JA and I agree with him that this appeal has no merit and should be dismissed with costs.

Since Mulyagonja, JA also agrees, the appeal is dismissed and the injunctton issued pending appeal lapses. The respondent shall pay costs ofthe appeal.

10 It is so ordered.

Dated at Kampala tt i. ...16.h a"v or 2022 L-

Cheborion Barishaki

JUSTICE OF APPEAL

# THE REPUBLIC OF UGANDA, IN THE COURT OF APPEAL OF UGANDA AT KAMPALA (Coram: Cheborion, Madrama and Mulyagonja, JJA) CIVIL APPEAL NO 172 OF 2019

- 1. SWT TANNERS LTD - 2. GENERAL AGENCIES UGANDA LTD - 3. SSUNAD LIMITED - 4. WILLIEX COMMODITIES LTD - 5. AKHCOM LIMITED - 6. JASSANI GENERAL TRADING LIMITED - 7. SONERI LIMITED - 8. SINGA RICE LIMITED - 9. ARMOUR TRADING COMPANY LIMITED - 10. JAM MOHAMMED INVESTMENTS LIMITED - 11. GLORRE INTERNATIONAL LIMITED - 12. IMBA FOODS UGANDA LIMITED - 13. ZEN TRADING LIMITED - 14. MABU COMMODITIES LIMITED} ....................................

#### **VERSUS**

**COMMISSIONER GENERAL** UGANDA REVENUE AUTHORITY} ....................................

(Appeal against the Judgment of Wangutusi J, in (Commercial Division) HCCS No. 880 of 2014 delivered at Kampala on 10th February 2016)

#### **JUDGMENT OF IRENE MULYAGONJA, JA**

I have had the benefit of reading in draft the judgment of my brother, Christopher Madrama, JA, I agree with the decision that the appeal fails and should be dismissed with costs.

Dated at Kampala this $\frac{1}{\sqrt{1}}$ Day of $\frac{1}{\sqrt{2}}$ 2022.

Irene Mulyagonja JUSTICE COURT OF APPEAL