Justice Susan Odongo of the Commercial Division of the High Court has declared illegal the Shs1.246bn demand notice issued by Uganda Revenue Authority (URA) against Britania Allied Industries Limited and that it shouldn’t be executed as directed by the Tax Appeals Tribunal in 2023.
Britania through their lawyers led by Yesse Mugenyi contested the decision of the Tax Appeals Tribunal which directed the industry to pay the said amount of money resulting from the importation of mango and guava fruit pulp which they use as raw materials in the production of their juice and other products.
It should be remembered that the tribunal agreed with John Musinguzi Rujoki’s URA that the said products are not categorised as imported products as declared by the East African Council of Ministers as exempted from paying taxes.
They added that products import attract 10% duty rate.
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URA through their lawyers led by Rodney Amanya Mishambi insist that it is only Apples and oranges which are not supposed to pay the said taxes even though Britain provided evidence in Court proving that for a period of time, URA officials have been assessing and verifying the said products as those in the categories which are not supposed to pay taxes.
URA lawyers admitted that they initially accepted Britania’s classification at first because the industry is an authorised economic operator in the country.
They however divulged that the law allows them to correct errors they detect during the course of doing their work and it is the reason why Britania was issued with a notice to pay the said amount of money.
The judge disagreed with URA’s submissions noting that it is wrong for a taxman to change goals when the record is clear and confirmed that URA subjected Britania’s applications to thorough review, verified the manufacturing facility, raw materials, and quantities, and issued recommendation letters confirming qualification for duty remission.
Furthermore, URA issued a Customs Post Clearance Audits conducted in 2016 and January 2020 which found that the goods were generally well classified and they never identified misclassifications or short levies regarding mango or guava pulp.
“This Court concurs with the legal principle that while the Respondent holds the statutory power to administer and enforce tax laws and correct erroneous interpretations, this power must be exercised fairly and reasonably,” the judge stated.
The judge noted that it is not a correct position of the law that if URA discovers that it was wrong in a previous interpretation of the law, and as a result change its position, that the earlier position is deemed illegal and unreliable.
She explained that it is an absurd interpretation of the law that URA has the right and power to change its position on a particular interpretation when it does so, their new position takes effect from the time it is made and does not render the earlier position illegal or unreliable.
” In the absence of evidence to substantiate the allegation, I find it difficult to believe the assertion that without the knowledge of the respondent, the appellant, for all these years, dishonestly and without full disclosure, misclassified the items hence misleading the respondent,” the judge added.
The judge wondered why before Rujoki issued the demand notice, on determination of whether mango or guava pulp qualifies as juice or a raw material or other product, he didn’t consult technical expert opinion for proper classification.
The judge directed that on further reference, World Customs Organisation should be involved on offering guidance.
