Intertrade f&c Ltd v. ikigo cy’igihugu cy’imisoro n’amahoro

Intertrade f&c Ltd v. ikigo cy’igihugu cy’imisoro n’amahoro

- Source: Amategeko - Section: Decisions (Judgements) - Date: 2014-05-24 - Case/document no.: RCOMA0197/12/CS - Collection: Supreme Court

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Intertrade f&c Ltd v. Rwanda Revenue Authority [Rwanda SUPREME COURT– RCOMA0197/12/CS – (Mugenzi, P.J., Kanyange and Munyangeri N., J.) May24, 2014] Commercial laws–contract of sale –Contract of collaboration for the supply of goods–Goods in the last recipient’s deposits are considered as having been delivered– whether the waybill can be considered as a storage contract–Relations between the contract that Intercontact Trading concluded with Minadef with the one concluded with the Appellant. Tax laws–Assessment of value added tax–when value added tax was supposed to be charged– Value added tax is charged at the remittance of goods to the recipient– Law n° 06/2001 of 20/01/2001 on the code of Value Added Tax ,Article20 (a, i, ii). Facts: Intertrade f&c ltd concluded a supply contract with Intercontact Trading who also had a supply contract with Minadef. Intertrade f&c ltd supplied goods to Minadef’s storage. Thereafter, it was assessed for value added tax and charged for taxes and imposed a fine. Intertrade f&c complained to the Commissioner General and its complaint was not successful. Finally it filed a claim to the Commercial High Court. The court held that the claim was baseless. The court found that the contract between Minadef with Intercontact Trading, in which Intertrade f&c alleged that it would not have been levied the value added tax as it would be paying double, was

different from that signed with Intercontact Trading. The court also found that the value added tax was supposed to be declared and given the moment Intertrade f&c ltd provided goods to Intercontact Trading. Furthermore, the court stated that the claim that the period of paying the value added tax had not yet arrived had no foundation because Article 20 of the law n◦ 06/2001 of 20/01/2001 instituting the value added tax provides in its application, two periods for levying the aforesaid tax. That is when the goods are withdrawn from the seller’s stock and when the invoices are made, which means that the foregoing applied in levying the value added tax. Intertrade f&c ltd appealed against this ruling in the Supreme Court requesting the annulment of the tax levied against it arguing that it did not complied with the law. The Defendant also insisted on collecting that tax since the Appellant had already remitted goods to the consignee. Held: 1. The Appellant had a supply agreement with Intercontact Trading who also had a supply contract with Minadef. The first contract was intended to help the second contract in its implementation but these are two different contracts and should not be confused. Thus, the fact that goods were found in Minadef’s deposits, being their last destination leads to a confirmation that goods were delivered to Minadef, since there is no warehousing contract between Intertrade f&c ltd and Minadef. No other evidence is provided by Intertrade f&c ltd showing that these goods were intended to be stocked while they were going to be delivered to Minadef (the consignee). Following the contract of sale, no storage ever occurred but the goods were delivered.

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2. The fact that the Appellant provided the ordered goods to Intercontact Trading as agreed in the agreement of collaboration concluded by both companies, the Appellant was supposed to withhold value added tax from Intercontact Trading on provided goods, in accordance with Article 20(a) i, ii) of the law n◦06/2001 of 20/01/2001 instituting the value added tax because it was the sale of its own goods.

3. The fact that the Appellant removed from its books goods that were handed to Minadef who granted the tender, should not be considered an accounting error, since it is clear that they were removed from storage and recorded in its commercial books for the year 2011, who thereafter began with new orders in 2012. This implies that the Appellant had to pay value added tax for the goods sold as calculated by RRA based on the law that is stated above. Appeal without merit; The case appealed remains; Court fees charged on the Appellant. Statutes and statutory instruments referred to: Law n° 06/2001 of 20/01/2001 on the code of Value Added Tax, Article20 (a, i, ii). No Cases referred to: Judgment I. BACKGROUND OF THE CASE [1] The Ministry of Defence (MINADEF) concluded a contract for the supply of tyres and “inner tube” with INTERCONTACT TRADING. In order to effectively perform the tender that it won, INTERCONTACT TRADING concluded a contract of collaboration for a short period of time with INTERTRADE F&C Ltd and INTERTRADE F&C Ltd agreed to provide tyres and“inner tube” relating to the tender won by INTERCONTACT TRADING and further requested its payment to be made as soon as INTERCONTACT TRADING was paid by MINADEF. [2] INTERTRADE F&C Ltd started to import tyres and“inner tube” from abroad and when they arrived MAGERWA, they were removed and later transfered to MINADEF’s

storage. INTERTRADE F&C Ltd explained that it acted accordingly because INTERCONTACT TRADING and INTERTRADE F&C Ltd did not have sufficient storage to keep the goods before their delivery to MINADEF. [3] In the year 2012, RRA assessed INTERTRADE F&C Ltd on value added tax and imposed a tax evaluated at 53. 945. 706 Rwfrs including fines and advised that the tax were in respect of the tyres and“inner tube” delivered to MINADEF [4] INTERTRADE F&C Ltd appealed to the Commissioner General who replied and said that its complaint has no foundation. In this regard, INTERTRADE F&C Ltd filed a claim at

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the Commercial High Court which held that INTERTRADE F&C Ltd’s claim was baseless because the value added tax of 53.945.706 Rwfrs was imposed in accordance with the law. [5] The court found that INTERTRADE F&C Ltd could not rely on the contract that MINADEF had concluded with INTERCONTACT TRADING by stating that the value added tax should not be imposed while it had already delivered goods to INTERCONTACT TRADING as agreed, because two different contracts of sale were concluded with each being liable for value added tax. Thus, the court found that the contract which MINADEF concluded with INTERCONTACT TRADING in which INTERTRADE F&C Ltd argued that it should not be imposed a value added tax, was different from the one concluded with INTERCONTACT TRADING. [6] The court also found that Article 20 governing tax procedures had been respected and complied with. The value added tax was supposed to be declared and paid when INTERTRADE F&C Ltd handed goods purchased to INTERCONTACT TRADING. It was written above the ″delivery notes″ exhibited by INTERTRADE F&C Ltd that its aim was to fulfill the agreement in the contract of sale concluded between INTERTRADE F&C Ltd and INTERCONTACT TRADING. Thus, the Court found that the claim by INTERTRADE F&C Ltd that the moment of collecting value added tax had not arrive had no foundation because Article 20 of the law n◦06/2001 of 20/01/2001

instituting the value added tax that was in application at the time the tax was imposed, provided two periods in which to collect the aforesaid tax. That is when the goods are withdrawn from the seller’s stock and when invoices are made, which means that the foregoing applied in charging value added tax. [7] On the fact that INTERTRADE F&C Ltd alleged that it would be charged twice in respect of the value added tax, the court stated that INTERTRADE F&C Ltd should not have these concerns, because the tax that was imposed is provided by the law, and that it was charged in due time. [8] INTERTRADE F&C Ltd appealed to the Supreme Court requesting the annulment of the tax claiming that it was illegally charged and that RRA insisted that the value added tax should be paid. [9] The trial was held in public on 01/04/2014 INTERTRADE F&C Ltd represented by the Counsel Me BASOMINGERA Alberto while RRA was represented by Counsel Me KABIBI Spéciose. II. ISSUES IN THIS CASE AND IT’S ANALYSIS. To determine whether the valued added tax imposed on INTERTRADE F&C Ltd was legally charged. [10] In determining this issue, the court is going to analyse three issues that are related to the first one and which formed the grounds of INTERTRADE F&C Ltd’s appeal as follow : 1. The fact that there was confusion between deposit and the transfer of property.

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2. The fact that no consideration was made on the relationship between the contract that INTERCONTACT TRADING concluded with MINADEF and that concluded with INTERTRADE F&C Ltd.

3. The fact that there was ignorance demonstrated towards the period in which the value added tax was supposed to be collected for goods in the storage of MINADEF.

1. Concerning the fact that there was confusion between deposit and the transfer of property. [11] Me BASOMINGERA, counsel of INTERTRADE F&C Ltd argued that the judge held that the goods which were found by RRA’s auditors in the warehouses of MINADEF were no longer INTERTRADE F&C Ltd’s property. He further argued that there was confusion between the storage contract (contrat de dépôt) and the tranfer of property (transfert de propriété), because MINADEF had kept the goods in accordance with the contract of storage that was concluded with INTERCONTACT TRADING and due to the fact that both INTERCONTACT TRADING and INTERTRADE F&C Ltd did not have storage. All the goods had to be received at the same time since the reception of one part was not allowed. Therefore, the period of charging the value added tax had not yet arrived because the goods were still kept in storage and were not yet sold. [12] He also alleged that the ″waybills″ were used as there was not other alternative in which the goods could access MINADEF’s storage. The waybills showed that there was a contract of storage concluded between these two companies and MINADEF. The fact that their accounting books showed goods that were conducted in MINADEF’s storage as expenses is a fault committed in relation to accountacy. The law on tax provides particular fines in respect of such inaccurate recording. [13] Me Kabibi

Spéciose, Counsel for RRA’s alleged that INTERTRADE F&C Ltd was supposed to pay the value added tax since it had already handed goods to INTERCONTACT TRADING according to the ″waybills, stating that the goods were in the storage of MINADEF. The argument whether the ministry received them (delivery) was baseless because INTERTRADE F&C Ltd did not have any contract with MINADEF. Instead, it concluded a contract with INTERCONTACT TRADING, and it handed the goods as agreed which was proven by the ″waybills″ that were used when the goods were delivered. Thus handing over the goods was considered as one of those period in which the value added tax should be collected based on Article 20(a) i, ii) law n◦ 06/2001 of 20/01/2001 instituting the value added tax and relating to when the tax is charged. [14] The Counsel for RRA alleged that using ″waybills″ was a matter of accounting and it was baseless since the accountant could not prove whether he or she had lost goods when he or she had not done so. Furthermore, he argued that what INTERTRADE F&C Ltd sold are shown by ″waybills″given to INTERCONTACT TRADING, and that it rests on the court to decide whether ″waybills″ may be considered as proof of a storage contract or as evidence of delivering the goods which were sold(livraison des marchandises vendues). The view of the court.

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[15] The court found that the fact that goods were found in MINADEF’s storage, being the last recipient(consignee) confirmed that goods were delivered to MINADEF. Since no contract of storage existed between INTERTRADE F&C Ltd and MINADEF, no evidence was submitted by INTERTRADE stating that these goods were going to MINADEF for storage.

2. Concerning the relationship between the contract that MINADEF concluded with INTERCONTACT TRADING and the one that INTERTRADE concluded with INTERCONTACT TRADING. [16] The counsel for INTERTRADE F&C Ltd alleged that the judge comfirmed that INTERTRADE F&C Ltd should not rely on the contract concluded between INTERCONTACT TRADING and MINADEF. The counsel for INTERTRADE F&C further stated that it could not pay value added tax as the contract of collaboration it concluded with INTERTRADE F&C Ltd was for a short-period of time and it was also a ″ subcontract ″ to perform the contract that MINADEF concluded with INTERCONTACT TRADING to supply tyres and“inner tube”. [17] He also stated that INTERTRADE F&C Ltd was supposed to fulfill all the request of MINADEF. This implies that its liabilities still lied with INTERCONTACT TRADING because in the situation where MINADEF found any defects in the goods provided by INTERTRADE F&C Ltd, MINADEF could not rely on the ″waybills″ made for INTERCONTACT TRADING and claim that it has received goods since Article 3 of the contract of collaboration tied its liabilites to INTERCONTACT TRADING until all the goods are received. In this regard, he argued that INTERTRADE F&C Ltd should not be imposed the value added tax while the contract of collaboration was being ignored and which could not be interpreted without taking into account the contract

that MINADEF concluded with INTERCONTACT TRADING. [18] RRA’s Lawyer alleged that INTERTRADE F&C Ltd arguements was baseless because the contract concluded between INTERCONTACT TRADING and MINADEF was never related. He further argued that if INTERTRADE F&C Ltd, did not refuse that it imported goods from abroad and handed them to the one to whom they had to be sold, which is INTERCONTACTTRADING, there was no reason for it to rely on the contract concluded between MINADEF and INTERCONTACT TRADING to which it was never a party. The view of the court. [19] The court found that the fact that INTERTRADE F&C Ltd handed to INTERCONTACT TRADING goods as requested and confirmed in the contract of collaboration, INTERTRADE F&C Ltd should have withheld value added tax from the goods sold to INTERCONTACT TRADING based on Article 20(a) i,ii) of the law n◦06/2001 of 20/01/2001 instituting the value added tax, because it was the sale of its own goods. If it did not do so and thereafter claim from INTERCONTACT TRADING, the value added tax, it would not rely on its faults and later state that RRA should have waited to impose the value added tax until MINADEF pays the former since it did not have any contract with MINADEF and the contract between MINADEF and INTERCONTACT TRADING did not have any link with INTERTRADE F&C Ltd.

3. Concerning the period in which the goods in MINADEF’s storage should have been charged

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[20] The counsel of INTERTRADE F&C Ltd alleged that the judge had ruled that INTERTRADE F&C Ltd was charged according to Article 20(a) (i),(ii) of law n◦06/2001 of 20/01/2001 instituting the value added tax, because there was output of goods in stock for INTERTRADE F&C Ltd. He argued that this was untrue because the period which should have been taken into consideration was the period that INTERCONTACT TRADING made the last invoice although the goods that came from MAGERWA and were tranfered to MINADEF’s storage were not yet received as they were supposed to wait until all the goods had arrived.(no partial reception was allowed). [21] The counsel for RRA argued that the argument of the Appellant was baseless because the value added tax was not imposed only because of the fact that invoice was made, although the making of an invoice was one of the element upon which a value added tax was charged and paid to RRA. It was also proven that INTERTRADE F&C Ltd sold its own goods. [22] He said that even though INTERTRADE F&C Ltd’s counsel confirmed that goods came from MAGERWA and were directly transferred to MINADEF, this was untrue because what proved that the goods were delivered was the ″waybills″ that there were delivered alongside with the goods. He further argued that the tax was levied because INTERTRADE F&C Ltd delivered goods to INTERCONTACT TRADING from its accounting books

and not the reception of the goods. The view of the Court. [23] Documents in the file showed that ″waybills″ were used by INTERTRADE F&C Ltd in handing goods to INTERCONTACT that were supposed to be delivered to MINADEF as provided in the tender that they won. It was also proven that there are documents showing that MINADEF received goods that were requested from those who won the tender. [24] The court found that the fact that INTERTRADE F&C Ltd removed from its books goods that were delivered to MINADEF who granted the tender, could not be considered as an error in accounting because it was proven that there were removed from the stock and from their commercial books of the year 2011 and thereafter began with new orders in 2012. This means that those goods were sold and therefore valued added tax had to be collected as calculated by RRA, based on Article 20(a, i, ii) relating to value added tax as discussed above. III. DECISION OF THE COURT [25] Decided that INTERTRADE F&C Ltd’s appeal is baseless ; [26] Decided that the appealed case remains unchanged; [27] Ordered INTERTRADE F&C Ltd to pay court fees evaluated at 27.200 Rwfrs.