20190625 TZHC Dar es Salaam

IN THE HIGH COURT OF TANZANIA AT DAR ES SALAAM CIVIL CASE NO. 205 OF 2016 MOROGORO MUNICIPAL COUNCIL ................................ PLAINTIFF VERSUS TANZANIA LEAF TOBACCO COMPANY LTD ................... DEFENDANT JUDGMENT MGETTA, l: Through its Municipal Solicitor office, the plaintiff, Morogoro Municipal Council, instituted this suit claiming against Tanzania Leaf Tobacco Company Limited, the defendant for the following relief(s): i. That the Defendant be ordered to pay the plaintiff the sum of Tzs 1,440,346,337/= being outstanding debt for the year 2014/2015 and 2015/2016. ii. That the defendant be ordered to pay decretal amount from date of judgment till the date of payment in full. iii. That the defendant be ordered to pay interest at bank rate from the date when the debt became due to the date of judgment. iv. Cost of this suit. v. Any other or further relief (s) this Court may deem fit to grant. 1 In its written statement of defence drawn and filed by Mr. Gasper Nyika, the learned advocate, the defendant vehemently denied the plaintiff's claims; and, hence prayed for the dismissal of the suit with costs. Upon completion of pleadings, the case was called on for hearing. At the trial, Mr. Wilfred Mramba assisted by Mr. Elikarim Samwel Tyeah, both learned Municipal Solicitors, appeared for the plaintiff; while, the defendant was being represented by Mr. Gasper Nyika, the learned advocate. There were issues framed and agreed by the parties for determination by this Court. These are as hereunder: 1. Whether the plaintiff is entitled to be paid service levy by the defendant. 2. Whether service levy is payable where produce cess has already been paid in respect of the same Crop. 3. What relief(s) the parties are entitled to. At the trial, the plaintiff brought one Bariki Jackson Marandu, the sole plaintiff witness (PW1) who testified and tendered the following exhibits: exhibit Pl - a letter of reference No. Fl0/MMC-2/VOL.11/49 dated 28/4/2015 titled "Request For Turnover"; exhibit P2 - a letter of reference. Na TTB/M.7/98 dated 04/5/2015 titled "Request For Turnover"; exhibit P3 - General receipt dated 26/6/2015 of amount of Tzs 2 25,000,000/=; exhibit P4 - a letter of reference No.Fl0/MMC- 2/VOL.111/12 dated 21/8/2015 titled "Reminder For Service Levy Bill for the Year 2014/2015" ; exhibit PS - a letter of reference No. Fl0/MMC- 2/VOL 111/19 dated 21/01/2016 titled "Last Reminder to pay service Levy Bill for the year 2014/2015 Tshs 634,677,357/71"; exhibit P6 collectively - first is Assessment Results for service Levy payment-Levy for July-June 2015/2016 amount of levy due is Tzs 805,668,979.43; and, second is a letter of Reference No. TTB/M.7/112 dated 30/5/2016 titled "Statistical Data of Tobacco Exported and Domestic Sales values for the period of April 2015 to March 2016"; exhibit P7 - a letter of reference No. TLTC/Service Levy for 2014-2015/June-24 dated 24/6/2015 titled "Service Levy for the year 2014-2015 Tzs 659,677,357.71; and, exhibit PS - a letter dated 20/10/2015 titled "Service Levy Bill for the Year 2014/2015". On his part, the defendant brought Mr. Richard Andrew Sinamtwa who testified as a sole defendant witness (DW1) and also tendered exhibit 01 - a letter of reference No.BA.91/175/02/158 dated 22/3/2017 from Morogoro Regional Commissioner's office addressed to Morogoro Municipal Director, Ifakara Town Director, and Executive Directors for Ulanga, Malinyi, Kilombero, Kilosa, Gairo, Mvomero na Morogoro. 3 PWl Marandu working with the plaintiff as an accountant asserted that he does keep records of revenue, income and expenditure on behalf of Morogoro Municipal Director. The dispute here is the payment of service levy. In this suit, the defendant is one of the payers of service levy to the plaintiff. The defendant is dealing with buying tobacco leafs from up country and transport it to Morogoro Municipality for purposes of processing it to add value and then export to abroad. The processed product is sold in foreign currency. The defendant was brought before this court because it failed to pay to the plaintiff Tzs 1,440,346,337/= as service levy for the period of two years: 2014/15 and 2015/16. He went on asserting that in respect of service levy for the period of 2014/15, he come to know the debt after the plaintiff has written a letter dated 28/4/2015 requesting the Tobacco Board to supply it with turnover for the period of 2014/15. On 4/5/2015 Tobacco Board supplied the plaintiff with the turnover of sales done by the defendant for the year 2014/15. Then, they calculated and came out with the amount of money the defendant was supposed to pay the plaintiff at the NMB exchange rate of Tzs 1911/= per dollar in the year 2014/2015. 4 They made calculation of USD 140,325,236.80 times Tzs 1911/= per dollar. They got Tzs 268, 161, 527, 524.80. Then, Tzs 268,161,527,524.80 minus Tzs 48,269,074,954.46 which is 18% of value added tax (VAT). It remains Tzs 219,892,452,570.34. That amount was multiplied by 0.3% of service levy rate which becomes Tzs 659, 677, 357.71. This is the amount that was supposed to be paid by the defendant to the plaintiff for the period of 2014/15. On 8/5/2015, the plaintiff issued invoice No. 0003902 to the defendant demanding it to pay the amount in the tune of Tzs 659,677,357.71. Having received that notice, the defendant paid the plaintiff Tzs 25,000,000/= as part payment of the total service levy. In it's acknowledging the receipt of that money, the plaintiff issued receipt No. 62284 dated 26/6/2015, exhibit P3. On 21/8/2015 the plaintiff wrote to the defendant demanding the remaining unpaid service levy amounting Tzs 634, 677, 357.71 as per exhibit P4. The defendant did not respond. On 30/12/2015 and 21/1/2016, more remainder letters exhibit PS collectively were sent to him. But, yet there was no any positive response. As far as the service levy for the year 2015/16 is concerned, there was a letter addressed to the Tobacco Board to supply the plaintiff with turnover. As per exhibit P6 collectively, they took export (sale) values 5 which is USD 128,869,443.1 plys domestic (Sale) values which is USD 1,878, 525. The total became USD 130,747,968.1. The amount USD 130,747, 968.1 times the existing exchange rate at that particular time which was 2054 per dollar, the total became Tzs 268,556,326,477.40. Now, Tzs 268,556,326,477.40 time 0.3% of the service levy rate of the turnover, it became Tzs 805,668,979.43 as service levy for the year 2015/16. PWl went on asserting that since they were not paid service levy for the period of 2014/15 and 2015/16 which amounts to 634, 677,357.71 plus 805,668,979.43 which is equal to Tzs 1440,346,337.10 as service levy, then the defendant be ordered to pay the same plus costs of this suit, interest and disturbances which resulted from the follow ups. When cross examined by Mr. Nyika, PWl Marandu, stated that it is true that in the year 2014/15 he deducted VAT of 18% in order to give relief to the defendant to enable him pay service levy. But, he was not sure that he paid VAT on the turnover. In calculating service levy for the year 2015/16, he also used exchange rate from the NMB and he did not deduct VAT. His calculation might be wrong as he did not deduct 18% of VAT as he did in the financial year 2014/15. 6 On his part, in defence, Richard Andrew Simamtwa, the sole defendant witness (DW1) asserted that he is working with Tanzania Leaf Tobacco Company as Director of Legal and Corporate affairs. The Company deals with buying, transporting and processing tobacco. They also export tobacco abroad after it has been processed. He went on asserting that when they buy tobacco leafs they pay cess at a rate of 3% of the farm gate price. He asserted there is also service levy which is 0.3% of the turnover. He submitted that they don't pay both service levy as well cess levy at ago. They pay only one as per law of the country which talks about entities. Hence, the defendant should not be subjected to both levies. They decided to pay cess levy in lieu of service levy. He went on asserting that the defendant had agreed with the plaintiff that it shall be paying Tzs 25,000,000/= per annum. They paid Tzs 100,000,000/= for the last four (4) years. Exhibit P4 shows that the plaintiff agreed to receive Tzs 25,000,000/= although there was no memorandum. He prayed to tender exhibit D1. He insisted that since they had paid cess levy, they were not supposed to pay service levy which is 0.3% of the turnover. He prayed that the matter be dismissed with cost. The above is all about the evidence adduced by both parties. There is no dispute that service levy is charged from Turnover; and that the 7 defendant had not paid it. The defendant witness claimed that they paid cess levy and therefore they were not supposed to pay service levy. Throughout the evidence, I never noticed any iota of evidence showing that they paid cess levy. As he agreed that, it was a choice to pay one of them and since he has not paid any, I am of the considered view that they ought to pay what demanded. Section 6(1) (u) of the Local Government Finance Act, CAP.290 provides that the revenue, funds and resources of an urban authority shall include: "All monies derives from the Service levy payable by Corporate at the rate not exceeding 0.3 percent of the turnover net of the value added tax and the excise duty". For setting the rate under section 6(1) (u) of the Local Government Act, CAP.290, the Morogoro Municipality did enact Morogoro Municipal Council (Service Levy) By-laws, 1999 (henceforth the By-laws) which empowers the Municipality to collect service levy from the Companies at a rate of 0.3% of the Turnover. For ease of reference, section 4 of the Bylaws is quoted as hereunder: "4. These shall be levied and collected from every resident business, enterprise or agency 8 in each year of income a Levy equal to zero point 3 levy percentum (0.3%) of the turnover in respect of all activities including manufacturing, processing, agricultural production, distribution of goods, rendering of services, commerce, importation of goods or services within the area of jurisdiction of the Authority. Such activities shall also include electricity operations (TANESCO Activities), water works, telephone services, insurance business and consultancy activities." The basis of calculating the service levy is the turnover. According to section 6 (1) (u) of CAP 290, turnover should be Net, that is to say that 0.3% of the turnover excluding value added tax (VAT) and excise duty. Hence, in order to get Net Turnover, one has to take the gross revenue minus the value added tax (VAT) and excise duty. Bearing in mind of this finding, the following is the calculation of what the defendant is supposed to pay plaintiff. 9 I begin with the Service Levy supposed to be paid in the year 2014/15. The exchange rate at particular time was 1811 and not 1911 because there is nowhere is shown to that effect. Thus, the calculation goes as follows: USD 140,325,236.80 times Tzs 1811/= per a dollar is equal to Tzs 254, 129,003, 844.80. Now, 18% of Tzs 254,129,003,844.80 is equal to Tzs 45,743,220,692.06. Then, Tzs 254,129,003,844.80 minus Tzs 45,743,220,692.06 is equal to Tzs 208,385,783,152.74. Finally Tzs 208,385,783,152.74 times 0.3% is equal to 625,157,349.5. There was money paid ie 625,157,349.50 minus 25,000,000/= is equal to 600,157,349.50 for the 2014/15 financial year. In respect of service levy supposed to be paid in the year 2015/16 is that first the exchange rate at that particular time was not 2054. I presume it was supposed to be Tzs 1911 on which I should make my calculation. If that is what I believe my calculation should be as follows: USD 130, 747,968.1 times Tzs 1911 which is equal to Tzs 249,859, 367,039.1. Now, 18% of Tzs 249,859,367,039.1 is equal to Tzs 44, 974,686.067.04. Then, 249,859,367,039.1 minus 44,974, 686,065.04 is equal to 204,884,680, 974.07 times 0.3% is equal to 614, 654,043/=. From the foregoing, it is obvious that the money that is demanded by the plaintiff is equal to Tzs 600,157,349.50 plus Tzs 614, 654,043/= which 10 is equal to Tzs 1,214,811,392.50 as service levy for the period of 2014/15 and 2015/16. Hence, having thoroughly gone through the evidence adduced by both sides, the plaintiff and the defendant, I have come at a conclusion that the Plaintiff has proved its claims at a balance of probability. As a result, I found that the Plaintiff is entitled to a payment of Tz Shillings one billion two and fourteen million eight eleven thousands three and ninety two and cent fifty (Tzs 1,214,811,392.50) as service levy for the year 2014/2015 and 2015/2016. The defendant is accordingly ordered to pay the Plaintiff Tz Shillings one billion two and fourteen million eight eleven thousands three and ninety two and cent fifty (Tzs 1,214,811,392.50) plus interest at bank rate from the date when the debt became due to the date of this judgment. The defendant is also ordered to pay costs of this suit. It is so ordered. C J.S. MGETTA JUDGE 25/6/2019 COURT: This Judgment is delivered today this 25th day of June, 2019 in the presence of Mr. Elikarim Samwel Tyeah, the learned 11