20170704 TZHC Arusha

IN THE HIGH COURT OF UNITED REPUBLIC OF TANZANIA IN THE DISTRICT REGISTRYOF ARUSHA AT ARUSHA MISCELLANEOUS CIVIL CAUSE NO. 15 OF 2016 IN THE MATTER OF AN APPLICATION FOR ORDER OF MANDAMUS, PROHIBITION AND CERTIORARI BY AND BETWEEN SOPA MANAGEMENT LIMITED .......•........................ 15T APPLICANT BEYOND TANZANIA LIMITED ........ ~························2No APPLICANT GRUMET! EXPENDITIOUS (T) LIMITED .................. 3Ro APPLICANT ELEWANA AFRICA (T) LIMITED ..... i •••••••••••••••••••••••• 4TH APPLICANT ABERCROMBIE & KENT (T) LIMITED ...................... STH APPLICANT RHINO LODGE LIMITED ....................................... .6TH APPLICANT And THE NGOROGNRO EXECUTIVE DIRECTOR, NGORONGORO DISTRICT COUNCIL. ......................... RESPONDENT RULING DR. OPIYO, J. Before me is an application preferred by the above named applicants. The application is preferred under section 17(2) of the Law Reform ( Fatal 1 ' . -.... Accidents and Miscell~neous Provisions) Act, Cap 310 and Rule 8 (1) (a) and (b) and 8(2) of the Law Reform (Fatal and Miscellaneous Provisions) Judicial Review Procedure and Fees) Rules, 2014. The applicants herein sought intervention of this court by applying for orders of certiorari and prohibition in which case they are praying that this HonourableCourt be pleased to quash the Respondent's decision of imposing and collecting service levy and prohibit the Respondent from continuing to impose and collect service levy from hotel including tourist hotels and tented camps owned by the applicants. The application has been supported by the affidavit affirmed by Mr.Mehdi Jan Mohamed. Before this court the applicants were represented by Mr. Wilson Mkebezi learned advocate, while the respondent was represented by Mr. Charles Mariki, Ngorongoro District Solicitor. Facts upon which this application emanate from are that the applicants own and operate hotels, tourist hotels and tented camps within various locations in Ngorongoro District most of which are found within Ngorongoro Conservation Area. On ih January 2016 the Applicants received from the Respondent demand notices requiring the applicants to pay service levy in respect of the hotels, tourist hotels and tented camps they own and operate. The said notices demanded the applicants to furnish payment of the service levy within the period of 14 days in terms of section 7 (1) (aa) of the Local Government Finances Act, Cap 290 (LGFA) as amended by section 35 and 36 of the Finance Act of 2010. Being aggrieved 2 ;. by the said demand notices the Applicants lodged this application for redress. Pursuant to the Order of this court delivered on 23/2/ 2017 this application was ordered to be argued by way written submission and both parties have duly complied with this order by submitting their written submissions on time. That being the case I find it worthwhile to summarise argument of each party as I do hereunder: The Applicants' Counsel in arguing for this application raised three issues for determination namely:- 1. Whether the Respondent's act of issuing demand notice for payment of service levy under section 7(1) (aa) of the Local Government Finances Act, Cap 290 is correct in law; 2. Whether the Respondent's act of imposing service levy to hotels including tourist hotels and tented camp is proper in law; 3. What reliefs are the parties entitled to. In arguing the first issue, the Applicants' Counsel essentially submitted that, issuing demand notices for payment of service levy relying on section 7 of the LGFA is wrong in law. In his view, assuming the demands were issued to a proper person, the correct section should have been section 13(1) of the LGFA. He quoted the said provision of law as follows:- 3 'Subject to this Act and the rules made by the Minister under this section, a local government authority may make by-laws imposing such rates to be paid by the inhabitants or such categories of inhabitants, for, on or in connection with such services, things, matters or acts as the authority may prescribe or specify in the By- laws in question~ He went further submitting that, by looking at the section above, not only that it does not give a direct power for District authorities to impose levy, but it also clearly requires that for a District authority to impose the levy it demanded, it should have done so through a by-law made under section 13(1) of the LGFA but with regard to the case at hand no such by law was specified by the Respondent when issuing the demand for service levy to the tourist facilities owned by the Applicants. As such he submitted that non-citation of an enabling provision when making a decision is quite fatal same as it is when lodging proceeding in court as there was no legal authority empowering the Respondent to impose the service levy. As regard to the second issue the Applicants' Counsel referred this court to The Local Government Finance Actand submitted that the stated that the Act was enacted in 1982 with specific objective "to make provision for sources of revenue and the management of funds and resources of local government authorities and for matters connected or incidental to securing the proper collection and sound management of finances in the local 4 government system' referring to the preamble to the LGFA he attached to this submission. The Applicant's Counsel in this regard was of the view that, in order to achieve this objective, sources of revenue had to be identified and the same are listed under sections 6 to 9 of the said Act. He submitted that, at the time of its enactment, the Local Government Finance Act identified 17 sources of revenue for Urban and 20 for District authorities respectively. By 2002 these sources of revenue had increased to 21 for Urban and 26 for District authorities as per section 6(1), 7(1) and 8(1) of the LGFA. According to the Applicant's Counsel,the Local Government Finance Act did not only identify sources for revenue, it also gave the local government authorities powers to impose taxes and rates on the identified sources, the power he said is found in section 13(1) in the original version of the LGFA which is now section 16(1) following the law revision made in 2002. In exercising powers given under section 13(1) of the LGFA, most District Councils made regulations introducing service levy as a source of income. The 0.3 percent service levy as a source of revenue for District and urban authorities was introduced by sections 23(b) and 24(b) of the Finance Act, No 12 of 1999.The sections read as follows; 23(b) Subsection (1) of section 6 is amended by adding immediately after paragraph ( q) the following new paragraphs: 5 (v) all monies derived from the service levy payable by corporate entities at the rate not exceeding 0.3 percent of the turnover net of value added tax and the excise duty. 24(b) 'Section 7 of the Local Government {Finances) Act 1982 is amended by adding new paragraphs after paragraph ( u) as follows: (aa) 'all monies derived from the service levy payable by corporate entities at the rate not exceeding 0.3 percent for the turnover net of the value added tax and the excise duty~ But in in 2003, critical amendments were made to the LGFA. Section 35 and 37 of the Finance Act, No.15 of 2003 inserted a new subsection (subsection 2) to section 13 of the LGFA. The new section 13(2) of the LGFA (now section 16(2) after the 2002 revision) reads as follows: 'Notwithstanding the powers to impose rates, charges, levies, fees or dues conferred upon local government authorities under section 6, 7, 8 and 9 of the Local Government Finances Act 1982, the local government shall not impose rates to be paid by the inhabitants or such categories of inhabitants, for, on or in connection I with such services, 6 matters or acts specified in the Third Column of the Schedule~ He submitted that schedule referred to above was introduced by section 37 of the Finance Act, 2003 and was introduced immediately after section 67 of the LGFA. The Schedule contains three columns: i. The first column is a serial number; ii. The second column lists services, matter or act in respect of which a local government authority may impose rates, charges, levies, fees or dues; and iii. The third column lists areas, services, matters or acts for which a local government authority shall not impose rates, charges, levies, fees or dues. He thus, argued that, the import of section 13 (2) read together with third column of the schedule of the LGFA is to exempt all areas, services, matters or acts listed under the third column of the schedule from imposition of service levy. And if one looks on the third column of Item 4 of the Schedule which relates to imposition of levies to guest houses there is a listed areas, services, matters or acts for which local government authorities are barred from imposing service levy. And one will clearly see that hotels including tourist hotels and camping tents are listed in the 7 areas, services, matters or acts for which a local government authority shall notimpose rates, charges, levies, fees or dues. Therefore, by virtue of section 13(2) of the LGFA as introduced by sections 35 and 37 of the Finance Act, 2003 read together with the item 4 of the Schedule to the LGFA, hotels including tourist hotels and tented camps are exempted from paying service levy. In the premises, he argued it is is clear that the Respondent's decision to impose service levy to hotels, including tourist hotels and tented camps contravenes the law. His further submission is that taxation in this country apart from other fiscal laws including the LGFA is primarily regulated by Article 138 (1) of the Constitution of the United Republic of Tanzania, 1977 which reads as follows; 'No tax of any kind shall be imposed save in accordance with a law enacted by Parliament or pursuant to a procedure lawfully prescribed and having the force of law by virtue of a law enacted by Parliament'~ He therefore argue that they have shown that section 13(2) of the LGFA exempts unequivocally hotels including tourist hotels and tented camps from paying service levy to local government authorities. It follows therefore that the continued imposition of service levy to hotels including tourist hotel and tented camps by the local government authorities without the authority of a law not only contravene section 13 (2) of the LGFA, it also defies Article 138 (1) of the Constitution of the United Republic of Tanzania and defeats the purpose which Article 138(1) of the Constitution seeks to serve. 8 He finally, in the premises invited this Court to answer the second issue in the negative and prayed that prayed that the demands issued by the Respondent for service levy from the hotels, including tourist hotels and tented camps owned by the Applicants be quashed for being illegal and prohibition order be issue to the Respondent from continuing to impose and collect service levy on the applicants. As far as the third issue is concerned, the Applicants' Counsel simply submitted that in view of the submissions he was humbly praying that this Honourable court be pleased to grant the orders sought. In reply, the Respondent's side in their written submission seriously contested the submission by the Applicants' submission by submitting that the demand notice issued by the Respondent to the Applicant is a statutory one and quite legal. As such, he was of the firm view that Applicants are required by the law to pay service levy to their respective Local Government Authorities' that is Ngorongoro District Council (Respondent herein).In support of his argument Counsel for the Respondent cited the provision of36 of the Finance Act 2012 and section 7(1) of Local Government Finance Act, Cap 290. The Respondent's Counsel also referred this court to the case of Hotels Association of Tanzania (HAT) and Attorney General Misc. Civil Cause No. 3 of 2015, in the HighCourt of Tanzania at Dar es salaam( unreported) where it was held that ''For the foregoing reasons, the petition was found to have no merits the same is dismissed The Hotels including tourist hotels and tended 9 camps which fall under the meaning of corporate entities are supposed to pay service levy to their respective local Government Authorities. With regard to the second issue the Respondent's Counsel simply submitted that this issues ought to die a natural death because of the unfounded argument advanced therein. He went further by citing the decision of this court by Mugasha, J (as she then was) in the case of Arusha City CouncilversusHM Tyre And Service Centre Limited, HC at Arusha in Civil Revision. No. 10 of 2013where she said ''nullify the injunction order restraining applicant to collect taxes and levies at Kilombero Market. Subsequently in the event the Injunctive order is nullified, the pending contempt proceeding on alleged defiance of the illegal injective order by the applicant is order to collect tax and levies at the Kilombero market in accordance with the I 1aw... ff From that, he argued that, based on the above, the respondent cannot be restrained from collecting service levy from the applicants and if the respondent is restrained from collecting levy, that will paralyse the functions of the District Council. This court is not going to consider rejoinder submission by the applicant's counsel as the same was filed out of time without leave of the court. Having closely gone through the submissions of both sides regarding this 10 application, I feel the need to adopt three issues raised by the Applicants' Counsel upon which submission of both is based as guidance to this court in determination of this application. The first issue is whether the Respondent's act of issuing demand notice for payment of service levy under section 7(1) (aa) of the Local Government Finances Act, Cap 290 is correct in law. The applicant's counsel, in regard to this issue, argues that section 7(1) (aa) is not applicable in relation to charging the levy in question, thus it was wrong for the respondent to make reference to section 7 of the LGFA in his demand notice to the applicants for payment of service levy in question instead of the correct and applicable section, in his view, section 13(1) of the LGFA which gives mandate to a local government authority to make by-laws imposing such rates to be paid by the inhabitants or such categories of inhabitants, for, on or in connection with such services, things, matters or acts as the authority may prescribe or specify in the By-Laws in question. So, in the circumstances of this case where no such by law was made by the respondent at the time of issuing the said demand notice for service levy to the tourist facilities owned by the Applicants, no compliance with appropriate section was made. Thus, non-citation of an enabling provision wt:len making a decision is quite fatal as there is no legal authority empower;ing the Respondent to impose the service levy. Respondents counsel seriously refuted the above argument by stating that their demand notice issued is a statutory and quite legal, as the applicants are required by the provision ofsection 36 of the Finance Act 2012in 11 amending section 7(1) of Local Government Finance Act, Cap 290 and as supported by the case law he cited to pay such levy. From what is on record the section 7(1) of the Local Government Finance act that was referred in the demand notice requiring the applicants to pay service levy enumerate the source of funds for the District Council to include all monies derived from the service levy payable by corporate entities at the rate not exceeding 0.3 percent for the turnover net of the value added tax and the excise duty. This section has never been amended or repealed by the law, not even by the one allegedly exempted the applicants from paying the same, and it had remained in our statutory books to date. It has all along co-existed with section 13(1) of the LGFA which the applicant claims is the applicable provision which gives mandate to a local government authority to make by-laws imposing rates and kind of taxes chargeable on habitants within it locality. That means the legislature did not intend to affect it in its subsequent amendments. What can be concluded from that, in my view is that each section is a substantive provision in its own context, as they regulate different subjects rather than conflicting with one another. While one deals with corporate entities the other one deals with inhabitants So, the levies and charges referred to in section 13(1) which require making by laws to charge on the inhabitants, excludes the one referred to under section 7(1) (aa) charged on corporate entities. It would be absurd if the principle legislation mandates charging of one levy, including the rate chargeable and at the same time require the Local government authority to make by laws to be 12 mandated to charge the same. Inhabitants referred to under section 13 (2), in my view expressly excludes corporate entities for the purpose of the charge under section 7(1) of the same Act as amended. For once, on this I borrow the distinction between inhabitants and corporate entity made by my learned sister, Teemba, J. in interpreting the above provisions faced with similar facts. She succinctly used the following words in so distinguishing:- ''It came to our attention after carefully perusal of the massive submissions and attached authorities, that the law concerned exempted the "inhabitants" or "categories of inhabitants" and not "corporate entities'~ We are of settled view that, the interpretations of these terms can help us decide whether the hotels including tourist hotels are inhabitants or categories of inhabitants subject to exemption, or corporate entities subject to pay service levy. The term INHBITANT is derived from a word ''Inhabit" which is defined in Black's Law Dictionary, Efh Edition to mean: "to dwell in; to occupy permanently or habitually as a residence'~ A CORPORA TE ENTITY is also defined in the same Law Dictionary as a term given to ''an organization existing independently of its shareholders. As a separate entity, a corporation can, in its own 13 -. name, sue and be sued, lend and borrow money, and buy, sell, lease and mortgage property" With these two definitions the question to be asked is whether do hotels including tourist hotels and tented camps fit in the above definitions. In order to answer this question, let us see the meaning 11 of the term hotel'~ Hotel is defined under Section 2 of The Hotel Act 2963, (Chapter 105, Revised Edition 2001) to mean any establishment intended for the reception of travelers or visitors who may choose to stay there and carried on with a view to profit or gain but does not included:- a) Any establishment which has accommodation for less than six guests; b) Any establishment which provides sleeping accommodation in dormitories only or; c) Any Government rest-house As already noted above, the term inhabitant refers to a natural person, where as corporate entity refers to an artificial person established und the law for a certain purpose and distinct from its shareholders or officials. Definitely we do not hesitate to say that hotels, including tourist hotels and tented camps are establishments having legal personality distinct from its proprietor (owner) and not natural persons 14 to acquire the status of an inhabitant. They are corporate entities. In other words, hotels including tourist hotels and tented camps are established at a certain place for gain and they have legal personalities after registration. In that, we agree to sail in the contention by the counsel for the respondent that the word "inhabitants" used in Section 13(2) of The Local Government Finance Act, referred to individuals residing in a local jurisdiction offering service within that jurisdiction and not an establishment in the form of a corporate entity. " Since the levies and subjects referred to in these two sections are found to be different, it was not wrong for the respondent to make reference to section 7 as enabling provision in demanding applicants, as corporate entities to pay 0.3 percent for the turnover net of the value added tax and the excise duty. No making by law was required in applying for the above section as argued by the counsel for the applicants. Thus, 1st issue is answered in the affirmative that the Respondent's act of issuing demand notice for payment of service levy under section 7 of the Local Government Finances Act, Cap 290 was correct in law. Disposal of the first issue in the affirmative, brings us to the second issue to determine whether the Respondent's act of imposing service levy to hotels including tourist hotels and tented camps is proper in law. The counsel for the applicants agrees that the 0.3 percent service levy as a source of revenue for District and urban authorities was introduced by sections 23(b) and 24(b) of the Finance Act, No 12 of 1999. But he argues 15 . - that, in 2003, critical amendments were made to the LGFA, Section 35 and 37 of the Finance Act, No.15 of 2003 inserting a new subsection (subsection 2) to section 13 of the LGFA to the effect that the local government shall not impose rates to be paid by the inhabitants or such categories of inhabitants, for, on or in connection with such services, matters or acts specified in the Third Column of the Schedule. He thus argued that, the import of section 13 (2) read together with third column of the schedule of the LGFA is to exempt all areas, services, matters or acts listed under the third column of the schedule from imposition of service levy. And looking at the third column of Item 4 of the Schedule which relates to imposition of levies to guest houses there is a listed areas, (including tourist hotels and camping tents), services, matters or acts for which local government authorities are barred from imposing service levy.Therefore, he argued that by virtue of section 13(2) of the LGFA as introduced by sections 35 and 37 of the Finance Act, 2003 read together with the item 4 of the Schedule to the LGFA, hotels including tourist hotels and tented camps are exempted from paying service levy. In the premises, he concluded by arguing that the Respondent's decision to impose service levy to hotels, including tourist hotels and tented camps contravenes the law, section 13 (2) of the LGFA in particular. This argument was equally refuted by respondent's counsel for what he said, it is unfounded based on provision of section 36 of the Finance Act, 2012 read together with section 7 of the LGFA, cap, 290 RE 2002 as amended and cemented by the decision of Mugasha, J (as she then was) in 16 -. the case of Arusha City CouncilversusHM Tyre And Service Centre Limited (supra) nullifying the illegal injunctive order restraining the Council from collecting taxes and levies at Kilombero Market in accordance to the law. He thus argued the respondent cannot be restrained from collecting levy as that will paralyseits functions. On the onset after what has been held in the first issue above that, the 2003 amendments, adding section 13 (2) to the LGFA did not in way affect the provision of section 7 of the Act under which the respondent demanded payment of levy from the applicants. Luck enough there is also section 36 of the Finance Act 2012 which cement it all that these entities were not exempted from paying the levy in question. To that end, determination of this issue will not detain me any longer as I readily subscribe to the interpretation by Teemba, J in the HAT's case above in holding that the Respondent's act of imposing service levy to hotels including tourist hotels and tented camp was proper in law;in relation to the same issue She held that; '1n order to decide on their arguments, let us see the wording of the recent amendments in 2012. The amendments in Section 6 and 7 of LGFA are similar. They provide that: •~. 35, Section 6 of Principle Act is amended in subsection (1) by deleting paragraph (u) and substituting for it the following: "(u) all monies derived from the service levy payable by corporate entities or any person conducting business with 17 business license at the rate not exceeding 0.3 percent of the turnover net of the value added tax and excise duty.· Provided that, the branches of the corporate entities shall pay service levy to the urban authorities in whose areas of jurisdiction they are located'~ These amendments require the corporate entities and their branches to pay service levy to urban or district authorities in whose areas of jurisdiction are located In our view, all the corporate entities were to be levied to that extent. Therefore, the hotels including tourist hotels and tented camps are not exempted from paying service levy" One may argue that the above decision is not binding on this court as it is also a decision of the same court. This is true, but it is equally important to note that for the sake of consistency and certainty in the law, the same court cannot also lightly depart from its previous decision. Based on that reality, I find no justification to depart from the correct finding by my learned sister Teemba, J. above on the exact same point of law, surprisingly, between 'the same parties' knocking the doors of the same court (at different District Registries) under different capacities for the purpose best known to them. I say so, because in the case before Hon. Teemba, J. the applicant was the Hotels Association of Tanzania (HAT) to which I have no doubt, some applicants in the current application, if not 18 . all, were members of the applicant Association and the respondent was the Attorney General as representative of all government entities, Ngorongoro District Council, the current respondent, inclusive. That means in the former case the applicants come to court through their Association, but in this application they opted to apply for the same individually. Worse still, it is the same advocate, Mr. Wilson Mukebezi who represented the 'same' applicants (in the context explained above) in both applications putting forward the same arguments in support of the applications. Before winding up, I feel obliged to comment on the unbecoming and indeed unprofessional insolence noted from advocate Mutebezi act of draining this court of its valuable energy for filing the matter he had already pursued and failed through the Constitutional Court in Misc. civil cause no 3 of 2015. He completely concealed the existence of the said previous case, to which he was an advocate of the same parties under a different capacity (through their Association) and argues the matter as if it is a completely new issue to him, let him claim innocence!. The reasons for doing so are best known to him, but the court finds the same to be so cruel, not only to the court, but also to his innocent clients for ill advice of testing the same waters through different beaches. This is nothing, but an .intentional abuse of court process that cannot be condoned in anyway. That being said, because the two issues have been answered in favour of the respondent, it means the application found to lack merits, the same is 19 . therefore dismissed with costs which, however, shall be borne by advocate Wilson Mkebezi in person, for the reasons hereinabove stated. DR. OPIYO, JUDGE 4/7/2017 20