20070920 TZHC Arusha 1

1 IN THE HIGH COURT OF TAN~ANIA AT ARUSHA 1 MISCELLANEOUS CIVIL APPLICATION NO. 68 OF 2004 IN THE MATTER OF THE LAW REFORM [FATAL ACCIDENTS AND I MISCELLANEOUS PROVISIONS] ORDINANCE, I ' CAP. 360 (AS AMENDED) i AND IN THE MATTER OF THE VALUE ADDED TAX ACT, 1997 i AND \ i IN THE MATTER OF THE TAX REVENUE APPEALS ACT, 2000 I AND ' i IN THE MATTER OF AN APPLICATION FdR THE GRANT OF ORDERS FOR CERTIORARI AND PROHIBITION AND I IN THE MATTER OF THE DECISION OF THE COMMISSIONER ' GENERAL OF THE TANZANIA REVENUE AUTHORITY REFUSING TO GRANT A WAIVER OF PAYMENT OF TAX PENDING THE CONSIDERATION OF THE APPLICANT'S OBJECTION TO VALUE 1 ADDED TAX ASSESSMEN T BETWEEN TANFOAM LIMITED ................................... 1 ••••••••••••• APPLICANT AND THE COMMISSIONER GENERAL OF TANZANIA REVENUE AUTHORITY ............................... l......... RESPONDENT f ... f 2 • RULINC R. SHEIKH, J This is an application for the orders of certiorari and prohibition challenging the decision o~ the respondent refusing to grant a waiver of payment df tax pending the i consideration of the objection submitted to the respondent by the applicant. The applicant is praying for an order of certiorari to quash the I decision of the ! respondent in his letter of 20/09/2002 r~fusing to grant a I I waiver of payment of tax sought by the applicant pending consideration of the objection raised bV the applicant to the assessment of value added tax amounting to shs. I • I 596,548,123 charged on imported taxaple goods namely I Polyol and TDI chemical raw materials. The applicant is also I seeking an order of proh,ibition to prohibit and restrain the respondent from requiring the ap;plicant to deposit with the respondent one half of the ass~ssed tax or any tax 3 at all pending the determination of the applicant's objection to the assessment aforesaid. The facts of this matter are basically not disputed as disclosed by the respective affidavits of the parties. on 15/06/2002 the applicant through its Attorneys wrote to the respondent addressing a Notice of Objection to the value added Tax Assessment of T.shs 596,548, 123/ = and alleging that the Arusha Regional Revenue Officer for value Added Tax had acted in bad faith by over-inflating the assessment to a sum whose requisite portion of tax the applicant was incapable of paying or if paid would result in its winding up. The applicant thereupon presented to the respondent an application for waiver of the requisite portion of tax pending consideration of the applicant's Objection on the grounds of uncertainty as to questions of fact, considerations of equity and undue difficulty of recovery of tax. The Deputy commissioner General summarily dismissed the application for a waiver of tax. 4 The applicant disputed more than one half of the value Added Tax assessment of shs. 596,548, 123/ 1 • Four grounds have been advanced in support of this I application. First, it is argued that the respondent's official i who determined the applicant's application for a waiver I had displayed a patently manifest bias and prejudice I against the applicant which is apparent dn the face of the I record, that in dismissing the applicants, application for a waiver of tax before entertaining th:e objection the respondent has made it impossible for th,e applicant to get I redress before the law, thereby conclwsively denying it i access to justice and that the responde nt has abused its 1 i discretionary powers under s.12 <3> of the Tax Revenue I I Appeals Act 2000 in refusing to allow the waiver sought I pending determination of the applicant's objection I I without having due regard to the hardship and needs of equity, and given the colossal sum of shs 256,124,062/= 1 demanded as a prerequisite for consideration of the 5 applicant's objection by the respondent. , It is also argued that the refusal to grant a waiver amou,hts to refusal to determine the objection conclusively, I denying the applicant access to justice, leaving the applicant without a ' remedy against the arbitrary grossly inflated assessment of tax as aforesaid and at the mercy of the aforesaid arbitrary I decision which, according to the applicant, will have the effect of putting the applicant company into liquidation. ' ' In other words counsel for the applicant is contending that it was erroneous and unfair/unjust on, the part of the respondent to refuse the application for a waiver. The respondent denied any bias, unfairness or abuse ' of discretionary power on its part. , countering the submissions by the applicant's counsel, it:was submitted on the respondent's behalf that the respondent had in assessing the additional tax and refusing the application I for a waiver acted within the ambits of its statutory powers, and that the applicant had failed to advance 6 i sufficient grounds for the grant of a waiver. The I respondent maintained that the decision was lawful in terms of s. 12 (3) of the Tax Revenue Appeals Act, 2000. In ' other words it is the contention of the respondent that there is no error on the face of the reco~d and that there was no abuse of the respondent's disc~etionary powers under the law as alleged by the applicant.: section 12 (1) and (2) of the Tax Revenue Appeals Act I No 15 of 2000 reads:- "12- (1) any person who disputes an assessment made I upon him by the commissioner General may, by I I notice in writing to the commissioner I General, object to the assessment. I <2) Subject to subsection 3, where a notice of I I objection to an assessment is given, the person I I objecting shall pay the amount of tax which is not in I I dispute or deemed by subsection ,(6) of this section I not to be in dispute, or pay one third of the assessed 7 tax, whichever is greater, pending the final determination of the assessment." section 12 (3) reads as follows:- "(3) - Where a notice of objection is given under subsection (1>, and the commissioner General is of the I opinion that, owing to- (a> uncertainty as to any question of law or fact, or (b> considerations of hardship or equity, or I I <c> impossibility, or undue difficulty or expense, of recovery of tax, the person objecting the assessment is unable to pay I I the tax due and payable by him in accordance with the provisions of sub-section <2>, the commissioner General may allow the person objecting the ! assessment to pay the lesser amount as is reasonable in the circumstances, or not to pay tax until the assessment or liablility to pay I tax is finally determined." .. 8 Clearly s.12 <3> gives the respondent the discretion to allow person objecting to an assessment to pay a lesser amount or not to pay the assessed tax until the assessment or liability is finally determined. I respectfully agree with Mr. Masele learned counsel for the respondent that the refusal to grant a waiver of payment of tax pending consideration of the applicant's objection cannot per se amount to an error on the face of the record, bias or prejudice and/or unfairness and/or abuse of discretionary powers, unless no reasons were given. To grant or not grant a waiver of the tax is indeed within the powers conferred upon the commissioner General under s.12 <3> of the Act. The question is, did the respondent give reasons for its refusal to grant a waiver, did it abuse its discretionary powers under s. 12 <3> of the Act? Clearly the commissioner General of the respondent has been given wide discretionary powers under s. 12(3) of the Act to grant a waiver of tax payable until the 9 I assessment or liability of tax is finally determined, on the I basis of the conditions/factors set out in paras <al, Cb) and 1 Cc) of section 12 (3) which have to, be taken into I consideration by the respondent when exercising such discretionary powers. The applicant has alleged that in I dismissing the application for a waiver the Deputy commissioner General acted in an unfair, prejudiced and I biased way, that he never addressed himself on the issue I of uncertainty as to the factual basis o~ the assessment, 1 and the hard fact that the applicant if for ced to pay would have to be liquidated. I The answer to the question asked earlier herein as to I whether the respondent had given reasons for its refusal to grant a waiver is inevitably in the negative form for I reasons given hereunder. In its letter dated 20/09/2002 in response to the I applicant's application for a waiver the respondent has I stated inter alia:- 10 I ., m The reasons based on uncertainty as to the I question of law or fact cannot be accepted. The tax is demanded without any ambiguity I according I to the provisions of the VAT ACT 1997. The assessment is based on the audit exercise carried 1 I out by TRA control officers. The fact that the I I monthly payable amounts are I uniform is somehow technical. It will be explained to you I I after meeting the conditions for filing a valid I objection. There has been no fabrication of the assessment. This will be demonstrated to you. (i) (iii) According to us there was ~o discrimination, I unfairness or bias and that these issues do not influence the assessment. The audit exercise was I I conducted in the J::>resence of te,chnical officers of 11 the company who were involved in answering questions including policy issues regarding the accounting methods adopted by the company. The assessment was not arrived at "a priori" as you have pointed out but was professionally determined. (iii) The fact that the Regional Revenue Officer (RRO) did not consider some of the presentations from MIS Tanfoam Ltd does not constitute unfairness, bias or discrimination. It will be demonstrated after the admission of the objection that there is enough evidence to justify the decisions which were made by the RRO: (iV) The question of impossibility, or undue difficulty or expense of recovery of tax as stipulated in section 12 (3) of, the Tax revenue Appeals Act 2000 cannot be relevant to this case. TRA has not failed to collect the tax. It is also not 12 true that TRA finds it expensive qr impossible or difficult to collect it. In this case IVI/S Tanfoam Ltd has the obligation of making payment of the tax on the supplies it makes and this ,includes the tax liabilities established through tax ·audits. Inability on the part of M/S· Tanfoam LTd: to pay this tax does not warrant the application of the cited provisions of the Act." (Emphasis mineL ' In the remaining part of the letter the respondent is calling upon the applicant "to comply with the requirements for submitting a valid objection under section 12 (2)" by paying shs 256,124,062/= <that is 50% of the assessment of shs. 630,248, 123/ = less shs 59,000,000/ = already paid by the applicantL It is quite obvious that this decision was made arbitrarily to the extent of being an abuse of the discretionary powers gra~ted to the respondent and without taking into account the factors which are 13 intended to guide the respondent in the exercise of its jurisdiction under s. 12(3> of the Act, and most importantly, evidently no reasons were given for the respondent's clearly decision as demonstrated in para$ m, (iii) and (iv>, whereby the respondent clearly deferred giving any explanations/reasons until after the admission of the objection i.e. meaning after the payment of the prerequisite sum of tax demanded. Firstly the decision by the respondent dismissing the application for waiver was clearly made in total disregard of the law and the guiding factors provided in S.12(3) of the Act as is evident in its letter dated 20/09/2002 the relevant parts of which I have reproduced above. In paragraph m of the letter it is stated inter alia, "The fact that the monthly payable amounts are uniform is somehow technical. It will be explained to you after meeting the conditions for the filing of a valid objection. ; 14 There has been no fabrication of the assessment. This will be demonstrated to you" Clearly the respondent did not address itself as to whether there was any uncertainty as to any question of law or fact in arriving at the decision. Nor did the respondent have any due regard to considerations of hardship or equity set outin s.12 (3) (bl of the Act as is evident in the letter aforesaid in particular in para (iV) which states inter alia ".................... Inability on the part of MIS Tanfoam to pay this tax does not warrant the application of the cited provisions of the Act." Again clearly the respondent did not have due regard to the hardship that payment of such a colossal amount would cause to the applicant and the necessity to exercise its powers of granting a waiver of some reasonable kind. The respondent failed to consider matters which it ought to have considered in reaching the decision to dismiss that application for a waiver pending determination of the • 15 objection. The shortcomings in the decision are aggravated by the fact that it is quite obvious from paras m, OiD and (iv> aforestated that the respondent has without any out doubt wilfully postponed/failed/refused to give any reasons for not granting the application for waiver. Indeed it is clear that the respondent was biased and prejudiced and refused to give any reasons or explanation until after the tax was paid. In para m it is stated "........................ There has been no fabrication of the assessment. This will be demonstrated to you" and in para (iiDit is stated "It will be demonstrated after admissions of the objection that there is enough evidence to justify the decisions which were made by the RRO" It seems to me that the respondent by its letter dated 20/09/2002 not only dismissed the application for waiver without having regard to the requirements under S.12(3> of the Act but also condemned the applicant unheard on its objection. For all intents and purposes the respondent 16 seems to have made up its 1mind and determined the objection raised by the applicant without affording it the opportunity to be heard contrary to the principles of natural justice. I Indeed in failing to consider/address matters that it ought to have considered by virtue of items (a> (b> and (c> of s. 12(3) of the Act the respondent has undoubtedly abused its discretionary powers under the subsection. In its decision the respondent has shown a bias and arbitrariness which has occasioned injustice to the applicant, and thereby violated the rules of natural justice. The decision of the respondent refusing to grant a waiver of payment of tax pending consideration of the objection and requiring the applicant to pay one half of the assessed tax was therefore contrary to law as shown above, and I have to, as I hereby do, quash it. In conclusion the application is granted. The orders of certiorari and prohibition are issued as· prayed. 17 ~~ R. SHEIKH JUDCE I ' ' ' 12/09/2007 I ' ' ' Ruling read this 20/09/2007 in the presence of Mr. Masele for the respondent also holding brief for Mr Ng'marvo learned counsel for the applicant, and vero B/C. ' Jl- R. SHEIKH JUDCE 20/09/2007 Imm