[2023] UGTAT 37

## **THE REPUBLIC OF UGANDA** IN THE TAX APPEALS TRIBUNAL OF UGANDA AT KAMPALA APPLICATION NO. 151 OF 2022

KWASA LOGISTICS LIMITED .................................... **VERSUS UGANDA REVENUE AUTHORITY** ....................................... **RESPONDENT**

## BEFORE: DR. ASA MUGENYI, MR. GEORGE MUGERWA, MS. CHRISTINE KATWE.

## **RULING**

This ruling is in respect of an application challenging Value Added Tax (VAT) assessments comprising principal tax of Shs. 88,774,440 and Shs. 55,772,931, and penalties of Shs. 60,025,186 and Shs.110, 073,661 for October and November 2021, respectively.

The applicant claimed a refund for input VAT on invoices issued by Sun Mutual Capital Limited. The respondent conducted investigations which purportedly established that the invoices were fictitious. As a result, the respondent issued Value Added Tax (VAT) assessments of Shs. 55,772,931 comprising Shs. 88,774,440 and Shs. 55,772,931 as principal tax and Shs. 60,025,186 and Shs.110, 073,661 as penalties for October and November 2021, respectively. The applicant objected and the respondent disallowed it.

## Issues

- 1. Whether the applicant is liable to pay the tax assessed? - 2. What remedies are available?

The applicant was represented by Mr. Sydney Ojwee while the respondent by Ms. Ritah Nabirye and Ms. Charlotte Katuutu.

The applicant submitted that on 28^th April 2022, the respondent issued two additional

assessments for penal tax under S. 65(6) of the VAT for knowingly and recklessly making misleading statements, S. 65(6) provides that where a person knowingly or recklessly; makes a statement or declaration to an official of the Uganda Revenue Authority that is false or misleading in a material particular; he is liable to pay penal tax equal to double the amount of the excess tax, refund or claim. The applicant contended that there ought to be proof that the false statements or omissions were made with the express knowledge of the taxpayer. It submitted that it employed Mr. Paul Agaba, who on his own accord and unknown to its directors and shareholders generated fictitious invoices purportedly issued by Sun Mutual Capital Limited. Mr. Paul Agaba fled the country against him.

The applicant submitted that *Black's Law Dictionary* 9^th Edition defines "Knowing" as; "Having or showing awareness or understanding; well informed... Deliberate; Conscious". It submitted that knowledge is further defined as an awareness or understanding of a fact or circumstance, a state of mind in which a person has no substantial doubt about the existence of a fact. Under Black's Law Dictionary, (supra) knowledge and intention are expounded on as follow.

"... Intention and knowledge commonly go together, for he who intends a result usually knows that it will follow, and he who knows the consequences of his act usually intends them. But there may be intention without knowledge, the consequence being desired but not foreknown as certain or even probable. Conversely, there may be knowledge without intention, the consequence being foreknown as the inevitable concomitant of that which is desired but being itself an object of repugnance rather than desire and therefore not intended certain or even probable...".

The applicant submitted that the Black's Law Dictionary defines "reckless" as conduct whereby the actor does not desire harmful consequence but nonetheless foresees the possibility and takes the risk. Recklessness involves a greater degree of fault than negligence but a lesser degree of fault than intentional wrongdoing. It is the state of mind in which a person does not care about the consequences of his or her actions. It submitted that the ordinary meaning of the word reckless is a high degree of carelessness. The applicant's reporting of its employee to the police and setting out a man hunt for him shows that it could not have, knowingly and recklessly, got involved in invoice trading.

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The applicant cited Queen v Sault Ste Marie [1978] 2 SCR 1299. Where the Supreme Court of Canada delineated the categories of fault in Canadian criminal law, Offences were divided into three types: (i) Mens rea (ii) Strict liability (iii) Absolute liability. Dickson J. stated that *mens rea* offences are these in which some positive state of mind such as intent, knowledge or recklessness must be proved by the prosecution either as an inference from the nature of the act committed or by additional evidence. The applicant submitted that the implication of the above provisions is that recklessly or knowingly is behavioral, and it is a state of mind which ought to be strictly proved by whoever is alleging the same. Such proof ought to be adduced before a competent court. Neither the applicant nor any of its members or employees have ever been tried or convicted in any competent court. The applicant also cited Sande Pande Ndimwibo v Uganda Revenue Authority HCCS 424 of 2014, where URA imposed a double tax penalty on the Plaintiff. It was held that for a penalty to be imposed, the applicant should have been given a fair hearing before an independent and impartial judicial body to make a finding of guilt for the alleged offences. In the above matter, Justice Madrama stated that.

"S. 65(6) which imposes penalties also presupposes that an offence has been committed. While the first Plaintiff had not been convicted of any offence by the time the demand for the penal tax was imposed on him by the Defendant, the provisions for imposition of penal tax under S. 65 of the VAT Act envisage a trial before an independent tribunal established by law consistent with A. 28(12) of the Constitution of the Republic of Uganda. This means that the person who among other things is presumed innocent until convicted cannot pay the penalty prescribed for a convict unless he has admitted the offence or pleaded guilty. ... In other words, a penal tax cannot be imposed without a conviction save for the provisions of the Constitution of the Republic of Uganda.

... Anything done in violation of an Article of the Constitution is a nullity and of no effect under Article 2 of the Constitution of the Republic of Uganda which gives the Constitution of the Republic of Uganda supremacy over all other laws."

His Lord ship further added that.

"It was necessary before imposing the penal tax or any tax at all, for the first Plaintiff who was being accused of the commission of an offence by fraudulently misrepresenting the tax affairs of the company to the Defendant, to be given a hearing. Because he was being accused of the commission of a criminal offence, he needed to be charged before an independent tribunal established by law if he did not admit the commission of an offence".

The applicant also cited Airtel Uganda Ltd v Commissioner General, Uganda Revenue Authority Civil Appeal 40 of 2013 where the Court of Appeal held that.

"We note that prompt payment of taxes is necessary to support service delivery by the Government of Uganda. However, the tax tribunal which has the power of the High Court is required to apply the rules of natural justice. One of the cardinal rules of natural justice is a right to a fair hearing. This is a non derogable right under Article 44(c) of the Constitution. A person who has objected to a tax assessed, appealed against it, paid 30 percent of the tax assessed, paid interest on arrears cannot in our view be penalized for having sought redress by the Tax Appeals Tribunal. The law in our view protects him or her from penalties during the period of dispute resolution".

The applicant submitted that courts are reluctant to penalize taxpayers without a fair hearing. It submitted that the Tax Appeals Tribunal should follow the precedents set by the High Court and the Court of Appeal regarding penal tax. It submitted that criminal liability is personal in nature and this not being an offence of strict liability, its mandatory for the elements of the offence to be proved before a competent court before the said penalty can be charged. The applicant submitted that it must first be tried by a competent court to prove the knowing and reckless.

The applicant submitted that in the financial year July 2021o June 2022, S. 65(6) of the VAT Act was amended, and the words 'knowingly' and 'recklessly' were deleted. The amended Section provides for punishment but does not make it an offence. S. 58 of the Tax Procedure Code Act still maintains the elements of knowingly and recklessly. The applicant submitted that to administer the provision of S. 65(6) of the VAT as amended, we must go to the Tax Procedure Code Act. The long heading to the Tax Procedure Code Act reads as follows.

"An Act to provide for a code to regulate the procedures for the administration of specified tax laws in Uganda to harmonize and consolidate the tax procedures under the existing laws and provide for related matters."

The applicant submitted that S. 2 of the Tax Procedure Code Act provides that "The Act shall apply to every tax law specified in Schedule 2". Under Schedule 2 of the Tax Procedure Code Act, the VAT Act is listed under paragraph (c). The applicant submitted

that the Tax Procedure Code Act is the procedural law for enforcement of the tax statutes as listed in the 2^nd Schedule. Therefore, any inconsistence that arises in the two provisions the procedural enforcement takes precedence. The applicant quoted Professor J. Oloka Onyango in "An Overview of the Legal System in Uganda", p. 54:

"Substantive law is the actual law as opposed to adjectival law while procedural law are the formal steps to be taken in an action or other judicial proceeding e.g., the procedural law of the penal Code is found in the Criminal Procedure Code Act. Procedural law lays down mechanisms through which substantive law can be enforced".

The applicant submitted that in this case, since the provisions provide for the same subject matter, but S. 58 of the Tax Procedure Code Act retains the words knowingly and recklessly and it's the procedural law it only follows that a taxpayer must be tried of an offence and convicted by a competent court before he is condemned to any punishment.

In reply, the respondent submitted that S. 18 of the Tax Appeals Tribunal Act places the burden of proof on the applicant to prove that an assessment is excessive or that the taxation decision should not have been made or should have been made differently. It submitted that the applicant has the burden to prove that the VAT assessments issued against it are excessive. The applicant has not discharged the burden.

The respondent submitted that S. 4 of the VAT Act, provides that VAT shall be charged under the Act. S.1(y) of the VAT Act, provides that a taxable supply has the meaning in S. 18 which defines it as a supply of goods or services in Uganda. "Input tax" is defined under S. 1(1) of the VAT Act as the tax paid or payable in respect of a taxable supply to or an import of goods or services by a taxable person. S. $28(1)$ of the VAT Act provides that a credit is allowed to the taxable person for the tax payable in respect of all taxable supplies made to that person during the tax period The respondent submitted that there was no actual taxable supply between the applicant and Sun Mutual Capital Limited, under the law. It rightly disallowed the claim and assessed the applicant VAT and Penal Tax. The applicant engaged in a VAT fraud scheme by introducing into its business fictitious invoices.

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The respondent submitted that the applicant admitted that it employed Agaba Paul as an accountant and project manager, who generated fictitious invoices in the names of Sun Mutual Capital Limited. The respondent submitted that since the accountant was an employee or agent of the applicant. his actions are deemed authorized by it. The respondent submitted that under O. 13 r.6 of the Civil Procedure Rules where a party has made an admission the other party may apply for judgement. The respondent cited Connie Kekiyonza Watuwa & Others v Attorney General, HCMA 544 of 2020, where in reference to Order 13 rule 6, Justice Ssekaana stated that: "The use of the words "either on the pleadings or otherwise" covers admissions that come to the court in other ways other than on the parties' pleadings." The respondent submitted that since it has been admitted in the applicant's pleadings and submissions that the transactions were fraudulent, no input credit can arise from such transactions. As such, it prayed that judgment on admission be entered against the applicant for the principal VAT of Shs. 88,774,440 and Shs. 55,772,931 for October and November 2021. The respondent submitted that the applicant has not proved that the two assessments of principal VAT were wrongly issued or excessive.

The respondent submitted that the applicant raised a new ground for challenging the objection decision. S. 16(4) of the Tax Appeals Tribunal Act provides that the applicant is, unless the tribunal orders otherwise, limited to the grounds stated in the taxation objection. The respondent submitted that the applicant objected on grounds that there was proof of the purchases made, goods received, and of payments. The respondent submitted that it requested the applicant to avail bank statements and copies of invoices. The respondent issued objection decisions maintaining the assessments on account of the applicant's failure "to provide sufficient evidence to prove that the input tax credit claimed was incurred". The applicant introduced new grounds purporting that it is not liable because the fraud was done by its employee, a one Agaba Paul, thereby acknowledging the fraud but seeking to profit from the same. The respondent cited Kasese Cobalt Company Limited v Uganda Revenue Authority Application 28 of 2018, where the Tribunal noted that to render justice, issues should be raised at the beginning of the trial and leave sought at the beginning not at the end of the trial as per S. 16(4) of

the Tax Appeals Tribunal Act. The respondent submitted that the applicant should have restricted its submissions to the ground that the transactions occurred and there was proof of the purchases made, goods received, and of payments. The applicant never made an application to the Tribunal for leave to add a new ground challenging the objection decision and as such it ought not to be entertained.

The respondent submitted that "penal tax" is defined in S. 3 of the Tax Procedures Code Act, to mean, a tax imposed as a penalty for failure to perform an act required by or under a tax law. It submitted that S. 65(6) of the VAT Act as amended provides that where a person makes a statement or declaration to an official of the Uganda Revenue Authority that is false or misleading in a material particular, inter alia that person is liable to pay penal tax equal to double the amount of excess tax refund and claim. By failing to make true statements or declaration to the respondent, the applicant made itself liable to penal tax. The respondent disallowed the input credit claimed by the applicant and issued VAT and penal tax assessments for using fictitious invoices to claim for input credit. The applicant admitted that the said Agaba was its employee creating an employer-employee or master-servant relationship. The respondent submitted that a master and servant relationship is defined in *Black's Law Dictionary*, 11^th Edition, p. 1169, as.

"The relation between two persons, one of whom (the master) has authority over the other (the servant), with the power to direct the time, manner, and place of the services provided. This relationship is similar to that of principal and agent, but that terminology applies to employments in which the employee has some discretion, whereas the servant is almost completely under the control of the master. Also, an agent who acts for the principal in business relations with third parties, whereas a servant does not".

The respondent submitted that under the principle of vicarious liability, the applicant is liable for the actions of its employee. It cited Stevenson, Jordan and Harrison Ltd $v$ *McDonald and Evans* (1952) 1 TLR, where Lord Denning held that.

"The justification of imposing vicarious liability is that the employer is in control of the behavior of his employee. As the employer obtains a benefit from the employee's work, he should also bear the costs of accidents arising out of it".

The respondent submitted that in *Muwonge v. Attorney General* [1967] EA 17, it was held that

"an act may be done in the course of employment so as to make the master liable even though it is done contrary to the orders of the master, and even if the servant is acting deliberately, wantonly, negligently, or criminally, or for his own behalf, nevertheless if what he did is merely a manner of carrying out what he was employed to carry out, then his master is liable".

The respondent also cited Black's Law Dictionary (supra) p. 1444 definition of the principal and agent relationship as:

"The relation between two persons, one of whom (principal) hires the other (the agent). whose tasks involve primarily the creation of new legal relations between the hirer and third persons. This relationship is similar to that of master and servant, but that terminology applies to employments in which the employee has little or no discretion, whereas the agent has considerable latitude".

The respondent submitted that the actions of Mr. Agaba are, in law, the actions of the applicant who is liable for tax liability arising there from.

The respondent submitted that S. 65(6) of the VAT Act does not include the words "knowingly and recklessly". The assessments were issued in April of 2022 and related to October and November 2021. These periods are after the amendment which took effect on 1^st July 2021. As such, the tax was properly assessed. The respondent submitted that the applicant's submission on mens rea offences, criminal liability, strict liability was misguided, out of context and ought to be disregarded as we are not dealing with a criminal offence.

The respondent submitted that in Adventcity Limited v Uganda Revenue Authority Application 28 of 2018 the Tribunal stated that:

"..................................... or she is already before a competent court which is empowered by the constitution to hear tax disputes. It would be double jeopardy for a party to appear before a criminal court as well as a civil one to listen to tax disputes."

The respondent submitted that this Tribunal is competent and has jurisdiction to entertain the matter. In *Balondemu David v Uganda Revenue Authority*, Application 18 of 2022, this Tribunal stated that. "For a person who is not an agent nor employee of the principal offender, to be held liable for the taxes, there would be need for a conviction or conclusive evidence."

The respondent submitted that since the present case deals with penal tax imposed on the applicant for actions done on its behalf, there is no need for a conviction. The respondent submitted that Article 28(7) of the Constitution provides that; "No person shall be charged with or convicted of a criminal offence which is founded on an act or omission that did not at the time it took place constitute a criminal offence. The respondent submitted that S. 59 (now repealed) created the offence of false or misleading statements.

The respondent submitted that in Cape Brandy Syndicate v IRC 1921 1 KB 64, Rowlatt J said:

"In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied...".

The Supreme Court in Registered Trustees of Kampala Institute v DAPCB SCCA 15 of 1993, held that "it is a wrong thing to read into the Act of Parliament words which are not there and in the absence of clear necessity". In *Uganda Revenue Authority v Siraje* Hassan Kajura, SCCA 9 of 2015, the Supreme Court held as follows:

"The trial court and the Learned Justices of the Court of Appeal read into Income Tax Act words which are not there while interpreting the S. $19(1)(a)$ of Income Tax Act that to be taxable these payments must relate to payments earned while the taxpayer was still in employment and not while out of it. The above interpretation is erroneous as it is not supported by the wordings of the Income Tax Act. If that was the intention of Parliament, it would have inserted words such as subsisting or existing employment. It is therefore my conclusion that the retrenchment packages envisaged in S. 19 of the income tax are liable for taxation."

The respondent submitted that there are no inconsistencies in the laws. S. 65(6) of the VAT Act is sufficiently intelligible, and it imposes penal tax of double the amount of tax. S. 65(6) does not create an offence but refers to a civil infraction and the standard of proof required is on a balance of probabilities. The imposition of penal tax under the subsection does not call for a trial or pronouncement of guilt.

The respondent submitted that Article $17(g)$ of the Constitution provides that it is the duty of every citizen of Uganda to pay taxes. This position was stated in *Uganda Projects* Implementation and Management Centre (UPIMAC) v URA, Constitutional Appeal 2 of 2009, where Lady Justice Kitumba stated "According to Article 17 of the Constitution a citizen has a duty to pay taxes and to do so promptly, so that government business can go on." The respondent submitted that the applicant was assessed to VAT of Shs. 88,774,440 and Shs. 55,772,931 and penal tax of Shs. 160,025,186 and Shs. $110,073,661$ . The same is due and is a debt to the government.

In rejoinder, the applicant submitted that it was agreeable to paying the principal tax assessed but not the penal tax accruing because of the fraudulent criminal acts of its employee. The issue remaining is whether the applicant is liable to pay the penal tax assessed by the respondent. It submitted that the respondent's scheduling memorandum filed on 19^th October 2022 shows that the only issue in contention is that of penal tax. The applicant submitted that O. 6 Rule 3 of the Civil Procedure Rules, states particulars of fraud should be stated in the pleadings. In Kampala Bottlers Ltd v Damanico (U) Ltd Civil Appeal 22 of 1992, the court stated "Normally, where fraud is pleaded, particulars of the fraud must be given. In Ddi Ouma & Another v Uganda National Roads Authority and others Civil Suit 159 of 2018, it was held that "Where no particulars of fraud are pleaded or particularized, plaint should be struck out". The applicant submitted that respondent did not give the particulars of fraud. In Elizabeth Nanteza Nabeta v Dr. Anthony Konde Civil Suit 391 of 2010 while quoting Kampala Bottlers Ltd v Damanico (U) Ltd, SCCA 22 of 1992, it was held that.

"Fraud must be strictly proved, the burden being heavier than one on balance of probabilities generally applied in civil matters"

It was further held that.

"The party must prove that the fraud was attributed to the transferee. It must be attributable either directly or by necessary implication, that is; the transferee must be guilty of some fraudulent act or must have known of such act by somebody else and taken advantage of such act".

The applicant submitted that if the respondent contends that the applicant committed VAT fraud, then they should prove that such an act happened, and it was committed by the applicant and not any other person.

On its raising a new ground the applicant submitted that the issue of the applicant not being liable for the criminal Act and omission of its former employee was the main issue that brought the applicant before this Tribunal. The applicant submitted that it cannot be said be giving evidence from the bar as it was its contention right from the beginning, which is in its application, that a one Paul Agaba acted on his own without the knowledge or permission of the applicant. The respondent in their submission stated that the applicant introduced Agaba Paul as its employee. They cannot therefore deny him.

The applicant submitted that the principle of agency as stated by the respondent is not applicable in this case because it was never the intention of the applicant and its accountant to enter illegal contracts. S. 123(1) of the Contracts Act states that an agent with authority to do an act, has authority to do anything which is necessary to do the act, which is lawful. In this case, the agent acted illegally and outside his authority. S. 160(1) of the Contracts Act, states that; The applicant submitted that Mr. Agaba Paul acted on his own peril and accord as the applicant deals in business of selling food with no accounting knowledge. It has since reported the accountant for this illegal act.

Having read submissions of both parties, this is the ruling of the tribunal.

Before the application may be determined on its merits, there was a preliminary point which was raised by the respondent that must be resolved first. The respondent contended that the grounds in respect of the applicant not being convicted and it not being liable for the actions of Agaba Paul raised in the application and submission were not in the objection decision. S. 16(4) of the Tax Appeals Tribunal Act reads.

"Where an application for review relates to a taxation decision that is an objection decision, the applicant is, unless the tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates."

The first objection decision of 11^th June 2022 states the objection has been disallowed "due to failure to prove that the input tax was incurred". The second objection decision of

11^th June 2022 states that the objection has been disallowed due to "failure to provide sufficient evidence to prove that input tax credit claimed was incurred". The acknowledgement receipt of the objection does not give objection details for objecting to the liability. The parties did not file a joint trial bundle to indicate if they were any attachment to the objection. However, looking at the objection decision it is not difficult to discern that the dispute before the Tribunal was not stated in the objection decision. The dispute before the Tribunal as to whether the applicant can be charged penalties under the VAT Act before it has been convicted and whether the applicant is liable for the actions of its accountant are not stated in the objection decision. In its application the applicant objected to the principal tax and penal tax. The objection decision shows that if the applicant proved it was not liable to pay the principal tax, then the liability to pay penal tax would vanish. The applicant admitted that it was liable to pay the principal tax and raised a new ground as to why it should not pay the penal tax. The new grounds involved denying that it is liable to pay penal tax because it was not convicted, and it is not liable for the fraudulent actions of its employee. These grounds raised are different from those in the objection decision which are failure to provide sufficient evidence that input tax credit claimed was incurred. Therefore, the grounds argued by the applicant were not stated in the objection decision. The applicant should be limited to what is stated in the objection decision.

Furthermore, the Tribunal directed the parties to file a joint trial bundle, which directive the parties did not comply with. Most of the evidence such as Agaba Paul being employed by the applicant is only in the pleadings. It is not part of the evidence before the Tribunal. For the Tribunal to believe that Mr. Agaba was an accountant employed by the applicant it would mean that the Tribunal must rely on hearsay evidence of the applicant's counsel given in its submissions. The applicant submitted that it was not convicted before it was charged penal tax. This is captured in the applicant's submission but is not borne out by evidence adduced during any hearing or evidence agreed in a joint trial bundle. For the Tribunal to hold that the applicant was never prosecuted before being charged penal tax, it has to work on assumptions, speculations and visions especially when the issue did not arise in the objection decision. A Tribunal cannot work on revelations given in

submissions. The applicant did not call any witnesses to testify on what was pleaded or on what is in its submissions. A legal point of law cannot be submitted relying on facts that have not been agreed on during the scheduling, or are not in a joint trial bundle or not adduced in evidence during a hearing. Therefore the Tribunal will uphold the preliminary objection by the respondent and dismiss the matter.

Without prejudice to the foregoing, the Tribunal will delve into the merits though they do not form the decision in this matter as it has been dismissed for failure to comply with the Tax Appeals Tribunal Act. The Tribunal already noted that the applicant does not dispute the principal tax under the VAT Act. In its submissions, it admitted that it was willing to pay the principal tax. The Tribunal would have entered judgement on the principal tax on admission under O. 13 r.6 of the Civil Procedure Rules which provides that where a party has made an admission, the other party may apply for judgement, but will not do so. This is because it has already dismissed the matter.

The Tribunal will now briefly address the issue of penal tax and the liability of an employer for the actions of its employee. The applicant submitted that the respondent imposed a double penalty on it under S. 65 of the VAT Act which reads.

"Where a person:

- a. Makes a statement or declaration to an official of the Uganda Revenue Authority that is false or misleading in a material factor or - b. Omits from a statement made to an officer of the Uganda Revenue Authority any matter or a thing without which the statement is misleading in a material particular; and - The tax properly payable by the person exceeds the tax that was i. assessed as payable based on the false or misleading information. - the amount of the refund claimed was false, or ii. - the person submitted a return with an incorrect offset claim." iii.

Before it was repealed, S. 65. of the VAT ACT provided that where a person "knowingly or recklessly" makes a statement or declaration etc., it is liable to penal tax. The words "knowingly or recklessly" are still retained in S. 58 of the Tax Procedure Code Act.

The Tribunal noted that its mandate is provided under Article 152 of the Constitution of Uganda which was restated in *Uganda Revenue Authority v Rabbo Enterprises (U)* Limited and Another Civil Appeal 12 of 2004. In Camat Foundation Uganda Limited v URA Application 114 of 2022 the tribunal noted that.

"The procedure before the Tax Appeals Tribunal is known. One should be appealing against an objection decision or taxation decision. If an assessment has penal tax, a taxpayer objects and an objection decision is made, and it appeals to the Tribunal, is the taxpayer properly before the Tribunal...".

It further noted that.

"It is important to determine whether penalties or penal tax is criminal or civil in nature or both. Where penalties or penal tax are both, it may mean that a taxpayer whose dispute is civil in nature may suffer double jeopardy if the dispute involving the principal tax is referred to the tribunal for hearing while the penal tax arising from the substantive tax is referred to a criminal court...".

The Tribunal concluded that.

"If the legislature decides to treat giving false and misleading information under S. 65 of the VAT Act as a civil wrong, the Tribunal cannot dispute it. The Tribunal cannot read or add 'conviction' or 'commits an offence' into S. 65 of the VAT Act when it is not mentioned. The penalty imposed on the applicant under S. 65 of the VAT Act. was not criminal but civil and statutory in nature. The VAT Act specifically created S. 59 to deal with the criminal aspect of giving false and misleading information. When S. 59 was deleted in the VAT Act, S. 58 of the Tax Procedure Code Act was enacted with adjustments to deal with the criminal aspect of giving false and misleading information. S. 65 of the VAT Act was not deleted nor repeated as it is in the Tax Procedure Code Act, leaving the civil aspect of giving false and misleading information in the VAT Act intact. The matter being civil in nature and a breach of a statutory tax obligation, it is within the mandate of the Tribunal under the Constitution and the Supreme Court decision of Rabbo Enterprise, to listen to the dispute involving civil penal tax."

The Tribunal could not abdicate from the mandate to listen to civil tax disputes provided in the Constitution On the employer's liability for the actions of its employees, the Tribunal noted that.

"In *Muwonge v Attorney General* [1967] EA 17 it was stated that an act may be done in the course of employment of the employee so as to make his master liable even though it

is done contrary to the orders of the master, and even if the servant is acting deliberately, wantonly, negligently, or criminally or for his own behalf, nevertheless if what he did is merely a manner of carrying out what he was employed to carry out, then his master is liable. The position in tax law would be no different from that of tort. Companies cannot file returns nor make statements or declarations to Uganda Revenue Authority. It is their employees who do that. A company is liable for the actions of its employees if they act for its benefit and or in the scope of their employment."

It concluded that.

"The false declaration and statements were made in the applicant's VAT returns and not those of Mark Kiyaga. If there was any person to benefit from the false declarations, it would be the applicant. It would claim VAT input tax and pay less VAT. There is no evidence that Kiyaga was personally benefitting from the false declarations. Therefore, the applicant's submission that the applicant should not be liable for the actions of Mark Kiyaga fails to extinguish the litmus test of employer's liability for the actions of an employee."

This case is similar to the above case. Likewise in the absence of any evidence that Mr. Agaba did not issue fictitious invoices, and was not an employee of the applicant, and the invoices were not issued in the applicant's returns, the Tribunal finds that the applicant is liable to pay the penal tax imposed on it. That is if the Tribunal is provoked to assume that Mr. Agaba was an employee of the applicant and issued fictious invoices which we already stated has not been borne out by any evidence adduced before it.

As already stated, this application is dismissed with costs to the respondent.

March Dated at Kampala. this $244$ day of 2023. Phistre Kentine **MR. GEORGE MUGERA MS. CHRISTINE KATWE** DR. ASA MUGENYI **CHAIRMAN MEMBER MEMBER**

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