[2023] UGTAT 53

## **THE REPUBLIC OF UGANDA** IN THE TAX APPEALS TRIBUNAL OF UGANDA AT KAMPALA **APPLICATION NO. 35 OF 2022**

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ROYAL VAN ZANTEN LIMITED APPLICANT

## **VERSUS**

UGANDA REVENUE AUTHORITY .................................... **................... RESPONDENT**

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

## **RULING**

This ruling is in respect of a preliminary point of law raised by the respondent that this application is not properly before this tribunal.

The applicant claimed a Value Added Tax (VAT) refund of Shs. 2,865,289,529 from the respondent for September 2016 to April 2020. The respondent offset tax liabilities of the applicant of Shs. 2,190,012,580 arising from the period 2012 to 2017 leaving an unpaid refundable amount of Shs. 675,276,974. The applicant filed this application seeking to recover the unpaid Shs. 675,276,949 and accrued interest of Shs. 675,276,949 totaling to Shs. 1,350,553,898

On 1^st February 2023, the parties entered a partial consent settlement order whereby the parties agreed that the applicant is entitled to a refund of Shs. 575,350,098 for September 2016 to December 2017. It was agreed that a refund of Shs. 99,926,852 is out of scope of the application and is not claimable by the applicant. The issue of interest that accrued from the late refund was referred to the tribunal for determination on its merits.

## Issues

1. Whether this application is improper before this tribunal?

The applicant was represented by Ms. Venessa Irene Mbekeka while the respondent by Ms. Patricia Ndagire.

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The respondent submitted that the applicant filed this application claiming that it had VAT refunds totaling to Shs. 2,865,289,529 for September 2016 to April 2020. The respondent used undisputed tax liabilities for the period 2012 to 2017 of Shs. 2,190,012,580 to offset the VAT refund leaving an unpaid refund of Shs. 675,276,974. It submitted that it reviewed the applicant's tax affairs which revealed that the only pending refunds that had been verified but not paid for September 2016 to June 2017 and September 2017 to December 2017 were Shs. 544,894,394.

The respondent submitted that Order 15 rule 2 of the Civil Procedure Rules provides that the Court may try any issues of law if it is of the opinion that the case or any part of it may be disposed of on the issues. It cited Mukisa Biscuit Manufacturing Company Limited $v$ West End Distributors Limited [1969] EA 696 where Sir Charles Newbold stated that,

"A preliminary objection consists of a point of law which has been pleaded, or which arises by clear implication out of pleadings and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the jurisdiction of the court, or a plea in limitation..."

The respondent submitted that the applicant filed this application for review on 3rd February 2022. The notices of approval were issued by the respondent on 25^th October 2019. The first refund of Shs. 544,894,394 was paid on 14^th March 2022. While the last refund of Shs. 30,455,704 was paid on 16^th December 2022 after verification making a total of Shs. 575,350,098.

The respondent submitted that there was no objection by the applicant and subsequently no objection decision by the former to clothe the latter with locus to file an application for review in the Tax Appeals Tribunal. The statutory procedure for a taxpayer aggrieved by a tax decision is to first lodge an objection in the prescribed form to the Commissioner. An objection decision is a prerequisite for lodging an application for review before the Tax Appeals Tribunal. The respondent cited S. 24 of the Tax Procedures Code Act which states that.

"1) A person who is dissatisfied with a tax decision may lodge an objection with the commissioner within 45 days after receiving notice of the tax decision.

2) An objection shall be in the prescribed form and shall state the grounds upon which it is made and contain sufficient evidence to support the objection"

The respondent submitted that in the absence of an objection decision, the Tax Appeals tribunal would have nothing to review. The respondent further cited Caroline Kahamutima v Commissioner Customs, Uganda Revenue Authority Miscellaneous Application 51 of 2021 where the tribunal stated that.

"Therefore, the applicant by filing an application for extension of time when it had not applied to the commissioner to review the letter of 16 June 2021, she was acting prematurely. The Tribunal does not have a decision of the Commissioner to review. Therefore, this application is incompetent."

The respondent submitted that this Tribunal can only entertain this application if there was an objection decision to be reviewed under S. 25 of the Tax Procedures Code Act and S. 14 of the Tax Appeals Tribunals Act. The Commissioner General issued a decision in respect of the refund claim on 25^th October 2019.

The respondent submitted that without prejudice the applicant never objected to the approvals and filed the application in the Tribunal 2 years after their issuance which is way out of time for lodging an application under S. 16(1)(c) of the Tax Appeals Tribunals Act. The respondent cited Uganda Revenue Authority v Uganda Consolidated Properties Limited, Civil Appeal 31 of 2000 where the Court of Appeal held that "Timelines set by statutes are matters of substantive law and not mere technicalities and must be strictly complied with."

The respondent concluded that there is no decision for the Tribunal to review. This application is improperly before the Tribunal, for being not only premature but also time barred and an abuse of the Tribunal process. The respondent submitted that the tribunal finds this application improper, premature, time barred and an abuse of court process and ought to be dismissed with costs to the respondent.

In reply, the applicant submitted that the preliminary objection cannot stand as it does not satisfy the test in Mukisa Biscuit Manufacturing Co. Ltd v West End Distributors Limited (Supra). It submitted that the Court of Appeal in *Butebi Investment Enterprises Limited* $v$

Kibalama Mugwanya Civil Application 354 of 2013 dismissed a preliminary objection noting that for it to stand, the error must be apparent on the face of the pleadings. The respondent admitted that the applicant is entitled to a refund. The applicant submitted that the respondent's statement of reason does not mention that the application is improper before the Tribunal. It is trite law that parties are bound by their pleadings (0.6 r. 7 of the Civil Procedure Rules). It cited Jani Properties Limited v Dar-es-Salaam City Council (1966) EA 281; and Struggle Ltd v Pan African Insurance Company Ltd (1990) ALR 46 -47, where the court observed that.

"The parties in civil matters are bound by what they say in their pleadings which have the potential of forming the record moreover, the Court itself is also bound by what the parties have stated in their pleadings as to the facts relied on by them. No party can be allowed to depart from its pleadings".

The applicant submitted that no impropriety was raised in the respondent's pleadings.

The applicant submitted that the respondent labored under the misconception that the Tribunal can only reviews objection decisions arising from objections. It contended that the Tribunal could review all decisions and omissions aggrieving a taxpayer. It cited S. 14 of the Tax Appeals Tribunal Act. The applicant submitted that S. 3 of the Tax Procedure Code Act, defines a taxation decision to mean,

"a. A tax assessment

b. A decision on any matter left to the discretion, judgment, discretion opinion, approval, satisfaction, or determination of the Commissioner…"

The applicant submitted that the respondent contends that only objection decisions can be reviewed by the Tribunal whereas this is not the case as the Tribunal has power to review taxation decisions as well.

The applicant submitted that S. 42 of the Value Added Tax Act stipulates.

"If for any tax period, a taxable person's input tax credit exceeds his or her liability for tax for that period, the Commissioner General shall refund him or her the excess within one month of the due date for the return for the tax period to which the excess relates, or within one month of the date when the return was made if the return was not made by the due

date".

The applicant submitted that S. 44(2) of the VAT Act further states that.

"Where the Commissioner General fails to make a refund required under Section 42(1) within the time specified in that Section, he or she shall pay interest at a rate of 2% per month compounded on the amount of refund for the period".

The applicant submitted that these Sections clothe the Commissioner with the mandate to ascertain and determine whether a taxpayer is entitled to a refund. The statute uses mandatory terms to require the Commissioner to pay the refund to the taxpayer.

The applicant submitted that remission of the approved refunds is discretionary and subject to the approval of the Commissioner. In Republic v Minister for Agriculture, Exparte Njuguna & others [2006] 1 EA 356 Ojwang J stated that "the correct perception of a discretion donated by law is that such discretion is only duly exercised when it is guided by transparent, regular, reliable and just criteria". It submitted that the mandate bestowed by S. 42 of the VAT Act must be exercised judiciously. The applicant contended that whereas a decision was made to issue a refund, the respondent unjustly omitted to remit these monies to the applicant for several years.

The applicant submitted that S. 3 of the Uganda Revenue Authority Act provides for the functions of the respondent which include to administer and give effect to the laws or specified provisions of the law set out in the First Schedule to the Act and for these purposes to assess, collect and account for all revenue to which those laws apply. The VAT Act is included in the First schedule and provides for refunds of overpaid tax as well as interest on late refunds. It defeats the intention of the law if the Commissioner abdicates from his statutory duty to issue refunds and pay the interest due without any recourse for a taxpayer in the event the respondent defaults. The applicant cited Birungi Barata & Associates v Uganda Revenue Authority Application16 of 2011 where it was noted that.

"The Tribunal wishes to clearly state that once a statutory duty is conferred on a public officer, it is mandatory that he or she must perform. A statutory duty is not like an ordinary duty or one that is delegated. The legislature would not go through the trouble of conferring a duty to a public officer in vain".

The Tribunal agrees with the applicant's citation of Halsbury's Law of England, 2001 Vol.1 para 20 page 29 which reads.

The applicant submitted that the usual remedy for failure to exercise a statutory discretion when the conditions have arisen for it to be exercised is a mandatory order to compel performance of the duty to act. A wrongful failure to exercise discretion may occur because the deciding body has misconstrued the scope of its own powers, believing it lacks the discretion vested in it or... An abuse of discretion may however be in another aspect a failure to exercise the discretion conferred."

The applicant submitted that the respondent approved refunds of Shs 2,865,289,529 for September 2016 to April 202 and offset tax liabilities of Shs. 2, 190,012,580 leaving an unpaid refundable amount of Shs. 675,276,974 but refused to make the payment to the applicant with no justifiable reason, an unreasonable omission for which the taxpayer may seek relief from the Tribunal. The applicant submitted that if the Tribunal were to accept the respondent's logic, it would mean that a taxpayer would have no remedy in cases where the respondent approves a refund but simply refrains from paying or issuing a formal denial. All the respondent would do, is keep quiet or refuse to perform a statutory duty and then later claim that any court intervention is premature as no objection decision was given. This would be absurd and would defeat the intention of parliament.

The applicant submitted that in R. V Secretary of State for the Home Department Ex parte Peg [1993], the House of Lords suggested that there is a duty to give reasons for decisions. This duty was not exercised by the respondent. The applicant submitted that in MTN (U) Ltd v URA Application 15 of 2018, the Tribunal ruled that matters before it involves a review of the decisions of the respondent or the Commissioner General and that a taxpayer is entitled to challenge such decisions if they can be shown to be illegal, irrational, or arrived at through procedural impropriety. The applicant submitted that it was grossly unreasonable for the respondent to neglect to pay the applicant until 2022 when an application for review of that decision was sought yet all necessary procedures and verifications had been completed. The applicant submitted that Kasule J in Twinomuhangi v Kabaale District Local Government Council HCB Vol 1 2006 submitted that.

"Irrationality refers to such gross unreasonableness, in the decision taken or act done,

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that no reasonable authority, addressing itself to the facts and the law before it would have made such a decision".

The applicant prayed that this tribunal finds that the applicant has locus as it seeks a review of a taxation decision made by a statutory body (the respondent) which it believes was irrational and unjust.

The applicant submitted that under S. 21(6) of the Tax Appeals Tribunal Act, the Tribunal may make an order as to damages, interest or any other remedy against any party and the order shall be enforceable as an order of the High Court. In this case, the Tribunal had powers to compel the respondent to pay refunds it has already approved and neglected to pay for more than two years, and to award interest. The Tribunal therefore has powers to grant the remedies sought by the applicant. The application was therefore rightly before it.

The applicant submitted that the respondent's preliminary objection is an attempt to approbate and reprobate which is a clear abuse of the process of the Tribunal. A partial consent was signed by the respondent and is binding. The applicant submitted that the respondent cannot approbate and reprobate as and when it suits it. The doctrine of approbate and reprobate can be understood to signify a proverb that "you can't eat your cake and have it too" and is essentially a principle of equity and further based on the rules of estoppel and the maxim "allegans contraria non est audiendus", which means that when one utters statements contradictory to one another the same shall not be heard. The applicant submitted that in Codrington v Codrington [1875] LR 7 HL 854 at 866, Lord Chelmsford referred to the doctrine in these terms:

"He who accepts a benefit under an instrument must adopt the whole of it, confirming to all its provisions and renouncing every right inconsistent with it."

The applicant submitted that the respondent having signed a consent settlement with the applicant cannot allege that the entire application under which a consent was reached is improper unless it seeks to nullify or challenge the validity of the consent settlement order. The applicant submitted that in MPB v LGK [2020] [EWHC) 90 (TCC), laid down the conditions for the doctrine of approbate and reprobate to apply in a situation as follows:

"The first condition is that the party must have elected or made his choice in clear and

unequivocal terms:

The second condition is that it is not necessary for the electing party to have taken a benefit from the choice he has made as such.

The third condition is that the electing party's subsequent conduct must be inconsistent with his earlier election or approbation".

The applicant submitted that the respondent unequivocally signed a consent to pay the applicant a sum of Shs. 575,350,098 and indeed paid this money to the applicant. Secondly, it was not compulsory to enter a consent settlement as it is done at the will of parties on such terms agreed between the parties. Lastly, the respondent's conduct in claiming that the application from which a consent was derived is improper before this Tribunal is inconsistent with the fact that a binding consent settlement order subsists and was even acted upon by the respondent.

In rejoinder, the respondent reiterated that this application is not proper before the Tribunal. It cited Yaya Farajllah v Obur Ronald & Others HCCA 0081 of 2018, where Justice Mubiru stated that.

"A preliminary objection consists of a point of law which has been pleaded, or which arises by clear implication out of the pleadings, and which if argued as a preliminary point may dispose of the suit."

The respondent submitted that the applicant filed this application claiming a refund of Shs. 675,276,974 and interest of Shs. 675,276,974. The money claimed was never approved by the respondent. Following verification, a total of Shs. 575,350,098 was approved and the last payment was made on 16^th December 2022. The respondent contended that this shows that there was never an obligation to pay as more verifications had to be carried out

The respondent submitted that the applicant concedes that there was never an official communication sent out to it on the refunds, but the respondent made an internal decision vide an Internal Memo to refund the applicant Shs. 544,894,394 which cannot qualify as a taxation decision under S. 24 of the Tax Procedures Code Act.

The respondent submitted that the applicant lodged an application for a VAT refund which

had to be verified and the applicant was refunded what was due. It was aggrieved by the failure to refund with interest. The respondent contended that the applicant first ought to object to the non- payment of interest to the Commissioner and if they are dissatisfied with his decision, then shall the jurisdiction of this Tribunal be ignited.

The respondent submitted that there is a distinction between an objection decision and a taxation decision. It cited Cable Corporation v Uganda Revenue Authority Civil Appeal 1 of 2011 where Justice Christopher Madrama, stated that

"S.1(g) of the Tax Appeal Tribunal Act explicitly provides that there has to be a taxation objection before an objection decision is made.................................... out of an objection, but an objection decision arises from an objection to a taxation decision other than a decision arising from an objection decision".

The respondent submitted that there was no objection in this case as prescribed in S. 24 of the Tax Procedures Code Act. The respondent submitted that the application lodged by the applicant does not state the date which the taxation decision was made.

The respondent submitted that the refund approval notices were issued on 25^th October 2019 to the applicant. It submitted that this application would be time barred and therefore improper before this Tribunal. It is noted that the applicant did not rebut that this application is time barred. The respondent cited Cable Corporation v Uganda Revenue Authority (Supra), where it was stated that.

"As far as the limitation period is concerned the distinction between an objection decision and a taxation decision is not important because both have a limitation period of 30 days for purposes of applications for review. Further distinctions would be niceties."

The respondent prayed that this Tribunal be pleased to find that this Application is improper, premature, time barred and an abuse of Court process and ought to be dismissed with costs to the Respondent.

The respondent submitted that the *Black's law Dictionary* 8^th Edition at p. 1329 defines reprobation as the act of raising an objection or exception as to the competency of a witness or the sufficiency of evidence. The respondent submitted that at p. 589, Estoppel is defined as a bar that prevents one from asserting a claim or right that contradicts what

one has said or done before or what has been legally established as true. The respondent submitted that the partial consent settlement order 2023 confirms that the applicant received a refund of Shs. 544,894,394 on 14th March 2022 and a further refund of Shs. 30,455,704 being the refundable variance from the respondent on 16th December 2022. That the total verifiable refund received by the applicant is Shs. 575,350,098 for the period September 2016 to December 2017. The respondent submitted that the doctrine of approbation/reprobation and estoppel does not apply to this matter because the partial consent settlement order does not deviate from the respondent's statement of reasons.

The respondent submitted that a consent by parties cannot confer jurisdiction to this Tribunal as the same is only borne out of statute. The respondent cited Makula International v Cardinal Emmanuel Nsubuga (1982) HCB 24 where it was held that "Once an illegality is brought to the attention of Court, it overrides all questions of pleading and Court is enjoined to address it to meet the ends of justice." The respondent submitted that this application is improper, premature, time barred and an abuse of Court process and ought to be dismissed with costs to the respondent.

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

The parties filed a partial consent, where it was agreed that the applicant is entitled to a refund of Shs. 575,350,098 for September 2016 to December 2017. It was also agreed that a refund of Shs. 99,926,852 is out of scope of the application and is not claimable by the applicant. The issue of interest that accrued from the late refund was referred to the tribunal for determination on its merits. At the hearing of the remaining issue, the respondent raised a preliminary objection that this application is not properly before the tribunal and is time barred.

The law relating to preliminary objection is provided for under Order 6 Rule.28 of the Civil Procedure Rules which states that.

"Any party shall be entitled to raise by his or her pleadings any point of law, and any point so raised shall be disposed of by the court at or after the hearing; except that by consent of the parties, or by order of court on the application of either party, a point of law may be set down for hearing and disposed of at any time before the hearing".

In Mukisa Biscuit Manufacturing Company Limited v West End Distributors Limited [1969] EA 696, Sir Charles Newbold stated that.

"A preliminary objection consists of a point of law which has been pleaded or which arises by clear implication out of pleadings and which if argued as a preliminary point may dispose of the suit".

The respondent submitted that this application is improperly before this Tribunal, as it is premature, time barred and an abuse of the Tribunal process. The Tribunal will address the preliminary objection.

The respondent submitted that there was no objection by the applicant and no objection decision by the respondent to clothe the applicant with locus to file an application for review in the Tax Appeals Tribunal. It cited S. 24 of the Tax Procedures Code Act which states that.

- "1) A person who is dissatisfied with a tax decision may lodge an objection with the commissioner within 45 days after receiving notice of the tax decision. - 2) An objection shall be in the prescribed form and shall state the grounds upon which it is made and contain sufficient evidence to support the objection."

It also cited Caroline Kahamutima v Commissioner Customs, Uganda Revenue Authority Miscellaneous Application 51 of 2021 where the applicant filed an application for extension of time without first objecting to the respondent's decision. The tribunal noted.

"Therefore, the applicant by filing an application for extension of time when it had not applied to the commissioner to review the letter of 16 June 2021, she was acting prematurely. The Tribunal does not have a decision of the Commissioner to review. Therefore, this application is incompetent."

The respondent submitted that the applicant never objected before lodging this application for review. It submitted further that the applicant's application did not state a date of service of taxation decision indicating that there was no decision for this Tribunal to review.

On the other hand, the applicant contended that it is was entitled to a VAT refund and interest due with or without having an objection decision. It contended that the respondent labored under a misconception that the Tribunal can only reviews objection decisions

arising from objections. Therefore, the question the Tribunal has to answer is whether a person who is claiming a VAT refund and interest needs to object to the respondent who is required to make an objection decision.

- Before we can address the procedure for objecting, the Tribunal has to look at the law on refunds as to how it addresses the issue for obtaining refunds and interest. The law dealing with VAT refunds is found in S. 42 of the VAT Act which states that. - "(1) If, for any tax period, a taxable person's input tax credit exceeds his or her liability for tax for that period, the Commissioner General shall refund him or her the excess within one month of the due date for the return for the tax period to which the excess relates, or within one month of the date when the return was made if the return was not made by the due date. - (2) Notwithstanding subsection (1), the Commissioner General - (a) shall, where the taxable person's input credit exceeds his or her liability for tax for that period by less than five million shillings, except in the case of an investment trader or person providing mainly zero-rated supplies, offset that amount against the future liability of the taxable person; and - (b) may, with the consent of the taxable person, where the taxable person's input credit exceeds his or her liability for tax for that period by five million shillings or more, offset that amount against the future liability of the taxable person.

(3) A person may claim a refund of any output tax paid in excess of the amount of tax due under this Act for a tax period.

(4) A claim for a refund under subsection (3) shall be made in a return within three years after the end of the tax period in which tax was overpaid.

- (5) Where a person has claimed a refund under subsection (3) and the Commissioner General is satisfied that the person has paid an amount of tax in excess of the amount of tax due, the Commissioner General shall refund immediately the excess to the taxable person. - (6) Where a person claiming a refund is required by the Commissioner General to provide accounts or records to substantiate the claim and fails to do so in a manner satisfactory to the Commissioner General within seven days of being requested, the time period specified in subsection (1) for making the refund shall not be binding on the Commissioner General. - (7) The Commissioner General shall serve on a person claiming a refund a notice in writing

of a decision in respect of the claim.

- (8) A person dissatisfied with a decision under subsection (6) may only challenge the decision under Part IV of the Tax Appeals Tribunals Act. - (9) No refund shall be made under subsection (5) in relation to a taxable supply that has been made to a person who is not a taxable person, unless the Commissioner General is satisfied that the amount of the excess tax has been repaid by the taxable person to the recipient, whether in cash or as a credit against an amount owing to the taxable person by the recipient".

The law relating to refunds is clear. A refund maybe used to offset a tax liability. A person who wishes to utilize the refund may claim for it within three years after the end of the tax period in which the tax was overpaid. Before a refund is made the Commissioner General is required to substantiate the claim within seven days of being requested. The Commissioner General may serve on the person claiming a refund in writing a decision in respect of the claim. A person dissatisfied with the claim may appeal under Part IV of the Tax Appeals Tribunal Act. Therefore, there is procedure of a person dissatisfied with how a claim is substantiated.

The Tribunal must also look at the law regarding interest due on refunds. The relevant portion of S. 44 of the VAT Act states that.

- (2) Where the Commissioner General fails to make a refund required under Section 42(1) within the time specified in that Section, he or she shall pay interest at a rate of 2% per month compounded on the amount of refund for the period. - (3) Where the Commissioner General finds, after conducting an investigation of any amount shown as an excess in terms of Section 42(1), that the excess amount of input tax credit is greater than the true amount due in excess of not less than fifty thousand shillings, no interest shall be payable under subsection (2) where there has been a delay in making the refund. - (4) Notwithstanding subsection (1), a taxpayer who causes delay in determining a correct refund payable to him, or her, and leading to a belated refund process, is only entitled to interest with effect from the date on which he or she filed his or her delayed return, lodged an application with the Tax Appeals Tribunal or the High Court, or submitted to the Commissioner General all necessary and satisfactory information required in relation to the refund in question, whichever is the later."

(5) Notwithstanding subsections (1), (2) and (4), the interest due and payable on over payments and late refunds shall not exceed the principal tax.

It is not in doubt that a taxpayer is entitled to interest on a refund where there is a delay in payment. However, a taxpayer may not be entitled to interest where the excess of input tax is greater than the true amount is not less than Shs 50,000. Interest may be affected where there is a delay in determining a correct refund payable.

The applicant contended that the statute uses mandatory terms to require the Commissioner to pay the refund and interest due. It further contended that the law does not provide for the procedure to claim how the refund and interest is payable when the respondent omits to pay them. It submitted that it defeats the intention of the law if the Commissioner abdicates from his statutory duty to pay refunds and interest due without any recourse available to a taxpayer to remedy the situation. Therefore, the Tribunal has to decide whether the applicant had a recourse available to it to recover any refund and interest due. It also has to determine whether the applicant is entitled to recover interest.

A statute has to be read as a whole and where possible the parties should use common sense as far as it is practicable. S.42(8) of the VAT Act states that: "A person dissatisfied with a decision under subsection (6) may only challenge the decision under Part IV of the Tax Appeals Tribunals Act." S. 48(6) deals with where a person claims for a refund and is required by the Commissioner General to provide accounts or records to substantiate the claim and fails to do so in a mariner satisfactory to him, if the Commissioner General makes a decision the person may appeal to the Tribunal under Part IV of the Tax Appeals Tribunal Act. The notices of approval attached to the applicant's application show that it made claims for VAT refunds and amounts were approved.

The respondent contended that the applicant did not object and has no objection decision. So, it is necessary to find out whether the applicant was required to object. S. 42(8) stated that where a person is dissatisfied under subsection (6) he may challenge the decision under Part IV of the Tax Appeals Tribunal's Act, S. 14 in the said Part states that.

- "14. Tribunal to review taxation decision. - $(1)$ A person who is aggrieved by a decision made under a taxing Act by the-

- (a) Uganda Revenue Authority: or - (b) Committee established under the Tax Procedure Code Act. - may apply to the Tribunal for a review of the decision."

S. 14 clearly states that where a taxpayer is aggrieved by a decision in respect of VAT refunds it may appeal to the Tribunal. S. 1(1)(K) of the Tax Appeals Tribunal Act defines a taxation decision as; "any assessment, determination or notice." S. 3 of the Tax Procedure Code Act defines a tax decision to mean.

- "(a) a tax assessment; or - (b) a decision made on any, matter left to the discretion, judgment, direction, opinion, approval, satisfaction, or determination of the Commissioner, other than a decision made in relation to a tax assessment."

An objection decision is defined under S. 1(g) of the Tax Appeals Tribunal Act as "a taxation decision made in respect of a taxation objection. S. 42(7) of the VAT Act states that The Commissioner General shall serve on a person claiming a refund a notice in writing of a decision in respect of the claim. In this case the respondent issued notices of approval, which the applicant did not seem to dispute and was not aggrieved by them. Therefore, it did not challenge them since it did not have any problems with the amounts approved. The applicant was aggrieved by the respondent not paying the refund and interest after having issued the notices of approval. The VAT Act is silent on how the applicant may recovered the refund approved and any interest due thereafter.

The remaining issues are: Having issued the notices of approval was the respondent required to pay the VAT refund and interest due? If so, can a taxpayer lodge an application before the Tax Appeals Tribunal without a decision from the respondent? Lastly, are there any time limits as to when a party should file an application challenging failure to aware interest and if so, what would its effects be?

The first sub-issue revolves around payment of refund and interest on issuing of notices of approval. S. 44(2) of the VAT Act states that where the Commissioner General fails to make a refund required under S. 42(1) within the time specified in that Section, he or she shall pay interest at a rate of 2% per month compounded on the amount of refund for the period. Under S. 42(1) the Commissioner General shall refund the excess within one

month of the due date for the return for the tax period to which the excess relates. The Commissioner General is required to pay interest after one month of the due date for the return for the tax period to which the excess relates. However, is the payment of interest automatic? S. 44(3) and (4) of the VAT Act provide exceptions. S. 44(3) states interest may not be paid where excess amount of input tax credit is greater than the true amount due in excess of not less than fifty thousand shillings, no interest will be paid. S. 44(4) states that a taxpayer who causes delay in determining a correct refund payable to him, or her, and leading to a belated refund process, is only entitled to interest with effect from the date on which he or she filed his or her delayed return. It is not automatic that a taxpayer is entitled to interest. This brings us to the question whether it is necessary for the respondent to issue a taxation decision.

The applicant contended that a taxpayer has no remedy where the respondent approves a refund but simply refrains from paying interest. The respondent may refuse to perform a statutory duty and claim that any court intervention is premature as no objection decision was given. We already stated that S.14(1)(a) of the Tax Appeals Tribunal Act states that a person who is aggrieved by a decision made under a taxing Act by the Uganda Revenue Authority may apply to the Tax Appeals Tribunal for a review of the decision. The respondent contended that to trigger of S. 14 of the Tax Appeals Tribunal the applicant has to seek an objection decision. The question the Tribunal has to ask itself is whether it can proceed without an objection decision. Black's Law Dictionary 10th Edition p. 1514 defines review as "1. Consideration, inspection, or re-examination of a subject or thing." In order to review there must be a thing or subject, In this case, a decision. S.14 of the Act is couched in mandatory terms. It gives jurisdiction to the Tribunal to review decisions. If there is no decision, then there is nothing to review. The Tribunal has no jurisdiction to review nothing. The applicant contended that a taxpayer has no remedy where the respondent refuses to pay a refund and interest after approving it. It contended it should be allowed to proceed without a decision contrary to the law. In a "Man of All Seasons" Sir Thomas More asked Mr. William Roper "And when the last law was down, and the Devil turned round on you-where would you hide, Roper, the laws all being flat?" if we procced without a tax decision, wouldn't the Tribunal be acting without jurisdiction? What happens when courts act without the power bestowed on them? They would be

condoning illegalities. By allowing a taxpayer to proceed outside the law, it may be difficult to know the reasons why the respondent has not paid it which may be to the taxpayer's detriment as the respondent may giving different and conflicting reasons as why it was not paid which never arose at the time of refusal. The applicant cited R. V Secretary of State for the Home Department Ex parte Peg [1993], where the House of Lords suggested that there is a duty to give reasons for decisions. By requiring a taxpayer to challenge a decision, it gives it an opportunity for the Tribunal to determine whether the decision by the respondent was illegal, irrational, or made without procedural impropriety. The Tribunal does not think that if a taxpayer is seeking for a refund and interest, the law vesting the Tribunal with jurisdiction should be snubbed

The Tribunal already noted that payment of interest is not automatic. As day follows night, where the revenue authority does not pay interest, it would be expected to give an explanation as to why it has refused to pay the interest. The VAT Act is silent on how a decision may be obtained from the respondent. However, this does not mean the law is silent. Since the applicant is not objecting to an assessment or a decision, there can be no objection and hence no objection decision. The applicant can only seek for a taxation decision. To do so, a taxpayer is required to demand for an explanation from the respondent as to why it has omitted, failed, or refused to pay the refund and interest and demand payment. A taxpayer has nothing to lose by seeking for an explanation from the respondent. The decision the respondent gives would give the applicant locus to file an application for review before the Triburial. In this application, the respondent did not give a decision as to why it has not paid interest. Was there a delay caused by the taxpayer in determining the correct refund payable to him? The Tribunal cannot tell. There is no decision from the respondent. The Tribunal notes that the amount of Shs. 575,350,098 the applicant consented to in the partial consent as the refund amount is different from of 675,276,949 which was claimed. Such discrepancies cannot be explained unless there is a decision from the respondent. It is important for the applicant to write to the respondent showing the interest due and how and when it arose and for the respondent to reply. By coming to the Tribunal when there is no decision, a taxpayer will be on a fishing expedition as to why interest was not paid. Yet it can get an explanation directly from the respondent and if it is still aggrieved it may push the matter to the next level.

In Auto Garage v Motokov (No. 3) [1971] E. A. 514, at p. 519 Spry V–P held as follows: – "if a plaint shows that a Plaintiff enjoyed a right, that the right has been violated and that the Defendant is liable, then, in my opinion, a cause of action has been disclosed and any omission or defect may be cured by amendment." It is already stated that when a VAT refund is approved it may be used to offset the taxpayer's liabilities, past or future. For instance, in this case, the respondent used a portion of the applicant's refund to offset it income tax liabilities. The Tribunal cannot assume that once a VAT refund has been approved, the taxpayer may still be interested in cash payment. It cannot be assumed that his right has been violated by non-payment of the refund. Once taxpayer demands for the refund and the respondent omits, fails, and or refuses to pay the taxpayer, its rights have been violated. The respondent must give a reason to why it has refused to refund and or pay interest. Where the respondent does not give an explanation, the applicant can still challenge its refusal to do so and demand for the refund and interest due using appropriate legal mechanisms.

The Tribunal already noted that an applicant aggrieved by a decision of the respondent in respect of a tax refund may file an application for review under S. 14 of the Tax Appeals Tribunal Act. Interest claimed by the applicant arises from a tax refund. Likewise, a taxpayer aggrieved by failure to pay interest should proceed under S. 14 of the Act which requires the respondent to make a decision. The applicant was not aggrieved by the notices of approval. It ought to have written to the respondent demanding for the refund and the interest due and sought for an explanation as to why it is not paid. A reply by the respondent would constitute a decision which would clothe the Tribunal with jurisdiction to review.

Lastly, the respondent contended that the application of the applicant was time barred. The Tribunal has stated that there was no decision made by the respondent. Time cannot begin to run when a decision has not been made. If the applicant was aggrieved by the notice of approvals, time would run from the time they were issued.

Taking all the above into consideration, the tribunal notes that the respondent did not make a decision. The Tribunal notes that a partial consent was entered. The applicant

received a refund Shs. 544,894,394 from the respondent on 14^th March 2022 and a further refund of Shs. 30,455,704 on 16^th December 2022 after verification, making a total verifiable refund of Shs. 575,350,098 for September 2016 to December 2017. The applicant does not refute the fact that it was refunded. The further verification which reduced the VAT refundable from Shs. 675,276,949 to Shs. 575,350,098 implies that there may have been a delay in ascertaining the correct VAT refundable. Since the verification was done after the application was filed it would be difficult to discern how interest will be due when the matter was pending before the Tribunal. Interest would not be payable in this case where verification is done after filing an application. Therefore, the Tribunal cannot determine the issue of interest. Since the applicant was refunded, there is no other issue to determine. The preliminary objection of the respondent is sustained. The main application is dismissed with costs to the respondent.

Dated at Kampala this

2023.

lmit tre Ker time

DR. ASA MUGENYI MR. GEORGE MUGERWA **CHAIRMAN MEMBER**

**MS. CHRISTINE KATWE MEMBER**