[2023] UGCA 344

### THE REPUBLIC UGANDA IN THE COURT OF APPEAL OF UGANDA AT KAMPALA CIVIL APPEAL NO. 33 OF 2014

$CORAM:$

Hon. Mr. Justice Richard Buteera, DCJ Hon. Lady Justice Catherine Bamugemereire, JA Hon. Mr. Justice Stephen Musota, JA

#### THE COMMISSIONER CUSTOMS, **UGANDA REVENUE** $10$ AUTHORITY.................................... **VERSUS TESTIMONY MOTORS** LTD....................................

(An appeal arising from the Judgment of Christopher Madrama, J. as he $15$ then was, in High Court Civil Suit No. 212 of 2012 delivered on 7^th August 2013 at the High Court Commercial Division)

# JUDGMENT OF CATHERINE BAMUGEMEREIRE, JA

$\mathsf{S}$

This is an appeal against the decision of Christopher Madrama, J (as he then was) in High Court Civil Suit No. 212 of 2012 in which he declared the appellant's decision to appraise all second-hand motor vehicles imported in Uganda for customs purposes using the alternative valuation methods other than transaction value method unlawful.

### **Background of the Appeal**

The facts of this appeal as ascertained from the court record are that on 19^th April 2010, the appellant issued a directive appraising all second-hand motor vehicles imported into Uganda, for customs purposes, using the Alternative Valuation Method instead of the Transaction Value Method.

The respondent was an importer of used motor vehicles in Uganda in the year 2010. On 30th July 2010 the respondent company imported a used motor vehicle from Japan and entered the same for customs purposes under entry number C68958 with a declared transaction s value of USD 5,200 out of which it was supposed to pay taxes of USD 3,588. The dollar rate to Uganda Shillings at that time was 2,232 thus the taxes due amounted to UGX 8,008,416/= under the Transaction Value Method. The respondent's declared value was rejected by the appellant's official and the respondent company was 10 appraised using alternative rnethods of valuation thus the respondent's custom duty amounted to UGX 19,558,8791=. The appellant's official informed the respondent that the Commissioner Customs Uganda Revenue Authority suspended the Transaction Value Method for used motor vehicles on 19th April 2010.

¹⁵ The respondent sued the appellant claiming that the appellant's action of suspending the operation of the law on customs valuation methods was unlawful, thus it was entitled to a revaluation of the customs duty payable on its car. The respondent also claimed general damages, exemplary damages, interest and costs of the suit.

20 The appellant contended that the decision dated 19th April 2010 to appraise all motor vehicles imported into Uganda for customs valuation purposes using alternative methods was supported by law and that it was prompted by challenges facing false documents like invoices and receipts by importers. The appellant further claimed

25 that it's decision was Iawful and consistent with similar decisions taken by other countries in the East African region thus it did not

infringe any of the respondent's or other person's Constitutional right to own property.

The trial Court entered Judgment in favour of the respondent declaring that the appellant's decision was unlawful. Court also s ordered for re-assessment of the respondent's imported motor vehicle for customs duty and that if it were found that the respondent paid over the assessed taxes, the excess could be refunded to it, with interest at the rate of 2l%o per annum from the date of overpayment, to the date of Judgement. Court awarded aggravated damages of Shs

10 20,000,0097= (Twenty million shillings) to the respondent, interest thereon; and costs.

Being aggrieved with the above decision, the appellant filed the instant appeal with 5 grounds as per the Memorandum of Appeal below;

## 1s Grounds of Appeal

- 1. The Learned trial Judge erred in law when he held that the directive of 19th April 2010 by the Comrnissioner Custorns to use alternative method of custorns valuation in respect of used motor vehicles was in contravention of z0 the East African Comrnunity Customs Management Act, 2004 (hereinafter referred to as EACCMA). - 2. The Learned trial Judge erred in law when he held that the Comrnissioner Customs had no powers under section ¹²²(l) of the EACCMA, 4thschedule paragraph 2 of part zs (ii) to exclude the transaction value rnethod as the primary method prescribed by the Act.

- 3. The Learned trial Judge erred in law when he held that the directive of the Comrnissioner Customs dated l9thApril 2010 was ultrauires the powers granted to hirn under section 5 of the EACCMA 2004. - 4. The Learned trial Judge erred in law when he held that the plaintiff/respondent is entitled to the consequential relief of reassessment of the Customs duty for the Jaguar motor vehicle, the subject matter of the suit. - 5. The Learned trial Judge emed in law when he held that the plaintiff/respondent was entitled to aggravated general darnages on the grounds that the defendant/appellant failed to use the prirnary method of valuation for the used motor vehicles.

The appellant prayed for the following orders and declarations;

- 1. That the appeal be allowed 15 - 2. Orders of the High Court be set aside - 3. Costs in this honourable court and the court below be awarded to the appellant.

### Representation

- At the hearing of the appeal, the appellant and their representative were absent but the file shows that the appellant was represented by the Legal Department of Uganda Revenue Authority while the respondent was represented by Mr. Terrence Kavuma for M/S Kabayrza Kavuma, Mugerwa & Ali Advocates. Counsel for the 20 - respondent agreed to proceed with their conferencing notes, which 25

were already on court record, and court adopted the same for both parties and fixed Judgment on Notice.

I however noticed that the appellant through Mr. Matthew Mugabi, Assistant Commissioner Litigation, URA wrote a letter on 2l't s November 2022 stating that they were absent when the file was called for hearing and filed an application requesting court to re-open the appeal in order for their submissions to be filed on record.

I have perused the appellant's application No. 793 of 2022 brought by Notice of Motion seeking to set aside this court's order relying on 10 conferencing notes and adopt their attached submissions in determining the appeal. It should be noted that the respondent was not given a chance to reply to this application. I have however perused the attached submissions and find that they are just an expansion on what was already stated in the appellant's conferencing 15 notes. I do not see any reason to adopt the same since court does not only rely on the parties' submissions to make its finding but the entire record. Since the respondent was not given a chance to reply and Judgment was already fixed on notice, it would be in the interest of justice that I decline to allow the application to re-open the appeal 20 to adopt the appellant's submissions. Civil Application No. 793 of 2022 is thus declined. I shall proceed to determine the appeal basing on the conferencing notes already adopted by this court and the entire record of appeal. Both counsel summarised their grounds below during the conferencing and agreed on three major grounds to

- 2s be resolved in this appeal; - 1. Whether the learned trial Judge erred in law when he held that the suspension by the appellant of the

operation of the Transaction Value Method of customs valuation in every case of imported used motor vehicle is unlawful?

- 2. Whether the learned trial Judge erred in law by holding that the respondent was entitled to reassessment of custorns duty on its imported motor vehicle, thus ordering reassessment and a refund of overpaid custorns duty if any? - 3. Whether the learned trial Judge erred in law in awarding the respondent aggravated damages of 20,000,000/=?

### The appellant's case

Counsel for the appellant contended that the appellant had powers under section 122 (6) of the EACCMA, 2004 to exclude the transaction Value Method, as guided and supported by the opinion/decision of the Technical Committee of the Customs Cooperation Council, and further buttressed by the decision of the sister Court of Kenya, on a similar matter: Republic v the Custorns and E Departrnent zo & Others. Misc. Application No. 329 of 2005. 15

It was counsel's argument that the trial court would have reached ^a different result, had it adverted to the above authority, and the specific circumstances pleaded as influencing the appellant's decision to value all used motor vehicles imported into Uganda, by alternative

25 valuation method, a method accepted by importers of used motor vehicles within the Uganda industry.

Counsel further submitted that the orders by the trial Court are erroneous, because, the respondent had never protested/objected to its self-declared value for its motor vehicle, let alone, through its appointed clearing agent. Additionally, that any refund of excess tax s can only be made, if applied for to the Commissioner Customs, within a year, from the date of payment of excess duty. In support of the above proposition, counsel relied on section 144 (2) of the EACCMA, and a persuasive authority by Hon. Justice Geoffrey Kiryabwire (as he then was) in Mandela Auto Spares Ltd v. 1o Comrnissioner Customs. ^HCT-00-CC-CS-20 1-20 I 1.

It was counsel's contention that court cannot extend time limits set by statute, as the trial Court ostensibly purported to do, by its orders. He made reference to Makula International v His Erninence Cardinal Emrnanuel Nsubuga (1982) HCB 11.

1s On the 4th ground, counsel submitted that the trial Court had no valid grounds for awarding aggravated damages in the quantum given. It was counsel's argument that the trial Court erred in basing the award on the purported breach of statutory duty owed to importers of used motor vehicles, when this was not a representative zo suit, and no such importers had sued.

Further, counsel contended that the trial Court in making the award did not follow the correct principles and there was no material evidence to support the award entirely. He added that the amount awarded was manifestly excessive, to warrant interference by the ²⁵ appellant Court Reference was made to Uganda Revenue

Authority v Wanume David Kitarnirike. CACA No. 43 of 2010.

It was counsel's prayer that this court grants the prayers made in the memorandum of appeal.

### The respondent's case

In reply counsel for the respondent submitted that the Commissioner 5 Customs does not have the power under the EACCMA to suspend the operation of the provisions of the act. Further, that the operation of the rules of customs valuation under section 122 of the EACCMA is mandatory and doec not permit the Commissioner to disregard the Transaction Value Method of valuation.

10 Counsel cited Article 49 (1) of the Treaty for the Establishment of the East African Comrnunity, which specifies the Assembly as the legislative organ and submitted that the Assembly did not delegate its legislative role of limiting or suspending the operation of the transaction value method of valuation in respect of used motor 1s vehicles. Reference was also made to section 19 (1) of the EACCMA, which empowered the Council to limit the operation of the 2"d Schedule.

It was counsel's submission that bhe determination of customs payable on imported goods in Uganda and the East African Community is regulated by section 122(L) of the EACCMA, which provides that;

"Where imported goods are liable to import duty ad valorem, then the value of such goods shall be determined in accordance with the Fourth Schedule and import duty shall be paid on that value."

Counsel submitted that the use of the word shall in the above section is mandatory for the appellant to determine the customs duty payable on used motor vehicles in accordance with the fourth Schedule of the EACCMA. Counsel referred to part 2 of the fourth schedule, which describes the manner of application of the customs valuation methods.

It was counsel's contention that the court ought to note that the EACCMA and the Transaction Value Method of customs valuation do not treat used vehicles different from new vehicles for customs valuation purposes. He submitted that the trial Judge did not err in law when he held that the suspension by the appellant of the operation of the Transaction Value Method in respect of imported motor vehicles was unlawful.

Counsel further submitted that section 21-L of the EACCMA and

- section 33 of the Judicature Act give court wide powers to give such remedies as may be deemed appropriate. It was counsel's contention that the provisions of section 144 (2) of the EACCMA are only relevant where an application for a refund has been made to the Commissioner Customs administratively but have no relevance 15 - where such applications are sought in courts of law as was done in the instant case. 20

Regarding the 5th ground on aggravated damages, counsel for the respondent submitted that the trial Judge had valid grounds for awarding aggravated damages. He referenced Uganda Revenue

Authority v Wanume Kitamirike CACA No. 43 of 2010, where Remmy Kasule JA (as he then was) noted that; 25

"Aggravated damages are like general damages, compensatory in nature, but they are enhanced as damages because of the aggravating conduct of the defendant. They reflect the exceptional harm done to the plaintiff by reason of the defendant's actions/omissions."

Counsel argued that it is trite that an appellate court will not interfere with an award of damages by a trial court unless the trial court has acted upon a wrong principle of law or that the amount is so high or so low as to make it an entirely erroneous estimate of the

damages to which the plaintiff is entitled. He cited Robert Cuossens v Attornev General SCCA No. 8 of 1999. 10

Counsel submitted that since the award of damages is in the discretionary powers of court, the trial Judge did not act upon ^a wrong principle in awarding damages. Counsel for the respondent prayed that the appeal be dismissed with costs to the respondent.

### Consideration of Court

This being a first appeal, this court is obliged under rule 30 (1) (a) of the Judicature (Court of Appeal Rules) Directions to reappraise the evidence and draw inferences of fact. This duty was well expounded in Kifamunte Henry v Uganda SCCA No. 10 of 1997 thus;

"The first appellate court has a duty to review the evidence of the case and to reconsider the materials before the trial Judge. The appellate court must then make up its own mind not disregarding the

2s judgment appealed from but carefully weighing and considering it..." The above principles will be borne in mind as I resolve the grounds of appeal in this case. I shall determine grounds 1,2 and 3 together since they are interrelated then grounds No. 4 and 5 finally.

,

Regarding Grounds No. I,2 and 3, I wish to note that the respondent imported a second hand car and where imported goods are liable to ad valorem duty then the fourth schedule of the act applies.

Section 122 (1) of the East African Community Customs Management Act, 2004 (hereinafter referred to as EACCMA) provides as follows;

¹⁰ "Where imported goods are liable to import duty ad valorem, then the value of such shall be deternrined in accorda with the fourth schedule and import duty shall be paid on that value."

Paragraph 2 (1) of the Fourth Schedule provides that; the nrrqfnrnq rzq'lrra nf ^I Y'\orted o^^.1 shqll ho fha frqnqqnfinn \/ tl ^I ^A

¹⁵ which is the price actually paid or payable for the goods when sold for export to the Partner State. (Underlining is for emphasis)

Considering the above provisions, it can be surmised that the value of imported goods is to be determined according to the fourth schedule and the customs value of imported goods is primarily the

- 20 Transaction Value Method. Both parties have not disputed these facts. However, the contention is that the appellant passed ^a directive on 19tr' April 2010 to use alternative methods of custom valuation and decided to use the Fall Back Method to assess the value of the car imported by the respondent. - 2s Paragraph 8 (1) provides for the Fall Back Value Method thus; Where the customs value of the imported goods cannot be determined

under the provisions of Paragraphs 2, 3, 4, 5, 6 and T, inclusive, the customs value shall be determined using reasonable means consistent with the principles and general provision.

5 Part II of the 4rh Schedule mandates valuation based on sequential order emphasizing that the rl methods for customs val inP d imported goods are to be valued in accordance with the provisions of this paragraph whenever the conditions prescribed therein are fulfilled.

10 15 Further, that where the customs value cannot be determined under the provisions of paragraph 2, it is to be determined by proceeding sequentially through the succeeding paragraphs to the first such paragraph under which the customs value can be determined. Except as provided in Paragraph 5, it is only when the customs value cannot be determined under the provisions of a particular paragraph that the provisions of the next paragraph in the sequence can be used.

(Underlined for emphasis).

In this case however, the appellant chose to use the Fall Back Method while assessing the import duty on the respondent's imported motor vehicle. If one were to follow the sequence as provided in part II of the 4th Schedule, it would be as follows.

- o Paragraph 2- tt,e Transaction value - o Paragraph 3-Transanction value of identical goods - o Paragraph 4-Transanction value of similar goods - o Paragraph 5-Reversal of order of application of deductive value and computed values - 25

o Paragraph 6-Deductive value

- . Paragraph 7-Computed value - o Paragraph 8-Fall Back Value.

5 Therefore, where the custom value of imported goods could not be ascertained under the previous methods; paragraphs 2,3,4,5,6 and 7, the Fall Back Method would be applied. This implies that if the appellant had decided not to use the Transaction value method as they did, they would have opted for the next method which was the transaction value of identical goods as provided above in sequence till the 8th paragraph, which was the Fall Back value method.

- The directive of the appellant exhibit Ptrl only provided for "using alternative methods of valuation until further notice." As rightly observed by the trial Judge, the alternative methods were not specified hence there was no basis for the appellant's officials to suggest that the alternative methods were the Fall Back Method. The 10 - Act provides for other methods to be used for valuation if the method prescribed in paragraph 2 (Transaction Value Method) fails to establish the customs value, and the interpretative notes require the succeeding method to be applied sequentially, that is one after the other. 15 - I therefore find no justification for the appellant deciding to use the Fall-Back Method yet the Act is specific on the procedure in case the transaction value method is not used. 20

Further, section 253 of the EACCMA provides that; "this Act shall take precedence over the Partner States laws with respect to any matter to which its provisions relate. This shows the mandatory

application of the EACCMA in relation to custom matters as 25

opposed to other decisions of court and opinions of committees as submitted by the appellant.

Regarding the powers of the commissioner, Section 5 (z) of the EACCMA provides that the Commissioner shall be responsible for the management and control of the customs including the collection of, accounting for customs revenue in the respective partner state.

Section 3 EACCMA provides that the Directorate of Customs as established by the Council under the treaty shall be responsible for the initiation of policies on customs and related matters in the community and the coordination of such policies in partner states.

I therefore conclude that the appellant/Commissioner Customs had no powers under section 122 (1) of the EACCMA and the 4th Schedule to exclude the Transaction Value method thus the acts of the appellant's officials of excluding the Transaction Value Method and using the Fall Back Method were unlawful. The learned trial Judge did not err.

Grounds No. 1, 2 and 3 therefore fail.

Regarding Ground No. 4, since I have held in Grounds 1, 2 ancl ³ above that the appellant's act of excluding the Transaction Value Method was unlawful, the respondent is entitled to the consequential relief of reassessment of customs duty for his imported car. Ground No. 4 also fails.

with regard to Ground No. b on award of aggravated damages the appellant contended that the trial Judge had no valid grounds for awarding aggravated damages in the quantum given. Counsel for the respondent contended that the award of damages is discretionary

thus the trial Judge did not act upon a wrong principle when he awarded aggravated d-amages to the respondent.

It is trite that an award of damages is at the discretion of court. In this case, the respondent was awarded aggravated damages to a tune of 20,000,000/=.

In l.)lrntr.r.. Mrrnininql (l..tt- nil nf I(icrrvr.rrr [1 I^I ¹IFlAqI court held that;

"It is well established that when damages are at large and ^a court is making a general award, it may take into account factors such as malice or arrogance on the part of the defendant and this is regarded as increasing the injury suffered by the plaintiff, &s, for example, by causing him humiliation or distress. Damages enhanced on account of such aggravation are regarded as still being essentially compensatory in nature."

- 1s In Ori SC ^N 04 of 2006. the appellant was awarded aggravated damages of UGx 200,000,000/= not only for the unwarranted and wrongful deprivation of his property but also because of the conduct and apparent arrogance of the respondents. - zo In Bank of Usanda v Betty Tinkamanyire SCCA No. 12 of 2007^t 25 Kanyeihamba JSC as he then was wrote the lead judgment and noted that;"In my opinion the acts of the appellant were not only unlawful, but were degrading and callous. In my view, a good case has been shown for the respondent to be eligible for the award of aggravated damages

# In Uganda Revenue Authority v Wanume David Kitarnirike CACA No.43 of 2010 Court noted that;

"Aggravated damages are like general damages, compensatory in nature, but they are enhanced as damages because of the aggravating conduct of the defendant. They reflect the exceptional harm done to the plaintiff by reason of the defendant's actions/omissions."

Further, in Basiima Kabonesa v Attorney General & anor SCCA No. 16 of 202r the Supreme Court affirmed the decision of

¹⁰ the Court of Appeal and Trial Court on aggravated damages thus; ".. that in this case, there was oppressive, arbitrary and unconstitutional action by the servants of government for which ^a penal sanction is called for, that this was a case where the plaintiffs should be awarded a collective enhanced compensatory damages not only for the unlawful deprivation of the plaintiffs entitlements but also for the arrogance of the defendants..." 15

In my understanding of the nature of aggravated damages basing on the above authorities, they are compensatory in nature like general damages; however, aggravated damages are enhanced by the conduct 20 of the respondent especially when there is some malice or arrogance accompanied. The trial Judge in this case awarded aggravated

damages for breach of statutory duty owed to the importers of used motor vehicles by the appellant.

It is my opinion that the appellant's act in this case was not 25 accompanied with any malice or arrogance thus the trial Judge erred

1,6

in awarding aggravated damages to the respondent. Ground No. ⁵ thus succeeds.

In the final result, this appeal partly succeeds in Ground No. 5, regarding the award of aggravated damages but fails on the rest of the grounds. This court therefore makes the following orders;

- 1) The appeal fails on Grounds No. 1,2,3 and 4. - 2) The award of aggravated damages of 20,000,000/= is set aside. - 3) The costs, 415 or (80%)thereof, in this court and the court below is awarded to the respondent.

to I so order

Dated at Kampala this....... ,iu"y or. @l^ 2023.

CATHERINE BAMUGEMEREIRE JUSTICE OF APPEAL

# THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL OF UGANDA AT KAMPALA CIVIL APPEAL NO. O33 OF 2014 THE COMMISSIONER CUSTOMS, UGANDA REVENUE AUTHORITY ....... O"""'APPELLANT VERSUS TESTIMONY MOTORS LTD RESPONDENT

[Coram: Buteera, DCJ; Bamugemereire & Musota, JJA]

## JUDGMENT OF RICHARD BUTEERA, DCJ

I have had the benefit of reading in draft the Judgment prepared by my learned sister, C. Bamugemereire, JA.

I agree with her findings and reasoning and have nothing useful to add.

Since Musota, JA, agrees with her judgment, it is, therefore, the unanimous decision of this Court that the Appeal partly succeeds in accordance with the orders made in the judgment of Bamugemereire, JA.

Dated at Kampala this 23" day of marl^ ... 2023

chard Buteera Deputy Chief Justice

## THE REPUBLIC OF UGANDA

#### IN THE COURT OF APPEAL OF UGANDA AT I(AMPALA

## CIVIL APPEAL NO. 33 OT 2014

(Arising from the Judgment and orders of Madrama, J (as he then utas) in High Court Ciuil Suit No. 212 of 2012)

#### THE COMMISSIONER CUSTOMS,

# UGANDA REVENUE AUTHORITY : : : : : : : : : : : : : : : : : : : : : : : : APPELLANT

#### VERSUS

TESTIMONY MOTORS LTD : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : RESPONDENT

#### CORAM: HON. JUSTICE RICHARD BUTEERA, DCJ

HON. JUSTICE CATHERINE BAMUGEMEREIRE, JA

## HON. JUSTICE STEPHEN MUSOTA, JA

#### JUDGMENT OF STEPHEN MUSOTA. JA

^Ihave had the benelit of reading in draft the judgment by -y sister Hon. Justice Catherine Bamugemereire, JA.

I agree with her judgment and the orders she has proposed. I have nothing useful to add.

Dated this 23r"day of tte^ rcr,- 2023

6/\*;t^^''n

Hon. Stephen Musota JUSTICE OF APPEAL