IN THE REPUBLIC OF UGANDA
IN THE HIGH COURT O F UGANDA AT KAMPALA
COMMERCIAL COURT DIVISION
ROCK PETROLEUM (U) LTD ……..…………..……..…………………… PLAINTIFFS
BEFORE: HON MR. JUSTICE LAMECK N. MUKASA
Mr. Fred Muwema
Mr. Enoch Barata for the plaintiffs
Mr. Terence Kavuma
Mr. Sirali Ali
Mr. Ali Sekatawa for the defendant
Mr. Habibu Arike
Mr. Ojambo Makoha
The plaintiffs’ case, as gathered from the affidavit in support, is that during the financial year 2007/2008, the Government of Uganda increased Excise Duty on Diesel from Ug shs450 to Ugshs 530 and on Petrol from Ugshs720 to Ugshs850 which the defendant started collecting from the importers. The plaintiff contends that the defendant’s authority to impose and collect the increased Excise Duty was pursuant to the provisional collection order issued by the Minister of Finance under the Taxes and Duties (Provisional Collections) Act, Cap 348 but that the order expired and ceased to have effect after four months i.e. on the 1st November 2007. That after the expiry the defendant’s continued imposition and collection of the increased Excise Duty without an enabling law was illegal. The plaintiff argues that the Excise Tariff (Amendment) Act No. 5 of 2008 by which the defendant was supposed to levy and collect the increased Excise Duty was passed and assented to belatedly on the 17th June 2008 with two fatal errors – i.e.
(ii) Amendment of a non-existent 2nd Schedule of the Excise Tariff (Amendment) Act 2007.
The plaintiff therefore contends that the Excise Tariff (Amendment) Act No. 5 of 2008 was void and did not have the force of law and could not confer any authority on the defendant to collect the increased Excise Duty because it did not effect the intended increase in the tax or amendment of the law.
The Excise Tariff (Amendment) Act No. 5 of 2008 was subsequently corrected in respect of the above errors by way of corrigenda but the plaintiff contends that the corrections only took effect from the date of the last publication of the Uganda Gazette on the 23rd January, 2009. That all tax collections by the defendant previous to that date which were not covered by the provisional collection order were illegal and thus refundable to the plaintiff and the other fuel importers.
The defendant’s case on the other hand, is that the Ministry of Finance made various tax law amendments for the financial year 2007/2008. Such amendments were reflected in the Excise Tariff (Amendment) Act No. 4 of 2007, later followed by the Excise Tariff (Amendment) Act No 5 of 2008. That the tax amendments were given legal effect by the Taxes and Duties (Provisional Collection) Order 2007 which took effect on 1st July 2007. The defendant contends that it was thereby mandated to collect the taxes arising from the Excise Tariff (Amendment) Act No. 5 of 2008. Pursuant thereto the defendant assessed, collected and accounted for the Excise Duty arising as a result of the aforesaid tax amendments.
The defendant states that in the process of drafting and printing the Excise Tariff (Amendment) Act No . 5 of 2008 two inadvertent typographical errors were occasioned:-
(ii) Section 2 of the Act which states the dates of commencement as 1st July 2008 instead of 1st July 2007.
The defendant further explains that during the financial year 2007/2008 there was a delay in renewing the Taxes and Duties (Provisional Collection) 2007 which expires four months after it is issued in anticipation of the passing by Parliament of the various Tax Bills placed before it. That the failure to renew the Taxes and Duties (Provisional Collection) order was remedied / cured by the coming into force of the Excise Tariff (Amendment) Act No. 5 of 2008 with the effective date of 1st July 2007. The defendant contends that it legally collected the taxes due and errors on the face of the Excise Tariff (Amendment) Act did not affect its validity. The defendant further contend that the plaintiff’s suit is against the interest of the public fiscus.
The issues for Court’s determination are:-
2. Whether the plaintiffs are entitled to a refund of monies collected by the defendant from the 1st November 2007 onwards under the Excise Tariff (Amendment) Act No. 5 of 2008.
The issues before me necessitate me first to set out the relevant Statutory provisions. Article 152 of the Constitution provides:-
an Act of Parliament.
(2) Where a law enacted under clause (I) of this article
The above constitutional provisions show that taxes can only be imposed under an authority of an Act of Parliament and tax variations must be reported to Parliament. The above provisions are mandatory.
Section 1 of the Taxes and Duties (Provisional Collection) Act empowers the minister, whenever the Government approves the introduction into the Parliament of a bill by which if the bill were passed into law, any tax or duty would be imposed or created, altered or removed, by Statutory Instrument to order that there shall be charged, levied and collected the tax or duty which would become payable if the bill were passed into law and came into operation in place of the tax or duty which would otherwise be payable. When that instrument is issued the tax authority is provisionally empowered to collect the tax or duty varied pending Parliamentary approval. However, section 2 of the Act provides that, if not revoked, every such order shall cease to have effect:
into law and coming into operation.”
But the Minister, with the approval of Parliament signified by resolution, is empowered from time to time by statutory order to extend the period by such further period as may be specified in the order.
The evidence adduced shows that the Budget for the Financial year 2007/2008 was on 14th June 2007 laid before Parliament by the Minister of Finance, Planning and Economic Development: Therein increases in Excise Duty were proposed on diesel from Ushs450 to 530 and Petrol from Ushs720 to Ushs850 per litre. The Minister by the Taxes and Duties (Provisional Collection) Order, 2007 authorised the provisional collection of the above increased Excise Duty pending the passing into law by Parliament the Bill for the Excise Tariff (Amendment) Act, 2007.
The Excise Tariff (Amendment) Act, 5 of 2008 was assented to on 17th June 2008. It provided:
“An Act to amend the Excise Tariff Act to replace the second schedule to the Act prescribing rates of excise duty.
Date of Assent: 17th June 2008
Date of Commencement: 1st July 2008.
Be it enacted by Parliament as follows:-
schedules to that Act the following new schedule –
“The Excise Tariff (Amendment) Act, 2008, Act No. 5 of 2008.
(Issued by the Uganda Printing and Publishing Corporation)
In printing the above Act, a typographical error was made in reference to the date of Commencement immediately above the words enactment and is corrected as follows:-
For the defendant to impose and collect any tax there must be a law authorising that tax. Article 152 of the Constitution of Uganda provides that no tax shall be imposed except under the authority of an Act of Parliament. The Constitution further provides that any tax variation must be reported to Parliament.
It is an agreed fact that the Minister of Finance laid before Parliament the Budget Estimates for the Financial Year 2007/2008 (annexture C to the affidavit in support) The Minister therein proposed increases in Excise Duty on diesel and petrol from Ushs450 and Ushs720 per litre to Ushs530 and Ushs850 per litre respectively. Pending enactment of the enabling law the Minister, pursuant to Section 1 of the Taxes and Duties (Provisional Collection) Act, on 15th June 2007 made the Taxes and Duties (Provisional Collection) Order 2007. With the Provisional Order in place the defendant assessed and collected Excise Duty as increased. Annexture B to the Defendant’s affidavit in reply shows a summary of Excise Duty collected for the period. The Provisional Order was expressed to come into force on the 1st day of July 2007. The amendment of the financial year 2007/2008 were reflected in the Excise Tariff ( Amendment) Act No 5 of 2008 (hereafter referred to only as “Act 5 /2008”) The Act had two commencement dates,1st July 2007, and 1st July 2008 and was published in the Uganda Gazette No 33 Volume C. 1 dated 2th June , 2008. It is clear that on 1st July 2007 the Bill for Act 5/2008 had not yet been passed into law. By the provisions of section 2 of the Taxes and Duties (Provisional Collection) Act the Provisional Order ceased on the expiration of four months after the date it came into operation. There is no evidence of extension of the order adduced. It thus ceased to have effect on 1st November, 2007. Mr. Muwema submitted that thereafter the defendant did not have the legal mandate to collect the Excise Duty at the proposed increased rates of Ushs530 per litre of diesel and Ushs850 per litre of petrol. However, the defendant continued to so assess and collect the Excise Duty from the importers.
Eventually the enabling Bill was passed into law Act 5/2008 published on 27th June 2008. This was towards the close of Financial Year 2007 /2008. The issue is whether Act 5/ 2008 retrospectively legalised the assessments and collections of the increased Excise Duty made after 1st July 2007. The Act had two commencement dates – 1st July 2007 and 1st July, 2008. In view of the unclear date when Act 5/2008 came into force Counsel for the plaintiff argued that the Act was ineffective. He contends that since 1st July 2007 there has not been an enabling law for the defendant to assess and collect the increased Excise Duty.
On the other hand, both Mr. Arike and Mr. Sekatawa, Counsel for the defendant, argued that Act 5/2008 had gone through the requisite legislative procedures of Parliament of enactment of Statutes. They contend therefore, that its legal force cannot be challenged or disputed. With all due respect I do not agree. For example a Statute which has been legally enacted can be challenged and declared void if found to be inconsistent with the Constitution, the supreme Law of Uganda.
Whichever commencement date is upheld it has retrospective enforcement of the Excise Duty already collected by the defendant from the fuel importers. Taxes already but otherwise unlawfully’ assessed and collected are thereby retrospectively imposed on the tax payer. An illegality would thereby be legalised. In Russell Vs Scolt (1948) 2 All ERI at page 5 Lord Simonds stated:-
Viscout Simon stated:-
However Section 14 (4) of the Act of Parliament Act, Cap 2 provides:-
“When an Act is made with retrospective effect, the commencement of the Act shall be the date from which it is given or deemed to be given that effect.”
Mr. Sekatawa, Counsel for the defendant argued that the legislative intention was clear that the law applies retrospectively. As to the rule against the retrospective effect of a statute Counsel cited Customs and Excise Commissioners Vs Shigleton (1988) STC 190 (Simon’sTax Cases) where Simon Brown held:-
The leaned Judge also stated that the rule against retrospective operation raises a presumption only , and as such it may be overcome, not only by express words of the Act but also by circumstances sufficiently strong to displace it.
In Shingleton case, (above) the tax payer was required to notify the Commissioners by 10th July 1984 that he was liable to be registered for Value Added Tax. He did not until 13th May1986. Under the Value Added Tax Act 1983, the Commissioners made an assessment on the taxpayer for the period 25th July 1985 to 13th May 1986. On 25th July 1985, Section 39 (5) of the 1983 Act, whereby penalty was imposed for failure to notify liability to be registered, was suspended by the penalty provision in the Finance Act 1985, Section 15 (3). The contention was that the Act cannot be applied where the default in respect of which the penalty is imposed took place before the 1985 Act came into force. Justice Simon Brown stated:-
In the instant case Act 5/2008 was assented to on 17th June 2008 and published in the Uganda Gazette of 27th June 2008 with a commencement date of either 1st July 2007 or 1st July 2008. What is enacted by Parliament is what follows the statement in an Act which states:
Secondly, Act 5/2008 Section 2 provides:-
“2 Amendment of Cap 338
The Excise Tariff Act is amended by substituting for the second schedule the following ----“
It is an agreed fact that Cap 338 following the amendment by Act 4/07, had only one schedule. It did not have a second schedule. Mr. Muwema argued that the sole purpose of the Act 5/2008 as provided therein was:-
He contended that Act 5/2008 was infective since it was intended to amend a non existing provision of the law or schedule. Further he argued that in light of the ambiguity in the commencement date Act 5/2008 has never come into force.
While admitting the two errors or mistakes Mr. Arike, Counsel for the defendant, submitted that the errors were typographical and have since been rectified in the corrigenda published in the Uganda Gazette Vol. CI No 63 dated 12th December 2008 and Vol. CII No 4 dated 23rd January 2009.
Black’s Law Dictionary 8th Ed defines corrigenda as:
As regards the ambiguity of the commencement date of Act 5/2008 Mr. Muwema invited this Court to resolve the issue in favour of the tax payers. Halsbury’s Law of England Vol. 44 (I) par 1009 states:-
“--- ambiguous words are construed in favour of the person liable to the duty”
The learned Judge then held:-
A number of authorities were cited to his Lordship. In his judgment he stated:-
“The first set of authorities came from Canada. The first case is Quebec Communicate wrabane Vs Notre Dame De Bosecours (1994) 3 S.C.R. 3.
The Court in that case refers to what it called the teleological approach to interpreting tax legislation. Under this approach a legislative provision should be given a strict or liberal interpretation depending on the purpose underlying it and that purpose must be indentified in light of the context of the statute, its objective and legislative intent. The teleological approach will favour the taxpayer or the tax department depending solely on the legislative provision in question and not on the existence of predetermined presumptions. The second case is:
The Queen Vs Golden (1986) ISRC 209
Which is an authority for the proposition that law is not confined to a literal and virtually meaningless interpretation of the Act especially where taxation, serves many purposes in addition to the old and traditional object of raising the cost of government from a “somewhat unenthusiastic public.”
In the above case the schedule to the Stamps Act as amended in 2002 provided for two rates the first being Shs5000/= and the second 1% of the total value which the plaintiffs argued and Hon Justice Kiryabwire found unclear and ambiguous. He held:-
In the instant case the legislative intention in Act No 5/2008 was to give effect to the increases in the Excise Duty proposed in the Budget to the Financial Year 2007/2008. For the tax to be assessed and collected there had to be an Act in force. The period pending the coming into force of an enabling Act, the legislature provides for provisional assessment and collection under the Taxes and Duties (Provisional Collection) Act. The Excise Duty increases were intended to run effective with the Financial Year 2007/2008. The new financial year in Uganda runs from 1st July. It is therefore proper for the Legislature to enact the enabling Act with a retrospective effect date from 1st July to validate the assessments and collections made between the presentation of the Financial Year Budget and the enactment of the enabling Act. However to avoid the unlawful assessment and collection of tax, in the pendency of the enabling Act, the Minister is empowered to issue a Provisional Order. In the instant case the Provisional Order was made but had ceased to be in force by the time Act 5/2008 was assented to and published. When assented to on 17th June 2008 and published on 27th June 2008 Act 5/2008 had two dates of coming in force. One on 1st July 2007, a date pre-assentment or publication of the Act and the other 1st July 2008, a date post-assentment or publication of the Act. Section 1 of the Act stated:-
A future statement but with a passed date. The body of the Act did not carry a retrospective intent of the Parliament. In such circumstances I find myself unable to find the clear intention of the Legislature. I am, also unable to follow the teleological approach of interpretation to cure the ambiguity in the Act as to the date of its commencement.
The issue is whether the errors were curred by the corrigenda published in the Uganda Gazette. The corrigenda relied upon by the defendant are indicated as:-
The errors in Act 5/2008 do not relate to spelling mistakes or wrong additions. They go to the main root of the Act as they affect the purpose and commencement date of the Act. The mandate to clarify such errors is only vested in the Legislature and cannot be exercised by a mere publisher. Article 79 of the Constitution provides:
(2) Except as provided in this Constitution, no person or body other than Parliament shall have power to make provisions having the force of law in Uganda except under authority conferred by an Act of Parliament.”
(8) A bill passed by Parliament and assented to by the President or which has otherwise became law under this article shall be an Act of Parliament and shall be published in the Gazette.”
It is only Parliament which has the mandate to make law. It follows that it is only Parliament which can revoke, amend or correct mistakes in any law which has become an Act of Parliament. The defendant has not cited any provision which empowers the Uganda Printing and Publishing Corporation to correct errors made by the Parliament in any enactment of an Act of Parliament.
Without any amendment or correction by Parliament the issue now becomes what is the legal status of Act No 5/2008. The Act was intended to implement and legalise the increase of Excise Duty on Diesel from Shs450/= to Shs530 and on Petrol from shs720 to shs850 per litre. Before the Amendment by Act 5/2008 the Excise Tariff Act as amended by Act 4/07 had only one schedule where the Excise Duty on Diesel is shs 450 and Petrol shs720. The schedule to Act 5/2008 puts Excise Duty on Diesel at Shs530 and on Petrol at shs850,, thereby providing for the purpose of the Amendment which was , inter alia, to increase the rate of Excise Duty on Diesel and Petrol, respectively. Unfortunately the Amendment instead substitutes a non existing second schedule. In Stanbic Bank Uganda Ltd & Other Vs URA (supra) reference was made to Francis Bannion in his book Statutory Interpretation pages 568 – 569 where he writes:
Hon. Justice Kiryabwire held:-
As to the commencement date of Act 5/2008, section 14 of the Act of Parliament Act provides:-
(2) Every Act shall be deemed to come into force at the first moment of the day of commencement.”
Where the date of commencement is found to be ambiguous, in my considered view, then recourse has to be made to the date of publication as though no date had been provided by the Act.
In the Kenyan Case of TSS Grain Millers Ltd Vs Attorney General (2003) 2 EA 685 the Minister of Finance had by a Legal Notice reduced the Customs Duty payable but did not set a date by which his order would take effect. Section 27 (I) of the Interpretation and General Provisions Act of Kenya provides:
The legal Notice was published in the Kenya Gazette on 21st May 1999. Court held that in the circumstances the effective date is the date of publication of the Legal Notice that is 21st May 1999. In light of the provisions of section 14 of the Acts of Parliament Act the above case provides good guidance. I accordingly find that Act No : 5/2008 came into force on the date of its publication in the Uganda Gazette, that is 27th June 2008. I therefore find that from 1st November, 2007up to 27th June 2008 the defendant could not legally impose and collect the increased Excise Duty on Diesel and Petrol.
Issue No 2 whether the plaintiffs are entitled to a refund of the Monies collected by the defendant from 1st November, 2007 onwards under the Excise Tariff (Amendment) Act No 6 of 2008.
Section 3 (3) of the Excise Tariff Act provides:
(b) by being charged on and paid out of the Consolidated Fund”
In his submission Mr. Sekatawa for the defendant submitted that Act 5/2008 has a retrospective effect and since its enactment there has been a law in force which retrospectively legalised the defendant’s assessment and collection of Excise Duty over the period when there was no Provisional Collection Order. Further that it is within public interest that government should keep running within the year as Parliament debates the financial laws.
I entirely agree that the defendant must collect taxes for the Government to enable it implement its policies, and run the country. However, the Constitution puts in place modalities for proper and lawful taxation.
The subject is not to be taxed unless the words of the taxing statute unambiguously impose the tax on him. See Rusell Vs Scott (Supra). Tax can only be collected on authority of an Act of Parliament. At the expiry of the Provisional Order the Minister did not make any extension of the Order, the defendant did not move the Minister to do the needful and when Parliament enacted the would be enabling law it did so with ambiguities. The laxity of the defendant, executive or legislature cannot be visited on the tax payers. I agree with Mr. Muwema’s submission that serving the public interest should not be used to promote illegality or breach of the law.
The law as referred to above, shows that refund of monies, unlawfully taxed or collected in excess of lawful tax is allowed.
In my considered judgment the plaintiff’s claim must succeed. Judgment is accordingly entered in favour of the plaintiff and I make the following orders:-
2. The defendant shall in accordance with the excise laws refund to each of the Diesel and Petrol Importers the monies so collected in excess.
Unless Court has reason to order otherwise costs follow the event See. Section 27 of the Civil Procedure Act. I have no reason to order otherwise. So the plaintiff is awarded cost of this suit.
Hon. Mr. Lameck N. Mukasa
Date: 19th July 2010