In an over-a-decade protracted legal battle between Uganda's tax collecting agency URA and one of the popular used car importing company, Testimony Motors, the court of appeal has unanimously settled the storm harmonizing the contested battle.
The case:
The Commissioner Customs URA v Testimony Motors Ltd Civil Appeal No 33 of 2014, judgement delivered on 23rd March 2023.
The Facts
The facts of the case are that on 19th 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 transactions value of USD 5,200 out of which it was supposed to pay taxes of USD3,588. The dollar rate to Uganda Shillings at that time was 2,232thus 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 methods 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...
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. The court awarded aggravated damages of Shs10 20,000,0097= (Twenty million shillings) to the respondent, interest thereon, and costs.
In the Lead judgement of the court delivered by Catherine Bamigemereire JA with whom Richard Butera DCJ and Stephen Musota JA agreed, the learned lady justice while finding 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 dissected the law in Section 122 (1) of the East African Community Customs Management Act, 2004 zeroing down to the fourth schedule parts I, II and III.
The learned lady justice observed that ;
1. The value of imported goods is to be determined according to the fourth schedule, and the customs value of imported goods is primarily the Transaction Value Method.
2. Part II of the 4rh Schedule mandates valuation based on sequential order emphasizing that the primary methods for customs valuations defined in paragraph 2 and imported goods are to be valued in accordance with the provisions of this paragraph whenever the conditions prescribed therein are fulfilled.
3. Where the customs value cannot be determined under paragraph 2 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.
The court concluded that 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, which the appellant didn't follow.
On analysing sections 253, Section 5 (2) and Section 3 of EACCMA, the learned justice of appeal found that 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.
This decision means that the value of the imported goods is to be determined in accordance with the fourth schedule of the EACCMA, and the customs value shall primarily be determined with the Transaction Value Method.
The decision has been welcomed by most car dealers and Tax attorneys in Uganda, and most say it will be helpful moving forward.
The Author, Simon Nyakoojo, is a Senior Writer and Co-Founder at the Judicial Sound Exponent. Are you impressed, have any concerns, or think we can improve this article? Email us or send us Twitter message.