Kilombero sugar loses legal challenge against Sh227million tax

Dar es Salaam. Tanzania’s leading sugar producer, Kilombero Sugar Company Limited (KSC), has lost a nearly two-decade legal battle to challenge Sh226.9 tax imposed by the Tanzania Revenue Authority (TRA) in 2013.

The Court of Appeal has nullified and quashed proceedings and decision of the Tax Revenue Appeals Board (Trat) and the Tax Revenue Appeals Tribunal (Trab), which initially heard the tax dispute.

The decision issued last week has rendered the sugar company’s appeal at the highest court in the land incompetent.

The top court has struck out an appeal by KSC, saying Trab illegally assumed jurisdiction it did not have when it entertained appeal by the sugar firm contrary to requirements of section 16 (1) of the TRA Act.

“It is no longer in dispute that the appellant (Kilombero Sugar) did not appeal against the respondent’s (TRA’s) objection decision. The net effect is that the Board assumed jurisdiction which it did not have in entertaining the appellant’s appeal from a non-objection decision.

“Such an incompetent appeal had the effect of vitiating the proceedings before the Board, so its decision. Consequently, the appeal to the Tribunal together with the proceedings and the resultant decision were a nullity from which no competent appeal could have been instituted before this court,” said the Court of Appeal.

KSC knocked the doors of the Court of Appeal in 2020 in protests of decision of Trab which dismissed their appeal against TRA Sh269.9 tax demand.

The legal battle has its roots in 2013 when the sugar producer filed three appeal before Trab challenging TRA’s final tax assessment involving Sh340.7 million.

The board partly allowed the appeal in a decision that aggrieved the taxman who also appealed to Trab against the decision. In the end, Trab ruled in favor of TRA but reduced the tax liability to the sugar company to Sh269.9.

However, as the sugar giant commenced steps to institute fresh appeal at Trab, TRA wasted no time and sent KSC them letter demanding payment of Sh269.9 in honour of Trab’s decision.

Believing that there was still room to appeal against TRA’s tax demand, Kilombero sugar filed a tax appeal before the Board, claiming that TRA’s decision to demand tax was illegal in absence of an application for execution as required by section 24 (3) of the TRAA.

The sugar firm believed that TRA had no automatic right to recover the amount arising from the decision of the Tribunal.

At the hearing of the appeal, one of the lawyers who represented TRA in the matter, Mr Juma Kisongo questioned jurisdiction of the board to entertain the appeal which, according to him, did not arise from an objection decision as per section 16 (1) of the TRAA.

It was their argument that the board had no jurisdiction to entertain an appeal from a non-objection decision pursuant to section 52 of the RAA.

On their part, Kilombero Sugar argued that the appeal before the board was grounded on section 50 (1) of TAA.

In their decision last week, justices of appeal---Shaban Lila, Lugano Mwandambo and madam Justice Lucia Kairo have sided with TRA that Kilombero Sugar’s letter in response to the tax demand did not amount to an objection.

“We say so because Mr Mtafya (Kilombero Sugar’s counsel) did not succeed in persuading us that such a correspondence met the preconditions set out under section 51 (1) of the TAA .