Africa-Press – Tanzania. THE Court of Appeal has dismissed the appeal by Pan Africa Energy Tanzania Limited, challenging 12bn/- tax assessment for 2008 and 2012 period on natural gas production and marketing activities made by Commissioner General of the Tanzania Revenue Authority (TRA).
Justices Jacobs Mwambegele, Rehema Kerefu and Issa Maige ruled against the natural gas producer and supply company, the appellant, after holding that the appeal challenging a decision given by the Tax Revenue Appeals Tribunal (Tribunal) in favour of TRA, the respondent, was devoid of merits.
“We do not find any cogent reasons to disturb the concurrent findings and the decisions of the Tax Revenue Appeals Board and the Tribunal. In the event, we uphold the decision of the Tribunal and dismiss the appeal with costs,” they declared.
According to the justices, it is not in dispute that the appellant is a registered company in Tanzania whose activities include production and marketing of natural gas, thus a taxable person and a registered tax payer.
They also noted that under the Operatorship Agreement, the appellant procured equipment and materials in his own name and then transferred the same to Songas Limited, who is another taxable person.
In return, the justices further observed, the appellant received reimbursements on the said transaction and it was not in dispute the failed to account and make returns for VAT on the imported services.
“Since there is no dispute that the said transaction was made by the appellant, a taxable person, in her own name in the course of her business, it constituted a taxable supply,” they said.
The justices, therefore, that it was not correct, as argued by counsel for the appellant that the said transaction was done by the appellant (an agent) on behalf of Songas (the principal), as the record bears out that the same was done by the appellant in her own name, hence an independent agent.
They pointed out that as correctly argued by the state counsel for the respondent, in terms of the provisions of section 29 (1) of the Value Added Tax Act, the appellant, as a taxable person, was required to issue a tax invoice in respect of that transaction.
“It is therefore our considered view that the appellant cannot be allowed to benefit from an omission which is illegal in the first place,” the justices said.
The appellant is a registered company in Tanzania whose primary activities include production and marketing of natural gas produced in Songo Songo gas fields.
Such activity is per Production Sharing Agreement (PSA) executed in October, 2001 between the Government of United Republic of Tanzania, the Tanzania Petroleum Development Corporation (TPDC) and the appellant.
The appellant operates the gas processing plant owned by Songas Limited under the Operatorship Agreement entered between them. In 2013, the respondent conducted tax audit on appellant’s accounts which covered the period of 2008 to 2012.
In the said audit, the respondent raised a number of queries including, over-claimed input tax, unaccounted VAT on imported services under Songo Songo operatorship services.
Subsequently, on December 19, 2013, the respondent issued an assessment for additional VAT payable of 12,263,250,914/-comprising principal tax of 6,012,588,034/- and interest of 6,250,662,880/-.
On 24th January, 2014, the appellant objected the respondent’s assessment for the additional VAT on account that she is entitled to claim half of the input tax that has been assessed as over-claimed by the respondent.
The appellant also stated that on the imported services, the respondent has assessed output tax without allowing corresponding input tax deduction and has wrongly imposed interest on the corrected VAT on imported services.
Furthermore, the appellant stated that the materials, equipment and services procured by the appellant on behalf of Songo Songo attracted no taxable supply. As such, the appellant proposed to only pay of 1,897,409,090/-.
The respondent and the appellant exchanged several correspondences to iron out their differences on the tax dues where some of the calculations were revised but the respondent maintained its position on most of the issues and thus confirmed the audit assessment for 12,263,250,914/-.
Aggrieved, the appellant unsuccessfully challenged the decision of the respondent to both the Board and the Tribunal. Undauntedly, the appellant decided to take the matter to the Court of Appeal.
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