IN THE COURT OF APPEAL OF TANZANIA

AT DAR ES SALAAM

(CORAM: OTHMAN, C.J., NSEKELA, J. A., and KALEGEYA J. A.)

CIVIL APPEAL NO. 49 OF 2008

ROSHANI MEGHJEE & CO. LTD. ……………. APPELLANT

COMMISSIONER GENERAL

TANZANIA REVENUE AUTHORITY ……………..… RESPONDENT

(Appeal from the judgment and decree of the Tax Revenue

Appeals Tribunal at Dar es Salaam)

(Shangwa, J.)

Dated the 28th day of January, 2008

NSEKELA, J. A.:

This appeal originates from VAT Tax Appeal No. 8 of 2007

before the Tax Revenue Appeals Board (the Board) in which

the appellant was Roshani Meghjee & Co. Ltd. and the

1
respondent was the Commissioner General of the Tanzania

Revenue Authority. The respondent was ordered to make a

VAT refund amounting to Shs. Tanzania 59,345,168.00 to

the appellant. The respondent was aggrieved by the Board’s

decision and appealed to the Tax Revenue Appeals Tribunal

(the Tribunal) in VAT Appeals No. 11 of 2007. The Tribunal

allowed the appeal hence this appeal preferred to this Court

by Roshani Meghjee & Co. Ltd., the appellant. The

respondent is the Commissioner – General of the Tanzania

Revenue Authority.

At the hearing of the appeal, the appellant was

represented by Mr. Martin Matunda learned Advocate, and

the respondent was represented by Mr. Juma Beleko,

learned Advocate. The appellant preferred four grounds of

appeal, namely:-

2
1. The Tax Revenue appeals tribunal erred in law in

holding that the respondent is not bound by the

incorrect advice given by his office in view of the

express provisions of section 70 of Value Added

Tax Act, Cap. 148 R. E. 2002;

2. The Tax Revenue Appeals Tribunal erred in law in

holding that the respondent has discretion under

section 70 of the Value Added Tax Act, Cap. 146

R. E. 2002 to refund or refuse a refund pursuant

to his wrong advise;

3. The Tax Revenue Appeals Tribunal erred in law in

holding that the general position to the effect that

estoppel cannot operate to prevent the operation

of law was applicable to the circumstances of this

case in view of the clear provision of section 70 of

the Value Added Tax Act, Cap. 148 R. E. 2002;

3
 4. The Tax Revenue Appeals Tribunal erred in law in

holding that the costs incurred by the appellant in

transporting, cotton wharfage, handling container

yard expenses and warehouse rent are non

reimbursable costs.

At the ourtset, Mr. Martin Matunda learned Advocate

for the appellant, consolidated the first three grounds and

argued them together, followed by the 4th ground of appeal.

He submitted that one of the functions of the respondent in

implementing revenue laws was to advise, advocate and

give directions to tax-payers. In the exercise of this

function, the appellant sought clarification from the

respondent on whether the appellant was entitled to claim

refund of VAT paid on transport, warehousing, and port

handling on behalf of the appellant’s principals where the

principals did not refund the VAT. This clarification was

4
sought in view of the Finance Bill of 2003. The respondent

confirmed the interpretation advanced by the appellant by

its letter dated 3/11/2003 to one Christopher Msuya.

Managing Director, Grant Thornton Tax Consultants Ltd,

who were acting on behalf of the appellant. However, by its

letter dated 29/03/2005 to the appellant, the respondent

had a change of mind.

They informed the appellant that their earlier

communications to them on the matter were erroneous and

should not be relied upon. This was the cornerstone of the

appellant’s case. Mr. Matunda contended that the

respondent should have invoked section 70 of the Value

Added Tax Act, Cap. 148 R. E. 2002 and interpreted it

liberally in favour of the appellant. The respondent was

expected to act fairly and equitably in its dealings with the

public. Mr. Matunda concluded by submitting that no

5
reimbursable costs are refundable by the respondent since

these costs are always borne by the appellant. The

clarification that the appellant sought was in respect of the

re-imbursable costs. The learned advocate added that the

respondent gave incorrect advice upon which the appellant

acted upon. He was of the view that section 70 of the VAT

Act as amended applied to the appellant and therefore

should be refunded Tanzania Shs.59,345,169/=.

On his part, Mr. Juma Beleko learned Advocate for the

respondent, submitted that the letter in question were

between the respondent and one Mr. Msuya, and therefore

the appellant, as he put it, is a stranger. He added that the

appellant was a commission agent and therefore did not

qualify for exemption under the 1st schedule of Act 15 of

2003. Mr. Beleko added that in the letter that sought

6
clarification on the law from the respondent, the appellant

did not seek a refund from the respondent.

A convenient starting point for the purposes of this

appeal is a letter dated 17/10/2003 from one Christopher

Msuya, Managing director of grant Thornton Tax Consultants

Ltd addressed to the Commissioner for VAT. This letter is

central to this appeal and we reproduce it in extensor. It

provides as follows:-

RE: CLARIFICATION ON THE AMENDMENT OF VAT

ACT, 1997

Our client, M/S Roshan Meghjee Co. Ltd. is an agent for

overseas buyers of cotton.

Our client earns commission on services performed for

the principals, including but not limited to, overseeing

7
transportation (if the cotton is brought exginnery),

storage and handling at the port.

In the process our client pays for these costs on behalf

of the principals and is eventually reimbursed.

As stated earlier, apart from the reimbursement, the

client also charges commission for the work done. On

the basis of the foregoing our client was a regular

repayment trader as all his services were considered as

exported prior to the finance bill 2003.

It is our understanding that by the introduction of the

said finance bill, the commission earned by our client is

considered as not having been exported, and therefore

has to suffer VAT.

It is also our understanding that our client will be

entitled to claim refund of VAT paid on transport,

8
 warehousing, and port handling on behalf of the

principal, so long as such VAT is not reimbursed by the

principals.

Kindly confirm the correctness of our

understanding so that we may advise our client

to properly comply with the law. Your earliest

response in this regard will be highly appreciated”

(emphasis added).

The response from the respondent in a letter to the

appellant dated 3/11/2003 in material part reads as under:-

“We would like to confirm that according to the

amendments of the VAT Act 1997 made through the

Finance Bill, 2003, your submission as regard to export

of services as well as VAT on transport, warehousing

9
 and port handling serviced is quite proper and you may

advice your client accordingly”.

On the 29/3/2005, the respondent, in his letter to the

appellant stated as follows:-

Re: PREVIOUS CORRESPONDENCES ON VAT ISSUES

Reference is made to the above mentioned subject.

You will recall that M/S Grant Thornthon who are your

Tax Consultants, wrote us a letter with Ref. No. GTT/J

– 5 dated 17th October, 2003 which sought to confirm

that:-

(i) Following the amendments introduced to the

VAT ACT, 1997 vide the Finance Act of 2003,

the commission earned by RMCL is liable for

VAT at the standard rate.

10
(ii) VAT incurred by M/S RMCL, which is not

reimbursed by principals qualifies to be input

tax to M/S RMCL, hence entitled to

deduction/claim for VAT repayment.

We replied to the above mentioned enquiries

vide our letter with Ref. No.

CVAT/VAT/10/01370 dated 3rd November,

2003.

We wish to inform you that our clarification

and advice were based on the contents of the

letter from your tax consultants. However,

on audit which was conducted to your

company by the department of Large

Taxpayers revealed that our letter with Ref.

No.CVAT/VAT/10/01370/30 of 3rd November,

11
2003 gave an incorrect advice as far as the

enquiry in (ii) above is concerned.

The final accounts of M/S RMCL which were

availed to the Large Taxpayers Department

gave a clear narration of the types of direct

reimbursable by the as well as non

reimbursable costs. The findings by the

Large Taxpayers Department has led us to

conclude that the non-reimbursable costs

cannot be claimed back as input tax by M/S

RMCL because they are not part of the costs

which were supposed to be incurred by

Principals. In addition, even the principals

could not have been entitled to claim them

because they are not registered for VAT in

Tanzania. On the basis of this fact, we have

12
 been compelled to rescind our earlier advice

which granted you the entitlement to input

tax deductions on VAT relating to the costs

which are not re-imbursable to M/S RMCL”.

The thrust of the three consolidated grounds of appeal

revolve around the doctrine of promissory estoppel. The

contention of the appellant is to the effect that the

respondent’s officials should always be gentleman and that

taxpayers expect and are entitled to receive ordinary fair

play from tax officials. The appellant in effect received

written assurances from the respondent’s officials on the

interpretation of VAT law under dispute and relied upon such

assurances. The appellant was in effect setting up an

estoppel against the Value Added Tax Act.

There is a well-known maxim that there can be no

estoppel against statute. It is on the basis of this maxim

13
that tax authorities are able to get away quite often from the

consequences of ill – advised letters/circulars it issues

purporting to explain the law.

As stated before, one Christopher Msuya, Managing

Director of Grant Thornton Tax Consultants Ltd, sought

clarification on behalf of the appellant on amendments to

the VAT Act, 1997 regarding, inter alia, entitlement to refund

of VAT paid on transport, warehousing, and port handling on

behalf of the appellant so long as VAT is not reimbursed by

the appellant’s principals. An official of the respondent, one

Mr. P. J. Kiatu, responded positively to this enquiry. Then

followed the respondent’s contrary advice on the 29/3/2005

in which the Commissioner for VAT rescinded the earlier

letter. The issue then before us is whether this latter

communication to the appellant, can be enforced in a court

of law.

14
 Taxation is a sovereign power to realize revenue to

enable the Government to discharge its obligations. The

power to do so is derived from Article 138 (1) of the

Constitution of the United republic of Tanzania. It provides

as follows:-

“138 (1) No tax of any kind shall be imposed save in

accordance with a law enacted by Parliament or

pursuant to a procedure lawfully prescribed and having

the force of law by virtue of a law enacted by

Parliament”.

The VAT Act, Cap. 148 R. E. 2002 was enacted by

Parliament. In the case of Income Tax Commissioners

v. AK [1964] EA 648 at page 652 H, it is stated as

under:-

15
 “I understand the law to be that no estoppel whatever

its nature, can operate to annual statutory provisions

and a statutory person cannot be stopped from

performing his statutory duty or from denying that he

entered into an agreement which was ultra-vires for

him to make. A statutory person can only perform acts

which he is empowered to perform. Estoppels cannot

negative the operation of a statute and it is a public

duty to obey the law….”

(See also: Chatrath v Shah [1967] EA 93); Tarmal

Industries Ltd v Commissioner of customs and Exercise

[1968] E.A 479.)

It is self – evident from these cases that the appellant’s

submissions on this issue cannot succeed. It is now settled

law that there is no estoppel against the performance of a

16
statutory duty. This disposes of the consolidated three

grounds of appeal.

The fourth grounds of appeal is essential based as well

on the respondent’s letter to the appellant dated the

29/03/2005 which has been reproduced before. The

relevant part reads as follows:-

“The findings by the Large Taxpayers Department had

led us to conclude that the non-reimbursable costs

cannot be claimed back as input – tax by M/S RMCL

because they are not part of the costs which were

supposed to be incurred by the principals. In addition,

even the Principals could not have been entitled to

claim them because they are not registered for VAT in

Tanzania On the basis of this fact, we have been

compelled to rescind our earlier advice which granted

17
 you the entitlement to input tax on VAT relating to the

costs which are not re-imbursable to RMCL”

This view was endorsed by the tribunal in its judgment on

appeal from the Board (see: page 295 of the record of

appeal). This ground of appeal is closely connected with the

consolidated three grounds of appeal. It is however

differently crafted. The issue concerns that what is termed

“non-reimbursable costs”. It appears to us that the refund

of these costs was not considered as such by the Board and

the Tribunal. In our view, what amounts to non-

reimbursable costs cannot be determined without evidence

being given to that effect to establish the facts. The issue

as to whether the reimbursement of costs included VAT was

not one of the issues framed for determination by the Tax

Revenue Appeals Board. It is not surprising that on appeal

to the Tribunal, it was dismissed on this point. Again, this is

18
the same issue being cleverly introduced on appeal to this

court. With respect, we cannot entertain it for this will

necessitate re-evaluating the evidence which is non-existent

on the record, assuming we had the power to do so, having

in mind Section 25 (2) of t5he Tax Revenue Appeals Act,

Cap. 408 R. E. 2002.

For the above reasons, we dismiss the appeal with costs. It

is accordingly ordered.

DATED at DAR ES SALAAM this 12th day of July, 2011.

M. C. OTHMAN
CHIEF JUSTICE

H. R. NSEKELA
JUSTICE OF APPEAL

L. B. KALEGEYA
JUSTICE OF APPEAL

19
I certify that this is a true copy of the original

E. Y. MKWIZU
DEPUTY REGISTRAR
COURT OF APPEAL

20