RESOLVING TAX DISPUTES IN NIGERIA: A TALE OF THE FLIRTATIONS OF OUR LAWS By Olumide, Bidemi Daniel 1 PROLOGUE Law Teacher:

From the Stabilini Visinoni and Cadbury cases I recommended to you last week, what three same themes will you consider to run through them both? Law Student 1: The jurisdiction of the VAT Appeal Tribunal; the fons et origo and the supremacy of the Constitution. Law Teacher: Interesting! Any other attempt? Law Student 2: A flirtatious tax law, an over - ambitious and inflexible Constitution and the same panel of the Court of Appeal. Class: (mild laughter)

BACKGROUND And so this commentary begins with the conclusion of the two cases, Stabilini Visinoni Ltd v. Federal Board of Inland Revenue2 and Cadbury (Nig.) Plc v. Federal Board of Inland Revenue3 where the same panel of the Court of Appeal held Section 20(1) of the Value Added Tax Act, 1993 (as amended) (VAT Act)4 unconstitutional in light of the overriding provisions of Section 251(1)(a) (b) of the Constitution of the Federal Republic of Nigeria, 1999 (1999 Constitution)5. An apt summary of the Honourable Courts decision in both cases is that the VAT Tribunal, technically a creation of Decree No. 32 of 1996, cannot validly hear and determine any matter that relates to the recovery of outstanding value added taxes, same being revenue of the Federal Government of Nigeria; the two cases had been separately instituted by the Federal Board of Inland Revenue at the VAT Tribunal sitting at Ibadan for the recovery of value added taxes that both Stabilini Visinoni
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Olumide, Bidemi Daniel A.C.T.I, LL.B, B.L, LL.M, PMP is a Financing and Tax Attorney with Adepetun Caxton-Martins Agbor & Segun, a Nigerian full-service law firm. 2 (2009) 13 N.W.L.R. (pt. 1157) 200; (2009) 1 T.L.R.N. 1 3 (2010) 2 N.W.L.R. (pt. 1179) 561; (2010) 2 T.L.R.N. 16 4 Section 20(1) of the VAT Act provides: Any tax penalty or interest which remains unpaid after the period specified for payment may be recovered by the Board through proceedings in the Value Added Tax Tribunal 5 Section 251(1) (a) (b) of the 1999 Constitution provides: Notwithstanding anything to the contrary contained in this Constitution and in addition to such other jurisdiction as may be conferred upon it by an Act of the National Assembly, the Federal High Court shall have and exercise jurisdiction to the exclusion of any other court in civil causes and matters (a) relating to the revenue of the Government of the Federation in which the said Government or any organ thereof or a person suing or being sued on behalf of the said Government is a party; (b) connected with or pertaining to the taxation of companies and other bodies established or carrying on business in Nigeria and all other persons subject to Federal taxation;

Ltd and Cadbury (Nig.) Plc ought to have imposed, collected and remitted to it. According to the panel of the Court of Appeal which heard both cases, as constituted by their Lordships Clara Bata Ogunbiyi, Chidi Nwaoma Uwa and Modupe Fasanmi, JJ.C.A, both the provisions of Sections 1(1) (3) (which preserves the supremacy of the Constitution) and 251(1) (a) (b) both of the 1999 Constitution renders Section 20(1) of the VAT Act, which vested such jurisdiction in the VAT Tribunal, invalid. On Wednesday, February 3, 2010 the Honourable Federal Minister of Finance, Dr. Mansur Muhtar pursuant to Section 59 of the Federal Inland Revenue Service (Establishment) Act, 2007 Act No. 13, 2007 (FIRS Act), notified the general public of the replacement of the Body of Appeal Commissioners and the Value Added Tax Tribunal with the Tax Appeal Tribunal, and which Appeal Tribunal is by paragraph 11 of the Fifth Schedule of the FIRS Act given the powers to adjudicate on disputes and controversies arising from the following tax laws: i. ii. iii. iv. v. vi. vii. viii. ix. x. Companies Income Tax Act Personal Income Tax Act Petroleum Profits Tax Act Value Added Tax Act Capital Gains tax Act Any other law contained in the First Schedule of the FIRSEA or other laws made or to be made from time to time by the National Assembly Stamp Duty Act Taxes and Levies (Approved List for Collection) Act All regulations, proclamations, government notices or rules issued in terms of these legislations Any other law for the assessment, collection and accounting of revenue accruable to the Government of the Federation as may from time to time or regulations incidental to those laws, conferring any power, duty and obligation on the Service Enactments or laws imposing taxes and levies within the Federal Capital Territory Enactments or laws imposing collection of taxes, fees and levies collected by other government agencies and companies including signature bonus, pipeline fees, penalty for gas flared, depot levies and licences, fees for Oil Exploration Licence (OEL), Oil Mining Licence (OML), Oil Production Licence (OPL), royalties, rents (productive and non-productive), fees for licences to operate drilling rigs, fees for oil pipeline licences, haulage fees and all such fees prevalent in the oil industry but not limited to the above listed6

xi. xii.

This commentary seeks to appreciate the new Tax Appeal Tribunal and its jurisdiction in light of the decision of the Court of Appeal in the Stabilini Visinoni and Cadbury (Nig.) Plcs cases, our constitutional supremacy and more importantly in the light of effective and efficient tax disputes resolution in Nigeria. Conclusively,
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Please see, Thisday Newspaper of Wednesday, February 3, 2010 at page 15

we might have an open-ended question on whether or not it will serve the nation more good for it to have specialised Courts for the resolution of tax disputes and if it so will, what steps ought to be taken to validate those that will be created.

BRIEFING THE CASES Stabilini Visinoni Ltd v. Federal Board of Inland Revenue: The FBIR commenced this action at the VAT Tribunal sitting at Ibadan by a Statement of Claim dated October 28, 2004 and claimed before the Tribunal its Best of Judgment (BoJ) Assessment of VAT remittable by Stablini Visinoni Ltd (Stabilini) for the periods August 1995 to December 2000 in the sum of N72,656,900.93 (SeventyTwo Million, Six Hundred and Fifty-Six Thousand, Nine Hundred Naira, Ninety-Three Kobo). Stabilini entered a conditional appearance in the suit by a Memorandum of Appearance dated November 30, 2004 and further filed a Notice of Preliminary Objection and Statement of Defence dated January 10, 2005. Stablini prayed the Tribunal for Orders dismissing the suit on the grounds that the Honourable VAT Tribunal is a body that radically violates the provisions of Section 251(1) of the 1999 Constitution and that the suit is an abuse of court process considering the fact that the FBIR had earlier instituted a similar suit consisting of the same parties, issues and subject-matter at the Federal High Court. The Honourable Tribunal heard the Notice of Preliminary Objection on March 8, 2005 and on March 21, 2005, gave its ruling wherein it dismissed Stabilinis objections by affirming its jurisdiction to hear the suit. Stabilini thereon proceeded to the Court of Appeal by a Notice of Appeal dated November 7, 2006, leave having been granted for it to appeal out of time. On hearing the appeal and upon its judgment delivered on Monday, May 25, 2009, the Court of Appeal, identified four issues for determination but proceeded to determine one in the main, to wit: Whether the VAT Tribunal was right to have assumed jurisdiction to hear and determine this matter, in clear violation of the provisions of Section 251(1) of the Constitution of the Federal Republic of Nigeria, 1999? In the lead judgment delivered by the Honourable Justice Clara Bata Ogunbiyi J.C.A., the Court of Appeal, after considering the arguments proffered by Mr. C.F. Agbu on behalf of Stabilini and Mrs. A.C. Akwiwu for FBIR, the Court of Appeal made the following findings of law and facts, to wit, that: the jurisdiction of a Court is derivable either from the Constitution or Statute and the absence of such renders a proceeding, no matter how well conducted, a nullity; in order to determine whether the FBIRs claim as filed at the VAT Tribunal, falls outside the Tribunals powers and jurisdiction, a thorough analysis of the provisions of Section 251(1) of the 1999 Constitution is apt;
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the analyses of the opening two distinctive phrases of Section 251(1)(a)&(b) are conjunctive and mandatory in nature, such that the specific jurisdictional conferment on the Federal High Court is sacrosanct. It cannot, regardless of anything which is either contrary and (sic) contained in the Constitution or in addition to any further jurisdiction to be conferred upon it by an Act of the National Assembly, be limited; the jurisdiction provided for under Section 251(1) of the 1999 Constitution is in relation to the revenue of the Government of the Federation, which is connected with or pertaining to the taxation of companies and other bodies established ... and subject to Federal taxation; from the totality of FBIRs Statement of Claim, it is apparent that the suit was for the recovery of revenue payable to the Federal Government of Nigeria; contrary to the arguments of Mrs A.C. Akwiwu, Section 315(1) & (3) of the 1999 Constitution does not derogate from or usurp the exclusive jurisdiction granted to the Federal High Court by Section 251(1); the Courts consistently frown at any attempt to erode or relegate the powers of the court or the supremacy of the Constitution and that the only way the VAT Tribunal can have jurisdiction to entertain the action is through a process of competent amendment of the Constitution; and there being no evidence of such having been done; the VAT Tribunal Act (sic) is in violation of Section 1(1)(3) of the 1999 Constitution; on the totality the case, Section 20 of the VAT Tribunal Act (sic) is very inconsistent with the Constitution and hence same cannot therefore stand and is hereby declared null and void. In other words the VAT tribunal had no jurisdiction to entertain this action.

Conclusively, the Honourable Court set aside the ruling of the VAT Tribunal and struck out FBIRs suit with an award of N50,000 (Fifty Thousand Naira) in favour of Stabilini. Cadbury (Nig.) Plc v. Federal Board of Inland Revenue: The FBIR commenced this action at the VAT Tribunal sitting at Ibadan on October 28, 2004 with a claim for the VAT due from Cadbury (Nig.) Plc (Cadbury) between 1999 and 2005 and principally claimed for the VAT arising out of the November 24, 1999 contract between Cadbury and Cadbury Schweppes Overseas Ltd, wherein Cadbury was given the rights to certain recipes, processes, know-how, trademarks and technical information in consideration for royalties and fees payable to Cadbury Schweppes Overseas Ltd on the basis of a fixed percentage of Cadburys annual sales and/or profits. It was FBIRs claim that this transaction is vatable. Pleadings were exchanged between the parties and the suit accordingly proceeded to trial. On March 13, 2006 the Tribunal gave its judgment and found Cadbury liable to pay VAT in the sum of N134,817,258 (One Hundred and Thirty-Four Million, Eight
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Hundred and Seventeen Thousand, Two Hundred and Fifty-Eight Naira) and a prejudgment interest of N114,304,468 (One Hundred and Fourteen Million, Three Hundred and Four Thousand, Four Hundred and Sixty-Eight Naira), giving a total of N249,121,726 (Two Hundred and Forty-Nine Million, One Hundred and Twenty-One Thousand, Seven Hundred and Twenty-Six Naira). Cadbury appealed the judgment and at the hearing raised six issues for determination, one of which was that whether in the light of Section 251(1)(a) and (b) of the 1999 Constitution, the Value Added Tax Tribunal established by the Honourable Minister of Finance has or lacks jurisdiction to entertain the respondents claim. The Court of Appeal gave judgment in the Appeal on Monday, November 30, 2009, wherein the Honourable Justice Modupe Fasanmi J.C.A., giving the lead judgment and relying on numerous judicial authorities, including the Honourable Courts earlier decision in Stabilini Visinoni Ltd v. Federal Board of Inland Revenue, made the following findings of law and facts, to wit, that: in determining the exclusive jurisdiction of the Federal High Court in respect of Section 251(1) of the 1999 Constitution, the court must carefully examine the facts of the case to see whether they justify the application of the section; that it is from the examination of the Statement of Claim and not the defence that the court can ascertain whether or not the Federal High Court has exclusive jurisdiction pursuant to the section; FBIRs cause of action deals with the revenue of the Federal Government of Nigeria and hence it is within the exclusive jurisdiction of the Federal High Court; Section 20(1) of the VAT Act is invalid in view of its inconsistency with Section 251 of the 1999 Constitution by virtue of Section 1 (3) of the 1999 Constitution; Section 6(6)(b) of the 1999 Constitution did not preserve the jurisdiction of the VAT Tribunal as a fact finding Tribunal, rather the sections objective is to preserve the legislative powers of the bodies which enacted existing laws and same does not prevent the unconstitutionality of an existing law from being challenged; Section 20 of the VAT Act is declared null and void.

The Honourable Court conclusively declared FBIRs case at the VAT Tribunal a nullity and set aside the Tribunals judgment with an award of N30, 000 (Thirty Thousand Naira) made in favour of Cadbury.

STABILINI VISINONI & CADBURY: WHAT LESSON FOR SPECIALISED COURTS? It may be recalled that the VAT Act 1993 as originally enacted, by Section 16 thereof provided that Any tax, penalty or interest which remains unpaid after the period specified for payment may be recovered by the Board through proceedings in the Federal High Court; and wherefore it was pursuant to Decree No. 32 of 1996 that the VAT Tribunal and its jurisdiction were introduced to our general body of laws. Effectively, the VAT Tribunal is today recognised as a creation of Section 20 and the Second Schedule to the VAT Act7 The enabling statute did not state it to be a superior court of record, but the nature of its relationship to the established hierarchy of Courts will suggest it as one. For example and by paragraph 24 of the Second Schedule to the VAT Act (as amended), appeals against the decision of the VAT Tribunal on points of law lay in the Court of Appeal, thus and unwittingly, placing it on the same rank in the hierarchy of courts as the Federal High Court and States High Courts, amongst others of the same hierarchy. Further, paragraph 12 of the same Schedule provided that the judgment of the Tribunal will be enforceable as a judgment of the Federal High Court, save that such judgment must first be registered at the Federal High Courts Registry. All these clothed the VAT Tribunal with the legal backing to adjudicate tax disputes, even though the fons et origo, the grundnorm that validates all laws, the Constitution of the Federal Republic of Nigeria, 1999, promulgated well after the relevant amendment to the VAT Act, did not expressly mention it, save for its blanket recognition of the VAT Act as an existing law under its Section 315. However, where as in the present case, we have a Constitution that expressly lists the jurisdiction that a Court created by it , such as the Federal High Court, is to have, then the VAT Act and its creation, the VAT Tribunal will have to tread carefully; after all, to the extent its existence and jurisdiction is not a constitutional creation, we lightly and without any import attached to the expression, call it a second class citizen. It should not attempt to share of the children of the Constitutions hereditaments; their jurisdiction having been expressly spelt out. Our body of laws is replete with all such Courts that the constitution never expressly mentioned, from the Courts Martial to the National Industrial Court; from the Investments and Securities Tribunal to the Tax Appeal Tribunal. These Courts, in as much as they were validly created by other statutes, they are preserved by such sections as Sections 6(5) (j-k), 6(6)(b)(d) and 315(1) of the 1999 Constitution; however, they will attract the reprimand of their decisions or assumption of jurisdiction being declared null and void when they over-step their bounds to determine subject-matters exclusively reserved for a court directly created by the
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As amended and now compiled as Cap. V1, Laws of the Federation of Nigeria, 2004.

Constitution. It was this forwardness that befell the VAT Tribunal in the Stabilini Visinoni and Cadbury cases; for all matters that are related to the revenue of the Federal Government (and the Court held VAT to be one of such) in which an organ of the Federal Government is a party to or connected with or pertaining to the taxation of companies, are exclusive to the jurisdiction of the Federal High Court. Thus, the Court of Appeal did not hesitate to raise the constitutional hammer of Section 1(3) of the 1999 Constitution to declare Section 20(1) of the VAT Act (as amended), null and void.

THE TAX APPEAL TRIBUNAL AND HOW NOT TO PLAY SAFE The present Tax Tribunal, while of the same rank as the Body of Appeal Commissioners is lower in hierarchy to the VAT Tribunal; this conclusion is drawn from the fact that whilst appeals from the VAT Tribunal on points of law lies to the Court of Appeal, such appeals from the Tax Appeal Tribunal, by virtue of paragraph 17 of the Fifth Schedule to FIRS Act, lies to the Federal High Court. Quite rationally, one should wonder why such a lower court will replace the VAT Tribunal and more importantly, why maintain an extended chain of judicial forums to determine tax disputes. But of course such wonder will only be warranted if the Tax Appeal Tribunals jurisdiction to determine tax and revenue disputes is constitutionally valid. Before proceeding further, it is important to explain the italicised and underlined replace in the preceding paragraph. The publication by the Federal Minister of Finance on Wednesday, February 3, 2010, to the effect that the Body of Appeal Commissioners and the Value Added Tax Tribunal have been abolished and no longer exist smears of wrong law in light of the fact that both the Body of Appeal Commissioners and the Value Added Tax Tribunal are creations of statute. Indeed, only by a corresponding statutory provision can their existence be terminated; unfortunately no statute has so spoken. The words of the Federal Minister of Finance are not lethal enough, only an Act of the National Assembly or amendments to the relevant existing laws is. We may save the day however by referring to the Body of Appeal Commissioners and the Value Added Tax Tribunal as disbanded. Now to the body of this head, Section 251(1) (a) and (b) of the 1999 Constitution creates the exclusive jurisdiction of the Federal High Court, without stating whether same is original or appellate. However, since by the express wordings of the same section, the National Assembly can create additional jurisdiction for the Federal High Court, it should be arguable that one of such additional jurisdiction is an appellate jurisdiction as paragraph 17 of the Fifth Schedule to FIRS Act has now done. But should there really be an argument here seeing the fact that the reality of the new Tax Appeal Tribunal is a reincarnation of the disbanded Body of Appeal
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Commissioners where appeals used to flow from it to the Federal High Court, through to the Court of Appeal and ultimately, the Supreme Court? But really, why should any Government want revenue and tax disputes to go through three levels in its judicial hierarchy before an unappellable determination by the Supreme Court? The pulse, nay purse, of Government should feel the bite of delays in the determination of tax and revenue disputes. These revenues ordinarily constitute the appropriations in a typical budget, and of course budgets should be developed on the basis of actual revenue and not the contingent revenue tied up in a litigation process. The almost 20 years it took to resolve Shell Petroleum Development Co. (Nig.) Ltd. v. Federal Board of Inland Revenue8 is indicative of how old a tax dispute can grow! It would practically defeat governments objective of taxation and revenue generation if citizens validly exercise their rights to dispute allegedly wrong assessments in a protracted system of tax liability adjudication. On a second thought, there is conservative wisdom in not placing the Tax Appeal Tribunal on the same rank as the VAT Tribunal, since the logical implication of this, in light of the decisions in Stabilini Visinoni and Cadbury, is that, practically all disputes arising from the legislations enumerated by the Federal Minister of Finance and as contained in the introductory part of this commentary, will largely not be subject to the jurisdiction of such Tax Appeal Tribunal but the Federal High Court. The only exceptions that can readily be hazarded from the Federal Minister of Finances list will be the personal income tax of persons indirectly mentioned under Section 2(1)(a) of the Personal Income Tax Act, that is, persons not included in Section 2(1)(b) thereof; Stamp Duties collectible by States Government, Capital Gains Tax collectible by States Governments and the taxes that fall under Parts B and C of the Taxes and Levies (Approved List for Collection) Act. All these are taxes that are due to State Governments and which by the bold, yet challengeable judgment of the Court of Appeal in Shittu v. Nigerian Agric. Coop Bank Ltd9, the Federal High Court is without jurisdiction to try. It may be recalled that the case is a judicial authority on the law that the Federal High Court has no jurisdiction in civil causes or matters relating to the revenue of a state Government or any authority established by the Government of a State. Less this authority and the highlighted laws, the Federal High Court is that channel which all federal tax and revenue disputes must pass through. The peculiar historical features of the Federal High Court as a federal revenue court should not easily be forgotten. Indeed its original creation in 1973 was in response to the need for the establishment of a court to hear and determine all matters relating to the revenue of the Federal Government. Apparently it seems we have now completed the same cycle with the constitution of the Tax Appeal Tribunal to hear and determine the same subject! The need for this development may not be far8 9

(1996) 8 N.W.L.R. (pt. 466) 256 (2001) 10 N.W.L.R. (pt. 721) 331, 317 (paragraphs D F), 319 (paragraph H)

fetched from the fact that over the years the Federal High Court has assumed more jurisdictions, even in the light of the remaining subsections to Section 251(1) of the 1999 Constitution, such that the hearing and determination of matters on the revenue of the Federal Government appears no longer to be its primary preoccupation. Further, when we reckon the fact that so many other statues including the Trade Marks Act, Patents Act, Nigerian Communications Act, Admiralty Jurisdiction Act, and so on, created additional exclusive jurisdictions for the Federal High Court, we will appreciate why matters that border on the revenue of the Federal Government will not often take priority in the long list of matters that are consistently filed at the Federal High Court. Unfortunately, whilst it is within our remit to cry over the over-burdened Federal High Court, its father, the Constitution and by virtue of its carefully crafted Section 251(1) (a)(b) is practically insensitive to this fact. Could it be that the fear of amending Section 251(1) (a) (b) led to the creation of the subordinated Tax Appeal Tribunal?

LET US TALK STRAIGHT The beauty of modern Government is in its dynamism; the ability to respond to changing times and circumstances with the swiftness and deftness that ensures that its objectives, which naturally must be legitimate, are met at the least costs. As far back as 1973, we had recognised the need for a special court to resolve tax and revenue disputes; the need for a dedicated forum to resolve such quite natural and unavoidable disputes. More importantly, we know as a matter of practical logic that the creation of an additional court, either south or north of the hierarchy of Courts, only protracts the litigation process. Most often than not, the object of a tax dispute is money. Time is a factor that really never waits for money even though the value of money is largely a function of time. Modern Government as a social business needs to value time by creating timeeffective and time-efficient processes for the resolution of disputes on monies it considers due to it. Shying away from the replacement of the jurisdiction of the Federal High Court in tax and revenue matters with a specialised Court of coordinate jurisdiction is a negation of dynamism. No price is too much to pay for ensuring that a system that works is birthed, not even a constitutional amendment.