COURT DECIDES THAT UGANDA’S EXCISE DUTY IMPOSED OVER GOODS IMPORTED WITHIN EAST AFRICA IS A VIOLATION OF THE TREATY

 East African Court of Justice, Arusha, 26^th March, 2019: The First Instance Division decided that the government of Uganda violated the East African Community Treaty and the Customs Union and Common Market Protocols by imposing extra excise duty law over imported cigarettes within East Africa. This was a decision in the case filed by the British American Tobacco (BAT) Ltd Uganda, challenging the Government of Uganda over the Excise Duty (Amendment) Act of 2017, that was assented to by the President of Uganda on 13^th June 2017,with a commencement date of 1^st July 2017 and the Act was published in the Uganda Gazette on 30^th June 2017.   The government of Uganda through the Uganda Revenue Authority issued tax assessment notices on the basis of the above amendments requiring the BAT (Applicant) to pay excise duty for its cigarettes manufactured in Kenya and imported to Uganda. The tax assessment initially categorised the cigarettes as locally manufactured but subsequently re categorised the same as imported attracting excise duty at the higher rate for imported cigarettes, i.e. Ushs 75,000 per 1000 sticks of ‘soft cup’ and Ushs 100,000 per 1000 sticks of ‘hinge lid’.

The court further ordered that implementation of the provisions of Sec 2(a) and (b) of the Excise Duty  (Amendment) Act No.11 of 2017 by misconstruction and wrongful re-classification of the British American Tobacco Ltd Uganda’s Cigarettes as ‘imported goods”, contravene and infringe on Articles 1 and 75 (6) of the Treaty as well as Articles 1 (1) and 15 (1) (a) and (2) of the Customs Union Protocol and Article 6 (1) of the Common Market Protocol.

The Court further ordered that the government’s misapplication of the provisions of the said Act by issuance of the payment registration slips for additional taxes in the sum of Ug shs 325,208,000 for the BAT’s 1,170 packages of soft cap cigarettes is illegal, null and void and the court ordered the gov’t with immediate effect to rescind and withdraw the payment registration slips.

In addition the court ordered the government to ensure the interpretation and application of Excise Duty Act with due regard and in compliance with applicable Community Law and to align the Ugandan tax laws with Community Law applicable to goods from EAC Partner States.

The court exercising its discretion ordered each party to bear its own costs on the basis that this case has canvassed matters of grave importance to the advancement of Community law and EAC intra-regional trade, which would be of significant public interest to across section of stakeholders within and beyond the EAC regional bloc.

The court however did not find any infringement of Articles 6 (d) and (e), 7 (1) (c) 75 (1) and (4) or 80(1) of the Treaty, neither was the alleged infringement of article 4 (5)(2) or 32 of the Common Market Protocol as alleged by the Applicant against the government of Uganda.

The judgment was delivered by Honourable Judges: Lady Justice Monica Mugenyi (Principle Judge), Justice Dr Faustin Ntezilyayao (Deputy Principal Judge), Justice Fakihi A. Jundu, Justice Audace Ngiye and Justice Charles Nyachae. 

Notes for Editors:

On 30^th June 2017, on 30^th March 2017, the Government of Uganda published the Excise Duty (Amendment) Bill No.6 of 2017 in the Uganda Gazette proposing an increase in the rate of excise duty on cigarettes (soft cup) from Ushs. 50,000 per 1000 sticks to Ushs. 55,000 per 1000 sticks. The said rate was to apply uniformly to all applicable tobacco products manufactured within the EAC. The Bill was laid before the Parliament and referred to the Committee on finance, Planning and Economic Development. 

The Committee held meetings and prepared a report where it was recommended that the Bill be passed into law subject to a proposed amendment introducing different excise rates for locally manufactured and imported cigarettes. On 10^th May 2017, the Bill was brought before the plenary, debated upon by Members of Parliament and subsequently passed by the Parliament. 

The Bill introduced amendments of excise duty on locally manufactured cigarettes (soft cup) to an amount of Ushs. 55,000 per 1000 sticks and Ushs. 75,000 per 1000 sticks for imports. While introducing Ushs 80,000 per 1000 sticks for hinge lid locally manufactured and Ushs. 100,000 per sticks for imported. 

The Act was assented to by the President of Uganda on 13^th June 2017,with a commencement date of 1^st July 2017 and the Act was published in the Uganda Gazette on 30^th June 2017.   The government of Uganda through the Uganda Revenue Authority issued tax assessment notices on the basis of the above amendments requiring the BAT (Applicant) to pay excise duty for its cigarettes manufactured in Kenya and imported to Uganda. The tax assessment initially categorised the cigarettes as locally manufactured but subsequently re categorised the same as imported attracting excise duty at the higher rate for imported cigarettes, i.e. Ushs 75,000 per 1000 sticks of ‘soft cup’ and Ushs 100,000 per 1000 sticks of ‘hinge lid’.

 Representatives of the British American Tobacco Ltd Uganda (seated in front) in court to receive the judgment.

 Judges of the First instance Division delivering the judgment.

Lawyers in court receiving the Judgment.