Tanzania: TRA Wins 2.5bn/ - Legal Battle Against Investor in Goldmine

By Faustine Kapama

GEITA Gold Mine (GGM) Limited has suffered another defeat over payments of tax amounting to

1,105,510.77 US dollar (about 2.5bn/-) after losing another appeal lodged by Tanzania Revenue Authority (TRA) Commissioner General.

This followed a decision issued by the Court of Appeal to dismiss with costs the tax appeal under which GGM, the appellant, had lodged to challenge the judgment of the Tax Revenue Appeals Tribunal (Tribunal), which had ruled in favour of TRA, the respondent.

In their judgment delivered recently, Justices Stella Mugasha, Gerald Ndika and Mary Levira declared; "We find no merit in this appeal.

Consequently, we uphold the decision of the Tribunal and dismiss this appeal in its entirety with costs."

The justices noted that in the appeal the main contention centred on fuel supplied by the appellant to a company known as Golden Construction Limited (GCL) to run the 24 small generators.

The appellant faulted Tribunal for holding that she was to pay Value Added Tax (VAT) for fuel supplied to GCL.

They noted also that the appellant did not dispute the fact that he had issued an invoice for fuel indicating VAT to GCL, although he said, it was wrong because there was no supply and the respondent was not supposed to claim VAT.

Furthermore, the justices observed the appellant was not privy to the subsequent agreement between Rolls Royce Company Limited (as a parent Company of GCL) and AIPL which supplied 24 generators consuming excessive fuel.

The appellant demanded payment for the fuel supplied for the running of the said generators from Golden Construction Limited and issued a tax invoice of 5, 527,553.83 US dollars and charged VAT of 20 per cent, but did not remit the same to the respondent.

"According to the record, the invoice was debited and it appears in the appellant's audit report for the year 2002 - 2003.

The invoice which the counsel for the appellant claimed that it was cancelled was found to be untrue both before the (Tax Appeals) Board and the Tribunal," the justices said.

Therefore, they said, since there was no dispute that the appellant supplied fuel to the GCL to enable the 24 generators to run for furtherance of business; and since the said generators were installed under an agreement in which the appellant was not a party, the supply of such fuel amounted to "vatable supply.

"Section 5(1) of the VAT Act defines "taxable supplies" as any supply of goods or services made by a taxable person in the course of or in furtherance of his business.

(Such) supply was evidenced by invoice; hence the appellant is not exempted from paying Tax in terms of section 4(1) of the Act," they ruled.

Referring to section 57 of the VAT Act, the justices pointed out that it was crystal clear that whenever an invoice issued as VAT chargeable for a supply of goods or service shall be recoverable as VAT due from the person issuing the invoice.

"Therefore, in the current matter, since the counsel for the appellant does not dispute the fact that (GGM) issued an invoice for the fuel supplied to GCL, we decline the invitation extended to us that we should interpret the law purposively and find that the appellant is not required to pay VAT," they said.

The justices agreed with the respondent that since the appellant supplied fuel to GCL and subsequently demanded payment including VAT as per the invoice, she was liable to remit the same to the TRA in terms of section 57 of the VAT Act.

Geita Gold Mine Limited owns and operates a gold mine in Geita. For smooth running of mining activities at the mine site, the appellant decided to build its own power station to produce electricity.

Therefore, she entered into an agreement with Golden Construction Limited (GCL) for construction of the said power plant, supply and installation of seven big generators and Geita Power Plant Limited (GPPL) to manage and operate the power plant.

The GCL supplied the said generators but on installation they collapsed. As a result, the holding company of GCL, the Rolls Royce, had to enter into a hire Agreement with Aggreko International Project Ltd to install 24 small generators to the appellant's mines as alternative to collapsed seven generators.

Such agreement between the appellant and GPPL permitted the operator of power house to use fuel efficiently and fuel consumption rate was imposed.

It was further agreed that excessive fuel consumption was subject to penalty by mines owner, the appellant.