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Total loses six-year legal battle to reverse Sh436 million tax liability
Dar es Salaam. A six-year-year battle ended in disappointment for Total Tanzania Limited, which has been resisting a Sh436.4 million tax on imported aviation fuel, after the Court of Appeal rejected its appeal.
Three justices of the highest court have sided with the Tanzania Revenue Authority (TRA) that JET A1 aviation fuel attracted the Railway Development Levy (RDL), rejecting Total’s argument that the consignment was not subject to the levy because it was declared for home consumption.
The decision is a triple blow for Total, whose previous two legal attempts to challenge the tax liability were dismissed by the Tax Revenue Appeal Board (Trab) and the Tax Revenue Appeals Tribunal (Trat), respectively.
Total imported the aviation fuel in November 2015 and declared the consignment was meant for home consumption. The fuel was consumed by international airlines fueling in Tanzania.
Following the declaration, the taxman issued a demand note requiring the company to pay Sh436.4 in RDL. Total unsuccessfully appealed to Trab against the tax liability.
The firm’s main argument was that the aviation fuel was not meant for free local circulation and thus could not attract RDL. Its second attempt to resist the liability at Trat also failed.
Total preferred an appeal to the Court of Appeal in 2022, arguing that Trat erred in holding that TRA correctly imposed the disputed levy. It was Total’s further contention that Trat was wrong in holding that the fuel was consumed in Tanzania in terms of the law.
Through its legal counsel, Alan Kileo, Total argued that the JET A1 that was sold to international airlines was non RDL-taxable and that the TRA’s act to impose RDL under the circumstances was in total ignorance and in violation of fundamental principles of taxation.
The counsel took the view that fuel filled in international aircraft at the airports in Tanzania was consumed abroad, and, therefore, the provisions of Section 20A of the Railways Act and Section 2 (2) of the East African Community Customs Management Act, 2004 were not inapplicable.
TRA, through senior state attorney Hospias Maswanyia, maintained that the company cannot escape liability after declaring the fuel for home consumption.
He said it was from that declaration, out of other options such as on transit, for export or for temporary use, that TRA demanded RDL be taxable under the provision of Section 20A of the Railways Act.
The section introduces an RDL of 1.5 percent on goods imported for home consumption in Mainland Tanzania in accordance with procedures applicable under the East African Community Customs Management Act.
In their Wednesday decision, Justices Stella Mugasha, Ignus Kitusi, and Gerson Mdemu dismissed the appeal by Total, saying the tax liability was imposed by TRA according to the law.
“The appellant (Total) imported JET A1; declared it for home consumption; is therefore estopped to say otherwise. It was consumed in Mainland Tanzania, a partner state to the EAC (East African Community), by fueling international aircraft commencing their journey in Tanzania Mainland; as such, it was harmless for the respondent to subject that consignment to RDL under Section 20A of the Railways Act,” said the justices.
The justices have rejected Total’s argument that it was forced to declare JET A1 for home consumption out of the available tax declaration mechanisms because the Tanzania Tax Integration System (TANCIS) was not configured to charge RDL.
“We found this wanting. The appellant made a choice out of available options, as such, he is estopped to decline. TANCIS is a system and RDL is chargeable by operation of the law, it is inconceivable to hold that the appellant was forced to declare JET A1 for home consumption while in his mind the intention was for something else,” they said.
