VODACOM BUSINESS NIGERIA LIMITED v. FEDERAL INLAND REVENUE SERVICE
(2019)LCN/13556(CA)
In The Court of Appeal of Nigeria
On Monday, the 24th day of June, 2019
CA/L/556/2018
RATIO
INTERPRETATION OF STATUTES: WHEN THE LANGUAGE OF A STATUTE IS PLAIN. CLEAR AND UNAMBIGUOUS
It is abecedarian that where the language of a statute is plain, clear and unambiguous, the task of interpretation hardly arises. The duty of the Courts will be to give the words used their ordinary, natural and grammatical construction. See MOBIL OIL NIG LTD vs. FBIR (1977) LPELR (24896) 1 at 22 and UWAZURIKE vs. A-G FEDERATION (2007) LPELR (3448) 1 at 12. PER UGOCHUKWU ANTHONY OGAKWU, J.C.A.
INTERPRETATION OF STATUTES: STATUTES SHOULD NOT BE READ OR INTERPRETED IN ISOLATION
It is a cardinal rule of construction that in seeking to interpret a particular section of a statute, one does not take the section in isolation but one should approach the question of the interpretation on the footing that the section is part of a greater whole. Put differently, where the subject matter construed concerns other sections of the same statute, all the related provisions must be read, considered and construed together as forming a composite whole. See CHIME vs. UDE (1996) LPELR (848) 1 at 51, MOBIL OIL (NIG) PLC vs. IAL 36 INC. (2000) LPELR (1883) 1 at 24 and RIVERS STATE GOVT vs. SPECIALIST KONSULT (2005) LPELR (2950) 1 at 35. This brings into play the provisions of Section 10 of the VAT Act. PER UGOCHUKWU ANTHONY OGAKWU, J.C.A.
APPEAL: THE MAIN CONCERN OF THE APPELLATE COURT
Perhaps it is pertinent at this stage to state that an appellate Court is concerned with whether the decision appealed against is the correct decision and not whether the reasons given for the decision are correct. See POATSON GRAPHICS ARTS TRADE LTD vs. NDIC (2017) LPELR (42567) 1 at 36, NDAYAKO vs. DANTORO (2004) 13 NWLR (PT 889) 189 at 220 and OLUSANYA vs. UBA PLC (2017) LPELR (42348) 1 at 27. So no matter how flawed the Appellant perceives the reasons of the lower Court to be, they are immaterial in so far as the decision arrived at is the correct decision: DAIRO vs. UBN PLC (2007) 16 NWLR (PT 1059) 69 at 161. PER UGOCHUKWU ANTHONY OGAKWU, J.C.A.
TAX LAW: THE REVERSE CHARGE PRINCIPLE: DEFINITION
In exoteric terms, the Reverse Charge is applicable in European Union Countries whereby the buyer of goods or services from supplier(s) in other EU countries assumes the responsibility of paying the applicable VAT rates instead of the Supplier. By this principle it is the buyer of goods or services that pays the VAT; put differently the VAT is paid by the person to whom the goods or services are supplied. By Section 10 (2) of the VAT Act, the person to whom the goods or services are supplied in Nigeria has the obligation to remit the tax. Even though the phrase Reverse Charge is not mentioned in the VAT Act, it seems to me that the philosophy which requires the person to whom the goods or services are supplied, to be the person to remit the tax is the same as the Reverse Charge which requires that the buyer of the goods or services (the person to whom the goods or services are supplied) assumes the responsibility of paying the tax. The lower Court may have been wrong in alluding to Reverse Charge, but its decision that the transaction is VATable by virtue of the provisions of Sections 2, 10 and 46 of the VAT Act is the correct decision. PER UGOCHUKWU ANTHONY OGAKWU, J.C.A.
TAX LAW: THE DESTINATION PRINCIPLE
The Destination Principle in taxation stipulates that goods imported from a State are exempted from VAT and are instead taxed for VAT in the destination State in which the goods are imported. It is a principle promoted by the Organization for Economic Co-operation and Development (OECD) which is an intergovernmental economic organization with thirty six member countries, of what is commonly known as the developed nations. Nigeria is not one of the member countries of the Organization for Economic Co-operation and Development. But was the destination principle applied by the lower Court? It does not appear to be so.PER UGOCHUKWU ANTHONY OGAKWU, J.C.A.
JUSTICES
MOHAMMED LAWAL GARBA Justice of The Court of Appeal of Nigeria
UGOCHUKWU ANTHONY OGAKWU Justice of The Court of Appeal of Nigeria
GABRIEL OMONIYI KOLAWOLE Justice of The Court of Appeal of Nigeria
Between
VODACOM BUSINESS NIGERIA LIMITED – Appellant(s)
AND
FEDERAL INLAND REVENUE SERVICE (FIRS) – Respondent(s)
UGOCHUKWU ANTHONY OGAKWU, J.C.A. (Delivering the Leading Judgment): This is an appeal against the decision of the Federal High Court, Lagos Division, in its appellate jurisdiction, arising from the decision of the Tax Appeal Tribunal. The facts of the matter are that consequent upon a tax investigation carried out by the Respondent into the affairs of the Appellant, it issued a Notice of Additional Tax Assessment on the Appellant for the payment of Value Added Tax (VAT) in respect of a transaction which the Appellant had with a non-resident foreign company for the supply of satellite bandwidth capacities to the Appellant. The Appellant objected to the assessment and the issue remaining unresolved, the Appellant appealed to the Tax Appeal Tribunal.
After due hearing, the Tax Appeal Tribunal dismissed the Appellant?s matter and ordered it to pay the tax as assessed by the Respondent. The Appellant was dissatisfied with the decision of the Tribunal and appealed to the Federal High Court (lower Court) in SUIT NO. FHC/L/4A/2016: VODACOM BUSINESS NIGERIA LIMITED vs. FEDERAL INLAND REVENUE SERVICE. The lower Court dismissed the
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Appellant?s appeal and affirmed the decision of the Tax Appeal Tribunal. The decision of the lower Court which is dated 19th December 2017 but stated by the parties to have been delivered on 18th January, 2018 is at pages 736-764 of Volume II of the Records. The Appellant was again dissatisfied and appealed to this Court. The extant Notice of Appeal on which the appeal was argued is the Notice of Appeal which is at pages 817-836 of the Records of Appeal.
The Records of Appeal having been complied and transmitted, the parties filed and exchanged briefs of argument. The briefs on which the Appeal was argued and which learned counsel adopted and relied upon at the hearing of the appeal are:
?1. Amended Appellant?s Brief of Argument filed on 27th February, 2019 but deemed as properly filed on 28th February 2019.
2. Amended Respondent?s Brief of Argument filed on 13th March 2019.
3. Appellant?s Reply Brief of Argument filed on 12th April 2019 but deemed as properly filed on 9th May 2019.?
Let me state at this outset that the Appellant?s Reply Brief was largely a re-argument of the submissions already
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made in the Appellant?s Brief. This is not the purpose of a Reply Brief. It is not proper to use a reply brief to extend the scope of argument and submissions in the appellant?s brief. See YANATY PETROCHEMICAL LTD vs. EFCC (2017) LPELR (43473) 1 at 27-28, ABDULLAHI vs. MILITARY ADMINISTRATOR (2009) LPELR (27) 1 at 13 and ECOBANK NIGERIA LTD vs. HONEYWELL FLOUR MILLS PLC (2018) LPELR (45124) 1 at 9-11. The Amended Appellant?s Brief is of 25 pages. The Amended Respondent?s Brief is of 23 pages while the Appellant?s Reply Brief is of 22 pages. The reiteration of a submission already made in the Appellant?s Brief in a Reply Brief will not improve the quality of the argument or make it acceptable, if it were ordinarily unacceptable.FSB INTERNATIONAL BANK vs. IMANO NIG LTD (2000) 7 SCNJ 65 at 70 and MAGIT vs. UNIVERSITY OF AGRICULTURE, MAKURDI (2005) LPELR (1916) 1 at 13. Accordingly, bearing the function of a reply brief in mind, I will only refer to the submissions in the Reply Brief where it consists of a response to a new issue or argument in the Amended Respondent?s Brief.
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The Appellant distilled three issues for
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determination as follows:
?1. Considering the facts and circumstances of this case, was the Lower Court right in holding that the subject transaction is VATable? (Grounds 1, 3, 4, 8, 11, 12, 15)
2. Without prejudice to Issue I above, was the Lower Court right when it held the Appellant liable to pay VAT even when the conditions precedent therefor were not fulfilled? (Grounds 2, 5, 6, 7, 11 and 16)
3. Whether the Lower Court was correct in law when it applied the Principles of Tax Laws of Reverse Charge and destination principle without recourse to the fact that there exists no Nigerian statute establishing those principles? (Grounds, 9, 10, 13, 14).”
The Respondent equally formulated three issues for determination, namely:
?1. Whether the transaction in this case qualifies as supply and consumption of services in Nigeria within the con of the provision of the VAT Act, and therefore liable to VAT? (distilled from Grounds 1, 3, 8, 11, 12, and 15)
2. Whether the obligation of consumer of service in Nigeria to remit VAT from the service is separate, distinct and independent of the obligation of the non-resident
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supplier of the services to register for VAT and include VAT in its invoice? (distilled from Grounds 2, 5, 6, 7, 11, and 16).
3. Whether the lower Court had done substantial justice by applying Destination Principle, Reserve Charge and/or the clause in the Contract between the Appellant and the supplier (NSS) which contracted the NSS?s VAT liability to the Appellant, in upholding the judgement of the TAT, or whether the Destination and Reverse Charge Principles of Tax Laws the Lower Court alluded to in upholding the judgment of the TAT are provided/contained/implicit in the VAT Act, Cap. VI, Laws of the Federation of Nigeria, 2004 (as amended in 2007) (?VATA?)? (distilled from Ground 4, 9, 10, 13, 14).?
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Aside from semantical and syntactical preferences, the issues nominated by the parties are the same two and tuppence. Accordingly, it is on the basis of the issues as crafted by the Appellant that I will consider the submissions of learned counsel and resolve this appeal.
ISSUE NUMBER ONE
Considering the facts and circumstances of this case, was the Lower Court right in holding that the subject transaction is
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VATable?
SUBMISSIONS OF THE APPELLANT?S COUNSEL
The Appellant submits that the lower Court was wrong when it upheld the decision of the Tribunal that the supply of Satellite bandwidth capacities to it by a non-resident foreign company was a VATable transaction. It was opined that there was no dispute that the foreign company is not in Nigeria and that the Satellite through which the services were provided is not without Nigerian territory. It was asserted that there was no appeal on the findings of the Tribunal that the foreign based company did not carry on business in Nigeria and the said decision which was not appealed against remained binding vide AJIBARE vs. AKOMOLAFE (2011) LPELR-3948 at 79-80 and OMNIA NIG LTD vs. DYKTRADE (2007) 15 NWLR (PT 1058) 576 at 617.
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It was contended that by the combined reading of Sections 2, 10 and 46 of the Value Added Tax Act, a service supplied by a non-resident person to a person inside Nigeria is only subject to VAT if the service is physically rendered in Nigeria. It was stated that where the service is rendered from outside Nigeria but only received in Nigeria, then the transaction will not be
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subject to VAT as location is crucial and key to the VATability of any transaction relating to the supply of services from a person not resident in Nigeria to a person resident in Nigeria.
It was argued that for the supply of service made by a non- resident foreign company to be VATable, it has to be an imported service, which by Section 46 of the VAT Act is defined as service rendered in Nigeria showing that the emphasis is on where the service was rendered and not where it was received; with the result that where the service is not rendered in Nigeria, it will not be subject to VAT. The Appellant maintained that the lower Court was wrong to hold that Section 2 of the VAT Act did not require a combined reading with Sections 10 and 46 of the VAT Act.
It is the further contention of the Appellant that the VAT Act like all other tax statutes must be construed strictly with nothing read into it as the ambit of a statute cannot be widened or restricted in the course of interpretation. The case of AHMADU vs. GOV OF KOGI STATE (1960-2010) 1 NTLR 244 was referred to. The lower Court, it was conclusively contended was wrong when it held that electronically
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supplied services (which are intangible services) are liable to tax in the place of supply, in the absence of any law which stipulates for such.
SUBMISSIONS OF THE RESPONDENT?S COUNSEL
The Respondent refers to Sections 2, 7 and 10 of the VAT Act and submits that Section 2 makes every service in Nigeria liable to VAT except the services listed in the 1st Schedule to the Act; and that the transaction the Appellant had with the non-resident foreign company was not one of the exempted services. It was posited that the rule in determining whether a particular transaction is VATable is whether it is specifically exempted in the 1st Schedule, otherwise it will be VATable. Section 46 of the VAT Act, it was stated defined taxable goods and services as the goods and services not listed in the
