SHELL NIGERIA EXPLORATION AND PRODUCTION CO. LTD & ORS v. FIRS
(2021)LCN/15563(CA)
In The Court of Appeal
(LAGOS JUDICIAL DIVISION)
On Friday, February 26, 2021
CA/L/951/2019
Before Our Lordships
Rita Nosakhare Pemu Justice of the Court of Appeal
Muhammed Lawal Shuaibu Justice of the Court of Appeal
Joseph Eyo Ekanem Justice of the Court of Appeal
Between
1. SHELL NIGERIA EXPLORATION AND PRODUCTION COMPANY LIMITED 2. ESSO EXPLORATION & PRODUCTION NIGERIA (DEEP WATER) LIMITED 3. NIGERIAN AGIP EXPLORATION LTD 4. TOTAL E & P NIGERIA LIMITED APPELANT(S)
And
FEDERAL INLAND REVENUE SERVICES RESPONDENT(S)
MUHAMMED LAWAL SHUAIBU, J.C.A. (Delivering the Leading Judgment): This appeal is against the judgment of the Federal High Court, sitting in Lagos, Coram Honourable Justice C. A. Obiozor delivered on the 28th of June, 2019 upholding the appeal of the respondent against an earlier judgment of the Tax Appeal Tribunal. At page 375 of the record of appeal, learned judge of the lower Court (sitting on appeal against the judgment of the Tax Appeal Tribunal) held as follows:-
“From the records the tax became due for payment in August, 2007. The conduct of the respondents in withholding payment for some two years amounted to grave invidious and despicable machination aimed at short changing the Nigerian nation of its revenue. The pretentious claim to objection is more than a clear and obtrusive contrivance, so infamously contrived to justify the deliberate refusal to pay accrued Education Tax for 2006 as due, and I so hold.
This deliberate delay to pay what is due and not contested, justify the imposition of penalty and interest by the appellant. The appeal therefore succeeds. The reliefs sought by the appellant are; in the final analysis, hereby granted.”
The appellants were dissatisfied with the above judgment and therefore appealed to this Court through a notice of appeal filed on 8/6/2019. The notice of appeal at pages 383 – 3286 of the record of appeal contains three grounds of appeal.
From the said three grounds of appeal, appellants distilled the following three issues for the determination of this appeal thus:-
1. From what date did the appellant incur any legal obligations under the revised Notice of Assessment?
2. Whether the appellants are liable to pay the penalty and interest demanded by the respondent in the Demand Note dated 23 June, 2009 even though they paid the assessed education tax within 14 days of the respondent’s service on them of the revised notice of assessment dated 25 September, 2007?
3. Is the service of the revised Notice of Assessment dated 25th September 2007 on the Concessionaire without notice to or service on the Appellants adequate compliance with the statutory requirement of Section 38 (1) of the PPTA, such that the appellants are liable to pay penalty and interest assessed in the Demand Note?<br< p=”” style=”box-sizing: inherit; margin: 0px; padding: 0px;”></br<>
The respondent on its part adopt the three issues formulated by the appellants. At the hearing of the appeal on 10/12/2020, learned counsel for the appellants, A. Tunde-Olowu, leading F. Bola Balogun and Ogonna Ogbuogu adopted and relied on the appellants’ brief as well as the appellants’ reply brief respectively filed on 13/9/2019 and 20/3/2020 but deemed as properly filed on 10/12/2020 in urging this Court to allow the appeal.
Ladipo Ojo Esq, learned counsel for the respondent adopted and relied on the respondent brief of argument filed on 21/10/2019 in urging this Court to dismiss the appeal.
Arguing issue one, counsel for the appellants’ submitted that by withdrawing the Notice of Assessment dated 26th June, 2007, the respondent retrieved the assessment and retreated from its position as contained in the Notice of Assessment No. PPTA/ED/23 dated 26 June 2007. He referred to Section 38 (5) of the Petroleum Profit Tax Act (PPTA) in contending that once the appellants objected to the Notice of Assessment and the respondent withdraw the notice of assessment, the appellants’ obligation to pay the assessed tax was suspended and remained so pending when a valid revised notice of assessment was served on the appellants.
Still in argument, learned counsel submitted that being a statute based dispute, the Court has a duty to construe the statute according to the intent of the legislature that passed the Act. Counsel cited Section 44 of the PPTA and the cases of AHMADU V GOVERNOR OF KOGI STATE (2002)3 NWLR (prt 755) 502 at 522 and AEROMARITIME (NIG) LTD V LAGOS STATE INTERNAL REVENUE BOARD (2001) LPELR – 6957 to contend that where as in this case there was a objection or an appeal by the taxable person, the collection of tax remain in obeyance until such objection or appeal is determined.
Counsel submitted further that the liability of the appellants to pay tax having objected to an assessment, begins from when they were served with the revised notice of assessment relying on Sections 38 (2), (8), 44 and 45(4) of the PPTA.
Responding to the above, learned counsel for the respondent referred copiously to the Provisions of Sections 30 (1), 37(2); 38 (2) & (5) of the PPTA and 14 and 15 of the Deep Offshore and Inland Basin Production Sharing Contract Act to contend that in joint venture petroleum operation, the respondent is to serve notice of assessment on the corporation or holder in respect of payment of petroleum profit tax. And since the returns which the respondent used in preparing the notice of assessment was filed by the concessionaire, the respondent rightly served the 1st appellant a notice of assessment in respect of Education Tax PPTBA/ED 23 dated 26th June, 2007. He contended that the notice of assessment was been withdrawn by the respondent only for necessary correction and re-issued with notice of assessment PPTBA/ED/23 dated 25th September, 2007 using the same number with the original assessment. It was thus submitted that the appellants incur legal obligation in respect of the revised notice of assessment effectively 21 days after the 28th of September, 2007 when the concessionaire was served with the revised notice of assessment as neither of the appellants herein filed a notice of objection after the revised notice of assessment was served on the concessionaire.
Counsel submitted further that the 1st appellant’s letter dated 20th July, 2007 cannot be regarded as notice of objection. Assuming without conceding that it is a notice of objection, it was contended that the ground of objection has elapsed with the re-issuance of another notice of assessment dated 25th September, 2007 with the original assessment number and served on the concessionaire on the 28th of September, 2007. And once the issue of objection has either been amended or revised, the notice of objection can no longer be operational.
On issue two, the appellants contended that the 1st appellant received a revised notice of Assessment dated 25th September, 2007 only on 10th June, 2009 as such the appellants are not liable to pay the assessed penalty and interest in the demand notice dated 23rd June, 2001 because they have not failed in their obligation which statutorily fixed 21 days time frame. Counsel submitted that a demand note must be predicated on an existing notice of assessment and the assessed tax stated therein must also be “due and payable” under the PPTA. A demand note according to the learned counsel cannot be based on a notice of assessment against which an objection or appeal has been issued or pending or which is withdrawn.
It was also submitted that the fact that the two notices of assessment bears the same number is irrelevant and does not also have the same legal effect. Counsel cited Section 44 of PPTA and the case of F.B.I.R V HALLIBURTON (W/A) LTD (2014) LPELR – 24230 (CA) in contending that in taxation legislation there is nothing to read in and nothing to be implied and that one can only look at the language used. Therefore, the demand notice issued by the respondent on the appellants based on the withdrawn notice of assessment dated 20th June, 2007 was invalidly issued under the extant law.
The respondent on the other hand contended that the evidence on record reveals that the initial notice of assessment was issued vide a letter of 14th August, 2007 while the revised notice of assessment dated 25th September, 2007 was served on the concessionaire on 28th September 2007 contrary to the appellants contention that the revised notice was served on 10th June, 2009.
Furthermore, the respondent contended that the demand note which was based on an amended notice of assessment PPTA/ED23 dated 26th June, 2007 is as genuine as the unamended one. It was therefore submitted that the first notice of assessment dated 26th June, 2007 and the amended notice of assessment dated 25th September, 2007 both has the same probative value. Reliance was placed on Section 37 (3) of the PPTA and the case of OGUMA V IBWA (1988)3 SCNJ (prt 1) 1326 to the effect that an amendment takes effect not from the date the amendment is made but from the date the original document which it amends.
It was also submitted that since the appellants did not file a notice of objection in respect of the notice of assessment PPTA/ED 23 dated 26th June, 2007 and the appellants held over the Education Tax for 2006 well over two years, they were liable to pay penalty and interest. And that the appellants’ letter dated 20th July, 2007 cannot be regarded as a notice of objection within the context of Section 38 (2) of the PPTA.
On issue three, the appellants contended that they were neither served nor had knowledge of service of the revised assessment despite repeated reminders to the respondent relying on the 1st appellant’s letter dated 27th August, 2007. Learned appellant’s counsel submitted that the uncontroverted facts are that the appellants were unaware that the revised notice had been served on the concessionaire two years previously and only made payment when the 1st appellant then received a copy of the notice on 10th July, 2009. Had the lower Court given due cognizance to this evidence, it would not have found that the appellants have waived their right to be served with the revised notice of assessment. Counsel cited Section 38 (1) of PPTA and the case of BANK OF THE NORTH LTD V ALHAJI BALA YAU (2001) SCNJ 168 at 192 to contend that waiver can only arise after knowledge of the act or omission.
Still in argument, counsel submitted that the fact that the NNPC files tax returns on behalf of the Contract Area, does not mean that NNPC is solely responsible for paying the tax and as such is the only party entitled to be served with the tax assessment. Assuming but without conceding that Deep Offshore Act prevails over PPTA, Counsel submitted that Section 14 of the Deep Offshore Act statutorily recognizes parties to the PSC as parties who pay the tax to which the Contract Area is assessed and placed an obligation on the respondent to recognize the appellants as such. Thus, the Deep Offshore Act clearly identifies the appellants as parties responsible for the tax payable by the Contract Area, and entitled to be individually named by the respondent and served with copies of receipts issued by the respondent for the payment of tax.
In further argument, counsel submitted that as parties aggrieved by the tax assessment of the respondent, and under obligation to pay the tax to which the Contract Area is assessed, the appellants can exercise the right to object to the assessment which in their opinion does not tally with the petroleum operations on the Contract Area.
In her reaction to the above, the respondent reiterated that the service on the concessionaire of the revised notice of assessment dated 25th September 2007 on 28th September was a proper service also alluding to the fact that by the 1st appellant’s letter dated 14th August 2007, the appellants have waived their right to be served personally. Counsel submitted that the provision of Section 38(1) of the Petroleum Profit Tax Act is inconsistent with the provision of Section 14 of the Deep Offshore and Inland Basin Production Sharing Contract.
He referred to MV PANORMOS BAY V OLAM NIGERIA PLC (2004)5 NWLR (prt 865)11 and NDIC V OKEM ENTERPRISES LTD (2004)4 SCJN 244 in contending that where as in this case, an issue in a statute is governed by a general provision and a specific provision; the letter would be invoked in the interpretation of the issue before the Court.
I have carefully considered the submissions of Counsel on both sides in relation to the above formulation but my candid view is that the three issues could conveniently be condensed into a lone issue to wit:-
Whether or not the appellants were properly served with the revised assessment and are liable to pay penalty and liability for late payment of the assessed education tax.
Before delving into the merit or otherwise of the said submissions, it is pertinent to restate the facts of the case giving rise to this appeal as gathered from the record. Appellants herein are parties in the Oil Mining Lease 118 Production Sharing Contract (OML 118 PSC) with NNPC. The 1st appellant is the operator of the lease whilst the 2nd – 4th appellants are contractors. NNPC is the concessionaire under the contract.
On 5th July 2007, the respondent herein served the 1st appellant with a notice of assessment for education tax of $75,381,332 for 2006. However, the 1st appellant discovered some omissions and errors wherein it objected to the assessment by its letter of 20th July, 2007 pointing out the respondent’s omissions and errors, requesting the respondent to correct them. Subsequently, the respondent served the appellants with the revised notice of assessment through the concessionaire and later availed them with a copy on 10th July 2009. Furthermore, on 23rd June, 2009, the respondent issued a demand note on the 1st appellant demanding $93,281,816.80 representing the education tax due with penalty and interest. The 1st appellant immediately paid $75,381,332 leaving out penalty and interest insisting that they be set aside since it has already paid the principal sum within the 14 days statutory period but the respondent declined this request. Appellants then applied to the Tax Appeal Tribunal which heard evidence and set aside the respondent’s demand note dated 23rd June, 2009 including penalty and interest maintaining that the payment of $75,381,332 completely discharged it from education tax liability for 2006 accounting year.
Miffed by the above decision, respondent appealed to the Federal High Court which upturned the said decision and ordered the appellants to pay the penalty and interest imposed by the respondent herein.
The provision of Section 37 of the Petroleum Profits Tax Act (PPTA) deals with assessments of tax and the form it should take. It states as follows:
“37(1)- Assessments of tax shall be made in such form and in such manner as the Board shall authorize and shall contain the names and addresses of the companies assessed to tax or of the persons in whose names any companies (with the names of such companies) have been assessed to tax and in the case of each company for each of its accounting periods, the particular accounting period and the amount of the chargeable profits of and assessable tax and chargeable tax for that period.
(2) When any assessment requires to be amended or revised, a form of amended or revised assessment shall be made in a manner similar to that in which the original of that assessment was made under subsection (1) of this Section but showing the amended or revised amount of the chargeable profits assessable tax and chargeable tax.
Section 38 of Petroleum Profits Tax Act on the other hand deals with notices of assessment thus:-
“38 (1) The Board shall cause to be served personally on or sent by registered post to each person whose name appears on an assessment in the Assessment List, a notice of assessment stating its accounting period and the amount of its chargeable profits, assessable tax and chargeable tax charged and assessed upon the company, the place at which payment of the tax should be made and informing such company of its rights under subsection (2) of this section.
(2) If any person in whose name an assessment was made in accordance with the provisions of this Act disputes the assessment, that person may apply to the Board, by notice of objection in writing to review and revise the assessment so made on him, and such application shall be made within 21 days from the date of such service of the notice of such assessment and shall state the amount of chargeable profits of the company of the accounting period in respect of which the assessment is made and the amount of the assessable tax and the tax which such person claims should be stated on the notice of assessment.
As a prelude to ascertaining proper service of the revised assessment, specific reference needs to be made to the reasons for the withdrawal of the initial assessment which are:-
1. The basis period:- the basis period specified in the notice of assessment (NOA) was incorrect – was 01/02/2005 – 31/12/2005 instead of 01/01/2006 – 31/12/2006.
2. The NOA was not properly addressed to contract area rather it was addressed to SNEPCO.
It was on the strength of the above that the respondent in its letter of 14th August, 2007 agreed to address the revised notice of assessment to be issued as requested by the 1st appellant.
The key issue is did the respondent address the 1st appellant’s observations in the revised notice of assessment and was there proper service on the appellants herein?
Learned counsel for the appellants referred this Court to their letters dated 27th August, 2007 and 18th December, 2007 at pages 29, 30 – 31 of the record of appeal in contending that when the revised notice of assessment was not forthcoming, the 1st appellant caused reminders to be sent to the respondent. Inspite of the appellants’ reminders and the respondent’s promises at various reconciliation meetings, the respondent did not serve on the appellants the revised notice of assessment. However, at one of the routine reconciliation meeting between 1st appellant and the respondent on 10th June 2009, the respondent informed the 1st appellant that it had served the revised notice of assessment on the Nigerian National Petroleum Corporation (NNPC).
In justifying service of notice of assessment to the appellants through NNPC, learned counsel for the respondent submitted that in view of the apparent lacuna in the Petroleum Profits Tax Act in respect of service on joint venture petroleum operation, the service of notice of assessment on such joint venture petroleum operation is proper under Section 14 of the Deep Offshore and Inland Basin Production Sharing Contract Act.
The contention of the respondent is that by the tenet of its letter of 14th August, 2007 where the 1st appellant was informed of the withdrawal of the initial notice of assessment and also notifying the 1st appellant that same will be corrected and re-issued in the name of concession owner’s and equity holders through the NNPC, the re-issued notice of assessment dated 25th September, 2007 addressed in the name of the Contract Area amounted to proper service. That being the case, the respondents submitted that the appellants incur legal obligation to pay the revised notice of assessment served on the concessionaire 21 days after the 28th September 2007. This according to the respondent was because the appellants’ ground of objection has since lapsed with the re-issuance of another notice of assessment dated 25th September, 2007.
I have earlier in this judgment reproduced the Provisions of Sections 37 and 38 of the Petroleum Profits Tax Act which provides that assessment of tax shall contain the names and addresses of the companies assessed to tax and in the case of each company; for each of its accounting period, the particular accounting period. Similarly, the notice of assessment shall be served personally on or sent by registered post to each person whose name appears on an assessment list.<br< p=”” style=”box-sizing: inherit; margin: 0px; padding: 0px;”></br<>
The 1st appellant’s complaint against the initial notice of assessment as earlier stated was that the notice of assessment be made in the name of the Contract Area. This is in tandam with the evidence of Mr. Ogonna Arizechi before the Tax Appeal Tribunal at page 58 of the record of appeal that the amount in the assessment notice was never contested. Thus, the complaint was a mere mistake of an inconsequential nature. The Provision of Section 39 (2) of the Petroleum Profits Tax Act provides that:-
“(2) An assessment shall not be impeached or affected–
(a) By reason of a mistake therein as to –
(i) The name of a company liable or of a person in whose name a company is assessed; or
(ii) The amount of tax
(b) By reason of any variance between the assessment and the notice thereof.
If in cases of assessment, the notice thereof be duly served on the company intended to be assessed or on the person in whose name the assessment was to be made on the company and such notice contains, in substance and effect, the particulars on which the assessment is made.”
It is clear from the above that the notice of assessment is properly served if it is served either on the company intended to be assessed or on the person in whose name the assessment was to be made on a company.
The 1st appellant requested that the notice of assessment be made in the Contract Area which request was undoubtedly acceded to by the respondent in the revised notice of assessment and it is true that if they (appellants) have any complaint as regards the contents of the revised notice of assessment, they would not have paid ultimately. Thus, in the absence of any complaint relating to the form or content of the revised notice of assessment, same was not only made but served strictly in accordance with the extant law. The burden of proving otherwise rest squarely on the appellants.
On the appellants’ allusion that by the withdrawal of the initial notice of assessment same cannot be correct because the Provision of Section 39 of the Petroleum Profit Tax Act explicitly stated that an assessment shall not be impeached or affected by reason of mistake as to the name of a company liable or of a person in whose name a company is assessed. In the circumstance, the liability of the appellants to pay the assessed tax which was not in contest can neither be retracted nor retreated.
It is also my respectful view that the said request for correction of the initial notice of assessment by the 1st appellant can neither hinder nor delay the collection of the assessed tax pursuant to Section 44 of the Petroleum Profits Tax Act.
Now having held the view that the withdrawal of the initial notice of assessment of 26th June, 2007 had no adverse effect on the final collection, and that the revised notice of assessment took into account all what was highlighted in the request made by the 1st appellant, the next issue to consider is the time when the obligation of the appellants become due as per the revised notice of assessment.
Section 45 (4) of the Petroleum Profits Tax Act states that final settlement of tax shall be due for payment within 21 days after service of the notice of assessment of tax for a given accounting period. It is not in doubt as admitted in the appellants’ brief that the mistakes in the initial notice of assessment was corrected in the revised notice of assessments and same was served on the Nigerian National Petroleum Corporation (NNPC). Also not in dispute is the fact that the concessionaire was served with the revised notice of assessment on 28th August 2007 as opposed to 10th June, 2009. Section 14 of the Deep Offshore and Inland Basin Production Sharing Contract Act is to the effect that the Corporation or the holder, as the case may be, shall make available to the contractor copies of the receipts issued by the service bearing the name of each party in the production sharing contract for payment of Petroleum Profit Tax under the Production Sharing Contract. I am therefore clearly of the opinion that for the appellants to contend that the final settlement of tax did not crystallize and remain in obeyance, must show that there is either an objection to the revised notice of assessment or appeal against same. It is the function of the Court or Judge when interpreting statutory provisions not to import words which do violence to the intent and meaning of the statutory provisions. Similarly, it is wrong to read into an enactment, an exception which it has not expressed and which will have the effect of depriving the person to be protected of that protection. See ORHIUNU V F.R.N. (2004) LPELR – 5880 (CA) and EGBE V ALHAJI (1990)1 NWLR (prt 128) 546. In F.B.I.R V HALLIBURTON (W/A) LTD (2016)4 NWLR (prt 1501) 53 and AHMADU V GOV. KOGI STATE (supra), this Court has stressed the need to stick strictly to the ordinary meaning of the words used on tax laws. The words in Section 45 (4) as well as other Sections of the extant laws are clear and unambiguous and therefore must fetch their ordinary and plain meaning.
The lower Court having strictly interpreted the relevant provisions of the Petroleum Profits Tax Act vis-à-vis the Deep Offshore Inland Basin Production Sharing Contract Act to their ordinary meanings in arriving at its decision, including the reasoning for the penalty and interest, such decision can hardly be faulted.
In the final analysis, having resolved the lone issue in favour of the respondent, I find that this appeal lack merit and should be dismissed with costs assessed at N100,000.00 against the appellants and in favour of the respondent.
Appeal dismissed.
RITA NOSAKHARE PEMU, J.C.A.: I had read before now, the lead judgment, just delivered by my brother, MUHAMMED L. SHUAIBU, JCA.
I agree with his reasoning and conclusions.
I also dismiss the appeal.
I abide by the consequential order made as to costs.
JOSEPH EYO EKANEM, J.C.A.: I read in advance the lead judgment of my learned brother, M. L. SHUAIBU. JCA. I agree with the reasoning and conclusion therein. In consequence, I dismiss the appeal for lack of merit. I abide by the order as to costs made in the lead judgment.
Appearances:
A. Tunde-Olowu with him, F. Bola-Balogun and Ogonna Ogbuogu For Appellant(s)
Ladipo Ojo For Respondent(s)
