Commissioner Customs Uganda Revenue Authority –Versus- Kirenga Fred

The Commissioner Customs Uganda Revenue Authority (Appellant) appealed to the Court of Appeal against  Kirenga Fred (Respondent) on three (3) grounds contesting the lower court’s awards to the respondent of compensatory damages, general damages and exemplary damages.

Background.
The respondent was charged with several counts of interfering with the goods; neutral portable ethanol that had been seized by Uganda Revenue Authority Commissioner in charge of customs and he was as well accused of fraudulent evasion of tax contrary to section 203 (e) and (f) of the East African Community Customs Management Act in the Chief Magistrates ‘court of Nakawa. On the 13th day of June 2011, court dismissed the criminal charges.
The lower Court ordered the release of the 160 drums of ethanol the appellant had seized from the respondent. The respondent later filed Miscellaneous Application No. 423 of 2011 following his acquittal as a result of the appellant refusing to release the goods in issue. The learned Magistrate (in the lower court) entertained the Application in which he declared that the Appellant was in contempt of court and he ordered the Commissioner to pay a sum of Ugshs. 1,000,000 daily until the order is complied with. The Appellant appealed against the orders of the Chief Magistrate. After that an application under Article 26 and 50 of the Constitution was filed in the High Court
The Chief Magistrate also ordered that the 160 drums of ethanol that were confiscated from the respondent be immediately returned to him. However, the respondent had made a self assessment by his agent and the value of his goods was under declared. The 160 drums had been sold at shs. 110, 000,000 by the appellant much above the value declared. Since the agent’s acts bind the principle, the respondent was found to have under declared the value of his goods in the Court of Appeal.

The Appellant, however, claimed to have banked Ug shs. 26, 054,706 on the respondent’s account, the appellant argued that this was the declared value of the goods less taxes which taxes the respondent claimed to have already paid. Therefore, the question would remain what happened to the balance and how tax was assessed.
The Appellant brought this appeal on three (3) grounds including;

•  That the trial judge erred in law and fact in awarding compensatory damages amounting to Ug shs. 230,983,291 for the alleged loss of 160 drums of ethanol
•  That the trial judge erred in law and fact in awarding the respondent general damages worth Ug shs. 80,000,000.
•  That the trial judge erred in law and fact in awarding the respondent exemplary damages of Ug shs. 150,000,000.

Judgment.
On the grounds of appeal against the damages awarded by the lower court, the Court of Appeal noted that the learned judge had awarded exorbitant compensatory damages to the tune of Ugshs. 230,983,291 as there was no way the ethanol could have been kept from August 2009 to the time judgment was delivered. It also observed that general damages arise from direct, natural and probable consequences of the act complained of and that therefore the fundamental character of damages is compensation not punishment.

It also observed that exemplary damages are punitive in nature and are given in addition to compensatory damages for the physical and mental suffering of the complainant. Considerations must be made before awarding these damages and these include; the complainant cannot recover damages when he/ she is a victim of punishable behavior; the power to award them should be used with restraint and finally the means of the parties are material in the assessment of exemplary damages. Court observed that the sale of the perishable goods (ethanol) by the Appellant was rightfully done in accordance with Section 214 of the East African Community Act which law permits the appellant to dispose of the goods when they are of a perishable manner.

On the point of under declaration of the value of goods, the Court noted that the East African Community Customs and Management Act 2004 Section 148 makes the owner of the goods liable for the acts and declaration of his agent. It further noted that Section 122 of the same Act is very clear that the importer (respondent) on request to find out how the customs value of the goods is determined is entitled to an explanation and therefore this was simply a procedural omission which could not be found unconstitutional or arbitrary.

Conclusion.
It is important to observe that the actions of an agent who under declares the value of goods bind the owner of the goods, therefore it is important to emphasize the actual value of goods to the tax officials so as to avoid being party to tax evasion which is prohibited by law. Our Senior Partner David Kaggwa was acting for the Respondent/Applicant in the above suit.