Position of the Law on the Liability of a Company/taxpayer to Enforce Remittance of VAT

Case Title: KANDELITE ENGINEERING CO. LTD v. FIRS (2023) LPELR-60682(CA)

In The Court Of Appeal

(LAGOS JUDICIAL DIVISION)

On, July 17, 2023

Before Their Lordships

Obande Festus OgbuinyaJustice of the Court of Appeal

Frederick Oziakpono OhoJustice of the Court of Appeal

Muhammad Ibrahim SirajoJustice of the Court of Appeal

Between

KANDELITE ENGINEERING COMPANY LIMITED (APPELLANT(s))

And

FEDERAL INLAND REVENUE SERVICE (RESPONDENT(S))

INTRODUCTION:

This appeal borders on payment and remittance of value-added tax.

FACTS:

The Respondent held the Appellant liable for its failure to file tax returns for some years listed. This was refuted by the Appellant, consequent to which the Respondent filed a tax appeal at the Lagos Division of the Tax Appeal Tribunal.

The Tax Appeal Tribunal ordered the Appellant to pay to the Respondent a withholding Tax of N3,641,462.00, with the outstanding VAT of N4,327,012.00 for 2004, penalties for late filing of CIT, EDT returns of N1,175,000.00, and the VAT and Penalties for late returns, totaling N21,105,875.31. ​The Appellant was aggrieved by the decision of the Tribunal and appealed to the Lagos Division of the Federal High Court.

The Court dismissed the appeal for lacking in merit. The Appellant, still aggrieved with the decision of the Court, further appealed to the Court of Appeal.

ISSUES:

The issues for determination were:

1. Whether the learned trial Judge was right in affirming the decision of the Tax Appeal Tribunal which held the Appellant liable for the non-payment of Value Added Tax by customers of the Appellant, in the face of overwhelming evidence that invoices were issued but the customers wilfully refused to pay the VAT despite being informed that same was issued for payment for and on behalf of the Respondent.

2. Whether the learned trial Judge was right in affirming the decision of the Tax Appeal Tribunal which held the Appellant liable for the non-payment and transmission of VAT by customers of the Appellant by placing reliance on Best of Judgment (BOJ) assessment.

DECISION/HELD:

In the final analysis, the appeal was dismissed.

RATIOs:

• TAXATION – VALUE-ADDED TAX– Position of the law on the liability of a company/taxpayer who is liable to collect VAT and remit same to the Federal Government where it merely issued invoice to its customers but failed to ensure payment of same
• TAXATION – ASSESSMENT OF TAX– Instance(s) in which a tax assessment body will be held to have rightly utilized the best of judgment assessment

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