The Commercial Division of the High Court has ordered Airtel Uganda Limited to pay Shs 1.09 billion in additional taxes arising from the importation of telecommunications equipment.

In a ruling delivered by Justice Stephen Mubiru, the court upheld the Uganda Revenue Authority’s (URA) decision to reassess the value of imported equipment after questioning the declared transaction value.

The dispute stems from October 2018, when Airtel imported a Broadband Processing Board Model N2 unit from Zhongxing Telecommunications Equipment (ZTE) Corporation of Shenzhen, China, at a declared Free on Board (FOB) price of $1,349.78.

However, around the same period, another telecommunications company declared identical equipment from the same supplier at a significantly higher FOB price of $10,145.23.

The wide price disparity prompted URA to conduct a customs spot audit at Airtel’s warehouse, focusing on the equipment. Following the audit, URA applied Method Two under the GATT Valuation Guidelines, which uses the transaction value of identical goods, and issued an additional tax assessment of Shs 1,091,541,475.

Airtel challenged the assessment before the Tax Appeals Tribunal, arguing that the transaction value method, as provided for under the East African Community Customs Management Act (EACCMA), should have been applied since all relevant documentation had been provided.

The company maintained that there was no justification for URA to resort to alternative valuation methods, having submitted documents including the Local Purchase Order, Commercial Invoice and contract of purchase.

However, in its ruling on April 30, 2021, the Tax Appeals Tribunal dismissed Airtel’s appeal, citing inconsistencies in the documentation.

The tribunal noted that Airtel relied on an undated purchase agreement effective August 1, 2015, and expiring August 1, 2017, yet the purchase order was dated September 11, 2018, and the commercial invoice October 5, 2018, raising doubts about the authenticity of the agreement.

It further observed discrepancies between documents, including differences in the number of items listed in the purchase order and the commercial invoice, as well as inconsistencies in pricing.

The tribunal also faulted Airtel for failing to present key supporting evidence, noting that purchase orders and invoices can be altered before or after transactions.

Dissatisfied with the ruling, Airtel appealed to the High Court, arguing that the tribunal erred in law by disregarding the transaction value method and misinterpreting principles governing international trade documentation.

However, Justice Mubiru upheld the tribunal’s findings, ruling that URA was justified in departing from the transaction value method due to the inconsistencies identified.

“Accordingly, the decision of the Tax Appeals Tribunal is hereby set aside. Instead, this court finds that the respondent was justified, on the facts of the case, to depart from the transaction value method and apply the transaction value of identical goods,” the judge ruled.

The court concluded that Airtel is liable to pay the additional tax of Shs 1,091,541,475.

The judge further noted that even where an appeal raises technical issues, courts may still uphold a tax liability if the substance of the assessment remains valid.