IN THE TAX APPEAL TRIBUNAL

SOUTH EAST ZONE

HOLDEN AT ENUGU

20^TH FEBRUARY 2020

APPEAL NO. TAT/SEZ/003/16

BETWEEN

SHELL PETROLEUM DEV. CO. OF NIG. LIMITED  -    Appellant

AND

ABIA STATE BOARD OF INTERNAL REVENUE     -   Respondent 

COMMISSIONERS

Barrister Chukwuemeka Eze                                      -    Chairman

Obri, Francis Ogar                                                    -    Member Ide John Udeagbala                                                  -    Member Prof. J.O. Anyaduba                                                  -    Member

Mazi Nnamdi Okwuadigbo                                          -    Member

PARTIES

None                                                                                                    -    Appellant

J.C. Okoji, Director of Taxes                                        -   Respondent

LEGAL REPRESENTATION

Shehu Mustapha                                                         -  Appellant

Obike Onyemere                                                         -  Respondent

JUDGEMENT

FACTS OF THE APPEAL 

The Respondent carried out a tax audit for 2013 year of assessment of the Appellant (with respect to PIT, WHT, Business Premises Levy and Development Levy) sometime in March 2015. Pursuant to the outcome of the audit, the Respondent on June 24, 2015 served the Appellant a Demand Notice dated June 17, 2015 for the total sum of N69,087,115.40. When broken down, this total sum covers tax liabilities of PAYE on Local staff (N50,430,074 with zero remittance); Withholding Tax (WHT) on contract and supplies (N13,712,737.03 with remittance of N12,303,638.68 leaving an outstanding sum of N1,409,098.35); a Development Levy of N62,000 with no remittance); a Business Premises Levy (of N5,000 with no remittance); a penalty (of N5,190,617.24) and an interest at 21% (of N11,990,325.81). The Appellant objected to the Demand Notice vide its letter to the Respondent dated 15 July, 2015. In the said objection, the Appellant debunked the PAYE tax liability as it denied having any staff resident in Abia State in 2013. It observed that the names of the purported employees were mainly corporate organizations and enterprises for which it has no obligation to deduct and remit PAYE. With regards to alleged WHT liability, it claimed that the amount stated as outstanding (N1,409,098.35) referenced in the Demand Notice was the payment for December 2012 which was due and remitted to the Respondent in January 2013. 

In relation to the Development Levy liability of N62,000, the Appellant denied any liability. With respect to the Business Premises Levy liability of N5,000, the Appellant stated that it was reviewing its position and that it will revert to the Respondent.

On 31st July, 2015, the Respondent served the Appellant an invitation letter dated 21st July, 2015, for a tax audit reconciliation meeting. The meeting was slated for 4th August, 2015. By another letter of the Respondent dated 30 July, 2015 but served on the Appellant on 10th August, 2015, the Respondent requested the Appellant to bring along certain listed documents during their reconciliation meeting slated for 4th August, 2015. The proposed reconciliation meeting of 4th August, 2015 did not hold. The parties eventually met on 26th August, 2015 but the meeting was inconclusive as evident in the Appellant’s letter to the Respondent dated October 27, 2015 through which the Appellant forwarded a CD Rom containing details of contract agreements the Appellant had with its independent contractors having their business addresses in Abia State.

In response, the Respondent on 30th November, 2015 served the Appellant a letter dated 17^th November, 2015 demanding four sets of documents to enable it resolve the 2013 audit exercise. The Appellant responded to the said letter on 7th December, 2015. In the Appellant’s response, it provided for the third time (according to it) the details of its vendors to the Respondent. It, however, declined to release other details because it considered them not having been made according to tax laws.

On 29th December, 2015, the Respondent served a letter on the Appellant dated 21 December, 2015 directing the Appellant to deliver audit notification letters to the 31 vendors who the Appellant had business with in 2013. The Respondent further directed the Appellant to ensure that the 31 vendors submitted some required information to the Respondent on or before 18th January, 2016.

By a letter dated 5 January, 2016, the Appellant declined the offer of the Respondent to serve the audit notification letters on the 31 vendors and to cause them to submit certain documentation to the Respondent. Following this refusal, the Respondent on 1^st February, 2016 served a sister company of the Appellant(SNEPCO) a letter dated 21 January, 2020 wherein it accused the Appellant of failing to provide it some documents it requested from the Appellant vide its letter in that regard dated 17th November, 2015. It labelled the inaction of the Appellant as amounting to obstruction and noncompliance to the resolution of the 2013 tax audit exercise. It commanded the Appellant to remit the sum of N69,087,115 as 2013 outstanding tax liability to it within 7 days or treat the correspondence as Notice of Refusal to Amend (NORA).

FILING OF PROCESSES

The Appellant was aggrieved and filed this appeal on 3rd March, 2016. The Respondent filed a response opposing the appeal on 30th March, 2016. The

Respondent also filed a Motion on Notice on 30th March, 2016 praying the Tribunal to dismiss the appeal on the ground that it was filed outside the period prescribed by the TAT Rules, 2010. The Respondent filed several witness statements on oath through:

(a)       Onyeabor C. C. on 30/3/16; (b) Eze Ndubuisi on 18/3/19;

(c)         J. C. Okoji on 16/5/19; and 

(d)        Chijioke Okoronka on 14/6/19; 22/7/19 and 24/7/19.

The Appellant filed a witness statement on oath of a second witness on 23/1/19 with leave of the Tribunal.

On 11th July, 2016, the Appellant filed an application dated 5th July, 2016 for an order for extension of time within which to file the Notice of Appeal. On 15th August, 2019, the Respondent filed its Final Written Address while the Appellant filed its response dated 27th August on 30th August, 2019. On 27th Sept., 2019, the Respondent filed a counter affidavit and written address opposing the Appellant’s application for extension of time filed on 11th July, 2016.

The Appellant on 4th October, 2019 filed a further affidavit in opposition to the Respondent’s counter affidavit of 27th September, 2019. The interlocutory applications before the Tribunal were determined by the RULING of the Tribunal of 20th November, 2019 but which was read on 11^th December, 2019.

RELIEF SOUGHT FROM THE TRIBUNAL

The Appellant prayed the Tribunal to set aside the Demand Notice with Reference No. BIR/ABTA/002/VOL.1/12/18 dated 17 June, 2015.

THE APPELLANT’S ARGUMENTS

The Appellant contends that:

(a)        the Respondent wholly disregarded the fact that the Appellant had no PAYE obligations in Abia State for the period under review, because the Appellant did not have any employee that was resident in Abia State in 2013 and thereby erroneously assessed the Appellant to additional PIT for non-existent employees;

(b)        the Respondent computed the alleged outstanding P.A.Y.E. liability of N50,430,074 (Fifty Million, Four Hundred and Thirty Thousand and Seventy-Four Naira) by reference to thirty-one persons/entities who were the Appellant’s vendors. 

(c)         the Respondent disregarded the evidence provided by the Appellant showing that it had fully discharged its WHT obligations for the period under review;

(d)        the Respondent disregarded the fact that the Appellant had no obligation to pay the State Development Levy in view of the fact that the Appellant had no employees in Abia State during the period under review;

(e)        the Respondent omitted to provide a basis for the assessed outstanding WHT or PAYE taxes;

(f)          the Respondent erroneously assessed the Appellant to Business Premises Levy when the Appellant maintains no business premises in

Abia State;

(g)        the Respondent sought to impose an obligation on the Appellant to provide information and documents held by third parties, which the Appellant is under no duty to provide, and relied on the Appellant’s refusal to provide that information and documentation as bases for refusing to amend/discharge the assessment; and 

(h)        the Respondent imposed interest and penalty for the alleged nonpayment/late payment of taxes when the statutory conditions for the imposition of interest and penalty have not been satisfied.

EVIDENCE LED BY THE APPELLANT TO JUSTIFY ITS CONTENTIONS The Appellant relied on the two witness statements on oath of Rotimi Kushanu sworn on 3rd March, 2016 and 11th July, 2016, and that of its second witness, Henry Etukedung, sworn on 23rd January, 2019.

The following documents tendered by the Appellant’s witnesses were admitted as exhibits.

EXHIBITS TENDERED BY APPELLANT’S WITNESS 1 (AW1) ON 23RD JANUARY, 2019

(a)        Withholding Tax remittances for 2013 made by the Appellant to the Respondent: Exhibit Shell 1 [para. 7 of the Witness Statement on Oath

(WSO) of 3/3/16]; 

(b)        Respondent’s Demand Notice to the Appellant dated 17th June, 2015:

Exhibit Shell 2 [para. 9 of the WSO of 3/3/16];

(c)         Objection from the Appellant to the Respondent dated 15th July, 2015:

Exhibit Shell 3 [para. 10 of the WSO of 3/3/16];

(d)        Motion on Notice for an order of Mandamus dated 29/9/15 but filed on 24-11-15 at Abia State High Court, Ukwa Division, by the Registrar of Business Premises, Abia State against the Appellant: Exhibit Shell 4

[para. 10(g) WSO of 3/3/16];

(e)        Letter from the Respondent to the Appellant dated 21 July, 2015:

Exhibit Shell 5 [para. 11 of WSO of 3/3/16];

(f)          Letter from the Respondent to the Appellant dated 30th July, 2015:

Exhibit Shell 6 [para. 11 of WSO of 3/3/16];

(g)        Letter from the Appellant to the Respondent dated 27 October, 2015:

Exhibit Shell 7 [para. 12 of WSO of 3/3/16];

(h)        Letter from the Respondent to the Appellant dated 17th November,

2015: Exhibit Shell 8 [para. 14 of WSO of 3/3/16];

(i)          Letter from the Appellant to the Respondent dated 7th December,

2015: Exhibit Shell 9 [para. 15 of WSO of 3/3/16];

(j)          Letter from the Respondent to the Appellant dated 21st December,

2015: Exhibit Shell 10 [para. 16 of WSO of 3/3/16];

(k)        Letter from the Appellant to the Respondent dated 5th January, 2016:

Exhibit Shell 11 [para. 17 of WSO of 3/3/16];

(l)          Notice of Refusal to Amend (NORA) dated 21st January, 2016 from the Respondent to the Appellant: Exhibit Shell 12 [para. 18, WSO of

3/3//16];

(m)      Acknowledged copy of the Respondent’s NORA to the Appellant dated 21st January, 2016: Exhibit Shell 13 [cross-examination of the AW1 by the Respondent’s counsel]

APPELLANT’S WITNESS 2 (AW2)

The Appellant’s 2nd witness gave evidence on 20th March, 2019. He adopted his witness statement on oath of 23/1/19 and tendered no exhibit. The AW2 confirmed during the cross-examination of the AW2 by the Respondent’s Counsel that the Respondent has business premises(although he called it “facilities” in some sentences) in Abia State. The contents of the Additional Witness Statement on Oath also gives credence to the position.

EVIDENCE OF RESPONDENT’S WITNESSES

The Respondent’s first witness (RW1), J.C. Okoji, gave evidence on 16th May, 2019. The Respondent’s Counsel withdrew Eze Ndubuisi’s WSO of 18/3/19 and C. C. Onyeabor’s WSO of 30/3/16 and they were struck out by the Tribunal. They relied on their WSO of 16/5/19 and applied that the documents attached to the WSO of Mr. Onyeabor be deemed as attached to the WSO of J. C. Okoji (RW1). The oral application was granted.

RW1 tendered the minutes written by the Respondent during the TARC Meeting of 26/8/15 and the same was admitted as EXHIBIT ABS1.

On 24th July, 2019, the Respondent through its 2nd Witness, Chijioke Okoronka, adopted the WSO of 14th June  and 24th July, 2019 after leave was granted. It withdrew the WSO of 22/7/19 and the same was struck out. Through RW2, the Tribunal admitted the Audit Report of Abiodun Babajide & Co. in relation to the 2013 tax audit of the Appellant dated 27th April, 2015 as Exhibit ABS 2.

On 17th September, 2019, the Respondent moved its Motion on Notice dated 5th Sept. but filed on 6th Sept., 2019 seeking to call a 3rd witness to tender documentary evidence of acknowledgement of service of Exhibits Shell 2 and 10 by the Appellant, who had filed a Counter-affidavit on 17/9/19 opposing the application, withdrew it voluntarily during proceedings of 17/9/19 and the same was struck out. The application was granted by the Tribunal and the Respondent’s 3rd Witness, Oriaku Augustine K., adopted his Witness Statement on Oath sworn on 6th September, 2019. The witness tendered ineligible copies of documents which it purported to be photocopies of acknowledged copies of Exhibits Shell 2 and 10. The Tribunal rejected them and advised the Respondent to tender legible copies originally stamped by the Appellant. The Respondent abandoned tendering eligible copies and proceeded to adopt its written address on 20th November, 2019.

ADOPTION OF WRITTEN ADDRESSES BY THE PARTIES

Parties adopted their written addresses on 20th November, 2019. The Respondent adopted its Final Written Address of 15th August, 2019 and its Reply on Point of Law of 6th September, 2019. The Appellant as well adopted its written address dated 27th August but filed on 30th August, 2019 and withdrew its reliance on paragraphs 73-76 of its Written Address.

ORDER OF TRIBUNAL MADE PURSUANT TO ORDER XX11 RULE 2 OF THE TAT RULES, 2010

Sequel to the non-availability of the attachment that was supposed to accompany Exhibit Shell 9, the Tribunal ordered that the attachment be made available as well as the documentary evidence of the last remittances filed by the Appellant with the Respondent before the Appellant became bereft of staff in Abia State.

ISSUE OF JURISDICTION ARISING FROM THE VEXED ISSUE OF EXTENSION OF TIME TO FILE THE NOTICE OF APPEAL

The Appellant’s application dated 5th July but filed on 11th July, 2016 for extension of time to file the Notice of Appeal of the Appellant was moved on 15th October, 2019; granted on 20th November, 2019 with the full ruling read on 11^th December, 2019. The Tribunal ruled that it had jurisdiction to decide on the merits of this appeal and adjourned the judgment to today, being 20^th February, 2020.

ISSUES FOR DETERMINATION

In its Final Written Address of 15th August, 2019, the Respondent raised two issues for determination, namely:

(1)     Whether the Appellant had no Pay-As-You-Earn obligation to the Respondent in 2013 as contended in its Notice and grounds of Appeal and therefore not liable to remit PAYE taxes to the Respondent in 2013?

(2)     Whether the Notice and grounds of Appeal were not filed out of time, and therefore incompetent?

The Appellant on its part submitted three issues for determination: