URA FINED FOR AUCTIONING GOODS WORTH 1.46BILLION FOR ONLY SHS 4MILLION

URN

The High Court sitting in Kampala has ordered the Uganda Revenue Authority (URA) to pay Shs 1.66billion in compensation for illegally auctioning goods worth Shs 1.46billion for only Shs 4million.

In a ruling by Justice Bernard Namanya in a case by Babaana Children of Uganda Ltd, the court said URA did not comply with the necessary legal requirements when auctioning warehoused goods.

“The unlawful disposal of the plaintiff’s goods was unjustified and constituted a serious breach of…the East African Community Customs Management Act, 2004, for which the defendant offered no satisfactory explanation at the hearing. The evidence shows that the medical equipment unlawfully disposed of by the defendant had been donated by persons in Switzerland and was intended to support improved access to modern health services in Uganda. The consignment comprised high-tech medical equipment, including dental surgery equipment, rehabilitation hospital equipment, and gynecology practice equipment. Beyond the loss of the equipment itself, the unlawful disposal deprived the intended beneficiaries of the anticipated medical services and caused inconvenience, disappointment, and loss to the plaintiff and its donors,” Justice Namanya’s ruling reads in part.

According to court records, Babaana Children of Uganda Limited, a charitable organisation, imported into Uganda a donated consignment comprising medical equipment and assorted commodities valued at Swiss Francs 364,817 .

Before the importation, Babaana sought a tax exemption from the Ministry of Health, which was confirmed by URA in November 2017. After the goods were warehoused, Babaana sought an extension of the warehousing period to December 2018 because construction of the intended clinic premises was incomplete, and that URA did not object to that request.

However, when it later followed up on the consignment for purposes of commencing the clearing process, it was informed that the goods had been disposed of. In 2020, the charity organization sued URA for disposing of its goods that were tax-exempt, with also knowledge of the extension of the warehousing period.

It demanded that URA compensate it with Shs 17.262 billion in damages. In its defence, URA noted that it lawfully handled the importation, warehousing, and disposal of the goods in accordance with the applicable customs laws.

URA added in its defence that, before importation of the goods, the charity organization sought tax exemption only for items intended for use in licensed hospitals, and that it specified the exempt items, including medical equipment and medical supplies, as well as the non-exempt items, such as toys, shoes, milk, toilet supplies, and office supplies.

URA also noted that the goods were warehoused on December 11, 2017, for the statutory maximum period of nine months, which expired on September 7 2018, and that Babaana failed to clear the goods, pay taxes on the non-exempt items, or formally apply for redemption before disposal.

In his ruling, Justice Namanya found that URA did not comply with a number of statutory requirements governing the sale of warehoused goods. “Fiona Tubeine, [URA] Manager, Customs Department, stated during cross-examination that a one-month notice of sale had been issued in the Uganda Gazette before the sale of the plaintiff’s goods.

However, no copy of the alleged Gazette notice was produced in evidence…I therefore find that the defendant sold the plaintiff’s goods without issuing the statutory one-month notice required by law.

Had such notice been issued, the plaintiff would have been allowed to take remedial action,” Justice Namanya ruled. He also added that although the goods’ estimated value was approximately Shs 1.46billion, they are said to have been sold for a paltry Shs 4million without a satisfactory explanation for the considerable disparity.

“The Exit Note issued by the defendant records the goods sold to Mr Isma Mpindi as worn clothing and other items with a gross weight of 2,500 kilograms, whereas the goods received into the warehouse weighed 6,600 kilograms. The high-value medical equipment is not reflected in that Exit Note. In light of this evidence, which the defendant did not satisfactorily controvert, I find that the defendant failed to account for the plaintiff’s medical equipment in the manner required by law,” the ruling reads in part.

With that ruling, the judge ordered that URA compensates Babaana Children of Uganda Limited with Shs 1.46billion as the value of the auctioned goods and also Shs 200million in general damages.

The court also slapped a 6% interest on the Shs 1.46billion from 2018 until full payment and 6% interest on the Shs 200million from the date of the ruling. URA was also condemned to paying the costs of the suit.