➥ CASE SUMMARY OF:
Access Bank Plc V. Edo State Board of Internal Revenue (2018) – CA/B/333/2015
by Branham Chima.
Access Bank Plc
Edo State Board of Internal Revenue
Court of Appeal – CA/B/333/2015
➥ JUDGEMENT DELIVERED ON:
16 March 2018
➥ THIS CASE IS AUTHORITY FOR:
⦿ IT IS PARAMOUNT TO DECIDE ISSUE OF JURISDICTION FIRST
The issue of jurisdiction is the bedrock of adjudication by a Court of law and as such, it is basically considered expedient to resolve same before proceeding to consider the main issues presented to the Court for adjudication on the merit. It goes without saying that the determination of a suit by a Court is null and void if done without jurisdiction notwithstanding how well or proper the proceeding was conducted. The jurisdiction of a Court to entertain a matter is therefore fundamental to the extent that if a Court has no jurisdiction to hear and determine a case, the proceedings is a nullity ab initio. See Madukolu v. Nkemdilim (1962) 2 SCNLR 341; A.G. Lagos State v. Dosunmu (1989) 6 SC (Pt. II) page 1; A.G. Rivers State v. A.G. Akwa Ibom State (2011) 8 NWLR (Pt. 1248) 31; Ajao v. Alao (1986) 5 NWLR (Pt. 45) 802; Galadima v. Tambai (2000) 6 SCNJ 190. — S.C. Oseji, JCA.
⦿ IT IS STATUTE THAT GIVES COURT JURISDICTION
Jurisdiction of Court is granted by the Constitution or an enabling statute but not by the Courts. In this regard, no Court shall have jurisdiction to go beyond the provisions of the relevant law, otherwise, it will be ultra vires. See Ugba v. Suswam (No. 2) (2012) 6 sc (Pt. II) 56. Also in Adetayo v. Ademola and Ors. (2010) 15 NWLR (Pt. 1215) 169 the Supreme Court held inter alia, that the fundamental nature of jurisdiction is that it does not exist in a vacuum because all Courts of law derive their power, authority, and therefore jurisdiction either under the Constitution or under specific statutes. In that respect no Court can assume jurisdiction in the absence of having been constitutionally and statutorily empowered to do so. See also A.G. Rivers State v. A.G. Akwa Ibom State (supra) and Arjay v. Airline Management Support Ltd. (2003) 5 SCM 17. — S.C. Oseji, JCA.
⦿ THE FUNDAMENTALISM OF FAIR HEARING – STATUTORY AND CONSTITUTIONAL
Now it has been held that the principle of or doctrine of fair hearing in its statutory and constitutional form is derived from the principle of natural justice under the twin pillars of audi alteram partem and nemo judex in causa sua. The principle of fair hearing is fundamental to the administration of justice as enshrined under Section 36 of the 1999 Constitution (as amended). It hinges on the conduct of a hearing which is fair to both parties to the suit and without bias or partiality in favour or against either of them who will thereby be prejudiced. See Ude v. State (2012) LPELR 14193 (CA); Uguru v. The State (2002) 9 NWLR (Pt. 771) 90; Newswatch Communications (CA) v. Attah (2006) 12 NWLR (Pt. 993) 144; Ovunwo v. Woko (2011) 6 SCNJ (Pt. 1) 124; Nosepetco Oil and Gas Ltd v. Olorunimbe (2012) 10 NWLR (Pt. 1307) 115. In Egbuchu v. Continental Merchant Bank Plc (2016) NWLR (Pt. 1513) 192 at 207, the apex Court held inter alia that: “The Constitutional provision for fair hearing mainly stems or germinates from two common law principles of natural justice. They are audi alteram partem and nemo judex in causa sua. The meaning of the Latinism is, hear the other party; hear both sides. No man should be condemned unheard. What the rule or doctrine of fair hearing means is that the parties must be given equal opportunity to present their case to the Court and no party should be given more opportunity or advantage in the presentation of his case.” See also Inakoju v. Adeleke (2007) 4 NWLR (Pt. 1025) 423. The issue of fair hearing is so fundamental and germane that any proceeding conducted without fair hearing amounts to a nullity and is bound to be set aside. See Tsokwa Motors (Nig) Ltd v. UBA Plc (2008) 2 NWLR (Pt. 1071) 347; Egbuchu v. Continental Merchant Bank Plc supra; Adigun v. Oyo State (1987) 1 NWLR (Pt. 53) 678. — S.C. Oseji, JCA.
⦿ PROCEDURE BY TAX AUTHORITY WHERE FAILURE TO MAKE NECESSARY TAX RETURNS
My understanding of the aforestated, is that where a taxable person fails to make the necessary tax returns in a year as prescribed by the relevant tax authority, the latter shall after the expiration of the period allowed proceed to make necessary assessment of the amount of tax due based on its best of judgment and such amount assessed must be delivered to the taxable person for his information and compliance. If after there is a failure or refusal to comply then a demand notice may be sent to him or the two may be sent together to facilitate the process of tax payment. Two points are required to be made clearer here. The first is that the assessment shall be on yearly basis for purposes of clarity and not a lumped up assessment. This is to ensure that tax payable for each year is clearly set out. The total number of years assessed where applicable may however be attached together with the demand notice and delivered to the taxable person. In other words, a demand notice is not the same as assessment notice as contended by the Respondent. — S.C. Oseji, JCA.
➥ LEAD JUDGEMENT DELIVERED BY:
Samuel Chukwudumebi Oseji, JCA.
⦿ FOR THE APPELLANT
⦿ FOR THE RESPONDENT
➥ CASE FACT/HISTORY
This appeal is against the Ruling of the High Court of Justice, Edo State sitting in Benin and delivered on the 21st day of July, 2015, wherein upon an application ex-parte by the Respondent the said Court granted an order of distrain against the properties of the Appellant and in favour of the Respondent based on the claim that the Appellant was liable to pay to the Respondent, the total sum of ₦42,184,790.16k being outstanding arrears on withholding tax on interest accrued therefrom. The facts of the case as can be gleaned from the record is that the Appellant which is a commercial bank and carries on business in Nigeria including Edo State received a Demand Notice from the Respondent requesting the Appellant to pay the total sum of ₦122,093,955.14 as withholding tax on interest for the period 2007 to 2012. The Appellant then engaged the services of a tax consultant who upon a review, found the amount demanded as unacceptable and consequently wrote a letter of objection to the Respondent attaching the relevant documents in support of the objection.
Based on the said objection, the Respondent readjusted the Appellants liability downwards. It issued another Demand Notice dated 15/12/2014 for the Appellant to pay the sum of ₦42,184,790.16k as withholding tax on interest for the period 2007 to 2012. Upon further discovery that the amount stated in the Demand Notice does not reflect the information and documents made available to the Respondent, the Appellant through its tax consultant wrote another letter of objection, and stated therein that the actual amount payable is the sum of ₦7,719,928.99k. The Appellant went ahead to pay the said sum of ₦7,719,928.99k to the Respondent who accepted same and issued a receipt of payment dated 22/1/2015.
However, the Respondent refused any further downward review of the sum of ₦42,184,790.16k as per the Demand Notice of 15/12/14 or to participate in any meeting on the issue with the Appellant. This is reflected in the letter to the Appellant dated 2/3/2015. The issue remained deadlocked and unresolved until the Respondent filed a motion ex-parte in the High Court of Edo State.
In the said motion ex-parte filed on 15/7/2015, the Respondent sought the following reliefs: (1) An order to distrain upon any land, premises or place of business in respect of which the Respondent is the owner or occupier at Access Bank Plc, Sapele Road, Benin City, Edo State in satisfaction of the Tax Liability in the sum of ₦42,184,790.16 (Forty Two Million, One Hundred And Eighty Four Thousand, Seven Hundred And Ninety Naira, Sixteen Kobo) established against the Respondent. (2) An order to distrain against any moveable goods, bond or securities or any kind of property belonging to the Respondent in satisfaction of the tax liability established against the Respondent as final and conclusive taxes due to the Applicant. The said ex-parte motion was supported by a 24 paragraph affidavit to which is attached four documents as Exhibits BIR1 to BIR4. The lower Court granted the said application which upon being served with the enrolled order, the Appellant was compelled to pay an additional sum of ₦34,454,861.27k. Aggrieved with the said ruling of the lower Court, the Appellant filed a notice of appeal with four grounds of appeal on the 29/7/2015. The Appellants brief of argument was subsequently filed on 12//11/2015 while the Respondents brief was filed on 31/5/2016.
➥ ISSUE(S) & RESOLUTION(S)
[PRELIMINARY OBJECTION: ]
I. Whether it is the Federal High Court that has the jurisdiction to entertain the application filed by the Respondent and not the State High Court because it relates to matters of taxation?
RULING: IN RESPONDENT’S FAVOUR.
A. THE STATE HIGH COURT HAS JURISDICTION IN RESPECT TO THE WITHHOLDING TAX IN EDO STATE
[‘A careful perusal of the processes filed before the trial Court by the Respondent show that the subject matter of the application relates to the issue of withholding tax on interest that accrues to individual and registered business names, account holders resident in Edo State. It does not in any way relate to the taxation of the Appellant itself but on interest accruable to individual account holders in the bank as well as registered business names that have account in the bank and resident in Edo State. I do not therefore see how it relates to or is connected with the taxation of the Appellant or any other companies as a corporate entity that will bring it within the ambit of Section 251(1)(b) of the Constitution. What is more, the persons on whom the withholding tax on interest is directed are not shown to be subjected to federal taxation.’]
B. STATE HIGH COURT, AND NOT FEDERAL HIGH COURT, THAT HAS JURISDICTION IN RESPECT TO STATE REVENUE
[‘This withholding tax interest is one of the means through which the states are generating revenue to meet the daily expenses of governance and one of the means of enforcing their revenue drive is by approaching the relevant State High Court and not the Federal High Court which statutorily and constitutionally have no jurisdiction to entertain any matter pertaining to or connected with the revenue of a State. The jurisdiction of the Federal High Court can only be invoked where the issue is connected with or pertaining to the revenue accruing to the federal government. In this regard, the case of Shittu v. Nigerian Agricultural and Co-operative Bank Ltd. supra, also relied on by the Respondent is very apt on this issue wherein it was held by this Court that: “I have considered and discussed in the judgment above, the ruling of the Federal High Court on appeal, I find no error in the decision and I affirm it in its entirety when I say yes to the principle issue in this appeal, that the issue of tax before the Court is on Personal Income Tax, pay as you earn (PAYE) and withholding Tax (WHT), the eligible Court to try the issue is the State High Court, Akwa Ibom State.” I also agree with the submission of the learned counsel for the Respondent that the collection of withholding tax does not constitute acts done in the course of administration and management of the Federal Government or any of its agencies as contended by the Appellants counsel.’
‘The above set out provision [section 78 PITA] no doubt makes it clear that the relevant tax authority whether federal, state or local government can sue to recover amount of revenue owed in a Court of competent jurisdiction depending on whether it is a federal, state or local government revenue. In this regard it cannot be said that only the Federal High Court has jurisdiction to hear matters pertaining to taxation. The objection raised is accordingly dismissed for lacking in merit.’]
[MAIN APPEAL: ALLOWED]
I. Whether the Appellant was liable to a distraining order in the absence of an appropriate prior tax assessment by the Respondent which is a pre-condition under the law?
RULING: IN APPELLANT’S FAVOUR.
A. THE DETERMINATION OF ISSUE 2 HAS DETERMINED THIS ISSUE
[‘Resolution of issue 2 ordinarily put paid to a further consideration of this issue 1 given the conclusion therein, to the effect that the whole proceedings leading to the said order ex-parte is a nullity. I will however for what is worth address this issue No. 1.’]
B. A TAX ASSESSMENT NOTICE WAS NOT FILED TO THE APPELLANT
[‘This leads me to the conclusion that assessment of tax payable on taxable income is an essential requirement of the personal income Decree and proof of service upon the tax payer of the notice of assessment as prescribed by Section 56 thereof is a sine qua non for establishing liability for non-payment of income tax under the Decree. See also Ukpong v. Commissioner of Finance (2006) 16 NWLR (Pt. 1013) 187 also relied on by the Appellant.’
‘In this regard, I agree with the submission of the Appellants counsel that the Respondent cannot fix arbitrary figure without giving the requisite breakdown of such figure on a yearly basis and having failed to carry out a valid tax assessment on the Appellant and notify the Appellant accordingly via a notice of assessment and then demand note before embarking on the enforcement of the sum of ₦42,184,790.16k constitutes non compliance with the provisions of the Personal Income Tax Act. This issue is also resolved in favour of the Appellant.’]
II. Whether the learned trial Judge was right in granting the Respondents ex parte application for the enforcement of the alleged tax liability without affording the Appellant the opportunity to be heard?
RULING: IN APPELLANT’S FAVOUR.
A. FAIR HEARING WAS NOT GIVEN THE APPELLANT RESULTING IN MISCARRIAGE OF JUSTICE PARTICULARLY IN RESPECT TO THE AMOUNT TO BE PAID
[‘A major point of note in the said ruling is that the order of distrain was made pursuant to the tax liability of ₦42,184,790.16k as claimed by the Respondent who did not disclose the fact that the Appellant had already paid in the sum of ₦7,719,929.99k to the Respondent and for which a receipt was issued. This fact and reality was not disclosed to the trial Court. The question then is, why conceal the said payment from the Court because such act or omission constitutes gross misrepresentation leading to a Court being misguided to make an order it ought not to make. What is more, the said order of distrain based on the alleged withholding tax liability of ₦42,184,790.66k gives the Respondent the licence to claim the whole amount when infact the Appellant had earlier paid in the sum of ₦7,719,929.99k as its own estimate of the amount payable. This situation would not have occurred had the Appellant been put on notice and given the opportunity to present its own side of the story. It indeed gives credence to the unsalutary effect of ex-parte application under certain circumstances.’
‘In Chief G.O. Igbinedion CFR v. Edo State Board of Internal Revenue (2017) VOL. 265 LRCN 69 at 85 86, one of the issues for determination was whether the Appellants right to fair hearing as provided in Section 36(1) of the Constitution of the Federal Republic of Nigeria 1999 (as amended) has not been breached by the ex-parte proceedings used to establish liability against him. This Court per BADA, JCA held inter alia as follows: I am of the view that the procedure adopted by the Respondent at the lower Court from which the learned trial Judge made the order distraining on the property of the appellant based on the provisions of Section 38 of the Edo State Revenue Administration Law 2012 (an enactment of the Edo State House of Assembly) are wrong, as it contravened the provisions of Section 36(1) of the 1999 Constitution of the Federal Republic of Nigeria (as amended) which is a provision guaranteeing fair hearing in the determination of the civil rights and obligations arising, involving private citizens and/or government bodies such as the Respondent. The 1999 Constitution of the Federal Republic of Nigeria (as amended) is supreme over the laws made by the states in Nigeria and any law passed by a State House of Assembly which is inconsistent with the provisions of the 1999 Constitution shall to the extent of its inconsistency be void. See Section 1(3) of the 1999 Constitution of the Federal Republic of Nigeria (as amended). In this appeal, there is no doubt that the Appellant having been deprived of the opportunity to participate in the Court proceedings of 20th day of October, 2015 where the Respondents ex-parte application to obtain Ruling against the Appellant, therefore his right to fair bearing has been breached.’
‘In the instant case notwithstanding the disagreement over the actual liability of the Appellant, and the fact that the sum of ₦7,719,929.99k was paid then to the Respondent, it still proceeded by way of an ex-parte application before the trial Court to obtain an order of distrain against the moveable and immoveable properties of the Appellant. This to my mind is a case of gross breach of the Appellants right to fair hearing and accordingly the said order ex-parte made by the trial Court on the 21st day of July, 2015 cannot stand having been made in violation of the provisions of Section 36(1) of the Constitution of the Federal Republic of Nigeria.’]
B. PITA DID NOT PROVIDE FOR ENFORCEMENT OF TAX LIABILITY VIA EX PARTE APPLICATIONS
[‘I have carefully gleaned through the above set out provisions of PITA [section 104] and I unfortunately failed to see where it is provided that enforcement of tax liability shall be by way of ex-parte application. The parliament did not give room for such method in the Act. It only conferred on the relevant tax authority (which includes the Respondent) the power to take action for the enforcement of payment of tax due from taxable person where an assessment has become final and conclusive and a demand note, has in accordance with the provisions of the Act been served on the taxable person. Granted that the Respondent acted pursuant to any statutory provision, this Court had in a number of cases frowned at the idea of having recourse to ex-parte applications to enforce such payments because it is a breach of the right of fair hearing and runs counter to the provisions of Section 36(1) of the Constitution of the Federal Republic of Nigeria 1999 (as amended).’]
‘On the whole this appeal is found to be meritorious and it is accordingly allowed. The Ruling of the High Court of Justice Edo State, delivered on the 21st day of July, 2015 is hereby set aside. Parties to bear their costs.’
➥ MISCELLANEOUS POINTS
➥ REFERENCED (LEGISLATION)
Section 104 Personal Income Tax Act;
➥ REFERENCED (CASE)
⦿ SERVING NOTICE OF TAX ASSESSMENT ON THE TAX PAYER MUST BE DONE
In this regard, the case of Fasogbon v. Layande (1999) 11 NWLR (Pt. 6280) 543 becomes very apt, wherein it was held at pages 556 557 that: “From the steps that must be taken before the tax payable is evolved, to argue that serving notice of assessment on the tax payer is not part of the procedure under the decree is unthinkable. It is like a Romeo without a Juliet. In the realm of the law, to say that the tax payer who by operation of personal income tax is legally indebted to the tax authority for the assessed income tax is not informed of the assessment of the income tax payable would be an imposition, an arbitrary act that affects his civil rights and therefore infringes upon his civil rights and of fair hearing under Section 36 of the 1999 Constitution of the Federal Republic of Nigeria.”
➥ REFERENCED (OTHERS)