The High Court has dismissed an application by two directors of KK Electrical Company (U) Limited seeking to stop their prosecution over allegations of tax evasion and VAT fraud.
The court ruled that the Uganda Revenue Authority (URA) acted lawfully in deciding to prosecute Mahmood Kasule and Henry Kasirye Masanganzira, the directors, who had gone to court seeking judicial review of the tax body’s decision to prosecute them.
They argued that the tax body had acted illegally and unfairly.
But in a ruling delivered by Justice Isaac Bonny Teko, the court found that URA had full legal authority to investigate the affairs of KK Electrical and to bring criminal charges once evidence pointed to tax offences.
The case has its roots in a routine tax investigation. URA carried out an audit of KK Electrical’s VAT records. As part of this, the authority reviewed electronic tax data captured on EFRIS.
The audit turned up what URA said were false VAT returns. Investigators flagged claims built on purchases and invoices they believed did not reflect real transactions.
Based on those findings, URA moved to prosecute. Kasule and Masanganzira, as officers of the company, were charged with making false and misleading statements to a tax officer, a charge brought under the Tax Procedures Code Act.
Before the criminal trial could proceed, Kasule and Masanganzira filed for judicial review, asking the court to halt the prosecution.
Their argument rested on the idea that KK Electricals was a separate legal entity, and that any wrongdoing should be attributed to the company, not to them personally.
They also questioned how URA had carried out its investigations and argued they had been unfairly singled out. Separately, they challenged the constitutionality of the law URA relied on to charge them.
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Justice Teko rejected the directors’ central argument that the company’s separate legal identity shielded them from personal prosecution.
He pointed to Section 82 of the Tax Procedures Code Act, which allows officers of a company to be held criminally accountable where the company commits a tax offence, subject to whatever legal defences may be available to them at trial.
He also dismissed the constitutional challenge the directors raised against Section 82, saying it was not a matter judicial review could settle.
“[The directors’] constitutional objection fails because the question of the validity of section 82 of the Tax Procedures Code Act falls within the jurisdiction of the Constitutional Court and cannot be determined in proceedings commenced by way of judicial review,” he ruled.
Justice Teko explained that questions such as whether the disputed invoices were genuine, whether the VAT claims were false, and whether the directors personally took part in any wrongdoing must be ironed out before the Anti-Corruption Court, where the criminal case is being heard.
He stressed that judicial review is not a substitute for a criminal trial and is not the forum for testing whether investigators reached the right conclusions. Its only job, he said, is to check whether a public authority acted within the law.
The court also rejected Kasule and Masanganzira’s argument that URA ought to have finished all its administrative tax procedures before turning to criminal prosecution.
Justice Teko said a tax dispute and a criminal prosecution serve different purposes, and one does not have to wait for the other. Where evidence points to possible criminal conduct, prosecution can proceed independently of any parallel tax assessment process.
Finally, on claims that URA had acted irrationally or unfairly, he noted that the tax body had carried out proper investigations, conducted VAT audits and examined electronic tax records, including EFRIS data, before deciding to prosecute.
Having found no basis to stop the prosecution, he dismissed the application and awarded costs to URA.
The ruling sends a clear signal to company directors and business owners in Uganda that hiding behind a company’s separate legal personality will not automatically protect them from personal prosecution where evidence links them directly to tax offences.
