The High Court has overturned tax assessments worth Shs1.24 billion that Uganda Revenue Authority (URA) had imposed on Britania Allied Industries Limited.
In a detailed ruling, Justice Susan Odongo said URA acted “unfairly” and “unlawfully” by retrospectively changing its interpretation of customs law after approving Britania’s imports for nearly a decade.
The dispute arose from the importation of mango and guava fruit pulp, which Britania uses as raw material to manufacture biscuits, confectionery, fruit juices and sauces.
Since 2013, Britania had been importing the pulp under the East African Community Duty Remission Scheme, which attracted a reduced import duty of 10%.
The company’s applications for duty remission were annually reviewed by URA, approved by the Commissioner of Customs, and subsequently gazetted by the East African Community Council of Ministers.
Trouble started in 2021 when URA conducted post-clearance reviews and changed its position, claiming that the pulp had been wrongly classified for years.
URA argued that mango and guava pulp should instead fall under HS code 2009.89.00, a category that attracts a higher import duty of 25%.
Based on that reclassification, URA issued retrospective assessments demanding Shs 221 million for the period July 2020 to June 2021 and Shs 1 billion covering the years 2017 to 2020.
Britania challenged the assessments before the Tax Appeals Tribunal, but the tribunal sided with URA and upheld the demands.
Britania then appealed to the High Court, arguing that URA could not lawfully turn around and punish it for a classification that the authority itself had approved and audited over many years.
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Justice Odongo agreed.
“The overwhelming evidence on record demonstrates that the respondent actively engaged with the appellant’s applications, creating a clear and unambiguous expectation over nearly a decade that the imports were eligible for the scheme,” she said.
She noted that URA had conducted customs post-clearance audits in 2016 and again in January 2020 and found the imports to be “generally well classified”, without identifying any short levies related to mango or guava pulp.
The court rejected URA’s claim that it had been misled by Britania, stating there was no evidence of fraud, concealment or dishonest declaration by the company.
“In the absence of evidence to substantiate the allegation, I find it difficult to believe the assertion that without the knowledge of the respondent, the appellant for all these years dishonestly and without full disclosure misclassified the items,” Justice Odongo said.
At the heart of the ruling was the doctrine of legitimate expectation, which protects taxpayers from arbitrary changes
Justice Odongo emphasised that while URA has the statutory mandate to interpret and enforce tax laws, any change in interpretation can only operate prospectively.
The judge described URA’s actions as oppressive and capricious.
“The capriciousness, oppression and arbitrary application of the taxes retroactively is the antithesis of certainty and regularity of law,” she ruled.
On the technical issue of classification, the court agreed with the tribunal that mango and guava pulp did not neatly fit under the specific juice subheadings for orange or apple juice.
However, the judge declined to allow URA to use that conclusion to justify backdated tax demands.
Justice Odongo also observed that mango pulp is commonly understood as a raw material rather than juice, noting international food standards that distinguish pulp from juice.
She suggested that a final technical determination on classification could be referred to the World Customs Organisation, but stressed that such a process could not be used to punish past conduct that URA itself had approved.
In the final orders, the court allowed Britania’s appeal in full. The court decision is a significant rebuke to URA’s use of retrospective tax assessments.
