Summary
On March 10, 2017, the Court of Appeal in Appeal Nos CA/L/1144/2015 and CA/L/1145/2015 – CNOOC Exploration & Production Nigeria Ltd & Anor v. Nigerian National Petroleum Corporation & Anor, overturned the decisions of the Federal High Court and upheld the jurisdiction of the Tax Appeal Tribunal (TAT) established by the Federal Inland Revenue Service (Establishment) Act 2007, to determine tax disputes.
These decisions are notable for being the first set of Court of Appeal decisions which specifically address the issue of the TAT having jurisdiction to determine tax matters. Indeed this issue was the climax of the appeals.
Background
The Appellants had prepared Petroleum Profits Tax (PPT) returns for the contract area and forwarded them to NNPC for onward transmission to the Federal Inland Revenue Service (FIRS) as provided for under a Production Sharing Contract. NNPC however transmitted a different set of PPT returns which it had prepared. FIRS subsequently assessed the Appellants to additional Petroleum Profits Tax (PPT) and additional Tertiary Education Tax (EDT) based on the PPT returns prepared by NNPC.
Dissatisfied with the additional PPT and EDT assessments of FIRS, the Appellants filed notices of objection. Upon the issuance of notices of refusal to amend assessments by FIRS, the Appellants instituted separate appeals challenging the additional PPT and EDT assessments at the TAT.
At the TAT, FIRS raised preliminary objections to the commencement of proceedings at the TAT, alleging that NNPC was a necessary party who ought to be joined as a party for the effectual resolution of the issues in dispute. The TAT agreed with FIRS and made orders joining NNPC as a party in the PPT and EDT appeals. Upon being joined as a party, NNPC raised preliminary objections to the TAT’s orders joining it as a party, and also challenged the jurisdiction of the TAT to hear the appeals on the ground that the subject matter of the dispute was within the exclusive jurisdiction of the Federal High Court. NNPC also contended that the TAT did not have personal jurisdiction over it as it was not aggrieved by the tax assessments issued by FIRS and so was not a proper party in the appeals and ought not to be joined as a party.
In its rulings on NNPC’s preliminary objections, the TAT although maintaining that NNPC was a necessary party, nonetheless struck out NNPC as a party on the basis that the rules of fair hearing require that a party must be given an opportunity to be heard. But such a party cannot be compelled to make any representation where it does not desire to do so.
NNPC then appealed against the rulings of the TAT striking it out as a party, on the ground that the TAT could not determine the matters before it in its absence since the TAT had stated that NNPC was a necessary party; and that in any event, the TAT did not have jurisdiction to determine tax matters, as such matters were within the exclusive jurisdiction of the Federal High Court.
The Federal High Court in its judgments of May 22, 2015, delivered by Hon. Justice M.B. Idris, held that the TAT lacked the jurisdiction to entertain the Appellants’ appeals because the purport of Section 251(1) of the 1999 Constitution (as amended), was to vest the Federal High Court with exclusive jurisdiction in matters pertaining to the revenue of the federal government including taxation. Consequently, the TAT could not adjudicate on matters pertaining to taxation. The Federal High Court also held that the NNPC had the requisite locus standi to initiate the appeal before it, having already been held to be a necessary party by the TAT.
Dissatisfied with the judgments of the Federal High Court in both the PPT and EDT appeals, the Appellants further appealed to the Court of Appeal vide notices of appeal dated August 21, 2015.
At the Court of Appeal, the Appellants argued that the NNPC was not a necessary party to the underlying actions at the TAT because it was not a party aggrieved by the tax assessments of the TAT since the decision of the TAT on the amount of tax liability payable by the Appellants did not in any way affect NNPC. The Appellants’ position was that the only parties aggrieved by the tax assessments issued by FIRS were the Appellants, who were the tax payers; and not NNPC. The Appellants further contended that NNPC did not have the locusstandi to institute the appeals at the Federal High Court having elected to be struck out as a party at the TAT. To permit NNPC to turn around to argue that it was a necessary party before the TAT would be tantamount to permitting it to approbate and reprobate. The Appellants also argued that even if NNPC was a necessary party (although vehemently denying this), non-joinder or mis-joinder of a party would not defeat an action. The Appellants further argued that the TAT’s jurisdiction to determine tax disputes did not encroach upon the exclusive jurisdiction of the Federal High Court as conferred on it by section 251(1)(a) and (b) of the 1999 Constitution (as amended). The Appellants explained that institution of tax appeals at the TAT before approaching the Federal High Court was merely an administrative condition precedent to approaching the Federal High Court and that in any event, the decisions of the TAT could be reviewed and quashed by the Federal High Court upon an application for judicial review or appeal to that Court.
On its part, NNPC argued that having affirmed that it was a necessary party, the TAT could not determine the appeals in its absence. NNPC also argued that it was the Federal High Court that was vested with exclusive jurisdiction over tax matters. Therefore, no other judicial body could exercise original jurisdiction in respect of tax matters. NNPC also argued that the clear purport of paragraph 20(3) of the Fifth Schedule to the FIRS Act was that the TAT was to be treated as a civil court for the purposes of exercising jurisdiction in respect of disputes arising out of taxation.
NNPC concluded by arguing that the provisions of the FIRS Act, no matter how laudable and practicable, could not override the provisions of the Constitution which vested exclusive juridiction on the Federal High Court in respect of the revenue of the Federal Government, taxation of companies and issues involving Federal Government agencies.
In its decisions in the PPT and EDT appeals, the Court of Appeal restated the principle that a necessary party is one whose presence is necessary for the effectual and complete determination of the issues in a suit. Following this principle, the Court of Appeal held that NNPC was not a necessary party to the tax dispute at the TAT as it was not aggrieved by the tax assessments and there was nothing on record to show that the reliefs sought by the Appellants at the TAT had any bearing or impact on the rights or obligations of NNPC. Consequently, the Court of Appeal was of the viewthat the dispute could be effectually and completely determined in NNPC’s absence.
As regards whether or not NNPC had the locus standi to institute the appeal at the Federal High Court, the Court of Appeal held that in determining whether a person had locus standi, such a person must be able to show that the action of the other party had adversely affected his right or interest in the subject matter of the claim. The Court of Appeal then stated that from NNPC’s own admissions and assertions that it was not aggrieved by the decisions of the TAT, it was clear that NNPC did not have the locusstandi to institute the appeals at the Federal High Court.
On the issue of whether the TAT’s jurisdiction to hear tax appeals is unconstitutional and an infringement of the exclusive jurisdiction of the Federal High Court in tax matters, the Court of Appeal made reference to its dicta in two of its previous decisions. In Shell Nigerian Exploration and Production & Ors. v. FIRS & Anor. (Unreported judgment, Appeal No. CA/A/208/2012 delivered on 31st August 2016) at page 38, the Court of Appeal had stated that:
“The procedure for resolving claims and objections such as in the instant matter, are spelt out. When an assessment is made and the party is not satisfied, it can serve a Notice of Objection with the FIRS. It can also file a Notice of refusal to amend the assessment as desired where it disagrees with FIRS. The party may also then appeal against the assessment to the Tax Appeal Tribunal. If the party is still dissatisfied with the decision of the Tax Appeal Tribunal, then it can approach the Federal High Court, The Court of Appeal and the Supreme Court.”
The Court of Appeal also quoted with approval, its dictum in Esso Exploration and Production Nig. Ltd & Anor. v. NNPC (Unreported judgment, Appeal No. person under the provisions of the Act or of any subsidiary legislation made there under. The procedure includes: i. Notice of objection to review and revise assessment made of the objector/applicant (section 38(2); ii. Notice of refusal to amend the assessment as desired by applicant where the applicant where the applicant fails to agree with the Federal Board of Inland Revenue (Section 38(6); iii. Appeal against the assessment to the appropriate Appeal Commissioners (now the Tax Appeal Tribunal established pursuant to section 50(1) of the Federal Inland Revenue Service (Establishment) Act, 2007, (Section 41); iv. Appeal to the Federal High Court where the party is aggrieved by the decision of the Appeal Commissioners or the Tax Appeal Tribunal (Section 42(i) and (ii). v. An appeal to the Court of Appeal. (Section 42(14).
