NWLR This Week: Enforcement of Value Added Tax Act and Sales Tax Law of Lagos State Amounting To Double Taxation; Doctrine of Covering the Field

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Parties: Attorney General, Lagos State. v. Eko Hotels Limited & 1Anor

Appeal No: SC/321/2007

Court: Supreme Court

Justices: MUSA DATTIJO MUHAMMAD, J.S.C. (Presided)
KADIRAT MOTONMORI OLATOKUNBO KEKERE_EKUN, J.S.C (Read the Leading Ruling)
JOHN INYANG OKORO, J.S.C.
AMIRU SANUSI, J.S.C.
EJEMBI EKO, J.S.C

Citation: (2018) 7 NWLR (Pt. 1619) P.518

Facts

The suit before the trial court was in the nature of interpleader proceedings. By an originating summons filed on the 5th day of March 2004, the 1st Respondent sought a determination by the Federal High Court as to whether remittance of money collected as tax by it from its consumers should be paid to the Federal Board of Inland Revenue (FBIR) or to the Lagos State Government having regard to the provisions of sections 1, 2, 10, 11, 12. 13, 14, 15 and 16 of the Value Added Tax (VAT) Decree No.102 of 1993 and sections 1, 2, 3, 4, 5 and 6 of the Sales Tax Law Cap. 175 and Sales Tax (Schedule Amendment) Order 2000 of Lagos State. It sought the following reliefs:

  1. A declaration that the plaintiff can only be a “taxable person” or remitting agent in respect of the amount due as tax on its sales to its consumers to a single body or agency and not to State and Federal agencies together.
  2. An order that the plaintiff is not entitled to pay or remit tax on its sales to its consumers to the Defendants until the rightful body to collect same is determined.
  3. An order directing the plaintiff to pay the amount due as tax on its sales to its consumers to a dedicated account until the rightful body to collect same is determined.”

The Originating Summons was supported by a 16-paragraph affidavit deposed to by one Samuel O. Alabi, Company Secretary/Legal Adviser of the 1st Respondent, Paragraphs 4 to 12 and 14 thereof illustrate the dilemma in which the 1st Respondent found itself. These are.

“4  That the applicant has been a “taxable person” or collecting agent to the 1st Defendant (FBIR) since 1994 and has been remitting tax on its sales to its consumers to it (FBIR).

  1. That sometime in 2001, the 2nd Defendant’s agent (A.-G., Lagos State) wrote to the plaintiff and demanded remittance of money due as tax on the plaintiff’s sales to its consumers to it by virtue of a newly enacted law which is Sales Tax Law Cap. 175 Laws of Lagos State 1995 and Sales Tax Amendment Order 2000.
  1. That the plaintiff has written to both Defendants explaining its dilemma but the Defendants still insist that the plaintiff must remit money due as tax from its sales to its consumers to the Defendants.
  1. That the agents of the 1st Defendant, particularly the VAT office in Lagos has been threatening the plaintiff with litigation for its failure to remit the said money to it.
  1. That the agents of the 2nd Defendant too has (sic) bees threatening the plaintiff with sanctions for failure to remit money collected as tax from the plaintiff’s sales to its consumers to it.
  1. That I believe that Value Added Tax and Sales Tax are the same and most of our consumers will reject the imposition of one tax as two taxes on them.
  1. The plaintiff is at a loss as to the rightful body to emit the lax to.
  1. Thai the 1st Defendant is relying on Value Added Tax Decree No. 102 of 1993 to demand for the payment of the money collected as tax on the sales to its consumers to it while the 2nd Defendant is also relying on Sales Tax Law Cap .175 Laws of Lagos State 1995 and Sales Tax Amendment Order 2000 to demand for the remittance of the same money due from the plaintiff’s sales to its consumers.
  1. That the plaintiff company has no interest whatsoever in the money in dispute other than administrative charges and costs.
  1. That the plaintiff company is willing to pay or transfer the money due as tax on plaintiff’s sales to its consumers into a dedicated account until the determination of this suit.”
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The appellant (2nd Defendant) and the 2nd Respondent (1st Defendant) filed counter affidavits in opposition to the Originating Summons. In addition, the appellant filed a Preliminary Objection challenging the jurisdiction of the court to entertain the suit. The Preliminary Objection was heard along with the substantive suit. On 20/12/2004, in a considered judgment, the Learned Trial Court dismissed the Preliminary Objection and held that the Federal High Court had jurisdiction to entertain the suit. It also held that the 1st Respondent could only be a “taxable person” or remitting agent in respect of the amount due as tax on its sales to its consumers to a single agency, which is the FBIR (2nd Respondent).

Dissatisfied with the decision, the Appellant appealed to the Court of Appeal, which in a considered judgment delivered on 13th July 2007 dismissed the appeal and affirmed the judgment of the Trial Court. The Appellant was aggrieved by the decision of the Court of Appeal and she further appealed to the Supreme Court.

Principle: 

On Whether enforcement of both Value Added Tax Act and Sales Tax Law of Lagos State amount to double taxation

Per KEKERE-EKUN, J.S.C. at page 547 paras. B-D.:

“In the course of resolving Issue 2 earlier , I did hold that the Value Added Tax Act is an existing law by virtue of section 315 (1) of the 1999 Constitution and that the Act has covered the field on the subject of sales tax and therefore prevails over the Lagos State Sales Tax (Schedule Amendment) Order 2000. I am in complete agreement with Learned Counsel for the 1st and 2nd Respondents that not only do both legislations cover the same goods and services, they are also targeted at the same consumer. The tax has already been collected by the 1st Respondent pursuant to the VAT Act. When a dispute arose as to which of the two Claimants the tax collected should be remitted to, it rightly approached the court for direction. There is no doubt in my mind that it would amount to double taxation for the same tax to be levied on the same goods and services, payable by the same consumers under two different legislations.”

On Application of doctrine of covering the field – 

The issue of covering the field is not much of any problem as regards subsections (1), (2) and (3) of section 4 of the Constitution. It is only in respect of section 4 (4) and (5) that the issue of covering the field poses a problem. In respect of any matter in the concurrent list both the National Assembly and the State House of Assembly are empowered to make laws. However, whenever both the National Assembly and the State House of Assembly purport to make laws on any common item or matter in the Concurrent Legislative List two situations may arise, thus-:

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a.) If the Law enacted by the House of Assembly of a State is inconsistent with the Law validly enacted by the National Assembly, the law made by the National Assembly shall prevail, and the Law made by the House of Assembly shall, to the extent of inconsistency, be void. Section 4(5) of the Constitution is emphatic on this; and

b.) Where the Laws made by both the National Assembly and the House of Assembly of a State with regard to the same issue or matter in the Concurrent Legislative List are not inconsistent, the law made by the National Assembly enjoys superiority or paramountcy over the law enacted on the subject by the House of Assembly of the State.

On Circumstances in which doctrine of covering the field might arise

The doctrine of covering the field can arise in two distinct situations, namely

a.) Where in the purported exercise of the legislative power of the National Assembly or a State House of Assembly, a la w is enacted in which the Constitution has already made provisions covering the subject matter of the Federal Act or the State Law.

b.) Where a State House of Assembly by the purported exercise of its legislative powers enacted a law, which an Act of the National Assembly has already made, provisions covering the subject matter of the State law.

In both situations, the doctrine of covering the field would apply because of the “Federal might” which relevantly is the Constitution and the Act.

On Operation of doctrine of covering the field –

The doctrine of covering the field is essentially that where the main, principal or superior law has covered a given field or area, any other subsidiary law made in that area or field cannot operate side by side with the main, principal or superior law. If the inferior law is inconsistent with the principal law, it has to be declared void to the extent of its inconsistency. But where it is consistent with the principal law, it has to be left in abeyance that is, inoperative pending when the principal law may give way.

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On Condition precedent to application and operation of doctrine of covering the field –

An Act of the National Assembly, for purposes of covering the field, can only be said to be a “predominant paramount” legislation if it was validly enacted, or could be deemed to have been validly enacted, with respect to any matter the National Assembly is empowered by the Constitution to make laws. An Act of the National Assembly enacted in respect of any residual matter, not being a matter either in the Exclusive Legislative or the Concurrent Legislative List, cannot be arrogated a predominant paramount legislation so as to override any law validly enacted by a House of Assembly of a State in respect of any residual matter. The determinant factor in covering the field is the validity of the predominant paramount legislation.

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