Uganda: Basajja Wins Battle With URA

Kampala — The High Court has ordered Hima Cement to pay Kampala International University (KIU) Shs2.7 billion in damages, among other awards. KIU is owned by Kampala businessman Hassan Basajjabalaba.

The judgment has also granted Hima Cement the right to demand the said total sum of the award from the Uganda Revenue Authority (URA), who, the judgment states unlawfully procured a breach of agreement between KIU and Hima Cement.

The January 4 judgment by former Commercial Court Judge Anup Singh Choudry will also see Mr Basajjabalaba paid damages in the price difference of cement from 2005 to the time of the judgment, the cost of the suit and 26 per cent in interest from October 26, 2005.

Mr Basajjabala has been asked to make calculations of the loss he incurred in the price differences and submit the total sum to the registrar for endorsement and effecting. Hima in January 2006 requested URA to investigate KIU over allegations that it was selling the tax-free cement Hima was supplying.

On August 30, 2005, KIU's Ishaka Campus asked President Museveni to waive tax on the construction materials, particularly cement which it was buying to build the University Teaching Hospital.

On November 30, the same year, government agreed to cover the taxes on the cement purchased by KIU from Hima Cement and Tororo Cement.

It paid Hima Cement over Shs2.6 billion to cover the Value Added Tax (VAT) on 50,000 tonnes of cement. At this point, KIU would only pay the equivalent cost price of the cement.

URA investigations later revealed that part of the cement was being diverted to the Kampala market by Seroma Limited, the company KIU said it had contracted to collect the cement on its behalf.

URA also discovered that the University Teaching Hospital project only required 13,974 tonnes of cement as opposed to the 50,000 tonnes government had paid for using tax payers' money. Hima was invoicing Seroma on behalf of KIU at a cost price per bag because government had paid VAT.

In its findings, URA said Seroma was making Shs1,885 in profit per bag of cement. On the strength of these findings, Hima Cement stopped supplying Mr Basajjabalaba's project.

In addition, URA requested the Finance Ministry to reduce the VAT facility extended to KIU to the actual level. Justice Choudry, however, ruled that URA was wrong to stop Seroma from receiving cement on the basis that it was being diverted. "The defendants on the other hand had the VAT in their credit account with the URA as its output tax."

"The payment was a matter of adjustments between the defendant and the URA as and when Hima submitted their returns," the judgment read in part. He also ruled that the scheme would not have benefited KIU because it made no sense to pay Seroma VAT on the cement when it had already been paid for by the government.

Asked why a Justice in the War Crimes Division of the High Court delivered a judgment in the Commercial Court, Judiciary Spokesperson Elias Kisawuzi said this is not strange. "He could have had pending issues that stopped him from delivering the judgment before he was transferred. Besides, some judgments can take over 10 years to conclude.During that period, a judge can be transferred more than twice," he said.

"The transfers will not stop a judge from delivering judgment on cases they were previously handling.

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