Civil Reference No. 7 of 2004
Geita Gold Mining Limited (the appellant) held a mining licence for a gold mine in Geita Region and, under the Value Added Tax Act, 1997 (Cap. 148, R.E. 2002) and a Mining Development Agreement (MDA) with the Government of Tanzania, enjoyed relief from VAT on fuel imported exclusively for its mining activities. The appellant outsourced parts of its operations to contractors, including Geita Power Limited (GPL), which operated an electricity power station, and DTP Terrassment (DTP), which provided mining services. Under specific agreements, the appellant supplied fuel to these contractors, with fuel costs charged separately from the contractors' service fees. A tax audit by the Commissioner General, Tanzania Revenue Authority (the respondent) revealed that VAT had not been remitted on fuel supplied to GPL and DTP, resulting in an additional VAT assessment of TZS 6,256,005,237. The appellant objected, claiming exemption, but the respondent maintained that the exemption did not extend to the appellant's contractors. The Tax Revenue Appeals Board and subsequently the Tax Revenue Appeals Tribunal both ruled against the appellant, holding that the fuel supply to contractors constituted a taxable ('vatable') supply. The appellant appealed to the Court of Appeal on four grounds, primarily contesting the treatment of the MDA and whether the fuel supply to contractors was a vatable supply attracting VAT under section 58 of the VAT Act.
(1) Whether the Tribunal erred in its treatment of the Mining Development Agreement (MDA) and the Minister's power under section 15 of the Mining Act to grant fiscal reliefs. (2) Whether the fuel supplied by the appellant to her contractors (GPL and DTP) for use in the appellant's mining activities constituted a taxable ('vatable') supply under the VAT Act. (3) Whether the Tribunal erred in invoking section 58 of the VAT Act to hold the appellant liable for VAT on such supplies. (4) Whether the Tribunal erred in interpreting section 11 of the VAT Act without regard to Article 6 of the MDA.
The appellant, through counsel, argued that the Tribunal contradicted itself by treating the MDA as binding while also finding the Minister lacked power to grant tax reliefs under the Mining Act. It contended that the fuel supplied to contractors was exclusively for the appellant's mining activities and thus fell within the VAT exemption under section 11 and the Third Schedule to the VAT Act, regardless of which entity physically performed the mining services. The appellant sought to distinguish the Court's earlier decision in Geita Gold Mining Limited v. Commissioner General (Civil Appeal No. 89 of 2019, the 'GGML case') on the basis that, unlike in that case, the invoice to GPL (exhibit R1) reflected no VAT charge, indicating no vatable supply occurred and that section 58 of the VAT Act was inapplicable. Counsel argued the fuel was merely 'back-charged' to account for consumption, not sold, and that the onus was on the respondent to prove otherwise regarding the nature of exhibit R1 as a 'sample' invoice, a contention raised only at the appellate stage. The respondent, conversely, urged the Court to follow the GGML case, arguing the factual distinction regarding the invoice was immaterial since back-charging fuel was equivalent to selling it, triggering VAT liability under section 58. The respondent maintained that the VAT relief on imported fuel was personal to the appellant and did not extend to supplies made to third-party contractors, irrespective of the purpose for which the fuel was ultimately used.
The Court of Appeal dismissed the appeal in its entirety with costs, upholding the Tribunal's decision. On grounds one and four, the Court found no contradiction in the Tribunal's treatment of the MDA, holding that MDAs required operationalisation through specific legal instruments (Government Notices) and did not themselves create an automatic right to fiscal relief; thus, the dispute did not concern the appellant's own entitlement to VAT relief but whether that relief extended to her contractors. On ground two, the Court held that section 11 of the VAT Act, read with paragraph 8 of the Third Schedule, granted relief only for importation 'by' and supply 'to' a registered mining company, not for supplies 'by' such a company to third parties including contractors. The Court distinguished but did not overturn the earlier GGML case (which had turned on an uncancelled VAT invoice), noting that despite exhibit R1 showing a nil VAT charge in this case, this factual difference did not absolve the appellant, since the supply of fuel to contractors was independently a taxable supply. Relying on its precedent in Resolute Tanzania Limited v. Commissioner General, TRA, the Court held that special tax reliefs (whether under VAT law or Government Notices on excise and fuel tolls) applied strictly and exclusively to the licence holder and did not extend to contractors or sub-contractors performing services on the licence holder's behalf. Accordingly, the fuel supplied to GPL and DTP constituted a taxable supply under section 58 of the VAT Act, obliging the appellant to charge and remit VAT. Ground three, concerning the application of section 58, was rendered moot and also dismissed.
The judgment reaffirms the principle of strict construction of tax exemption provisions, holding that VAT reliefs granted to mining licence holders for imported fuel are personal to the licence holder and do not extend to contractors or sub-contractors performing mining-related services on the licence holder's behalf, regardless of the ultimate purpose for which the fuel is used. It clarifies that Mining Development Agreements do not themselves confer self-executing fiscal reliefs but require implementation through specific legal instruments such as Government Notices. The decision also demonstrates the Court's approach to distinguishing prior precedent (the GGML case) on its facts (presence or absence of a VAT-bearing invoice) while nonetheless reaching the same substantive outcome by relying on the independent taxable nature of supplies to contractors, as previously established in Resolute Tanzania Limited v. Commissioner General, TRA. This reinforces consistency in the treatment of fuel supplies to third-party contractors across different tax relief regimes (VAT, excise duty, and road/fuel tolls) applicable to mining companies in Tanzania.
Speak directly with our advocates. We turn precedent into actionable advice for your matter.