Civil Reference No. 7 of 2004
Tanelec Limited, a manufacturer and distributor of electrical transformers and switchgears based in Arusha, was assessed by the Commissioner General of the Tanzania Revenue Authority (TRA) for Value Added Tax (VAT) of Tshs. 1,039,065,475/= on imported services for the years 2009–2012, under section 28 of the VAT Act, 1997. Tanelec objected, arguing it had already accounted for the VAT in its returns and disputed the charging of interest. The TRA maintained its assessment, relying on section 16(1)(b) of the VAT Act, which it said required payment of input tax before it could be claimed in returns. Tanelec appealed to the Tax Revenue Appeals Board, where the sole agreed issue was whether input tax on imported services had to be paid before being claimed in VAT returns. After the hearing concluded and a judgment date was set, the Board, while deliberating in the parties' absence, invoked Rule 17(1) of the Tax Revenue Appeals Board Rules, 2001 to call for additional documents (VAT returns and invoices) from Tanelec. The Board then used these documents to make adverse findings—including that Tanelec had failed to prove that Trans Century Investing Africa of Nairobi supplied management services and had wrongly accounted for input tax—without recalling the parties to address these new matters. The Board dismissed Tanelec's appeal, and the Tax Revenue Appeals Tribunal upheld this decision, reasoning that the Board had wide powers and was not bound by strict rules of evidence. Tanelec appealed to the Court of Appeal on eight grounds, focusing particularly on the denial of its right to be heard on the additional documents and issues raised by the Board.
The central issue before the Court of Appeal was whether the Tax Revenue Appeals Board (and the Tribunal in upholding it) violated the appellant's fundamental right to be heard by relying on additional documents and making adverse findings on issues not raised or argued by the parties, without affording the appellant an opportunity to address those matters before judgment.
The appellant, through Mr. Maro, argued that after the Board concluded the hearing and scheduled a judgment date, it improperly called for additional documents while deliberating in the parties' absence and used those documents to make findings adverse to the appellant (e.g., on the identity of service suppliers and improper VAT accounting) without recalling the parties to be heard on these new matters, in breach of natural justice. He contended the Tribunal erred by endorsing the Board's view that it had "wide powers" and was "not bound by rules of evidence," arguing instead that section 17(2) of the Tax Revenue Appeals Act, Cap. 408 required the Board to act as an ordinary court applying the Civil Procedure Code when receiving evidence. He relied on prior Court of Appeal authorities emphasizing that natural justice and the right to be heard are constitutional rights binding on courts and tribunals alike, and that decisions made without hearing parties on newly raised issues are liable to be nullified. The respondent, through Mr. Manyanga, argued that the Board was merely assisting itself by calling for documents (VAT returns and invoices) that the appellant should have tendered during the hearing, and that Rule 17(1) of the Tax Revenue Appeals Board Rules, 2001 permitted the Board to call for such documents to aid its deliberations. He contended that the documents were supplied well before deliberations and that the parties were informally consulted for clarification, and thus no violation of the right to be heard occurred. In rejoinder, Mr. Maro disputed this factual claim, pointing to the record showing the Board called for documents only after concluding the hearing and while deliberating alone, with no evidence that the appellant was invited to comment on them.
The Court of Appeal allowed the appeal, holding that the Board, and subsequently the Tribunal, violated the appellant's constitutional right to be heard. The Court found that the Board, after concluding the hearing and fixing a judgment date, improperly used additional documents obtained during private deliberations to make adverse findings against the appellant on matters (such as the identity of suppliers and correctness of VAT accounting) without affording the appellant an opportunity to address these issues. The Tribunal compounded this error by endorsing the view that the Board had "wide powers" and was "not bound by rules of evidence," which the Court rejected as inconsistent with the constitutional right to a fair hearing under Article 13(6)(a) of the Constitution, as recognized in Mbeya-Rukwa Autoparts and Transport Ltd v Jestina George Mwakyoma and reaffirmed in Samson Ng'walida v Commissioner General of TRA and VIP Engineering and Marketing Limited v City Bank Tanzania Limited. The Court held that this breach of natural justice was sufficient on its own to nullify the proceedings and dispose of the appeal, making it unnecessary to consider the remaining seven grounds of appeal. The Court ordered that the Tax Revenue Appeals Board at Arusha rehear Appeal No. 15 of 2015 afresh, with each party bearing its own costs.
This ruling reaffirms that the right to be heard, as a fundamental constitutional principle under Article 13(6)(a), applies not only to ordinary courts but equally binds specialized tribunals and boards such as the Tax Revenue Appeals Board and Tax Revenue Appeals Tribunal. It clarifies that even where such bodies are granted procedural flexibility (e.g., under Rule 17(1) of the Tax Revenue Appeals Board Rules, 2001, to call for additional documents), they cannot use such powers to make adverse findings on new issues without affording parties an opportunity to be heard. The decision reinforces the principle, drawn from prior authorities including Mbeya-Rukwa Autoparts, Samson Ng'walida, and VIP Engineering, that any decision made in violation of the audi alteram partem rule is liable to be nullified in its entirety, regardless of the merits of the underlying substantive issues. The case underscores the procedural safeguard that tribunals must limit themselves to issues raised by the parties or, if new issues arise, must give parties a fair opportunity to address them before rendering a decision.
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