Court dismisses application seeking to halt implementation of digital tax stamps

Manufacturers have been dealt yet another blow after the civil division of the High Court threw out an application in which they wanted to have the implementation of the digital tax stamp solution halted.

The Alcohol Association of Uganda, Nile Breweries and 38 other manufacturers had filed an application before the court seeking to have the implementation of the digital tax stamps halted until the main suit in which they challenge the stamps is disposed of.

In a ruling made by Justice Musa Ssekaana on Tuesday afternoon, the court said he could not grant an order halting the implementation of the digital stamps saying the applicants ought to have shown evidence that there are higher chances of winning the main case.

“For a temporary injunction to be granted, court should have evidence that the applicant would suffer irreparable injury which damages would not be capable of atoning if the temporary injunction is denied and status quo not maintained. There should be proof that the balance of convenience is in the favour of the application,”Ssekaana said.

He warned that courts should always be slow in granting injunctions against government projects which are meant for the interest of the public at large as against the private proprietary interest or otherwise for a few individuals.

“The courts should be reluctant to restrain the public body from doing what the law allows it to do. In such circumstances, the grant of an injunction may perpetrate breach of the law which they are mandated to uphold.”

The judge, therefore, noted that courts cannot ignore a public interest in favour of individuals’ interest by issuing an injunction on matters of public interest.

“The circumstances of the case are that the minister of finance made regulations which have come into effect and it is the duty of every citizen to comply with the law until the court declares it unconstitutional or invalid,”Ssekaana said.

The development comes barely a week after the tax appeals tribunal three out another case by manufacturers against the implementation of the digital tax stamp solution.

On Friday, a three-man of the appeals tribunal including Dr. Asa Mugenyi, Dr.Stephen Akabway and Siraj Ali ruled that the manufacturers would suffer no irreparable damage from the implementation of the DTS solution and that they didn’t prove what costs they would incur in its implementation.

“The major fear of the importers and manufacturers is that they may incur costs to install Digital Tracking Solutions on their premises. Incurring costs is not the same as suffering irreparable damage that cannot be compensated. The applicants have not given an estimate of the costs that will be incurred in installing the Digital Tracking Solutions in their premises,” the tribunal ruled.

The ruling comes at a time when a set of manufacturers have been, for months now, resisting a move by the Uganda Revenue Authority to install machines at their factories that would help the tax body tell in real-time the production capacity to estimate tax revenue collection.

The digital stamp solution, already used by Kenya and Tanzania, was gazetted to the public and started functioning today, November 1.

The legal defeat leaves no hurdle in the way for its implementation and opens the manufacturers up for more scrutiny by the tax body as it works towards an increased revenue collection basket to stem government borrowing.