A charity at the centre of a Uganda Revenue Authority (URA) medical equipment auction dispute turned down a compensation offer of up to Shs2.8 billion from the tax body and instead pursued a Shs22 billion claim in court, only to receive an award of Shs1.66 billion.
Babaana Children of Uganda Ltd had sued URA over the auction of specialised medical equipment donated from Switzerland for a children’s health facility, arguing that the disposal was unlawful and had caused significant losses.
The High Court in Kampala found that URA breached customs procedures when it auctioned the equipment, awarding the charity Shs1.46 billion, representing the value of the medical equipment, and Shs200 million in general damages.
Justice Bernard Namanya also ordered URA to pay interest on the awarded amounts, including six per cent per annum on the Shs1.46 billion from 2018 until full payment.
The ruling means the charity missed out on at least Shs1.1 billion from the compensation package URA had initially offered before the matter went to court.
URA Assistant Commissioner for Corporate and Public Affairs Robert Kalumba said the charity had acted unreasonably by rejecting the tax body’s settlement proposal.
According to Kalumba, URA had acknowledged mistakes in the handling of the consignment and taken action against officials responsible for the auction.
“Goods arrive in the country in 2017. Goods are tax exempt because they are medical in nature. Goods stay in URA Warehouse for a year till December 2018,” Kalumba explained.
He said the delay occurred because the taxpayer was still completing construction of the medical facility where the equipment was intended to be installed.
“Customs staff at the time go ahead to auction the goods on the basis that they had overstayed the statutory warehousing time,” Kalumba said.
After the taxpayer complained, URA launched an investigation, which resulted in the officers involved in the auction leaving the institution.
“URA lodges an investigation leading to staff responsible for the auction leaving the institution,” he said.
Kalumba said URA later offered compensation of Shs2.5 billion, which was increased to Shs2.8 billion, but the taxpayer rejected the offer and opted to seek a much higher award through court.
“The taxpayer refuses asking for Shs22 billion instead and takes URA to court,” Kalumba said.
“Court dismissed taxpayer claim of Shs22 billion awarding them Shs1.4 billion plus interest,” he added.
The dispute originated from a consignment of medical equipment valued at 364,817 Swiss francs, including dental surgery equipment, rehabilitation hospital equipment and gynaecology practice equipment.
Babaana Children of Uganda had obtained confirmation from URA in November 2017 that the medical items qualified for tax exemption before placing the consignment in a bonded warehouse.
The charity requested an extension of the warehousing period to December 2018, explaining that construction of the health facility was incomplete.
However, when the organisation later attempted to clear the goods, it discovered that URA had already auctioned them.
Court records indicate the equipment, valued at approximately Shs1.46 billion, was sold for only Shs4 million.
Justice Namanya faulted URA for failing to provide evidence that it had issued the legally required one-month notice before the auction.
The judge also questioned how high-value medical equipment could disappear from auction records.
“The high-value medical equipment is not reflected in that Exit Note,” Justice Namanya ruled, adding that URA failed to satisfactorily account for the medical equipment.
URA had argued that the goods had exceeded the statutory warehousing period and that some items in the consignment, including toys, shoes, milk, toilet supplies and office supplies, were not covered by the tax exemption.
The tax body maintained that the disposal was carried out within customs law, but the court rejected this argument, finding that mandatory procedures had not been followed.
Kalumba said URA would comply with the judgment despite its earlier settlement efforts.
“The matter is closed, and we shall comply,” he said.
It remains unclear if the client will appeal the award that is nearly half of the original offer or swallow their bitter pill and take what came of it.
