Legal Technicalities in Appellate Determination of Tax Disputes

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1.0.?????????? Introduction

?The Federal High Court (the ‘FHC’ or the court) sits as the immediate appellate court over the decisions of the Tax Appeal Tribunal (the ‘TAT’ or ‘Tribunal’) by reason of section 28 of the Federal High Court Act, and paragraph 17(1) of the Fifth Schedule to the Federal Inland Revenue Service (Establishment) Act (or the 'FIRS Act') (‘5th Schedule’) which permits appeals on points of law alone.[1]

?Recently, there has been a surge in the use of legal technicalities by the FHC to determine appeals from the judgments of the TAT. First, we have the cases of Chief J. W. Ellah, Sons & Co v FIRS [2]and FIRS v West Atlantic Ship Land Ltd,[3] the FHC overruled the decisions of the TAT on the ground that the appellant failed to serve pre-action notice on the tax authority.

?More recently in Dauda v Minister of Finance & Ors (the ‘Dauda’s Case’),[4] the Federal High Court nullified another judgment of the Tax Appeal Tribunal on the premise that the judgment was endorsed by a commissioner who did not participate in all the proceedings. The common denominator amongst these cases is that they were mainly decided on legal technicalities; the substance of the cases was not touched or touched merely as academic exercise in fulfilment of the requirement to pronounce on all issues submitted for determination.

?This emerging trend must be discouraged in tax appeal in strong terms.

2.0.?????????? Legal Technicalities

Legal technicality, in law, is not a term of art; it has no exact meaning. Typically, it concerns procedural rules with capacity to influence or even determine the outcome of a suit without a consideration of the merits of the case. The definition of a technicality varies. However, it is often concerned with the aspects of the law that interfere with the outcome of a suit. Some legal technicalities actually govern procedures, enabling or restricting access to courts.

?In Nigeria Civil Service Union v Ekasa & Ors,[5] the Court of Appeal aptly captured the concept of legal technicalities in the following terms:

?"A technicality in a matter could arise if a party is relying on abstract or inordinate legalism to becloud or drown the merits of a case. A technicality arises if a party quickly takes an immediately available opportunity, however infinitesimal it may be, to work against the merits of the opponent's case. In other words, he holds and relies tenaciously unto the rules of Court with little or no regard to the justice of the matter. As far as he is concerned, the rules must be followed to the last sentences, the last words and the last letters without much ado, and with little or no regard to the injustice that will be caused the opponent."

?The apex court conceived technicality in terms of legalism and an unhealthy adherence to rules rather than justice. The Black’s Law Dictionary views legalism as ‘formalism carried almost to the point of meaninglessness; an inclination to exalt the importance of law or formulated rules in any area of action.’ [6] Legalism involves the fettering of discretion, the adversary style, the taking of technical points and formality.[7] Thus, technicality entails a rigid attachment to and exaltation of legality.

?Legal technicality refers to procedural rules that can dictate the outcome of a case without having anything to do with the merits of that case. It is a small but ultimately important detail of the law.[8] But, justice cannot be dispensed with on mere technicality. The courts are there to do substantial justice rather than adhering to mere technicality.[9]

3.0.?????????? The Dauda’s Case [10]

?The appellant, a legal practitioner was served with Exhibits JB4 and JB5 together with notices of attachment and assessed to a tax liability in the sum of N1,225,115,562.33 (One Billion, Two Hundred and Twenty- Five Million, One Hundred and Fifteen Thousand, Five Hundred and Sixty-Two Naira, Thirty-Three Kobo) only broken down as follows:

??????? i.??????????? Personal Income Tax Assessment for 2010 – 2017 in the sum of N977,561,982.08 (Nine Hundred and Seventy-Seven Million, Five Hundred and Sixty-One Thousand, Nine Hundred and Eighty-Two Naira Eight Kobo) only;

????? ii.??????????? Withholding Tax Assessment for 2010 – 2017 in the sum of N71,987,564.52 (Seventy-One Million, Nine Hundred and Eighty-Seven Thousand, Five Hundred and Sixty-Four Naira Fifty-Two Kobo) only; and

??? iii.??????????? Value Added Tax for 2010 – 2017 in the sum of N176,565,016.74 (One Hundred and Seventy-Six Million, Five Hundred and Sixty-Five Thousand and Sixteen Naira Seventy-Four Kobo.

?Aggrieved, the appellant filed an appeal with the Abuja zone of the TAT. After listening to both parties, the TAT entered judgment in favour of the respondent. Two of the respondent’s assessments were affirmed. Dissatisfied with the decision of the Tribunal, the appellant further appealed to the FHC in line with the provision of paragraph 17(1) of the 5th Schedule. One of the appellant’s grounds of law was that –

?"Tax Appeal Tribunal Abuja erred in law and rendered the entire proceedings a nullity when at various stages of the hearing and determination of the Appellant’s appeal it sat with differently constituted panels such that a member Hon. Nasiru Kuliya who did not participate or attend on certain dates when crucial and critical aspects of the proceedings took place turned around to participate in the deliberation and delivery of the final judgment and by so doing violated elementary but fundamental principles of fair hearing."

?In relation to the ground of law (which is the only focus of this article), the following issue was formulated:

?"Whether or not the entire proceedings before the trial Tribunal is not nullified and rendered null and void consequent upon the haphazard participation of one of its members in the person of Hon. Nasiru Kuliya whose inconsistent participation caused the TAT to sit with differently constituted panels at various stages of the hearing and determination of the Appellant’s appeal? (Ground 5 of Amended Notice of Appeal)."

?The appellant argued that Hon. Nasiru Kuliya inconsistent participation in the hearing and delivery of judgment violated his constitutional right to fair. He argued further in the circumstances, the entire proceedings of the TAT ought to be declared a nullity relying on Muideen v NBA & Anor [11], Kalejaiye v LPDC [12], and Gabriel Gbenoba Esq v Legal Practitioners Disciplinary Committee & Anor [13].

?The submissions of the learned counsel to the appellant apparently found favour with the FHC which held as follows (on the issue):

?"On the whole, I find that the failure of the Tribunal to observe the principle of fair hearing has the consequence of nullifying the entire proceedings and in fact has so done. By this conclusion, I make an Order nullifying the proceedings of the TAT for not complying with the principles of fair hearing. Therefore ground 5 upon which this issue is predicated is resolved in favour of the Appellant."

4.0.?????????? Appraising the FHC’s Decision

?In arriving at this decision, the Ekwo, J. reasoned inter alia that it would be wrong for any member of the TAT to sit in the panel whenever it was convenient for him. The entire process would by that account manifest itself as a derision of the statutory nature of the panel since the TAT was empowered to decide the rights, duties and liabilities under tax laws and the consistency in the panel during the proceedings of a case must be mandatory. According to the learned judge, the

?"...next issue not considered by the respondent when making submission on this point is the statutory and constitutional effect of the outcome of the proceedings of the TAT. It cannot be denied that apart from being present in the proceedings by all members of the panel, the members of the TAT would require to deliberate on the processes and proceedings before coming to its conclusion or decision on the matter. A member of an administrative tribunal like the TAT must be consistent in the proceedings. By endorsing the judgment…Part of the ramification of the rule of fair hearing is that a man cannot be a judge in a matter he never heard or never fully heard. A member of an administrative tribunal such as the 1st Respondent (sic) must be consistent in the proceedings…"

?The court also questioned whether there was a law which allowed a member of the TAT to attend proceedings as such member pleases – and still – take part in the deliberations that resulted in the final decision of the panel. If the attendance by any member of the panel was optional, then such absent member did not have to take part when the other members were deliberating and taking a decision. If he did, then he had participated in taking a decision in a matter he was not part of.

?With due deference to his lordship, this decision is a veneration of legal technicality. More importantly, the decision was reached per incuriam.

4.1.???????????? The Decision Venerated Legal Technicality

?Issue one was a preliminary matter. According to the FHC, the "crucial preliminary issue to be determined at this point is whether the rule of fair hearing is applicable to the proceedings of the Tax Appeal Tribunal." [14]

4.1.1.????? Appellant failed to Discharge Legal Burden

The FHC nullified the decision of the Tribunal mainly because one of the commissioners who did not attend all the proceedings culminating in the judgment endorsed the judgment. In the FHC’s view, this amounted to a grave error punishable with the nullification of the entire proceedings since it also implicated fair hearing. However, the FHC’s judgment as well as the appellant’s submission failed to demonstrate how the inconsistent participation of the commissioner resulted in a violation of the appellant’s right to fair hearing.

Moreover, the legal burden to establish failure of fair trial by reason of the commissioner’s occasional absence or inconsistent participation and how it violated the appellant’s right to fair hearing was never demonstrated or discharged. The appellant never satisfied this burden. On its part, the FHC merely made some blanket generalizations in agreeing with the submission of the appellant. The reasoning of the FHC was rather abstract and more of sweeping statements.

4.1.2.????? The 5th Schedule does not prescribe mandatory attendance of all commissioners

?The 5th Schedule does not prescribe mandatory attendance of all commissioners at all times validity of the Tribunal’s proceedings and judgments otherwise, there would be no requirement for a quorum. The quorum provision presupposes that all commissioners may not attend all proceedings. It envisages this event. The purpose of quorum therefore is to ensure expeditious determination of tax appeals by the TAT in the absence of a member or two such that the Tribunal’s jurisdiction to hear tax matters remains unaffected.

?The Legislature was very deliberate in inserting a quorum provision. It is not the duty of the court to question the wisdom of the law makers in the guise of interpreting the provisions of the statute. In fact, courts should not venture into law making which is the exclusive province of the legislature.[15] It is not the function of the courts to rewrite or amend the clear provision of a statute in order to give it a slant that accords with the court’s own view.[16]

?Specifically, the quorum for the sitting of the Tribunal is prescribed under paragraph 2(4) of the 5th Schedule. It provides that the "quorum at any sitting of the Tribunal shall be three members." Thus, under the 5th Schedule, what is required to confer jurisdiction on the Tribunal to hear and determine an appeal is the presence and attendance of at least three commissioners of the Tribunal. When three commissioners of the Tribunal are in attendance, the TAT is properly constituted, and its proceedings cannot be vitiated.

?A Court (including a tribunal) is competent when (1) it is properly constituted as regards numbers and qualifications of the members of the bench, and no member is disqualified for one reason or another[17]; and (2) the subject matter of the case is within its jurisdiction, and there is no feature in the case which prevents the court from exercising its jurisdiction: and (3) the case comes before the court initiated by due process of law, and upon fulfillment of any condition precedent to the exercise of jurisdiction.[18]?The TAT’s proceedings in the case satisfied all these conditions.

?Unlike the High Court manned by a single judge whose absence would delay the hearing administrative tribunals circumvent this shortfall of conventional court by making provision for a quorum which will confer jurisdiction on the tribunal to hear the matte in the absence of certain number of their members.

4.1.3.????? Tax Matters Deserve Determination on the Merits

?Taking into account the nature of tax, tax disputes (original or appellate) should be determined on the merits. Tax has an expropriation effect.[19] It is an interference with private wealth or property.[20] In addition, it is paid on threat of imprisonment or other sanctions.[21] Tax disputes are too sensitive to be decided on technicality. The hey days of crass technicalities and arid legalism has gone. The courts are now more interested in doing substantial justice.[22] Tax matters must be fairly administered according to the rules of substantive law, regardless of any procedural errors not affecting the litigant's substantive right; a fair trial on the merits.[23]

?In addition, none of the cases cited by the appellant in support of the issue was tax related. They concerned disciplinary matter between a professional body and its erring members. In other words, the cases were concerned with issues of professional misconduct. This article aligns with the position of the respondent’s counsel.

?If the FHC has taken into consideration the totality of the TAT’s establishment law including the rules of procedure against the background of the objective for which the Tribunal was established, it would have sooner realised that technicalities or irregularities without more cannot vitiate the Tribunal’s proceedings.

?To the extent that issue one determined the appeal in limine, by nullifying the entire proceedings of the TAT, it amounts to determining the appeal on technicality notwithstanding that the FHC then found it "pertinent to address the substantive issues in this case". [24] Interestingly, this case is more famous and rightly so, for nullifying the entire proceedings of the Tribunal. The implication of the decision is that however the FHC decided the substantive issues, the preliminary matter had already decided the fate of the case.

?The determination of other issue was an academic exercise perhaps to satisfy the requirement that the court should determine all issues brought before it.[25] The issue one has taken the wind from the sail of other issues. Regrettably, the issue was an issue in the vicinity of technicalities which should not be magnified. Rather the FHC should have focused on the merits of the appeal. Courts are always enjoined not to resolve matters on the basis of technicalities; courts are established not to relish in technicalities but to do substantial justice.[26]

?In summary, the critical failure of the FHC’s judgment is that it could not demonstrate how the absence of one commissioner in some of the proceedings violated the appellant’s constitutional right to fair hearing. It is not sufficient to make some abstract submission or sweeping statements like the FHC did. It should be demonstrated how the inconsistent participation violated the appellant’s right to fair hearing. If the Tribunal was competent and it was, the proceedings cannot be a nullity.

4.2.???????????? The Decision was reached Per Incuriam

?The FHC’s decision was wrong in law for failing to follow the precedent of the Supreme Court. The apex court had had occasion to pronounce on the issue of variation in the composition of panel in the case of Shuaibu v Nigeria - Arab Bank Ltd (or the ‘Shuaibu’s case’).[27] In that case, the court laid down the test to apply in determining whether variation or inconsistent participation (as the FHC elegantly termed it) could vitiate a hearing. According to the Supreme Court, the correct position is:

"the complaint of the appellant before us that Adio J.C.A. participated in the judgment when he did not join in the hearing is at best, a complaint of irregularity which unless it occasions a miscarriage of justice, will not vitiate the proceedings of the Court below."

?What the FHC should have considered in that case was whether the absence or inconsistent participation of the commissioner occasioned a miscarriage of justice or even prejudiced the appellant.

?Evidently, contrary to the apex court’s decision that variation in composition is an irregularity which cannot nullify the entire proceedings unless it occasions a miscarriage of justice, the FHC considered it a ‘grave error’ which implicated fair hearing. The FHC actually went on a voyage of its own. The Supreme Court’s decision in the Shuaibu’s case binds the FHC and to the extent that the FHC did not consider it in reaching its decision, the judgment of the FHC was reached per incuriam. It is therefore null and void.

?Previously, in Reiss and Co. Nig Ltd v FBIR (or the ‘Reiss’ case’),[28] the Federal Revenue Court (the predecessor of the FHC) held, and quite rightly, that variation in the panel of the tribunal simpliciter did not render the trial a nullity. It merely rendered the trial irregular and whether the nature of the irregularity was sufficient to set the trial aside would depend on the particular circumstances of the case. The test is whether the irregularity resulted in a miscarriage of justice.

?While the decision in the Reiss’ case only has persuasive effect on the FHC being a decision of a court of coordinate jurisdiction, the Supreme Court’s decision in the Shuaibu’s case is binding on the FHC.

5.0.?????????? Conclusion

When hearing tax appeal, the FHC should do everything to favour fair trial of the question between the parties rather than assisting one party run from the arena of conflict by hiding under the apron of legal technicality or procedural irregularity. The court should be cautious and circumspect in determining appeals on technical grounds as the effect is to terminate the tax dispute in limine.[29]

The FHC’s judgment failed to articulate in clear, objective and unambiguous manner how the occasional absence or inconsistent participation of Hon. Nasiru Kuliya resulted in lack of fair hearing, occasioned a miscarriage of justice or prejudiced the appellant. It is not enough to make sweeping statements. Reasons for a decision must be logical, assertive and direct. It cannot be sentimental, conjectural, inferential or abstract.

Quorum is one of the mechanisms for expeditious hearing and determination of tax appeals inserted by the law makers into the establishment law of the Tribunal. It effectively prevents the absence of a member from affecting the jurisdiction of the Tribunal to hear an appeal. When three commissioners of the Tribunal are in attendance, the TAT is properly constituted and its proceedings are not vitiated.[30] By inserting the quorum provision, the Legislature has provided an effective mechanism to circumvent the delay that may arise in the hearing of tax appeal by the occasional absence or inconsistent participation of members.

Moreover, by order xxi rule 4 of the TAT Rules, the Tribunal's decisions are expected to be 'institutional' not 'individual'.

?The FHC’s decision was reached per incuriam for failing to follow the precedent laid down by the apex court in the Shuaibu’s case. It may well be that the decision was not brought to the attention of the FHC or the FHC did not advert its mind to the purport of the decision.

Finally, as much as possible, the FHC should determine tax appeals on the merits. Where no miscarriage of justice is occasioned by the appellant’s failure to observe any rules or follow a procedural step, legal technicality should not be allowed to be erected. Indeed, justice must stand erect, whilst technicality prostrate before it. The appellant needs to prove his case. Legal technicalities can only deliver judgment not justice in tax disputes.

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[1] Dauda v FIRS & Ors (2024) 81 TLRN 1, 46.

[2] Suit No. FHC/PH/CS/153/2020 (22 September 2022 unreported).

[3] Suit No FHC/PH/CS/93/2022 (27 September 2022 unreported).

[4] (2024) 79 TLRN 1.

[5] (2021) LPELR - 54752(CA) 19 - 20. See also HRH Oba Samuel Adebayo Adegbola & Ors v Mr. James Olatunde Idowu & Ors (2020) 7 NWLR (Pt. 1722) 94, 128.

[6] The Black’s Law Dictionary Black’s Law Dictionary, Bryan Garner (ed.) (8th edn, West Publishing Co 2004) 913 – 914.

[7] ibid.

[8] Vocabulary.com, ‘technicality’, available at <https://www.vocabulary.com/dictionary/technicality> accessed 23 August 2024.

[9] Madubueze & Anor v Mortgages PHB Ltd & Ors (2021) LPELR – 53821 (CA) 42 - 44.?

[10] (n 4).

[11] (2021) LPELR- 55885(SC).

[12] (2019) 8 NWLR (Pt. 1674) 365.

[13] (2021) LPELR – 53064 (SC).

[14] (n 4) 35. Although the FHC then proceeded to address the substantive issues in the case.

[15] Uzodinmu v Udenwa (2004) 1 NWLR (Pt. 854) 317.

[16] lzedonmwen v Union Bank of Nigeria Plc (2012) 6 NWLR (Pt. 1295) 1.

[17] This only concerns defect in the appointment of a commissioner.

[18] Madukolu & Ors v Nkemdilim (1962) LPELR – 24023 (SC) 9 - 10.

[19] Olanrewaju Lassise-Phillips, ‘Standard of Proof in Tax Dispute Resolution: A Case for Clear and Convincing Evidence’, (2023) SLP Law Journal 47, 69 – 70.

[20] The 1999 Constitution, s 44(2)(a) which permits some degree of derogation from right to property for the purpose of taxation, when it stipulates that nothing in section 44(1) of the Constitution shall be construed as affecting any general law for the imposition or enforcement of any tax, rate or duty amongst others.

[21] Jamie Whyte, ‘Is Owen Jones right that taxation is theft?’ available at < https://iea.org.uk/is-owen-jones-right-that-taxation-is-theft/ > accessed 23 August 2023.

[22] Registered Trustees of Motors Spare Parts Dealers Association of Nig & Ors v Ikpo & Ors (2008) LPELR - 8530 (CA) 13.

[23] Zakari v Kawu & Ors (2023) LPELR – 61172 (CA) 42 - 43.

[24] (n 4) 39.

[25] Zuma Steel West Africa Ltd v. Ben (2024) LPELR - 61697(CA) 22. See also Okwara v Okwara [1997] 11 NWLR (Pt. 527) 160.

[26] Registered Trustees of Independent Petroleum Marketers Association of (Nig.) v Aro Brothers Petroleum Ltd (2021) LPELR - 55995 (CA) 10 – 11.

[27] (1998) 5 NWLR (Pt. 550) 582.

[28] (1922 – 2014) 2 All NTC 307.

[29] That is, as a preliminary matter and specifically before the proceeding commences, without considering the merits of the case Most preliminary objections are actions in limine. They raise technical legal points, which if sustained, prematurely terminate the life of an appeal before getting into the facts of the issue in dispute. It is a subtle way to circumvent the hearing of an appeal on the merit. When the dispute centres on tax, such objections on technicality should be treated with caution. It is understandable if the objection is a fundamental issue like the question of jurisdiction of the court to hear the appeal.

[30] Madukolu & Ors v Nkemdilim (n 17).