Facts
The Plaintiff approached the Federal High Court, Port Harcourt, by way of Originating Summons, seeking determination of four constitutional questions and seeking the grant of eleven reliefs by the court. The Plaintiff questions, among others, the interpretation of the provisions of items 58 and 59, Part I of the Second Schedule to the 1999 Constitution vis-à-vis the residual powers of the States of the Federation to make laws, as well as Section 4(7) of the 1999 Constitution (as amended), the powers of the Federal Government of Nigeria to make laws for the purpose of taxation other than for stamp duties, taxation of incomes, profits and capital gains and the powers of the Federal Inland Revenue Services (FIRS) to enforce and administer laws inconsistent with or in excess of the powers of the Federal Government of Nigeria to make laws.
Upon being served with the Originating Summons, the First Defendant entered a Memorandum of Conditional Appearance, filed a Counter-Affidavit to the Affidavit in support of the Originating Summons, and a Notice of Preliminary Objection challenging the competence of the suit, on the grounds that the Plaintiff did not issue and serve it with Pre-Action Notice in line with Section 55(3-4) of the Federal Inland Revenue Service (Establishment) Act, 2007; the suit is an abuse of court process; and that the suit was wrongly commenced by Originating Summons. The Second Defendant also filed a Memorandum of Conditional Appearance, a Counter-Affidavit and a Notice of Preliminary Objection to the competence of the suit, and challenging the jurisdiction of the court to determine the suit as constituted. The grounds were that: the proper Defendant is not before court; the subject of the suit is not within the jurisdiction of the court to determine; and some of the reliefs are beyond the jurisdiction of the Federal High Court.
By a Motion on Notice filed on 27th November, 2020 the First Defendant also submitted six questions covering all the questions raised in the Originating Summons, upon which it urged the court to grant a Case Stated/Reference to the Court of Appeal.
Issues for determination
1. Whether the Federal Republic of Nigeria and the Federal Government of Nigeria are entitled to make laws for the purpose of taxation other than taxation of incomes, profits and capital gains, and if not, whether the 1st Defendant is entitled to enforce and administer laws inconsistent with, or in excess of the authority of the Federal Republic of Nigeria or the Federal Government of Nigeria to make laws?
2. Whether the legislative competence of the National Assembly to impose tax or duties on capital gains, incomes or profits of persons and on documents or transactions by way of stamp duties, extends to and includes the power to levy or impose any form of Sales Tax including Value Added Tax or any other form of levy, and if so, whether the power of the Federal Republic of Nigeria to delegate the power of collection of taxes can be exercised for the purpose of delegating the duty to any other person other than the Government of a State or other authority of a State?
3. Whether the Taxes and Levies (Approved List for Collection) Decree No. 21 of 1998, now Act, in so far as it purports to legislate in respect of the responsibility for collection of taxes and levies, assessment and collection of taxes other than as provided for under items 58 and 59 of the Exclusive Legislative List (Second Schedule Part I), and items 7 and 8 of the Concurrent Legislative List (Second Schedule, Part II), is not unconstitutional, null and void?
Arguments
Regarding the Preliminary Objection of the Second Defendant, the Plaintiff argued that by Order 26 Rule 2(1) and 29 Rule 4 of the Federal High Court (Civil Procedure) Rules, 2019 the only cognisable way of challenging jurisdiction of court is by Motion on Notice supported by an Affidavit and Written Address where the ground is not based on law alone. Counsel argued that the Preliminary Objection is also incompetent, because it did not contain any prayer or relief. He submitted further that the case falls squarely within the subject-matter jurisdiction of the Federal High Court under Section 251(1)(a)(b)(p)(q) & (r) of the 1999 Constitution, which confers exclusive jurisdiction on the Federal High Court in matters relating to revenue of the Federation and taxation, among others, and that the conditions for invoking the original jurisdiction of the Supreme Court pursuant to Section 232(1) and Section 1(c) of the Supreme Court (Additional Original Jurisdiction) Act are not present in this case.
Regarding the issue of joinder of proper parties, the Plaintiff argued that the Second Defendant, as the Chief Law Officer of the Federal Government of Nigeria, is the proper party to sue, and that there is no need to join the National Assembly. Counsel for the Second Defendant countered the submissions, stating that the challenge to the jurisdiction of court is based on law, and does not require an Affidavit in support of the Preliminary Objection or a relief, since the court can only strike out the case once it arrives at the conclusion that it lacks jurisdiction. In response to the argument on joinder of parties, counsel argued that the dispute in the Originating Summons, is between the National Assembly and Rivers State.
With respect to the Preliminary Objection of the First Defendant, the FIRS submitted that by Section 55(3)-(4) of the FIRS Act, it is mandatory for the Plaintiff to issue it with a Pre-Action Notice through its Executive Chairman before commencing the suit, and failure to so do, rendered the action incompetent. Counsel submitted further that the suit is an Abuse of Court Process, as an action with similar subject with the present Defendants in Suit No. FHC/PH/CS/30/2020 was filed and pending before the court for judgement. He argued further that Originating Summons is inappropriate, for suits which are contentious in nature. The Plaintiff argued otherwise, stating that the wording of the referenced section shows that it is not applicable to suits filed against the FIRS in its corporate name, but to suits filed against the Executive Chairman, Board members and other officials of the FIRS. The Plaintiff also posited that the reconstitution or mis-constitution of the parties by including the Attorney-General of the Federation as a Plaintiff in the Affidavit and Written Address in support of the Preliminary Objection without the leave of court, renders the process incompetent. Counsel submitted further that, there is material dispute to derogate from the use of Originating Summons in this instance.
Arguing the First Defendant’s application for Case Stated, counsel submitted that the questions formulated for reference to the Court of Appeal involve substantial issues of law which arose in the proceedings. The Plaintiff responded and urged the court to take judicial notice of the fact that the application was filed before parties concluded filing of their respective processes in the suit, and that the questions did not arise in the course of the proceedings. Counsel argued that by the questions, the determination of the entire suit would have been transferred to the Court of Appeal.
Arguing the issues in the Originating Summons, the Plaintiff submitted that by virtue of Items 58 and 59 of the Second Schedule, Part I of the 1999 Constitution, the Federal Government can only make laws on, demand and collect duties and taxes in relation to incomes, profits and capital gains and the powers of its agencies (like the First Defendant) is limited to the administration of these taxes only. Counsel submitted that imposition of VAT, Withholding, Education and Technology Tax by the Federal Government is ultra-vires its constitutional powers and therefore, null and void. The First Defendant on its part, posited that by Sections 4(1-4) & 351(1)(a), 318(1) and Items 62, 67 and 68 of the Second Schedule, Part I of the Constitution, the National Assembly has expansive powers to enact legislations to cover the referenced taxes in the Originating Summons. Counsel argued that the taxes mentioned are on the incomes of the taxable persons, and within the purview of Item 59 of the Second Schedule. The Second Defendant on his part, expressed the view that the Federal Government is not limited to Items 58 and 59 of the Second Schedule and that the National Assembly is constitutionally empowered to enact laws and impose taxes on persons other than corporate bodies in Rivers State, and that the Plaintiff cannot make laws which are inconsistent with a law enacted by the National Assembly.
Court’s Judgement and Rationale
Deciding the Preliminary Objection of the Second Defendant, the court held that it is founded on issues of law only and so, there was no need for filing an Affidavit in support and that a Notice of Preliminary Objection is envisaged under the Rules of Court as a mode of making an application before the court. The court held further that the suit falls within the subject matter jurisdiction of the Federal High Court pursuant to Section 251(1)(a)(b)(p)(q) & (r) of the 1999 Constitution, and that the suit is not a challenge to the legislative competence of the National Assembly to enact the Statutes, subject matter of this suit; hence, the National Assembly need not be joined as a party. The Preliminary Objection was thereby, dismissed.
With regard to the Preliminary Objection of the First Defendant, the court found that the unilateral inclusion of the name of the Attorney-General of the Federation as a Plaintiff in the Affidavit and Written Address, without leave of court, rendered the affected processes incompetent. Thus, the Preliminary Objection was bare and without legal argument in support of. The court thereby struck same out. The court however, went on to touch on the issues raised in the Objection, and determined them. His Lordship found that Section 55(3) of the FIRS Act does not provide for service of Pre-Action Notice on the FIRS, before commencement of an action against it. Determining the issue of Abuse of Court Process, the court distinguished the referenced suit from the present suit, and found that the conditions for multiplicity of actions are not in this case. On suitability of Originating Summons for commencement of the action, the court found that the suit relates to interpretation of the Constitution and primarily, issues of law and thus, was properly commenced.
Determining the application for Case Stated, the court held that, the questions did not arise in the course of the proceedings because the parties were yet to conclude filing their respective processes in the suit. Also, the questions cover almost the entirety of the case, thereby showing that the aim of the application is to transfer the suit to the Court of Appeal for adjudication in contravention of the decision in ALHAJI ATIKU ABUBAKAR v A-G, FEDERATION & ORS. 3 PLR/2007/23(SC). The court thereby, dismissed the application.
In its resolution of the questions raised in the Originating Summons, the court held that looking at Sections 4(1-4)(a) & (b), 315(1)(a), 318(1) and Items 62, 67 and 68 of the Second Schedule, Part I of the 1999 Constitution, as well as Sections 1, 2(a) of Part 3 (Supplemental and Interpretation) of the 1999 Constitution, there is nowhere that the Federal Government is given wide powers to make tax laws beyond the limits of Items 58 and 59 of Part I of the Second Schedule. Items 58 and 59 clearly state that the Federal Government is only empowered to enact laws in relation to stamp duties, taxations of incomes, profits and capital gains only. Tax laws are interpreted strictly, without room for presumption and intendment. It does not admit of equity – FEDERAL BOARD OF INLAND REVENUE v INTEGRATED DATA SERVICES LIMITED (2009) 8 NWLR (Pt. 1144) 637-638. It is the law that where a Statute mentions a specific thing among other alternatives, it is deemed that those not mentioned are excluded. The 1999 Constitution having specifically designated the taxes that the Federal Government is empowered to impose and collect in Items 58 and 59, this must be read to exclude other species of taxes like VAT, Withholding, Education and Technology Tax. Had the framers of the 1999 Constitution intended otherwise, they would have specifically mentioned them in the Constitution.
Determining the second issue, the court highlighted the provisions of Item 7(a) & (b) of Part II, Second Schedule of the 1999 Constitution and came to the conclusion that in the exercise of the powers of the National Assembly to impose any tax or duty on capital gains, incomes or profits of persons other than companies and documents or transactions by way of stamp duties, the National Assembly may provide that collection or administration of the tax law shall be carried out by the Government of a State or other State authority, subject to the conditions prescribed by the National Assembly. The provisions do not extend the legislative competence of the National Assembly to impose any form of tax outside those specifically mentioned in Item 7(a) & (b) and delegation to any other person or entity other than the State Government or an Authority of the State Government shall be null and void.
Regarding the third issue which questions the constitutionality of the Taxes and Levies (Approved List for Collection) Decree No. 21 of 1998, now Act, which purports to legislate on collection of taxes and levies other than as provided under Items 58 and 59, the court referred to the decision of the Court of Appeal in UYO LOCAL GOVERNMENT COUNCIL v AKWA IBOM STATE GOVERNMENT & ANOR. (2020) LPELR-49691(CA) where the appellate court nullified the Taxes and Levies Act for being inconsistent with the provisions of the 1999 Constitution. His Lordship held that the Taxes and Levies Act being unconstitutional, any tax or levy provided for in the Act is automatically rendered unconstitutional, null and void, except such taxes are provided for in the 1999 Constitution or any other law validly made by a competent legislature.
Having resolved all the issues in favour of the Plaintiff, the court granted all the reliefs sought in the Originating Summons.
Reliefs in the Originating Summons Granted.
Representation
D.C. Den-Wigwe, SAN; K.C.O. Njemanze, SAN with others for the Plaintiff.
O.C. Eyiba, Esq. for the 1st Defendant.
D.L. Inko-Tariah, Esq. for the 2nd Defendant.
Reported by Optimum Publishers Limited,Publishers of the Nigerian Monthly Law Reports (NMLR)(An affiliate of Babalakin & Co.)
