A LEGAL DISCUSS OF THE (A.G OGUN
STATE V. ALHAJA AYINKE ABERUAGBA (1985) 1 NWLR PG. 395) BRINGING OUT THE THREE
MAIN ISSUES AT THE SUPREME COURT, THE DECISION OF THE COURT ON THE ISSUES AND A
BRIEF COMMENT ON THEM[1].
According to the court
in Whitney v. I. R.C[2]
there are three stages in the impo
sition of tax, sales tax in this connection. There is the declaration of liability i.e the enabling statute will determine what persons in respect of what property are liable. The second is the assessment stage, which particularize the exact amount which a person liable has to pay, and lastly is the method of collection and or recovery, if the person taxed does not voluntarily pay. It is by considering each of the above stages that we will know whether a particular state sales tax law is legal or otherwise
The Supreme Court in
the Aberuagba’s case was invited to decide the validity or otherwise of the 1982 Sales Tax Law of Ogun State, which
provided in Section 3(1) as follows:
“A tax to be known as sales tax shall be charged in
accordance with the provisions of this law on all taxable products brought into
the state and on the supply of goods and services in any inn not exempted from
the requirement of registration under this law at the rate specified opposite
each class of goods or services in the First Schedule to this law”
Part
1 of the First Schedule provides:
“Petrol………………..1 kobo per litre
Diesel Oil……………1
kobo per litre
Petroleum products
other than petrol and diesel oil……………1 kobo per litre”
By originating summons,
the plaintiffs/ appellant who were wholesale purchasers of beer in Ogun State
instituted for themselves and on behalf of wholesale purchasers of beer in the
state claiming an declaration that the Sales tax Law is inconsistent with the
provisions of the constitution of Federal Republic of Nigeria on legislative
taxing powers of the Federal and State government respectively.
The Learned Chief Judge
Craig C.J referred the matter to the
Court of Appeal stating that since the state tax law affects other wholesalers
of tobacco paint and alcoholic spirits, it is presumable that these other
classes of people might contemplate taking actions against the state government
thereby it becomes a matter of urgent public importance not only to all the
State House of Assembly who has adopted this law, but to the Nigerian business
concern in general that a proper adjudication be made on whether or not the
sales tax law is valid and constitutional.
The appellants
dissatisfied with the judgment of the appellate court brought the matter before
the Supreme Court who based on the important constitutional issues raised
invited all the Attorney General in the federation as amicus curiae.
A.
Whether
the omission to include item 38 of the exclusive legislative list of the 1960
& 1963 Constitution of the Federal Republic of Nigeria into the 1979
Constitution shows an intention to regard sale tax law as a residual subject OR
whether it implies that the power to legislate on all Fiscal Subject have been
vested in the Federal Government in relation to Item 61.
Item 38 of the
Exclusive Legislative List of the 1960 and the 1963 Constitution confers a
general sale or purchase tax upon the Federal Government by specifically
granted parliament a general power over taxes on amounts paid or payable on the
sale or purchase of commodities with certain exceptions. It provides thus:
“Taxes
on amounts paid or payable on the sale or purchase of commodities except-
(a) produce,
(b) Hides
and skins
(c) Motor
Spirit
(d) Diesel
oil sold or purchased for use in road vehicles
(e) diesel
oil sold or purchased for other than industrial purpose”
Having omitted item 38
in the provision of the exclusive legislative list of the 1979 Constitution, it
was argued by the counsel to defendant (Ogun State) that this makes it a residual
matter in which the state can legislate on i.e, the state now has power to make
tax law on sales and purchase of commodities without regards to the exceptions
stated therein however.
Notwithstanding the
above, the Court of Appeal held the argument not to hold water by stating that
although Item 38 has been omitted, the subject matter of sales tax still fits
into Item 15, item 58 and most certainly, item 61 of the exclusive legislative
list of the 1979 Constitution which has the following provisions:
Item 15 - Customs and excise duties
Item
58 – Taxation of incomes, profits and capital gains, except as otherwise
prescribed by the constitution.
Item
61- Trade and commerce, and in particular
(a) trade
and commerce between Nigeria and other countries including importsof
commodities into and export of commodities from
Nigeria, and trade and commerce between the states;
(b) establishment
of a purchasing authority with power to acquire for export or sale in world
markets such agricultural produce as may be designated by the National Assembly
(c) inspection
of produce to be exported from Nigeria
and the enforcement of grades and standards of quality in respect of produce so
inspected
(d) establishment
of a body to prescribe and enforce standards of goods and commodities offered
for sale
(e) control
of the prices of goods and commodities designated by the national Assembly as
essential goods or commodities; and
(f) registration
of business name
As such, there is
therefore no vacuum that will make the subject matter residual.
It was also argued that
the use of the word “in particular” under item 61 restricts the powers of the
federal government to only the provisions of paragraph (a) - (f) above. The
Appeal Court however, relying on the fundamental
objective and directive principle of state policy under section 16 of the
constitution which directs the federation to control the national economy in
such manner as to ensure maximum welfare, freedom and happiness of every
citizen held in the contrary that the phrase is one of emphasis and not
limitation which unequivocally means that
“trade and commerce” without any limitation is the exclusive legislative
province of the Federal Government
Another argument raised
on this issue was that the intention of the drafters of the constitution was
not to concern the Federal Government with petty matters such as control of
street trading, regulation and collection of market fees, licensing beer
parlours, control of advertising e.t.c which are responsibilities of the state
or local government therefore, it will amount to a judicial summersault for the
appeal Court to hold that all aspect of trade and commerce are exclusive to the
Federal government.
In furtherance, it was
also canvassed that if sales tax on whatever matter is an excise duty as held
by the Appeal Court, then it would be wrong to say that sales tax falls under
item 58 and 61 when excise duty is expressly confined to item 15. It was
submitted that if the words “trade and Commerce” in item 61 were intended to
cover all aspects and ramifications of trade and commerce to be within the
Exclusive legislative list, then it would not have been necessary to make any
of the other provisions in the Exclusive Legislative List which are connected
to trade and commerce.
Lastly, an alternative
argument was advanced that even if the Federal powers is limited under item 61
to the matters set out in paragraph (a) – (f) therein, the state tax law of
Ogun State is still unconstitutional and void as it infringes the provisions of
trade and commerce between the states as provided for in item 61(a). It was
buttressed that the Federal Government having been given powers to regulate
inter-state trade and commerce by item 61(a), any state law having the
possibility of interfering with trade and commerce between the states is null
and void.
The Supreme Court in
resolving this issue applied the principle of Interpretation of Statute
enunciate in Adesanya v. President of Nigeria (1981) 5 S.C 112 “that all the provisions relating to an
issue must be read together and not disjointly”
Based on the above, all
provisions of the constitution relating to the taxing powers of the federal
government and the State Government were read together.
It was discovered that
by virtue of section 4, 150 and item D of part II of the second schedule to the
constitution the federation has powers to impose tax on any matter in the
exclusive and concurrent list. Also, pursuant to section 4 and item D9 of part
II of the second schedule a State has powers to impose tax on matters in the concurrent
list and residual matters.
The powers of the state
on the Concurrent list are however subject to the rule of inconsistency under
section 4(5) and the doctrine of covering the field. i.e, it is not within the
competence of the state to:
·
make sales tax law affecting any of the
matters in the exclusive legislative list
·
make any sales tax law in the concurrent
legislative list which is inconsistent with any law validly made by the Federal
Government
·
make any sales law on any matter in the
concurrent legislative list where the any validly made law by the Federal has
covered the field. i.e where both laws are not in conflict.
Relying on item H 18 of
part II of the second schedule which reads:
“subject
to the provision of this constitution a House of Assembly may make laws for
that state with respect to industrial, commercial or agricultural development
of the state”
And the provisions of section 7(3) of the
Constitution:
“it
shall be the duty of the local government council within the state to
participate in economic planning and development of the area referred to in (2)
of this section and to this end an economic planning board shall be establish
by a law enacted by the house of Assembly of that State”
The Supreme Court
formed an opinion that while the constitution requires the Federation to
control the national economy, it also empowers the state to participate in the
development of the economy within the state and a Local Government in the
development of the economy within its jurisdiction. It is therefore wrong to
hold that the state has no power to regulate any aspect of trade and commerce.
HELD:
Bello, J.S.C reading
the lead judgment:
“…I would construe the words “in Particular” in item 61
to be words of limitation and that the trade and commerce power of the
Federation is limited to sub-item (a) to (f) therein…in this respect,
international trade and commerce and inter- state trade and commerce are
specifically reserved for the federation, while trade and commerce within a
state is left as a residuary matter to the state.”
COMMENTS:
Although Karibi Whyte
J.S.C in his dissenting judgment held that the phrase “in particular” is one of emphasis, it is also my opinion that the
above phrase in the context within which it was used cannot be said to be of
limitation.
My reason for this is
not farfetched. It is clear that before
the phrase was used in Item 61 of the exclusive legislative list, a comma was used to show that it is of
emphasis.
“Trade and commerce, and in particular…”
The 20th
Century Chambers Dictionary has defined the word comma as “the points that
marks the smallest division of sentence, the smallest interval, break,
discontinuity…”
Flowing from the above
it is undisputable that the phrase does not limit trade and commerce to the
provisions of (a) – (f) rather it stands distinctly on its own.
Having stated that the
federation has exclusive power on trade and commerce, and having recognized
that the state also possesses taxing powers under the concurrent legislative
list, the State cannot be precluded from making laws in accordance with its
relevant powers. This must however be done with regards to the above enunciated
doctrine of covering the field and inconsistency rule.
B.
Validity
of the State Tax Law in so far as it imposes tax on purchasers of all taxable
products brought into the State (inter- State Commerce)
Section 4(3) of the
1979 Constitution of the Federal Republic of Nigeria gives the National
Assembly Unfettered power to legislate on all items of the Exclusive Legislative
List.
The List in its Item
61(a) provides for “trade and commerce
between Nigeria and other Countries including Import of commodities into and
export of commodities from Nigeria, trade
and commerce between states”
The above clearly shows
that the Federal Government has the exclusive powers to make any law relating
to International Trade and Commerce, and Inter- State Trade and Commerce to the
exclusion of the other tiers of government
It was argued that the
State House of Assembly under Item H of Part II to the Second Schedule
Paragraph 18 and 19 respectively has powers to make laws for the Industrial,
Commercial or Agricultural Development of the state.
Item 18 provides:
“Subject to the provision of this
Constitution a House of Assembly may make Laws for that State with respect to
Industrial, commercial or agricultural development of the state”
Item 19 provides: “Nothing in the foregoing
paragraphs of this item shall be construed as precluding a House of Assembly
from making Laws with respect to any of the matters referred to in the
foregoing paragraphs”
This argument was
however discarded on the premise that Section 4(3) in clear terms prohibits
State from making laws with respect to any matter in the Exclusive List, which
includes inter-State trade and commerce.
ESO JSC stated that
Trade and Commerce relates to commercial intercourse i.e it involves movement
of commerce whether to or from the foreign countries or between interstate or
intrastate and the latter done through Sea, air or land and is different from
commercial development stated in the concurrent list.
Assuming but not
conceding that Trade and commerce and Commercial Development means the same
thing, such laws can only be made by the state subject to the inconsistency
rule and the Doctrine of Covering the Field.
HELD
Bello JSC reading the
lead judgment
“I hold that in so far
as the law purports to impose sales tax on taxable products brought into the
State, it offends the provision of the inter-state or international trade and
commerce and contravenes section 4(3) of the constitution. I declare that the
law is unconstitutional to that extent…furthermore, item 61(e) empowers the
Federation to control the prices of goods and commodities. Under the Price
Control Act 1979 and the Price Control Commodities Order 22 of 1979, the
federal Government has controlled the prices of petrol, diesel oil and
petroleum products. I have earlier show that the Act and Order are existing
laws. since the sale tax is intended to be paid by the consumers, it is tantamount
to an increase- in my view- in the prices of the taxable products namely
petrol, diesel oil and petroleum the prices of which have been controlled by
the Federal Government. That being the case, I hold the sale tax to be
inconsistent with the Price Control Act and the Order made thereunder.
Consequently, the sale tax on petrol, diesel oil and other petroleum products
is unconstitutional null and void”
COMMENTS
In my opinion, the
supreme court was right in its decision in that the Sales tax law of Ogun State
based on the Provisions of its Section 3 is not only discriminatory, but also
undermine the powers given to the federal Government under the Item 61(a) of
the Exclusive Legislative List of the 1979 Constitution of the Federal Republic
of Nigeria by imposing sale tax on all taxable products brought into the state.
It is also inconsistent
with the provisions of Section 4(3) which excludes from the purview of the
State House of Assembly powers to make laws regarding (Item 61(e) of the Exclusive list) control of the prices of goods
and commodities designated by the National Assembly as essential goods or
commodities to which petrol, diesel and petroleum products is not an exception.
C.
Whether
the tax imposed under the Sales Tax Law is an excise duty within the meaning of
Item15 of the Exclusive Legislative List
Under this issue, it is
overt that the word ‘excise’ within the context of item 15 of the exclusive
legislative list is not defined in the Constitution or in the Interpretation
Act 1964 which, by virtue of the Section 277(4) of the 1979 Constitution
applies for the purpose of interpreting its provisions. Consequently, it
beholds on the court to determine the constitutional meaning of the word.
The appellate court
held on this issue that the arm of the Sales Law which provides for the
taxation of all taxable products brought into the state is an imposition of
excise duty within the meaning of item 15 of the exclusive legislative list of
the 1979 Constitution, it is therefore ultra
vires of the Ogun State House of assembly, and must accordingly be adjudge
null and void.
Counsel for the
appellant in person of Adaramaja (chief) contended that in the Nigerian
context, ”excise duty” is a tax imposed on production of goods at the place of
production and the tax is paid by the
producer before the entry of the goods into the market and that excise duty is
not imposed on distribution.
Whereas a sale tax is a
tax imposed on a consumer at the time of the sale of the goods, and the fact
that a wholesaler is appointed as a collecting agent would not affect the
character of the sale tax. To this extent, he relied on Dickenson Arcade Ply Ltd v. The
State of Tasmania & Anor. (1974) 13 C.L.R 177.
Gathering more
momentum, the Legal drafts man for Kaduna state arguing in favour of the
appellant postulated two tests to determine whether a tax is an excise duty or
a sale tax. Which includes: (1) when
is the tax due/
(2) Who is liable to pay the tax.
In answering the above,
he was of the view that an excise duty is due for payment at the place of
manufacturing and is paid by the manufacturer who must pay whether he sold the
goods or not; and on the other hand, a sale tax is due at the point of sale and
the consumer pays. Since the later is the case here, the Ogun state law cannot
be regarded as an excise duty.
The Attorney general of
Lagos State submitted that the appellate court was wrong in relying on the
Australian decisions which were based on the provisions of the Australian
Constitution which reflected the history of customs and excise duties in that
country. It would therefore be impossible for such to do justice to the word in
the context of the Nigerian situation.
Counsel for the
respondent in person of Chief Williams on the other hand argued that for
practical reasons, it is obviously easiest and most effective to collect the
duty immediately on their production before distribution to the wholesalers,
retailers or ultimate consumers. It was the convenience of the collection of
excise duty at the point of production, according to learned counsel that led
to the erroneous impression that “excise duty” is limited only to duty imposed
on goods at the point of their production in factory
He therefore based on
plethora of Nigerian authorities[3]
demonstrated that ‘excise duty’ is simply and purely a tax on manufactured
goods and its collection at the point of manufacture is purely a matter arising
from practical considerations of effective collection.
Recognizing the
Jurisdiction differences, and based on our common law heritage contended that
the interpretation given to the word ‘excise’ is of persuasive effect
The Supreme Court in
treating the subject matter so that justice would be manifestly done,
recognized the dictum of Lord Coleridge
in Rv. Peters[4]
“I am quite aware that dictionaries are not to be taken as authoritative
exponents of the meaning of words used in Acts of Parliament, but it is a well
known rule of Court of Law that words should be taken to be used in their
ordinary sense, and we are therefore sent for instruction to these books”.
The court emphatically
stated that a statutory provision is not an aid in the construction of the
Constitution but may be a guide in discovering the intention of its framers.
After considering the
provisions of Section 2, 29, 15 and 24(1) of the Excise Ordinance, Cap 65 Laws
of Nigeria 1948, The Customs and Excise Management Act 1958 as amended by
several Acts which repealed the former Ordinance and section 14 of the Customs
and Excise Management (Amendment) Act 1972 reasoned that ‘excise duty’ has
always been levied on goods manufactured within the country, and tax payable by
the manufacturers before the goods are removed from the factory or warehouses.
The constitutional
definition given by other common law countries would be inapplicable because
they were all decided within the context of the Constitution of the Country
concerned.
Hence, there is no
universal meaning of the word as each case must be viewed through the
spectacles of its constitutional perspectives. In essence, our Constitution
should be interpreted in such a manner so as to satisfy the susceptibilities of
the Nigerian society for whom it was made and to meet the needs of the Nigerian
Institution“… it would be in my
respectful view, an exhibition of the highest degree of absurdity, folly and
ridicule by a state to follow the example of Australia and make Sales Tax Laws which would require a person
who purchased a stick of cigarette from a hawker to go to the State Tax Office
for the purpose of paying the sales tax after he has smoked the cigarette”[5].
After due deliberation
and inclination, ‘excise’ within the purview of iem15 was defined to be a duty
charged on goods, manufactured or
produced in Nigeria whether in the process of their manufacture or production
or their storage or distribution before their sale to the consumers in Nigeria
but does not include a tax imposed on the sale
of goods to a distributor, retailer or consumer. For emphasis, “excise” is a
tax on the goods while sales tax is a tax on their sale.
HELD
Bello, J.S.C reading
the lead judgment:
For the above reasons,
I hold that the sales tax imposed under sections 3(1) and 3(4)(ii) of Ogun
State Tax Law is not an excise duty.
COMMENTS
It is my opinion on
this issue that the Supreme Court in its leading judgment has set the pace that
Sale tax law does not in any way amount to excise duty notwithstanding its
method/agent of collection in as much as its collected upon sale of the
affected goods and not upon their manufacturing or production as the case may
be.
[1]
BY: MABAWONKU
OLUSEGUN OLANREWAJU
[2]
[1926] A.C 37 at 52
[3]
Tobacco Cigarettes Excise Duty Ordinance No. 23 of 1933, The Custom and Excise
Management Act No. 55 of 1958, Excise
Ordinance Cap 65 Laws of Federation 1948, Customs Tariff Act 1965, General
Excise Regulation No. 55 of 1958, Excise (Control and Distillation) Act 1964
and the Customs and Excise Management (Amendment) Act, 1960.
[4]
(1886) 16 Q.B.D. 636 at 641
[5]
Bello JSC
