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The High court in Kampala has ordered the Uganda Revenue Authority (URA) to pay Shs 1.66 billion in compensation for unlawfully auctioning donated medical equipment worth Shs 1.46 billion for just Shs 4 million.
In a ruling delivered by justice Bernard Namanya in a case filed by Babaana Children of Uganda Ltd, the court found that URA breached mandatory legal procedures under the East African Community Customs Management Act, 2004, when it disposed of the goods.
“The unlawful disposal of the plaintiff’s goods was unjustified and constituted a serious breach of…the East African Community Customs Management Act, 2004, for which the defendant offered no satisfactory explanation at the hearing.
The evidence shows that the medical equipment unlawfully disposed of by the defendant had been donated by persons in Switzerland and was intended to support improved access to modern health services in Uganda. The consignment comprised high-tech medical equipment, including dental surgery equipment, rehabilitation hospital equipment, and gynaecology practice equipment.
Beyond the loss of the equipment itself, the unlawful disposal deprived the intended beneficiaries of the anticipated medical services and caused inconvenience, disappointment and loss to the plaintiff and its donors,” Namanya ruled.
Court records show that Babaana Children of Uganda Ltd, a charitable organisation, imported a donated consignment of medical equipment and assorted items valued at 364,817 Swiss francs.
Before importing the consignment, the organisation applied to the ministry of Health for a tax exemption, which URA confirmed in November 2017. After the goods were placed in a bonded warehouse, Babaana requested an extension of the warehousing period until December 2018 because construction of the health facility where the equipment was to be installed had not been completed.
According to the organisation, URA did not object to the request. However, when Babaana later sought to clear the consignment, it was informed that the goods had already been auctioned.
The charity sued URA in 2020, arguing that the authority had unlawfully disposed of tax-exempt goods despite being aware of the approved extension of the warehousing period. It sought Shs 17.26 billion in damages.
In its defence, URA maintained that it handled the importation, warehousing and disposal of the goods in accordance with customs laws.
The tax body argued that the exemption covered only items intended for use in licensed hospitals, including medical equipment and medical supplies, while other goods in the consignment such as toys, shoes, milk, toilet supplies and office supplies were not exempt from tax.
URA further contended that the goods were warehoused on December 11, 2017, for the statutory maximum period of nine months, which expired on September 7, 2018. It argued that Babaana neither cleared the goods, paid taxes on the non-exempt items nor formally applied for redemption before the goods were disposed of.
Justice Namanya, however, found that URA failed to comply with several statutory requirements governing the disposal of warehoused goods.
“Fiona Tubeine, [URA] manager, customs department, stated during cross-examination that a one-month notice of sale had been issued in the Uganda Gazette before the sale of the plaintiff’s goods. However, no copy of the alleged Gazette notice was produced in evidence.
I therefore find that the defendant sold the plaintiff’s goods without issuing the statutory one-month notice required by law. Had such notice been issued, the plaintiff would have been allowed to take remedial action,” the judge ruled.
Justice Namanya also questioned how goods valued at approximately Shs 1.46 billion were sold for only Shs 4 million without any satisfactory explanation.
“The Exit Note issued by the defendant records the goods sold to Mr Isma Mpindi as worn clothing and other items with a gross weight of 2,500 kilograms, whereas the goods received into the warehouse weighed 6,600 kilograms. The high-value medical equipment is not reflected in that Exit Note.
In light of this evidence, which the defendant did not satisfactorily controvert, I find that the defendant failed to account for the plaintiff’s medical equipment in the manner required by law,” the ruling states.
The court awarded Babaana Children of Uganda Ltd Shs 1.46 billion as the value of the auctioned goods and Shs 200 million in general damages.
Justice Namanya also ordered URA to pay interest at six per cent per annum on the Shs 1.46 billion from 2018 until full payment, and six per cent interest on the Shs 200 million general damages from the date of judgment until payment in full. URA was further ordered to bear the costs of the suit.
