East Coast Oil and Fats Limited loses Sh6.7bn claim on imported oil duty

The commercial division of the High Court has dismissed a case in which the manufacturer of edible oil, fats and soaps—East Coast Oil and Fats Limited—sought a refund of Sh6.7 billion it had paid in additional customs import duty on palm oil.

The court has sided with the Tanzania Bureau of Standards (TBS) and the Attorney General (AG) that the second quality test on the oil imported from Indonesia showed the product was refined and not crude oil as initially declared.

East Coat sued TBS and the AG in 2017 contesting the validity of the second testing carried by TBS and the subsequent report as erroneous, null and void.

It had sought a declaration that the second report on the oil brought aboard MT PYSX Delta was erroneous for categorising the import as refined rather than crude palm olein.

The company also sought an order that it was entitled to a refund of Sh6.7 billion import duty allegedly overpaid on top of Sh4.4 billion it has paid the taxman.

Dispute starts

The case revolves around decision by TBS to send its Quality Assurance Officer, Yassin Zahoro, on January 30, 2017 to collect samples of imported palm Olein consignment that arrived at the Dar es Salaam port for re-testing.

Ten litres of the oil were collected from the vessel at taken to TBS food laboratory for further testing.

According to the officer, the analysis he prepared indicated that the sample was ‘refined palm Olein’. He then routed the report to the Tanzania Revenue Authority (TRA) for assessing taxes.

The court heard that oil company was invited to witness the re-testing of the samples but refused to attend.

East Coast contended that it could not attend the re-testing because it was satisfied with the early testing.

TBS proceeded with the exercise by requesting its food laboratory to re-test the samples. According to the report, the product was refined, bleached and deodarised, and thus. The TBS officials concluded that the consignment was “Not Crude Palm Olein.

The test report was communicated to TRA for necessary action. The company protested the re-testing and demanded a rectification but in vein.

Mr Abas Rafiq Ali who testified for the oil company told the court that without passing an industrial process of refining, bleaching and deodorising it, the imported consignment was unsuitable for human consumption.

He, thus, invited the court to consider the report as erroneous. He claimed in court that the act caused TRA to charge them customs duties at a higher rate as if it were a finished product while in fact it was a crude.

According to the witness, TBS acted arbitrarily and without any reasonable cause when she conducted the second testing of the import.

“The first defendant (TBS) caused serious injury to the plaintiff (East Coast) in terms of the storage charges of the consignment, customs warehouse rent, and factory’s operating costs, and loss of business, including but not limited to the fact that it has to be processed before being fit for human consumption,” argued the witness.

While admitting that they received an invitation letter from TBS to attend the re-testing of the sample earlier drawn from the consignment, he reiterated that they declined to invitation because there was no good cause as they were satisfied with the first report.

He further told the court that the Malaysian standards used in analysing oil, were used globally and, that, those specification relates to sample of Crude Palm Olein.

Under TRA calculations, customs duty paid to imported crude palm olein stands at 10 percent while refined palm olein attracts 25 percent custom duty.

When cross-questioned, the witness admitted that TBS and the government chemists were two government entities responsible for conducting standard tests in Tanzania and that, all consignment are tested by those two authorities at the Dar es Salaam port.

The oil company reiterated that TBS was to blame for the second report and escalation of the tax assessment. “The plaintiff had never imported refined oil but the consignment imported was crude palm olein,” he testified.

East Coast case fails

Judge Deo Nangela rejected argument by East Coast that the second testing was conducted arbitrarily without their presence.

“What was done, however, was a re-testing of the samples already taken, and which, as per the testimony of a defence witness were the very same samples tested in the first round of testing.

“The first defendant took steps and invited the plaintiff (East Coast) to take part in witnessing the re-testing. However, the plaintiff declined or turned down the invitation. The absence of the plaintiff from witnessing the second testing, therefore, was an act done out of her own choice,” said the judge.

At the hearing of the case, East Coast advanced three reason why they declined the invitation to attend the second test. They argued that they were satisfied with the earlier test report, and, second, they had not requested for a re-testing of the sample and finally the invitation letter did not state why the re-testing being done was.

“I hold a view that the plaintiff was ill-advised and since a full liberty was given to the plaintiff to attend the second testing, the she cannot blame anybody.

“I hold so because, in the first,, it is a fact even in other jurisdictions, as I indicated earlier, that a possibility to carry out an re-test of a sample does exist. As such retesting of sample is not an alien exercise,” said the judge.

He further said since the witnesses by East Coast were not experts who could say without hesitation that the second test report was erroneous, what they offered in their testimony can be taken as sufficient proof that the second test report was erroneous.

“I hold so because TBS cannot solely depend on results offered by other laboratories, including the SGS-Indonesia, the reason being that, their testing objective may not be the same and, secondly, the integrity of their results cannot be 100 percent guaranteed,” said the court.

The court dismissed the case and ordered the plaintiff to pay costs of the case.