The Plaintiff’s claim against the 1^st Defendant was for an amount of GH¢1,221,831.54 together with interest.

The background to this suit was that the Plaintiff, an oil marketing company, supplied bitumen AC20 to the 1^st Defendant, a road construction company. The 1^st Defendant had failed to pay for the products supplied saying that the Plaintiff had charged import levies and VAT contrary to the ECOWAS Trade Liberalization Scheme (ETLS).

The 1^st Defendant therefore made a counterclaim for the following reliefs:

a. A declaration that under the Value Added Tax Act, 2013 (Act 870) and other related laws, Bitumen AC20 is exempt from VAT.

b. Under the ECOWAS Trade Liberalization Scheme, which Ghana is committed to, Bitumen AC20 manufactured and imported from Cote D’Ivoire is exempted from import duty.

c. A declaration that the Plaintiff was wrong by including VAT and import duty in the prices of Bitumen AC20 that was purchased from it by the Defendant.

d. An order to the Plaintiff to refund to the 1^st Defendant the amount of GH¢292,549.42 being the excess of VAT and import duty, which the Plaintiff had wrongly charged the 1^st Defendant on all of the transaction between them.

e. Interest on the amounts in paragraph (c) above at the prevailing bank rate starting from the period the Court would deem reasonable, taking into account the various periods beginning from 2012 that the VAT and import duty were charged by the Plaintiff.

f. Costs including attorneys’ fees.

The 2^nd Defendant which was later on joined to the suit, stated in its defence that the 1^st Defendant was not entitled to apply for a refund since it had not paid any import duty to the 2^nd Defendant. It was of the opinion that it was only the person who had wrongly paid import duties who could ask for a refund and since the Plaintiff had not wrongly paid import duty or VAT, the issue of a refund did not arise at all.

The issues forwarded to this court for trial were:

1. Whether or not under the ECOWAS Trade Liberalization Scheme, in the second schedule Part 1 heading 27.14 of the ECOWAS Preferential Rates, bitumen, AC20 which, the 1^st Defendant had purchased from the Plaintiff is liable for import duty?

2. Whether or not by the determination of issue 1, the Plaintiff was right in charging the 1^st Defendant an amount of GH¢586,455.91 being import duty of 10% on bitumen AC20, which the 1^st Defendant had purchased from the Plaintiff?

3. Whether if indeed the import duty of GH¢586,455.91 was indeed illegal, the Plaintiff must be entitled to any amount in excess of GH¢635,375.63 being the difference between the Plaintiff’s main claim against the 1^st Defendant and the illegal charges of import duty on the product.

4. Whether in the light of the determination of all the issues above, the Plaintiff is entitled to its reliefs against the 1^st Defendant?

5. Whether or not the Plaintiff is entitled to its claim?

6. Whether or not the 1^st Defendant is entitled to its counterclaim?

The facts of the case are not in dispute. The Plaintiff an oil marketing company had supplied to the 1^st Defendant a road construction company, a quantity of bitumen products. The 1^st Defendant defaulted in its payment schedule. According to the Plaintiff the 1^st Defendant had as at April 2014, been in default to the tune of GH¢1,221,831.54. The 1^st Defendant does not deny this. Indeed in paragraph 8 of the 1^st Defendant’s Statement of Defence, it states as follows:

In response to paragraph 12 of the Statement of Claim, the 1^st Defendant admits that there is an outstanding bill of GH¢1,221,831.54 on a number of invoices submitted to it by the Plaintiff; however the 1^st Defendant explains that to the extent that the outstanding bill includes import duty and Value Added Tax, the 1^st Defendant disputes that it owes this amount to the Plaintiff.

In other words, the 1^st Defendant though it owed the amount as endorsed on the writ was of the view that the sum owed consisted of import duties and VAT for which it was exempt under the ECOWAS Trade Liberalization Scheme. All matters in contention could be subsumed under a single issue which is whether or not AC20 bitumen products are exempted from import taxes under the ECOWAS Trade Liberalization Scheme? Since this involves an interpretation of the said Scheme, the parties applied for legal submissions to be filed in the matter. The Court granted the application. The Plaintiff in its submissions stated that the ECOWAS Trade Liberalization Scheme (ETLS) showed various rules and rates applicable to specific commodities and goods when imported, exported, manufactured or produced in Ghana. It was Plaintiff’s case that the bitumen product supplied to the 1^st Defendant and which is the subject matter of this suit was not one of the products which were exempt from import duty and tax. It also submitted that the product bitumen AC10 and AC20 are from crude oil processing making them taxable as they are classified under HS Code 27.13.20.00.00. The 2^nd Defendant in its submission corroborated the stance of the Plaintiff that the goods supplied to 1^st Defendant fell under HS Code 27.13.20.00.00 and was therefore subject to import tax.

The 1^st Defendant referred the court to the Second Schedule Part A, Chapter 1, Heading 27.14 of the Harmonized Code or the ECOWAS Preferential Rates stating that bitumen had been specifically mentioned as one of the products exempted from import duties. The Defendant  has  also  attached  a  letter  from  the  Commissioner  of  2^nd  Defendant’s Commissioner to the Chief Executive Officer Platinum Seal Ltd dated 27^th May, 2015. It is captioned: RE REQUEST FOR EXEMPTION FROM THE PAYMENT OF TAXES ON BITUMINOUS PRODUCTS NAMELY AC10 AND AC20 FROM VIVO ENERGY GHANA LTD

Reference is made to your application letter dated 11^th May, 2015 on the above subject matter.

Be informed that under the ECOWAS Trade Liberalization Scheme, it is only the import duty liability that is waived if the company and the products are properly registered. As such the scheme does not apply to VAT.

Your request to seek clarification as to whether the product is a VATable commodity or not may be directed to the Commissioner, DTRD, whose outfit is clothed with the authority to determine same.

Please be guided accordingly.

Signed

Assistant Commissioner, Import & Export

Exhibit GRA 4 attached to the 2^nd Defendant’s submissions is the Harmonized System and Customs Tariff Schedules 2012 issued under the authority of the Ministry of Finance and Economic Planning. HS Code 27.13 .20 refers to Petroleum Bitumen which is subject to import duty of 10% and VAT of 12.5%. The products classified under HS Code 27.14 refers to bitumen and asphalt, natural; bituminous or oil shale and tar sands; asphaltites and asphaltic rocks. The duty rate is 0%. In which category did the product which was supplied by Plaintiff to Defendant fall? Was the product natural or processed? The Exhibit F series attached to the Plaintiff’s submissions are forms from the Ghana Revenue Authority (Customs Division). The description of goods on these forms is Bitumen AC 10 and AC20. A total amount of GH¢447,056.39 and GH¢265,699.56 respectively was charged as taxes. Included in these taxes was Import Duty, Import VAT among others. These documents show that the Plaintiff’s imports were not tax exempt and that the 2^nd Defendant had duly imposed and collected import duties and import VAT from the Plaintiff. Exhibit B which is the same as Exhibit GRA 2 submitted by both Plaintiff and 2^nd Defendant is a letter dated 2^nd January 2015. It is from the Commissioner of the 2^nd Defendant Authority to the Finance Director of Plaintiff. It will be set out in full for its full import:

Dear Sir,

Re: Clarification of Product Declaration under the Harmonized System and Customs Tariff Schedule 2012

Reference is made to your letter of 23^rd December, 2014 on the above subject.

The classification of bitumen depends on its source: whether obtained from crude oil processing or from natural sources. Hence, pending the determination of the source of the bitumen imported, it is recommended that the classification under Chapter 27, Heading 27.13 be used for bitumen grades imported from Cote d’Ivoire.

You are therefore requested to submit samples of bitumen grades AC 10 and AC 20 to the Customs Laboratory, KIA for analysis.

By copy of this letter, the Assistant Commissioner of Customs (KIA/Laboratory) is to determine the source of the bitumen grades AC 10 and AC 20.

The results of the analysis would assist in the classification of the bitumen grades.

Signed

Assistant Commissioner, Petroleum

For Commissioner

In view of this letter, until otherwise directed, the bitumen grades AC 10 and AC 20 were to be classified under 27.13 which attracted import duties and VAT of 10% and 12.5% respectively. Following on this, Exhibit C/GRA3 dated 22^nd June 2015 was written and signed by the same Assistant Commissioner, Petroleum. Its contents are as follows:

Reference is made to your letter of 23^rd December, 2014 on the above subject.

The Customs Laboratory requested assistance from the Ghana Highways Authority and the manufacturers (Societe Multinationale De Bitumes) to assist in the determination of the source of bitumen grades AC 10 and AC 20. The manufacturers provided a Certificate of Quality from Intertek West Africa SARL Cote d’Ivoire; it could be inferred that the bitumen samples AC 10 and AC 20 are from crude oil processing and are therefore classifiable under HS Code 27.13.20.00.

The 1^st Defendant abandoned his argument with respect to the VAT component of the charges as same had already been determined in another court.

The 2^nd Defendant has had the product the Plaintiff supplied to the Defendant classified under HS Code 27.13.20.00 and not HS Code 27.14. It is therefore subject to import duty of 10% and VAT of 12.5%. This is in view of Exhibits C/GRA3 dated 22^nd June 2015 and signed by the Assistant Commissioner, Petroleum under whose jurisdiction the product falls. Having been so classified, the Plaintiff was charged both income tax and VAT. It did not get an exemption on these taxes. The Plaintiff is therefore within its rights to pass on to the 1^st Defendant which has purchased these products import duties and VAT since the products were not exempt from same. The Court in view of this classification under HS Code 27.13.20.00 accordingly declares that the products sold by Plaintiff to the 1^st Defendant are not tax exempt and are subject to import duties of 10% and VAT of 12.5%. As a result, the Plaintiff’s case against 1^st Defendant succeeds and it is entitled to the sum of GH¢1,221,831.54 together with interest from 1^st July 2014 to date of final payment.

The 1^st Defendant’s counterclaim fails and is hereby dismissed. It has already abandoned its claim for declaratory reliefs that under the Value Added Tax Act, 2013 (Act 870) and other related laws, Bitumen AC20 is exempt from VAT and that the Plaintiff was wrong in including VAT in the prices of Bitumen that was purchased from it by the Defendant.

Consequently, it is also not entitled to the following:

(a) Under the ECOWAS Trade Liberalization Scheme, which Ghana is committed to, Bitumen AC20 manufactured and imported from Cote D’Ivoire is exempted from import duty.

(b) A declaration that the Plaintiff was wrong by including VAT and import duty in the prices of Bitumen AC20 that was purchased from it by the Defendant.

(c) An order to the Plaintiff to refund to the 1^st Defendant the amount of GH¢292,549.42 being the excess of VAT and import duty, which the Plaintiff had wrongly charged the 1^st Defendant on all of the transaction between them.

(d) Interest on the amounts in paragraph (c) above at the prevailing bank rate starting from the period the Court would deem reasonable, taking into account the various periods beginning from 2012 that the VAT and import duty were charged by the Plaintiff.

Costs of GH¢20,000.00 is awarded against 1^st Defendant in favour of Plaintiff.

Costs of GH¢5,000.00 is awarded against 1^st Defendant in favour of 2^nd Defendant.

(SGD)

JENNIFER A. DODOO

JUSTICE OF THE HIGH COUR