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FEDERAL INLAND REVENUE SERVICE v. MTN NIGERIA COMMUNICATION PLC
FEDERAL HIGH COURT
(LAGOS DIVISION)
(A. O. FAJI, J)
FACTS
This case arose from a dispute between MTN Nigeria Communications PLC (the Respondent) and the Federal Inland Revenue Service (FIRS) (the Appellant) concerning the assessment and enforcement of Value Added Tax (VAT) liabilities allegedly incurred by the Respondent in respect of certain transactions conducted in 2007 and between 2010 and 2017. The dispute was triggered by a report issued by the Office of the Attorney General of the Federation, following an investigation into the Respondent’s tax compliance. The report alleged that the Respondent was liable to pay a total of ₦242.2 billion in import duty and VAT, in addition to approximately $1.248 billion in VAT and withholding taxes. These liabilities were said to relate to various goods and services procured by the Respondent during the relevant periods.
Upon receipt of the report, the Appellant notified the Respondent and initiated a review of the Respondent’s tax and accounting records. Several meetings ensued between both parties, resulting in a revised tax assessment by the Appellant. Dissatisfied with this revision, the Respondent lodged an objection. In response, the Appellant conducted a further review and again revised the assessment. However, the Respondent remained dissatisfied and consequently filed an appeal before the Tax Appeal Tribunal. The Tribunal, after considering the arguments of both parties, ruled in favour of the Appellant in respect of the principal VAT liability. However, it held that the Appellant was not entitled to impose any interest or penalties on the Respondent. Aggrieved by this part of the decision, the Appellant appealed to the High Court of Lagos State, seeking to set aside the Tribunal’s ruling on interest and penalties and to recover the full reliefs initially sought.
One of the key issues submitted for the Court’s determination was: Whether the Tax Appeal Tribunal erred in law when it set aside the interest and penalty imposed by the Appellant on the Respondent’s VAT liability.
ARGUMENTS
Counsel for the Appellant contended that the Tax Appeal Tribunal erred in law when it declined to uphold the imposition of penalties and interest on the Respondent’s VAT liabilities. He argued that the Tribunal’s reliance on the provisions of the Companies Income Tax Act (CITA) and the Federal Inland Revenue Service (FIRS) Act to determine when a VAT assessment becomes final and conclusive was fundamentally misplaced. According to counsel, VAT matters are governed exclusively by the Value Added Tax Act, which contains specific and unambiguous provisions on the finality of tax assessments. It was the Appellant’s submission that under the VAT Act, once an assessment is properly issued in accordance with the law, it becomes final and conclusive if not challenged within the stipulated time. Counsel emphasised that the Tribunal ought to have applied the VAT Act as the governing legislation, rather than resorting to general tax laws such as CITA or the FIRS Act, which are not directly applicable to VAT assessments.
Furthermore, counsel argued that the statutory timeline for remittance of VAT is fixed and specifically, the 21st day of the month following the taxable transaction. A taxpayer’s failure to file a VAT return or make the requisite payment by that deadline, he submitted, automatically attracts the imposition of penalties and interest under the VAT Act. Finally, counsel asserted that the accrual of penalties and interest in such circumstances is not discretionary but obligatory. He maintained that the VAT Act imposes a strict liability regime for late payment or non-compliance, and that the Tribunal had no legal basis to waive or disregard the statutory consequences of default. In support of these arguments, counsel cited judicial authorities interpreting the mandatory nature of penalty and interest provisions under tax statutes.
In response, learned counsel for the Respondent submitted that the Tax Appeal Tribunal was correct in its decision to set aside the penalties and interest imposed on the Respondent. Counsel contended that the Tribunal rightly relied on the provisions of the Federal Inland Revenue Service (FIRS) Act, which governs the administration, enforcement, and collection of all federal taxes, including Value Added Tax (VAT). It was the Respondent’s position that, in matters relating to tax enforcement, particularly the imposition of penalties and interest, the provisions of the FIRS Act prevail over those of the VAT Act. Counsel maintained that under the FIRS Act, penalties and interest do not accrue merely upon the issuance of a tax assessment. Rather, they arise only when the assessment becomes final and conclusive, following the taxpayer’s failure to object within the time prescribed by law. Counsel further argued that any apparent inconsistency between the VAT Act and the FIRS Act regarding the timing and conditions for the imposition of penalties should be resolved in favour of the FIRS Act. He asserted that the FIRS Act, being the more recent and specific legislation governing tax administration, should take precedence in determining when liabilities become enforceable.
In addition, counsel contended that the Appellant’s reliance on the VAT Act alone was misplaced, particularly because the Tribunal’s judgment did not disregard the VAT Act but was grounded in the comprehensive regulatory framework of the FIRS Act. He submitted that the Appellant failed to directly challenge or displace the Tribunal’s application of the FIRS Act in its reasoning. Counsel, therefore, urged the appellate court to dismiss the appeal and affirm the decision of the Tax Appeal Tribunal. He maintained that VAT assessments do not become automatically final and conclusive upon issuance, and that the obligation to pay penalties and interest only arises where a taxpayer fails to challenge the assessment within the period prescribed under the FIRS Act, not simply by virtue of the assessment being made under the VAT Act.
DECISION OF THE COURT
In resolving the issue, the Federal High Court held that:
A tax assessment becomes final for the purpose of imposing penalties and interest when the tax remains unpaid beyond the statutory period, irrespective of any objections or appeals subsequently lodged by the taxpayer. The Court clarified that where an assessment is contested either by objection or appeal, as occurred in the present case, the assessment does not attain finality until the Tax Appeal Tribunal, or the Court delivers its decision. However, once liability is established by the Tribunal or the Court, any penalties and interest are to be computed retroactively from the original due date of the tax, not from the date of the adjudication.
The Court further distinguished the nature of Value Added Tax from Companies Income Tax. It explained that VAT, as a consumption-based tax, is immediately payable upon the consumption of goods or services, whereas Companies Income Tax is assessed annually and becomes due after the end of a fiscal year. Emphasising the supremacy of the Value Added Tax Act (VATA) in matters relating specifically to VAT, the Court held that VATA, being a special legislation, prevails over general tax statutes in the event of any conflict. Accordingly, where a taxpayer defaults in the payment of VAT, that taxpayer cannot later evade liability for interest and penalties merely because the matter was under dispute. The statutory consequence of default, namely, the accrual of penalties and interest, follows automatically from the time the tax was originally due.
Issue resolved in favour of the Appellant.
S. Ovia Esq., with Y. Ogunpitan Esq., for the Appellant
Agbada S. Agbada Esq., with P. Baiyere Esq., for the Respondent
This summary is fully reported at (2025) 4 CLRN in association with ALP NG & Co.
See www.clrndirect.com ; www.alp.company.
