THE Zambia Revenue Authority (ZRA) has lost an appeal in the Supreme Court against the Lusaka High Court judgment which ruled that the authority should refund 3,525 former civil servants money it wrongfully deducted from them.
Following the ruling, ZRA would have to refund the former government workers who left employment under the Voluntary Separation Scheme in 1999 over K4.2 million wrongfully deducted from their terminal benefits.
The money would be refunded with interests, costs and any other relief.
In her ruling, Supreme Court Judge Hildah Chibomba, who sat with justices Elizabeth Muyovwe and Florence Lengalenga, said the appeal by ZRA lacked merit and she referred the matter back to the deputy registrar for assessment.
She said the High Court was entitled to conclude as it did, that sections 87,108 and 113 did not have any application to that action.
Ms Justice Chibomba said the lower court was also on solid ground when it referred the matter to the deputy registrar for assessment as clearly, there was a dispute, to which the ZRA was a party, over the computation of the amounts owed which needed to be resolved.
“We therefore, find no basis to disturb the findings of the learned judge. This one ground of appeal, therefore, fails,” Ms Justic Chibomba said.
“For reasons stated above, this appeal is dismissed for lack of merit and the matter is referred back to the deputy registrar for assessment. Cost in this court and in the court below are for the respondents to be taxed in default of agreement.”
When the former workers were separated from government in 1999, they were paid special severance package which ZRA taxed although they were exempted from tax under part IV of the second schedule of the Income Tax act. The former civil servants took the matter to court against ZRA and the authority did not file any defence, and the separated workers obtained judgment in default of appearance and defence.
In January 2013, the two parties signed a consent order in which it was mutually agreed that the judgment in default of appearance and defence be set aside and that the workers be paid according to their individual assessments.
After change of advocates, the former government workers complained of under payments after ZRA declined to pay on ground that the claims had been re-assessed and they were refunded through their previous advocates.
ZRA objected and filed a notice to raise preliminary issues, urging the court to set aside the application for irregularity and that it was its contention that the assessment ought to be done by the authority and not the court.
The deputy registrar dismissed the preliminary objection and ordered that the matter proceeds for assessment on account that ZRA, as a party to the dispute, could not assess the extent of its own liability.
ZRA appealed to the High Court in chambers advancing five grounds among them that what the former government workers had been claiming was ultra vires the consent order and untenable at law, and that the learned deputy registrar had not taken into account the fact that the workers had already been paid their refunds. But the former civil servants argued that the deputy registrar was on firm ground when he ordered that the assessment should proceed.
After considering the submissions, the High Court judge dismissed all the five grounds of appeal and found that since the matter had been brought before court it was well within its jurisdiction to conduct the assessment. The judge concluded that as argued by the workers, sections 87, 108 and 113 of the Income Tax Act were irrelevant, as the provision related to matters before they became subject of court proceedings.
The court conceded that the deputy registrar had not addressed the issue of statutory limitation but that on the basis of his findings, the court was confident that the deputy registrar would have reached the same conclusion. In the Supreme Court, Ms Justce Chibomba said the court noted that there were submissions relating to payment of money into court and that the court had deliberately not given its opinion as it did not find any evidence on the record.
She said the appeal by ZRA lacked clarity on who was to carry out the assessment, when it should be conducted and procedure to follow in the event that the parties disagreed over the assessments. The former civil servants contended that the fact that ZRA had paid into the court K2,783,315.25 was not only an admission of liability, but also, a partial fulfillment of their claim.
On the other hand, ZRA argued that contrary to the former civil servants’ claim that that they were exempted from paying tax on ground that there was no law that provided for taxation of payment made to employees who opt for voluntary separation, section 14 of the Income Tax Act made it mandatory for all income received from any source to be taxed.