Justice Umar Mohammed of the Federal High Court in Abuja has nullified a Tax Appeal Tribunal decision that ordered Abuja Electricity Distribution Plc (AEDC) to pay the Federal Inland Revenue Service (FIRS) over N5.3 billion in outstanding Value Added Tax and Withholding Tax liabilities for the period 2013–2017.
In a ruling delivered on Monday, the judge set aside the December 14, 2023, tribunal judgment and sent the matter back for a fresh hearing before a differently constituted panel, citing a serious breach of natural justice due to the “likelihood of bias.”
The court found that one of the five tribunal members who heard the case and delivered the verdict, Honourable Julius Bamidele Ajayi, had previously been a senior FIRS official directly involved in the tax audit that generated the disputed assessment against AEDC.
Evidence unchallenged by FIRS
AEDC had presented sworn affidavits, including testimony from a KPMG tax partner who dealt directly with the FIRS audit team, stating that Mr Ajayi – then a coordinating director at the revenue service – oversaw the very tax investigation that led to the multi-billion-naira demand.
Justice Mohammed noted that the FIRS filed no counter-affidavit to dispute these claims, leaving the evidence uncontroverted. Reading from the KPMG deposition in open court, the judge highlighted that the audit team “reported to Mr Julius Bamidele Ajayi” during the exercise.
Quoting established Supreme Court precedents, Justice Mohammed ruled that “no one should sit in judgment in a case in which they have a personal interest or prior involvement.” He stressed that even the appearance of bias is sufficient to invalidate proceedings, regardless of whether the correct decision was ultimately reached.
“The presence of a former FIRS official who participated in the audit that birthed this liability raises a real likelihood of bias,” the judge held. “Once the principles of fair hearing and impartiality are breached, the entire proceeding is rendered void.”
Background of the dispute
The case originated from a 2018 joint tax investigation by the FIRS and the Economic and Financial Crimes Commission covering AEDC’s operations from 2013 to 2017. The revenue service subsequently issued assessments totaling billions of naira, which AEDC contested.
After losing at the Tax Appeal Tribunal in suit TAT/ABJ/APP/330/2022, AEDC appealed to the Federal High Court, arguing that enforcing the N5.3 billion payment would severely disrupt electricity supply to millions of customers across the Federal Capital Territory, Niger, Kogi, and Nasarawa states.
The court agreed that the composition flaw was fatal to the tribunal’s decision and ordered an immediate retrial before a new panel.
The development marks a significant setback for the FIRS in its efforts to recover the disputed taxes and underscores the judiciary’s insistence on impartial adjudication in revenue disputes.
