The High Court in Kampala has ordered the Uganda Revenue Authority (URA) to pay more than Shs 1.66 billion in compensation after finding that the tax body unlawfully auctioned donated medical equipment worth Shs 1.46 billion for only Shs 4 million.
In a judgment delivered by Justice Bernard Namanya, the court ruled in favour of Babaana Children of Uganda Limited, a charitable organisation, holding that URA failed to comply with mandatory legal procedures before disposing of the goods that had been stored in a customs warehouse.
Justice Namanya described the disposal as unlawful and a serious breach of the East African Community Customs Management Act, 2004, noting that URA failed to provide a satisfactory explanation for its actions.
“The unlawful disposal of the plaintiff’s goods was unjustified and constituted a serious breach of the law,” the judge ruled, adding that the consignment consisted of donated high value medical equipment intended to improve access to modern healthcare services in Uganda.
According to the judgment, the shipment included advanced dental surgery equipment, rehabilitation hospital equipment and gynaecology practice equipment donated by well-wishers in Switzerland. The court observed that the illegal disposal not only caused financial loss to the charity and its donors but also denied intended beneficiaries access to vital medical services.
Court records show that Babaana Children of Uganda Limited imported the donated consignment, valued at 364,817 Swiss Francs, after obtaining tax exemption approval from the Ministry of Health, which was confirmed by URA in November 2017.
The organisation later requested an extension of the warehousing period until December 2018 because construction of its planned health facility had not been completed. According to the evidence presented in court, URA did not object to the extension request.
However, when the charity later sought to clear the goods, it discovered that the entire consignment had already been auctioned.
In 2020, Babaana Children of Uganda Limited sued URA, arguing that the authority unlawfully disposed of tax-exempt goods despite being aware of the approved extension. The organisation had sought compensation amounting to Shs 17.262 billion.
URA defended its actions, maintaining that it handled the importation, warehousing and disposal of the goods in accordance with customs laws.
The tax authority argued that only medical equipment and medical supplies qualified for tax exemption, while other imported items, including toys, shoes, milk, toilet supplies and office supplies, remained taxable.
URA further stated that the goods had been warehoused on December 11, 2017, and that the statutory nine-month storage period expired on September 7, 2018, without the importer clearing the goods, paying taxes on non-exempt items or formally applying for redemption before disposal.
After reviewing the evidence, Justice Namanya found that URA failed to comply with several statutory requirements governing the disposal of warehoused goods.
The judge noted that although URA claimed it had published the mandatory one-month auction notice in the Uganda Gazette, it failed to produce any copy of the Gazette notice during the trial.
“I therefore find that the defendant sold the plaintiff’s goods without issuing the statutory one-month notice required by law. Had such notice been issued, the plaintiff would have been allowed to take remedial action,” the judge ruled.
The court also questioned how goods valued at approximately Shs 1.46 billion could have been sold for only Shs 4 million, saying URA offered no satisfactory explanation for the enormous difference in value.
Justice Namanya further observed inconsistencies in URA’s records. While warehouse records showed the imported consignment weighed about 6,600 kilograms, the exit note issued after the auction recorded only 2,500 kilograms of worn clothing and miscellaneous items sold to one Isma Mpindi. The high value medical equipment was not reflected in the auction records.
“In light of this evidence, which the defendant did not satisfactorily controvert, I find that the defendant failed to account for the plaintiff’s medical equipment in the manner required by law,” the judgment states.
As a result, the court awarded Shs 1.46 billion to Babaana Children of Uganda Limited as compensation for the value of the lost goods and Shs 200 million in general damages, bringing the total award to Shs 1.66 billion.
The court also ordered URA to pay interest at 6 percent per annum on the Shs 1.46 billion from 2018 until payment in full, and 6 percent per annum on the Shs 200 million general damages from the date of judgment until settlement. URA was further ordered to meet the legal costs of the suit.
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