⦿ CASE SUMMARY OF:
The Attorney-General, Ogun State v. Alhaja Ayinke Aberuagba (1985) – SC
Sales tax law;
Covering the field;
Customs and excise;
1. THE ATTORNEY-GENERAL, OGUN STATE
1. ALHAJA AYINKE ABERUAGBA;
2. ALHAJI ABUDU AINA;
3. ALHAJA ADUNNI AKINSANYA;
4. CHIEF OLUMUYIWA OKENLA;
5. ALHAJA AGBEKE SHOTE;
6. MRS. L.O. ODUNSI;
7. ALHAJA AMUDATU SANNI (For themselves and on behalf of Wholesale Purchasers of Beer in Ogun State);
(1985) NWLR (Pt.3) 395;
⦿ LEAD JUDGEMENT DELIVERED BY:
⦿ LAWYERS WHO ADVOCATED
* FOR THE APPELLANT
– Chief Adaramaja;
* FOR THE RESPONDENT
– Chief Williams, SAN
By an originating summons, the respondents as plaintiffs, who are wholesale purchasers of beer in Ogun State instituted the suit in the High Court of Ogun State for themselves and on behalf of wholesale purchasers in the State claiming against the defendant now Appellant, as follows:
(i) A declaration that Section 3(1), 3(4)(ii), 3(7), 4, 5, 8 and 21 of the Sales Tax Law 1982 are inconsistent with the provisions of the Constitution of the Federal Republic of Nigeria and accordingly void.
(ii) An injunction restraining all officers, servants, and agents of the Government of Ogun State from executing any of the provisions of the said enactment or from requiring the Plaintiffs or any of them to implement or otherwise carry out the said provision.
(iii) Such further or other reliefs as to the Court may deem just.
The matter was fully argued before Craig, C.J. In the course of hearing, learned counsel for the plaintiffs requested the High Court to refer the question as to the constitutional validity of the Law to the Court of Appeal for determination pursuant to the provisions of section 259(2) of the Constitution. After hearing submissions of counsel on all the issues, the learned Chief Judge delivered a well considered Ruling in which he expressed his opinion that substantial questions of law of urgent public importance were involved in the suit. Accordingly, in pursuance of section 259(2) of the Constitution he referred to the Court of Appeal the following questions:
(1) Whether the omission to include item 38 of the 1960 and 1963 Exclusive Legislative List in the 1979 Constitution shows an intention to regard the Sales Tax Law as a residual subject or whether the power to legislate on all fiscal subjects have been vested in the Federal Government.
(2) Whether the tax imposed under the Sales Tax Law is an excise duty within the meaning of that term in item 15 of the Exclusive Legislative List.
(3) Whether the enactment of the Sales Tax Law is an exercise of power with respect to Trade and Commerce in item 61 of the Exclusive List.
(4) Is the Sales Tax Law valid and constitutional in so far as it imposes tax on purchasers of taxable goods?
(5) If the answer to question 4 is in the affirmative, are sections 4, 5 and 8 valid and constitutional as being incidental to the execution of the Sales Tax Law?
In his lead judgment (with which Nasir, P., Phil-Ebosie, Kazeem and Ete, JJ.C.A. concurred) Omo J.C.A., after he had extensively considered the submissions of learned counsel and reviewed the Australian and Canadian cases cited by counsel in support of their submissions, answered the questions on reference as follows:
“In view of my findings above, I will answer the questions referred to this Court, and set out by the learned trial judge in the court below, seriatim as follows:
Answer: The power to legislate on trade and commerce is vested in the Federal Government. The omission of Item 38 as set out does not show any intention to regard the Sales Tax Law as a residual subject. Power conferred on the states by Item 38 is covered by Item 15 and/or 6 of the exclusive legislative list in the 1979 Constitution.
Answer: YES, it is; except as to the tax on the supply on goods and services in an Inn.
Answer: No, but it imposes tax on products not on purchaser (of goods).
Answer: The answer to question 4 above is negative. The second part of this question therefore does not arise.”
The Appellant was not satisfied with the decision of the Court of Appeal and so he has appealed to this Court.
1. Whether the omission to include item 38 of the 1960 and 1963 Exclusive Legislative List in the 1979 Constitution shows an intention to regard the Sales Tax Law as a residual subject or whether the power to Legislate on all fiscal subjects have been vested in the Federal Government?
2. Whether the tax imposed under the Sales Tax Law is an excise duty within the meaning of that term in item 15 of the Exclusive Legislative List?
3. Whether the enactment of the Sales Tax Law is an exercise of power with respect to Trade and Commerce in item 61 of the Exclusive List?
4. Is the Sales Tax Law valid and constitutional in so far as it imposes tax on purchasers of taxable goods?
5. If the answer to question 4 is in the affirmative, are sections 4, 5 and 8 valid and constitutional as being incidental to the execution of the Sales Tax Law?
⦿ HOLDING & RATIO DECIDENDI
1. ISSUE 1, was in favour of the respondent, in part.
i. It is clear from the foregoing that the control of the economy is not within the exclusive power of the Federation. Each government (Federal State and Local) has a share in the control. While the constitution requires the Federation to control the national economy. it also empowers the State to participate in the development of the economy within the State and a Local Government in the development of the economy within its area of jurisdiction. It is therefore wrong for the Court of Appeal [to] conclude that because section 16 obliges the Federal Government to control the national economy and since trade and commerce is an integral part of the national economy, the words “in particular” are words of emphasis and, accordingly as it held a State has no power to regulate any aspect of trade and commerce. With all due respect, this conclusion is inconsistent with the provisions of item 18 of Part II of the Second Schedule and section 7(3) of the Constitution.
ii. Section 7(5) states that the functions to be conferred shall include those set out in the Fourth Schedule to the constitution. The functions set out therein include control and regulation of out-door advertising and hoarding, control and regulation of shops, kiosks, restaurants and other places for sale of food to the public, laundries and the development of agriculture and natural resources. These functions, in my view, are invariably matters relating to trade and commerce. That being the case, the Constitution having specifically empowered a State to confer trade and commerce power on its Local Governments, it must be inferred that the Constitution reserves some trade and commerce power to a State. Otherwise, it would be ridiculous for the Constitution to oblige a State to give what it does not possess. For the above reasons, having regard to all the relevant provisions of the Constitution, I am of the firm view, that the Constitution does not confer on the Federation exclusive power over trade and commerce in item 61. I hold that all the Governments (Federal, State and Local) have been accorded their respective shares to control trade and commerce. Accordingly, I would construe the words “in particular” in item 61 to be words of limitation and that the trade and commerce power of the Federation is limited to the sub-items (a) to (f) therein. For the avoidance of any doubt, I may emphasize that the Federal Government had power to make law on the items specified in sub-items (a) to (f). In this respect international trade and commerce and inter-State trade and commerce are specifically reserved for the Federation. While trade and commerce within a State is left as a residuary matter to the States. Accordingly, I would not invalidate the Sales Tax Law of Ogun State by reason of the proposition that, having regard to the generality of item 61, a State has no power at all over trade and commerce. I reject the proposition because it has no constitutional basis.
iii. Now, section 3(1) of the Law imposes sales tax on products brought into Ogun State. The products are petrol, diesel oil, petroleum products, beer and alcoholic spirits, tobacco and paints. Since the sales tax is only chargeable on the product brought into the State and because the products can only be brought into Ogun State from another State or from outside Nigeria, it follows that the tax is a discriminating tax directed against inter-State or international trade and commerce which are within the exclusive regulatory power of the Federation under item 61(a). Accordingly, I hold that in so far as the Law purports to impose sales tax on taxable products brought into the State, it offends the provision of inter-State or international trade and commerce and contravenes section 4(3) of the Constitution. I declare the law unconstitutional to that extent. Furthermore, item 61(e) empowers the Federation to control the prices of goods and commodities. Under the Price Control Act 1977 and the Price Control Commodities Order 22 of 1979, the Federal Government has controlled the prices of petrol, diesel oil and petroleum products. I have earlier shown that the Act and the Order are existing laws. Since the sales tax is intended to be paid by the consumer, it tantamounts to an increase in my view in the prices of the taxable products, namely petrol, diesel oil and petroleum the prices of which have been controlled by the Federal Government. That being the case, I hold the sales tax to be inconsistent with the Price Control Act and the Order made thereunder. Consequently, the sales tax on petrol, diesel oil and other petroleum products is unconstitutional, null and void. I do not treat beer as a controlled commodity because under Order No. L.N. 21 of 1979 it has been approved as a commodity subject to the resale price maintenance agreement between the manufacturer and the seller. There is no evidence of such agreement in the record of appeal. So it is with tobacco.
iv. Having regard to the foregoing, I may summarise that the Federation has implied exclusive power to make sales tax law in all matters within the Exclusive and Concurrent Lists while the States have implied or residuary power to enact sales tax law on all matters outside the said Lists.
2. ISSUE 2, was answered in the negative.
i. I would respectfully define “excise” within the purview of item 15 to be a duty tax charged on goods manufactured or produced in Nigeria whether in the process of their manufacture or production or their storage or distribution before their sale to the consumers in Nigeria but does not include a tax imposed on the sales of goods to a distributor, retailer or consumer. For emphasis, “excise” is a tax on the goods while sales tax is a tax on their sale.
ii. With regard to the submission that the sales tax is excise because manufacturers have been appointed as its collecting agents, I think from the fact that the goods have been brought into Ogun State it follows that the goods had passed the manufacturing process and if their manufacturer deals with them in Ogun State he can only be regarded as a wholesaler or distributor or retailer. A multinational company, like the United Africa Co. Ltd., may be a manufacturer of a taxable product in another State. It may then, as a wholesaler or distributor bring the product into Ogun State and it may sell the product as a retailer in its Kingsway Stores in Ogun State. Under the circumstance, I do not think that the mere appointment of wholesalers, which include manufacturers, as the tax collectors is sufficient to change the character of the sales tax to excise. I have already shown in mere definition of “excise” that wholesalers, distributors and retailers can be appointed as sales tax collectors. For the above reasons. I hold that the sale tax imposed under sections 3(1) and 3(4)(ii) of Ogun State Sales Tax Law is not an excise duty. However, the sales tax under the said two subsections is unconstitutional, null and void because the Law imposes the tax on taxable products brought into the State which is a matter of inter-State trade and commerce which is within the exclusive legislative power of the Federation. Accordingly, my Answer to Question 2 is No.
3. For ISSUE 3, the Supreme Court stated, “In so far as the Sales Tax Law purports to impose sales tax on the taxable products, it is an exercise of power with respect to inter-State or international trade and commerce in item 61(a) of the Exclusive List. The Answer to the Question is therefore Yes to this extent.”
4. ISSUE 4, was answered in the negative, the Supreme Court stated, “My answer to Question 4 is also No but in so far as the Law imposes the tax on the taxable goods brought into the State.”
** Kayode Eso, JSC (dissents on issue 1 only):
i. The omission to include in the 1979 Constitution Item 38 of the Exclusive Lists in the 1960 and the 1963 Constitutions, does not show an intention to regard the Ogun State Sales Tax Law as a residual subject. The power is in the National Assembly. All fiscal subjects to the extent of my discussion in this judgment are vested in the Federal Government.
**Nnamani, JSC (dissents on ISSUE 2)
i. That the Ogun State House of Assembly had power to legislate to impose sales tax on consumption of goods is beyond question, but I think that the tax as framed under Section 3(4)(ii) of the law is Excise duty and is beyond the legislative competence of that Assembly. It is unconstitutional as being in breach of Section 4(3) of the Constitution, Excise being within Item 15 of the Exclusive Legislative List.
In my opinion, the time has arrived when commercial stage dictates that the Court should construe the word “excise” broadly, consistently with its practical meaning. It cannot or ought not now be limited to taxes imposed on the producers or manufacturer of goods simpliciter. It should be extended to include all the inominate taxes imposed even after the goods have left the producer or manufacturer but before they are in the hands of the consumer. Thus any tax imposed and paid by any person other than the consumer at the time of purchase are properly regarded as excise and within the exclusive legislative competence of the National Assembly.
(On ISSUE 1)
Like Customs and Excise in item 15, “Trade and Commerce” in item 61 is also elliptical. The phrase “in particular” is in my opinion, not a delimitation of the scope of the subject matter, but is emphasis as to scope. A comparison of the items enumerated in (a) (f) discloses that they are elaborations of itmes 11, 22 and complimentary to item 31, of the same list. The subject matter of regulation is Trade and Commerce. One of the definitions of the word “trade” in Webster’s New 20th Century Dictionary p. 1934is “the act or business of exchanging commodities for other commodities or money; the business of buying and selling; commerce, barter.” “Commerce” is also defined as “an interchange of goods, wares, provation or property of any kind, between nations or individuals. Neither by barter or by purchase and sale; trade; traffic,” (See Webster’s Dictionary (Supra) at p. 364.) There is very little, if any, distinction in the meaning of the two words. Thus where the enumeration of specific items is merely for emphasis, then all those items not particularly enumerated are within the general scope of powers conferred. See Citizens Insurance Co. v Canada v. Parsons (1881) 7 App. Cas. 96,112. It appears conclusive that the particular enumeration relate both to the external, and inter state activities with respect to Trade and commerce. Accordingly, the general powers of regulating trade and commerce which affect the States even though internally within a particular state, have been vested in the National Assembly. A shift in amphsis in the enumeration of the powers from the 1963 Constitution. where there was no provision akin to item 61 in the present Constitution. The provision relating to economic objectives in S.16(1) and especially S.16(3), S.16(4), S.140, and Third Schedule F, the National Economic Council reveal the intention of the Constitution to vest the control of the economy in the National Assembly. Apart from this, the concept of Nigerian federalism operating only one Constitution has shifted from the pre 1966 position of composite States with co-equal units with separate Constitutions to one Constitution with a dominant federal government with subsidiary component governments. Thus with respect to the enumerated activities and matters incidental thereto, it is difficult to imagine anything left for the States. It is not disputed that they can impose any taxes within the limitations of the power vested in them in the concurrent Legislative List; it is however only within such powers that they can act. See McCulloc v. Maryland 4 Wheat 316 (1819).
(On ISSUE 2)
The contention before us is that the Sales Tax Law here imposed is paid by the purchaser at the time of the contract, and therefore is a tax on the consumer. In determining the real nature of the law, it is not relevant to consider the characterisation by the law maker the important factor is the substance and effect of the legislation Richfield Oil Corporation v. State Board of Equalization 329 U.S. 69. Section 3(4)(ii) purports to make the purchaser pay the tax imposed for the wholesaler at the time of the contract of purchase and renders the wholesaler accountable to the Board for the tax. It is clearly not disputed that the purchaser who is not defined here is not necessarily, the ultimate consumer of the taxable product. This renders the tax so paid liable to be passed on to the ultimate consumer. A purchasers means any person who, through a sale at retail requires the ownership of tangible personal property for valuable consideration. The relevant consideration in determining taxability, if at all, is the purpose for which the property is bought and the disposition of the goods made by the buyer. Thus where the tax is imposed on a buyer who does not reshelf but uses the goods for himself, then the tax imposed on such a buyer is not an excise tax because it is not liable to be passed on to another who buys it from him. Where a Sales Tax, as in this case, is directed by the enabling statute to be collected by the retailer from the consumer, it was in De Aryan v. Akers, 308 U.S. 581, held to be an excise tax on the retailer and not on the consumer. The case in hand is even more direct. It is a tax to be collected by the wholesaler, on behalf of the Board, but in respect of goods bought by a retailer who intends to resell to the ultimate consumer. This is an indirect tax and an excise tax within the accepted cognition of the word, and is item 15 of the Exclusive Legislative List of the Constitution 1979. The Ogun State House of Assembly has no legislative competence in respect there to being ultra vires the House of Assembly.
S. 4 of the 1979 Constitution;
⦿ SOME PROVISIONS
Sales Tax Law 1982:
Section 3 of the Law reads:
“3(1) A tax to be known as Sales Tax, shall be charged in accordance with the provisions of this Law on all taxable products brought into the State and on the supply of goods and services in any inn not exempted from the requirement of registration under this Law at the rate specified opposite each class of goods or service in the First Schedule to this Law.
(2) The tax shall be under the care and management of the Board.
(3) All money and securities for money collected or received for or on account of the tax shall form part of the revenue of the State.
(4) The tax shall be due: (i) in the case of the supply of goods and services in an inn from the purchaser of goods and services at the time of the supply of such goods and services and shall be collected and accounted for and remitted to the Board by the inn keeper within such time and in such manner as are herein prescribed;
(ii) in the case of any other taxable product by the purchaser at the time of entry into the contract of purchase of the taxable product with the wholesaler and shall be collected, accounted for and remitted to the Board by the wholesaler in the State, within such time and in such manner as are herein prescribed.
(5) The tax shall be a debt due to the Board and recoverable as such by the Board from the inn keeper or wholesaler whose duty it is to collect, account for and remit the tax to the Board. The daily records of the tax shall be kept and shall be remitted monthly by the inn keeper or wholesaler to the Board on or before the 10th day of the month next following the month for which the tax is due.
(7) The Executive Council may from time to time by Order amend the list of products and services liable to sales tax and may also by Order alter the rate of tax payable on any taxable product or class of goods or taxable service.”
Item 18 of Part II of the second Schedule, which reads:
“18. Subject to the provisions of this Constitution a House of Assembly may make laws for that State with respect to industrial, commercial or agricultural development of the State.”
Item 61 which reads:
“61. Trade and commerce, and in particular –
(a) trade and commerce between Nigeria and other countries including import of commodities into and export of commodities from Nigeria, and trade and commerce between the States;
(b) establishment of a purchasing authority with power to acquire for export or sale in world markets such agricultural produce as may be designated by the National Assembly;
(c) inspection of produce to be exported from Nigeria and the enforcement of grades and standard of quality in respect of produce so inspected;
(d) establishment of a body to prescribe and enforce standards of goods and commodities offered for sale;
(e) control of the prices of goods and commodities designated by the National Assembly as essential goods or commodities, and
(f) registration of business names.”
Section 7(3) of the Constitution, which says:
“(3) It shall be the duty of a local government council within the State to participate in economic planning and development of the area referred to in subsection (2) of this section and to this end an economic planning board shall be established by a Law enacted by the House of Assembly of the State.”
Section 7(1) of the 1979 Constitution which provides:
“7(1) The system of local government by democratically elected local government councils is under this Constitution guaranteed; and accordingly, the Government of every State shall ensure their existence under a Law which provides for the establishment, structure, composition, finance and functions of such councils.”
Black’s Law Dictionary defines it (Excise) thus: “Tax laid on manufacture, sale or consumption of commodities or upon licences to pursue certain occupations or upon corporate privileges. In current usage the term has been extended to include various licence fees and practically every internal revenue tax except the income tax.”
⦿ RELEVANT CASES
In Brown v. Houston 114 U.S. 611 at 630 the Court had this to say: “No State has power to make any law or regulation which will affect the free and unrestricted intercourse and trade between the States, or which will impose any discriminating burden or tax upon the citizens or products of other States coming or brought within its jurisdiction.”
Lord Coleridge in R. v. Peters (1886) 16 Q.B.D. 636 at 641, cited by the Attorney-General of the Federation, is apt. He said: “I am quite aware that dictionaries are not to be taken as authoritative exponents of the meaning of words used in Acts of Parliament, but it is a well-known rule of Court of law that words should be taken to be used in their ordinary sense, and we are therefore sent for instruction to these books.”
⦿ NOTABLE DICTA
It may also be observed that the case was decided before the Constitution (Suspension and Modification) Decree 1984 No. 1 with retrospective effect from 31st December. 1983 and for this reason the appeal must be determined in accordance with the relevant provisions of the Constitution as they were before the promulgation of the Decree 1984 No. 1. – Bello JSC. AG, Ogun State v. Aberuagba (1985)
If all the powers to legislate on all fiscal subjects, as the Question suggests, have been vested in the Federal Government then none of our States would survive for one day because none would have a budget and Appropriation Law having regard to the dictionary meaning of the word “fiscal” I have earlier on indicated. – Bello JSC. AG, Ogun State v. Aberuagba (1985)
Now, the constitutional meaning of “excise” in Australia may be summarised: it is any tax imposed at any stage “in a process of bringing goods into existence or to a consumable state, or passing them down the line which reaches from the earliest stage in production to the point of receipt by the consumer” per Kitto J. in Dennis Hotels Pty. Ltd. v. Victoria (1961) 104 C.L.R. 529 at 559 – Bello JSC. AG, Ogun State v. Aberuagba (1985)
I must emphasize, however, that a statutory provision is not an aid in the construction of the Constitution but may be a guide in discovering the intention of its framers. – Bello JSC. AG, Ogun State v. Aberuagba (1985)
It follows from the foregoing that under the provisions of our statutes “excise duty” has always been levied on goods manufactured within the country and the tax is payable by the manufacturers before the goods are removed from the factories or warehouses. It was only on the happening of the two events, which I have shown in the foregoing paragraph, that excise duty was formerly imposed on goods that had left the factories or warehouses and had entered into the process of distribution. Such goods are now automatically forfeited. Liability for the payment of excise duty has never been imposed on distributors or retailers of manufactured goods. – Bello JSC. AG, Ogun State v. Aberuagba (1985)
Our Constitution should be interpreted in such a manner as to satisfy the susceptibilities of the Nigerian societies for whom it was made and to meet the needs of the Nigerian institutions. – Bello JSC. AG, Ogun State v. Aberuagba (1985)
Every State in Nigeria, in exercise of its legislative powers under the concurrent Legislative List, can legislate for sales tax within its own State, save that it does not restrict inter-state trade. Once it does that, it exceeds its powers and, therefore, such State’s sales tax is liable to be declared invalid. – Sowemimo, JSC. AG, Ogun State v. Aberuagba (1985)
Any State Government in the Federation of Nigeria has the legislative power to impose sales tax. So long as that sales tax does not discriminate against other products of the State itself, or of other States, it will remain valid. But, in respect of this particular sales tax, it discriminates against other products within the States constituting the Federal Republic of Nigeria. To that extent, it will be regarded as invalid. – Sowemimo, JSC. AG, Ogun State v. Aberuagba (1985)
Sales Tax is tax on consumption and until the goods have arrived at the point of consumption, it is not due and payable. This is distinct from excise duty which is levied at the point of manufacture. – Irikefe, JSC. AG, Ogun State v. Aberuagba (1985)
I also hold that, to the extent that portions of the Ogun State Sales Tax Law, more particularly referred to in the lead judgment, discriminate against goods brought into Ogun State, in favour of goods in that State, such provisions would inhibit the free flow of inter-state commerce; as such, they (the provisions) would be null and void, as being in conflict with the express provisions of the Federal Constitution of 1979 as amended by the Constitution (Suspension and Modification) Decree No. 1 of 1984, which sanction such free-flow. – Irikefe, JSC. AG, Ogun State v. Aberuagba (1985)
If this is a Federation where the local government council could not control or regulate simple occupations as the Kiosk or “buka” for the sale of gari or melon, the trade of shoe making or bicycle repairing, brick making or roadside mechanic, that is no Federation. There is a lot of difference between these and wholesale delivery and vehicular movement of beer, rice or tyres which will amount to commercial intercourse. Further, for each unit to be master in its own domain is not one of compartmentalization. – Eso, JSC. AG, Ogun State v. Aberuagba (1985)
In effect the issue is the constitutional validity of the Sales Tax Law of Ogun State A Law to impose a tax upon the purchase of specified goods and services and to make provision for the collection and recovery thereof and for purposes connected therewith enacted by the Ogun State House of Assembly, the date of commencement being 25th February, 1982. Its validity has been questioned in relation to items 15 and 61 of the Exclusive Legislative List in Part 1 of the 2nd Schedule to the Constitution of the Federal Republic of Nigeria, 1979 hereinafter referred to as the Constitution. This suit arose before the modification and suspension of some of its provisions by Decree No. 1 of 1984. – Nnamani, JSC. AG, Ogun State v. Aberuagba (1985)
There is no doubt that in the construction of a word in an enactment resort to the dictionary meaning is of immense assistance where there is no other guide. Otherwise, where the words of the enactment are clear and unambiguous, the words themselves clearly disclose the intention of the law maker. – Karibe-Whyte, JSC. AG, Ogun State v. Aberuagba (1985)
Excise tax is essentially a tax on production, whereas Sales Tax is on sale. – Karibe-Whyte, JSC. AG, Ogun State v. Aberuagba (1985)