Federal High Court Declares Collection of Stamp Duty Charges Illegal

Retail Supermarkets Nigeria Limited is a well-known and reputable company (known as “Shoprite”), which operates a successful chain of supermarkets in Nigeria, and is a customer of Citibank Nigeria Limited, a deposit money bank where it maintains an account. On the 29th of January 2016, Citibank informed the Plaintiff of its intention to implement the Central Bank of Nigeria’s Circular (the “CBN Circular”), which mandates all financial institutions and deposit money banks (including the 1st Defendant) to charge N50 on “receipts given by any bank or financial institution in acknowledgment of services rendered in respect of electronic transfer and teller deposits from of N1, 000 and above.” Thereafter, Citibank commenced deduction of the sum of N50 on all eligible transactions.

By an amended originating summons dated the 8th of July 2016, Retail Supermarkets Nigeria Limited commenced an action in Suit No.: FHC/L/CS/126/2016 – Retail Supermarkets Nigeria Limited v. Citibank Nigeria Limited & Central Bank of Nigeria at the Lagos Division of the Federal High Court asking the court to determine the following questions:

Whether the stamp duty rate of N50 per deposit into the bank accounts of the Plaintiff in excess of N1000 per transaction as stated in the 2nd Defendant’s circular reference CBN/ GEN/DMB/02/006 of 15th January 2016 is inconsistent with the provisions of the Stamp Duties Act Chapter S8 Laws of the Federal Republic of Nigeria 2004 and therefore null, void and unenforceable?

Whether the Financial Regulations of 2009 can amend and/or overwrite the statutory provisions of the Stamp Duties Act or any other legislation of the Federal Republic of Nigeria?

The Plaintiff also sought the following reliefs against the Defendants, a declaration that the provisions of the 2nd Defendant’s circular reference CBN/GEN/DMB/02/006 of 15th January 2016 are inconsistent with Schedule 1 of the Stamp Duties Act Chapter S8 Laws of the Federal Republic of Nigeria 2004 and are invalid, null and void.

An order of perpetual injunction restraining the 1st Defendant either by itself, its agents, servants, privies, assigns or any person claiming through or deriving authority from taking any step to implement or from further implementing the 2nd Defendant’s circular reference CBN/ GEN/DMB/02/006 of 15th January 2016 in relation to the Plaintiff’s bank accounts.

Briefly, the Plaintiff’s case was that section 89 and the Schedule to the Stamp Duties Act clearly exclude the payment of stamp duty on receipts given for money deposited in any bank or with any banker. Accordingly, the CBN Circular which requires the 1st Defendant to effect a stamp duty deduction of N50 on every transaction in excess of N1, 000 per transaction is inconsistent with the Stamp Duties Act and is therefore unenforceable against the Plaintiff.

The Plaintiff argued that the Financial Regulations, 2009 (which is a subordinate legislation) cannot purport to amend section 89 and the Schedule to the Stamp Duties Act (an Act of the National Assembly) by increasing the stamp duty payable on receipts given for the payment of money from 2 kobo on every N4 to N50 on an eligible transaction of N1, 000 contrary to the provisions of section 89 and the Schedule to the Act. The Plaintiff argued that the only body vested with the power to amend the stamp duty rates in Nigeria is the National Assembly as stipulated by section 116 of the Stamp Duties Act. Consequently, the provisions of the Financial Regulations, 2009 are inconsistent with the Stamp Duties Act and Schedule thereto, and are therefore invalid, null and void.

The Plaintiff also argued that the provisions of the Financial Regulations, 2009 regarding the stamp duty rates are ultra vires the Minister of Finance because under the Stamp Duties Act, the Minister of Finance has no power to make any regulations regarding stamp duties. Section 115 of the Stamp Duties Act, specifically provides that only the President and the Governor of a can make regulations with respect to stamp duties. The Plaintiff also argued that the Minister does not have the power to delegate his power to make regulations. Relying on the decision of the Supreme Court in Psychiatric Hospital Management Board v. Ejitagha (2000) 11 NWLR (Pt. 677) 154 at 163, the Plaintiff argued that the purported delegation of this power to the Minister of Finance is ultra vires the powers conferred in section 115 of the Stamp Duties Act.

Finally, in urging the Federal High Court to declare the CBN Circular invalid, the Plaintiff relied on the Court of Appeal’s decision in Appeal No.: CA/L/437A/2014–Standard Chartered Bank Limited v. Kasmal International Services Limited & 22 Ors., where a panel of five justices of the Court of Appeal overturned the decision of the Federal High Court in Suit No. FHC/L/CS/1710/2013-Kasmal International Services Limited v. Central Bank of Nigeria per Aneke J and unanimously held that there is no obligation on banks to deduct and remit stamp duty on deposits. In the words of Justice Saulawa JCA :

“… in the absence of any express provision to the contrary, (by way of amendment to the STAMP DUTIES ACT) the provisions of the schedule to the Stamp Duties Act…are exempted from the payment of Stamp Duties. As such, there is no obligation thereupon to deduct and remit stamp duty on deposits or transfers, either as erroneously found by the court below, or at all. And I so hold.”

On 13 March 2017, the Federal High Court, per Justice Austine Obiozor granted all the reliefs sought by the Plaintiff. In reaching its decision, the court cited the Supreme Court decisions in Global Trans. Oceania S.A. v. Free Ent (Nig.) Ltd (2001) 5 NWLR (Pt. 706) 426 and Ngwo v. Monye (1970) 6 NSCC 70 at 76, and came to the conclusion that following the doctrine of stare decisis, the court was bound to apply and give effect to the decision of the full court of the Court of Appeal in Appeal No.: CA/L/437A/2014 - Standard Chartered Bank v. Kasmal International Services Limited & 22 Ors.

Conclusion

Following the decision of the Federal High Court in favour of Retail Supermarkets Limited, the position of law in Nigeria is that collection of stamp duty charges by banks is illegal, null and void.