COLOMBO, Sri Lanka – September 24, 2026 – A significant Value Added Tax (VAT) dispute between Ace Containers (Private) Limited and the Commissioner General of Inland Revenue has concluded at the Court of Appeal of the Democratic Socialist Republic of Sri Lanka, with both parties reaching an amicable settlement. The Court, comprising Justice B. Sasi Mahendran and Justice Adithya Patabendige, issued an order today, September 24, 2026, acknowledging the joint resolution and terminating the appeal proceedings.
The case, identified as CA/TAX/14/2025, originated as an appeal by way of Stated Case from the Tax Appeals Commission (TAC) under Section 11A of the Tax Appeals Commission Act No. 23 of 2011. Ace Containers (Private) Limited, a prominent limited liability company engaged in operating a Container Yard/Depot in Mabole and providing comprehensive logistic services, had challenged determinations related to VAT assessments.
Background to the Dispute
The core of the dispute revolved around four key questions of law initially formulated by the Tax Appeals Commission and forwarded to the Court of Appeal for its opinion. These questions primarily addressed:
- Whether the TAC erred in concluding that a specific assessment was not time-barred under Section 33(1) of the Value Added Tax Act, No. 14 of 2002.
- Whether the TAC misdirected itself concerning the Appellant’s Deposit Service Agreement and its provisions for discounts or free services.
- Whether the TAC erred in concluding that discounts offered as free services were not established by agreement or practice.
- A general inquiry into whether the Respondent and the TAC erred in their conclusions given the facts.
These complex legal points underscored the intricate nature of tax assessments and the interpretation of tax legislation concerning business practices, particularly for companies offering diverse services like Ace Containers.
The Path to Settlement
The Court proceedings took a collaborative turn earlier this year. On May 18, 2026, both counsels informed the Court that a similar matter had been settled by the TAC, prompting them to seek further time to explore settlement terms for this particular case. This collaborative approach culminated on July 16, 2026, when the Appellant and Respondent filed a joint motion, officially notifying the Court of their agreement to settle the matter.
The terms of the settlement, which were brought to the attention of the Court, signify a comprehensive resolution:
- The Notice of Assessment dated January 27, 2022, is to be annulled.
- The assessment is to be amended by allowing the full value of the tax credit notes claimed by Ace Containers (Private) Limited.
- The determination of the Commissioner General of Inland Revenue dated July 6, 2023, and the subsequent determination of the Tax Appeals Commission dated December 11, 2024, are both set aside.
Court’s Concluding Order
In light of the parties’ successful settlement, the Court of Appeal deemed it unnecessary to proceed with a determination on the questions of law initially raised. Accordingly, the proceedings were terminated, and the appeal was formally dismissed pro forma, without costs being imposed on either party.
The Registrar of the Court of Appeal has been directed to forward a copy of this order, along with all relevant documents, to the Tax Appeals Commission for necessary action in accordance with Section 6 of the Tax Appeal Commission Act (as amended). This resolution highlights the importance of dialogue and settlement in resolving complex legal and financial disputes, even at the highest levels of the judiciary.
Source: Read original document