[2024] KETAT 1067 (KLR)

Aco Drainage Systems Limited v Commissioner of Customs and Boarder Control (Miscellaneous Case E036 of 2024) [2024] KETAT 1067 (KLR) (12 July 2024) (Ruling)

Neutral citation: [2024] KETAT 1067 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Case E036 of 2024

E.N Wafula, Chair, E Ng'ang'a, M Makau, EN Njeru & AK Kiprotich, Members

July 12, 2024

Between

Aco Drainage Systems Limited

Applicant

and

Commissioner of Customs and Boarder Control

Respondent

Ruling

1. The Applicant vide a Notice of Motion dated the 5th April 2024 and filed on the 3rd May, 2024 and which is supported by an Affidavit sworn by Stefano Pisanu, the Managing Director of the Applicant, on the 8th April, 2024, sought for the following Orders:-i.This Tribunal be pleased to grant an extension of time to submit the appeal documents against the Respondent's objection decision dated 3rd October 2023 and demand notice dated 23rd February 2024 as provided for under Section 13(3) of the Tax Appeals Tribunal Act.ii.Costs of this application be provided for.

2. The application is premised on the following grounds:-i.That Section 13(3) of the Tax Appeals Tribunal Act allows the Applicant to lodge an application for extension of time to submit appeal documents to the Tribunal.ii.That Section 13(4) of the Tax Appeals Tribunal Act requires the Applicant to provide reasonable grounds for submitting the appeal documents out of time.iii.That the Applicant was delayed by the manufacturer and exporter of the item under dispute whose evidence was crucial to the resolution of this case.iv.That the delay in lodging this appeal was not inordinate since the Applicant proactively and voluntarily already settled the taxes under dispute on 4th September 2023.

3. The Respondent opposed the application through a Replying Affidavit sworn by Sosten Kiprop, an officer of the Respondent, on the 8th May 2024. The grounds of opposition as highlighted in the Affidavit were as follows:-i.That the orders sought by the Applicant should not be granted by the Tribunal as they are an abuse of the Court process and the Applicant is undeserving of the same.ii.That the Applicant is not deserving of the orders sought in the application, as the whole period of delay has not been sufficiently explained satisfactorily to the Tribunal thus the application ought to be dismissed.iii.That the Respondent is merely carrying out its statutory duty under the law by issuing a demand notice and consequently pray that its actions be upheld by the Tribunal.iv.That the Respondent's mandate of collection of revenue is key to the economic development of the Country and consequently, the public and all the arms of the Government and specifically the Tribunal is called upon to assist the Respondent in carrying out its mandate so long as the same is within the Law.v.That in the circumstances, it is in the Public interest that the Tribunal dismisses the Applicant's application to pave way for the Respondent to collect taxes due from the Applicant which are key to the economic development of the Country.vi.That the indolence and negligence of the Applicant should not bar the Respondent from fulfilling its mandate of collecting taxes that are still due and payable.vii.That the Applicant has failed to satisfy the principles as set out in the case of Nicholas Kiptoo Arap Korir Salat V Independent Electoral And Boundaries Commission & 7 Others[2014]Eklr.

Analysis and Findings 4. In compliance with the directions of the Tribunal to the effect that the application was to be canvassed by way of written submissions, the Respondent filed its submissions on 15th May 2024 while the Applicant did not file any submissions. The Tribunal has duly considered the Respondent’s written submissions in arriving at its determination in this Ruling.

5. The Applicant’s application is primarily praying to the Tribunal for extension of time to file an appeal out of time.

6. The power to expand time for filing an Appeal is donated by Section 13(3) of the Tax Appeals Tribunal Act which provides that:“The Tribunal may, upon application in writing, extend the time for filing the Notice of Appeal and for submitting the documents referred to in subsection (2).”It is therefore a discretionary power and not a right to be granted to the Applicant.

7. In determining whether the to expand time, courts have in the past considered a number of factors. These factors were discussed in Leo Sila Mutiso vs Rose Hellen Wangari Mwangi, Civil Application Nai. 251 of 1997 where the Judge held that:“It is now settled that the decision whether to extend the time for appealing is essentially discretionary. It is also well stated that in general the matters which this court takes into account in deciding whether to grant an extension of time are, first the length of the delay, secondly the reasons for the delay, thirdly (possibly) the chances of the appeal succeeding if the application is granted and fourthly the degree of prejudice to the respondent if the application is granted.”

8. The court in Wasike V Swala [1984] KLR 591 provided the hierarchy of the factors to consider when it stated that:“an applicant must now show, in descending scale of importance, the following factors: -a)That there is merit in his appeal.b)That the extension of time to institute and/or file the appeal will not cause undue prejudice to the respondent; andc)That the delay has not been inordinate.

9. The Tribunal, guided by the principles set out in Leo Sila Mutiso vs Rose Hellen Wangari Mwangi, Civil Application Nai. 251 of 1997, Wasike V Swala [1984] KLR and Section 13 of the Tax Appeals Tribunal Act 2013 used the following criteria to consider the application:a.Whether there is a reasonable cause for the delay.b.The merits of the complained action.c.Whether there will be prejudice suffered by the Respondent if the extension is granted.

a. Whether there is a reasonable cause for the delay. 10. Regarding delay, the Applicant stated that it was delayed by the manufacturer and exporter of the item under dispute whose evidence was crucial to the resolution of the intended appeal.

11. The Respondent on its part submitted that the Applicant was not deserving of the orders sought in the application, as the whole period of delay has not been sufficiently explained satisfactorily to the Tribunal thus the application ought to be dismissed.

12. The statutory timelines and provisions to file an appeal have been clearly set out in the Tax Appeal Tribunal Act. Section 13 (3) of the Act provides as follows with regard to the statutory timelines in commencing appeal process:-“A notice of appeal to the Tribunal shall—(a)be in writing;(b)be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.(2)The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal, of—(a)a memorandum of appeal;(b)statements of facts; and(c)the tax decision.” (Emphasis added)

13. In addition, Section 13(4) of the TAT Act provides as follows in regard to grounds under which an Applicant can be granted leave to file an appeal out of time:“An extension under subsection (3) may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the Applicant from filing the notice of appeal or submitting the documents within the specified period”

14. The Respondent’s decision that the Applicant wishes to challenge was rendered on 3rd October 2023 and therefore the Applicant ought to have filed its Notice of Appeal on or before 2nd November 2024. This application was brought up by the Applicant on 3rd May, 2024 which is 6 months and 2 days late. The Tribunal noted that the delay was for a period of about 6 months and which period the Tribunal has ordinarily not considered to be inordinate.

15. The Tribunal in the circumstances finds that the application has been brought without inordinate delay and the Applicant deserves to be heard on merit.

b. The merits of the complained action. 16. The Tribunal considered whether the matter under dispute was frivolous to the extent that it would be a waste of the Tribunal’s time, or it was material to the extent that it deserved its day in the Tribunal.

17. The test is not whether the case is likely to succeed. Rather, it is whether the case is arguable. This was the finding in Samuel Mwaura Muthumbi V Josephine Wanjiru Ngungi & Another (2018) eKLR where the court stated that;“Looking at the draft Memorandum of Appeal filed, I am unable to say that the intended Appeal is in arguable. Of course, all the Applicants have to show at this stage is arguability- not high probability of success. At this point the Applicant is not required to persuade the Appellate court that the intended or filed appeal has a high probability of success. All one is required to demonstrate is the arguability of the Appeal, a demonstration that the Appellant has plausible grounds of either facts or law to overturn the original verdict. The Applicants have easily met that standard. I believe that the Applicant has discharged this burden.”

18. The Tribunal was further guided by the findings of the court in Kenya Commercial Bank Limited Vs Nicholas Ombija (2009) eKLR where it was held that:-“An arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court.”

19. Similarly, in Kenya Commercial Bank Limited Vs Nicholas Obija (2009) eKLR it was stated that:-“an arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court”

20. that was equally the position held in Stanley Kangethe Kinyanjui Vs Tony Keter & others (2013) eKLR where the court held that:-“on whether the appeal is arguable, it is sufficient if a single bonafide ground of appeal is raised, .. an arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court: one which is not frivolous.”

21. The Tribunal noted that the Applicant in the Affidavit has cited and attached the review decision of the Respondent which it wished to challenge. The Applicant also attached a letter indicating that it made payment under protest due to the urgency of its shipment at the time. All these in the view of the Tribunal will require a rebuttal by the Respondent.

22. Going by the standards set out in the Stanley Kangethe Kinyanjui Vs Tony Keter & others (2013) case the Tribunal finds that the Applicant had an arguable case which required to be canvassed and considered on its full merits.

c. Whether there will be prejudice suffered by the Respondent if the extension is granted. 23. The courts have held that in considering whether to extend time, due regard must be given to whether the extension will prejudice the opponent. In determining this, the Judge in Patrick Maina Mwangi v Waweru Peter [2015] eKLR quoted the finding in United Arab Emirates V Abdel Ghafar & Others 1995 IR LR 243 in finding that:“…….a plaintiff should not in the ordinary way be denied an adjudication of his claim on its merits because of a procedural default, unless the default causes prejudice to his opponent for which an award of cost cannot compensate………”

24. The test, therefore, as set out in the case above is whether the Respondent will suffer irreparable prejudice if the application is granted.

25. The Tribunal was of the view that having found that the subject matter was arguable, the Applicant’s recourse to justice now lies in an appeal to the Tribunal. Thus, the Applicant’s would suffer prejudice if it is not granted leave to file its appeal.

26. The Respondent on its part did not demonstrate that there will be any prejudice that could not be compensated by award of penalties and interest on the principal tax amount subsequently found due and payable. The Tribunal therefore finds that the Respondent will not suffer prejudice since it will still be able to collect the taxes plus interest and penalties should the Applicant be found to be at fault.

27. Consequently, the Tribunal finds that the Respondent will not suffer prejudice if the extension is granted.

Disposition 28. Based on the foregoing analysis, the Tribunal finds that the application is merited and accordingly proceeds to make the following Orders:-i.The application be and is hereby allowed.ii.Leave be and is hereby granted for the Applicant to file its Notice of Appeal, Memorandum of Appeal, Statement of Facts and tax decision out of time.iii.The Applicant to file and serve its Notice of Appeal, Memorandum of Appeal, Statement of Facts and tax decision within Fifteen (15) days of the date of delivery of this Ruling.iv.The Respondent to file its response to the appeal within the statutory timeline from the date of service of the appeal documents.v.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 12TH DAY OF JULY, 2024. ERIC NYONGESA WAFULACHAIRMANEUNICE N. NG’ANG’A MUTISO MAKAUMEMBER MEMBERELISHAH N. NJERU ABRAHAM K. KIPROTICHMEMBER MEMBER