[2025] KETAT 136 (KLR)

Airtel Networks Kenya Limited v Commissioner of Customs and Border Control (Tax Appeal 851 of 2022) [2025] KETAT 136 (KLR) (Commercial and Tax) (21 February 2025) (Judgment)

Neutral citation: [2025] KETAT 136 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Tax Appeal 851 of 2022

RM Mutuma, Chair, Jephthah Njagi, D.K Ngala, T Vikiru & M Makau, Members

February 21, 2025

Between

Airtel Networks Kenya Limited

Appellant

and

Commissioner Of Customs And Border Control

Respondent

Judgment

Background 1. The Appellant is a company incorporated in Kenya and its core business is providing integrated telecommunications services including voice and data, SMS, internet services and money transfer services.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 Laws of Kenya. Under Section 5 (1) of the Act, Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5 (2) with respect to performance of its functions under subsection (1), the Respondent is mandated to administer and enforce all provisions of the written laws as set out in Part 1 and 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. On 2nd April 2022, the Appellant imported network equipment under entry NO. 22NBOIM403407992 from NEC Africa (PTY) Limited, a company registered in South Africa.

4. The Appellant declared the purchase price, which was the price payable to NEC Africa (PTY) Limited as the customs value of the goods.

5. On 5th April 2022, the Appellant through its agent, Bollore Transports and Logistics Limited made a customs declaration vide entry number 22NBOIM403407992 for clearance of machines.

6. The declared total customs value was Kshs. 32,468,204. 80 and the Appellant paid taxes amounting to Kshs. 10,154,094. 00.

7. On 7th April 2022, physical verification was conducted and the verification officer referred the case to Respondent's Valuation and Tariff Office at JKIA for the determination of applicable customs value and taxes payable.

8. The Respondent’s Valuation and Tariff Office at JKIA uplifted the unit value for premium chassis bundle with enhanced midplane MX240, Premium bundle DC power MX480 and Premium bundle DC power MX960 declared under Customs entry No. 22NBOIM403407992 with total extra taxes payable of Kshs. 11,346,250. 87.

9. The Appellant upon receipt of the additional assessment requested for the release of the consignment via bank guarantee in a letter dated 5th May 2022 and release granted via bank guarantee No. 201020216005-GP dated 5th May 2022 from Standard Chartered Bank of Kshs. 11,346,251. 00.

10. On 9th May 2022, pursuant to Section 229 (1) of EACCMA, the Appellant applied for a review of the Respondent’s decision to uplift the import duties of entry No. 22NBOIM403407992.

11. On 23rd May 2022, the Respondent sent an email to the Appellant attaching a letter dated 20th May 2022 indicating that the letter from the Respondent was a response to the Appellant’s unreferenced letter dated 6th May 2022.

12. In view of the Respondent’s letter dated 20th May 2022 alleging lack of documentary support for the price used by the Appellant on entry No. 22NBOIM403407992, on 30th May 2022, the Appellant re-submitted the documents to support the price declared on the import documentation.

13. The Appellant vide an email dated 30th May 2022 also requested the Respondent for a meeting to discuss the various documents which the Appellant had submitted to support the declared customs value.

14. The Appellant's clearing agent confirmed that a meeting with the Respondent had been scheduled for 8th June 2022. However, on 8th June 2022, the Respondent did not attend the meeting and a subsequent meeting was scheduled for 10th June 2022.

15. On 8th June the Appellant again re-submitted to the Respondent, the documents to support the customs value for entry No. 22NBOIM403407992.

16. The Appellant and Respondent held a meeting on 10th June 2022, during which the Respondent requested for the same documentation that the Appellant had previously sent to support the declared customs value.

17. On 13th June 2022, the Appellant re-submitted documents which had previously been sent to the Respondent on 6th May 2022, on 30th May 2022 and on 8th June 2022.

18. On 15th July 2022, the Appellant sent a letter via email indicating that since the Respondent had failed to respond to the Appellant within the 30 days mandatory period provided for under Section 229 (4) EACCMA, the Appellant’s application dated 9th May 2022 was allowed by law pursuant to Section 229 (5) of EACCMA.

19. On 28th July 2022, the Respondent vide a letter to the Appellant claimed that the Respondent’s letter- dated 20th May 2022 was the Commissioner’s decision under Section 229 (4) of the EACCMA.

20. Aggrieved by the Respondent’s decision of 28th July 2022, the Appellant filed this Appeal vide the Notice of Appeal dated 1st August 2022 and filed on 2nd August 2022.

The Appeal 21. The Appeal is premised on the following grounds of Appeal as stated in the Appellant’s Memorandum of Appeal dated and filed on 16th August 2022. a.The Respondent erred in law by failing to issue a decision to an application for review made pursuant to Section 229 (1) of the East African Community Customs Management Act, 2004 (EACCMA) within the 30 days statutory deadline mandated by law;b.The Respondent erred in law and fact in failing to realise that upon failing to issue a decision within the prescribed timeline, the Appellant’s application dated 9th May 2022 was deemed to have been allowed by law;c.The Respondent erred in law by failing to appreciate that the letter dated 28th July 2022 and the enforcement measures proposed therein are null and void;d.The Respondent has violated Articles 40, 47 and 50 of the Constitution and Section 4 of the Fair Administrative Actions Act by threatening to enforce a bank guarantee on a matter that has been resolved by operation of the law;e.Alternatively, and without prejudice to the foregoing, the Respondent erred in law and fact by failing to appreciate that the Appellant applied the Transaction Value, that is the price paid for the goods as the customs value, as provided for under Paragraph 2 (1) of the Fourth Schedule of EACCMA;f.Notwithstanding and without prejudice to the foregoing, the Respondent erred in law and fact by substituting the transaction value determined by the actual price paid, with the value of identical and similar goods; and,g.Notwithstanding and without prejudice to the foregoing, the Respondent erred in law and fact by uplifting the customs value using the value for identical and similar goods without providing the basis or criteria for the substituted customs valuation method and without disclosing the identity of the goods or their source.

The Appellant’s Case 22. The Appellant’s case is premised on the following;a.Statement of Facts dated and filed on 16th August 2022 together with the documents attached thereto;b.Witness statement of Ian Chengo’le dated and filed on 13th March 2022 and adopted on oath by the Tribunal as evidence in chief on 27th September 2023;c.Written submissions dated and filed on 9th September 2024; and,d.Appellant’s reply to the Respondent’s submissions dated and filed on 3rd October 2024.

23. The Appellant averred that on 2nd April 2022, it imported network equipment under entry No. 22NBOIM403407992 from NEC Africa (PTY) Limited, a company registered in South Africa.

24. That the Appellant and NEC Africa (PTY) Limited, a telecommunications equipment supplier engage in business transactions as independent parties using NEC Africa (PTY) Limited pricing structure. That the agreed pricing structure/global purchase agreement for February 2021 to 30th June 2022 was provided to the Respondent and attached to the Appellants Statement of Facts.

25. That the pricing for the network equipment imported under entry No. 22NBOIM403407992 was based on the global pricing structure.

26. The Appellant averred that Section 122 (1) of East African Community Customs Management Act, 2004 (EACCMA) provides that the value of imported goods shall be determined in accordance with the Fourth Schedule of EACCMA. That the Fourth Schedule of EACCMA provides a sequential order of the customs valuation methods. Paragraph 2 (1) of the Fourth Schedule provides that the primary method of customs valuation is the Transaction Value.

27. The Appellant averred that the Transaction Value method which refers to the price actually paid or payable for the goods is the recommended method for determining the customs value of imported goods.

28. That the Appellant adopted the Transaction Value method for customs valuation for its imports in accordance with Paragraph 2 (1) of the Fourth Schedule to the EACCMA, and therefore declared the price payable as the customs value of the goods imported from South Africa under entry No. 22NBOIM403407992. That a copy of the invoice for the goods imported under entry No. 22NBOIM403407992 and a copy of the proof of payment were attached to the Appellant’s Statement of Facts.

29. The Appellant averred that upon attempting to pay the import duties and clear the shipment under entry No. 22NBOIM403407992, the Appellant was verbally informed that the Respondent had raised customs valuation queries on the price declared for the shipment and the matter had been referred to the Respondent’s valuations team for determination.

30. That Section 122 (2) of EACCMA provides that upon written request, an importer shall be entitled to an explanation in writing from the Respondent as to how the customs value was determined. That further, Section 122 (3) of EACCMA provides that where, in the course of determining the customs value, it becomes necessary for the Respondent to delay the final determination, the goods can be released to the importer upon providing a guarantee for the import duties.

31. That to avoid accumulation of further hefty demurrage charges, and in accordance with Section 122 (2) and (3) of EACCMA, the Appellant vide a letter dated on 6th May 2022, requested the Respondent to release the shipment under a bank guarantee pending the written notification from the Respondent’s valuations team regarding the proposed uplift of the import duties.

32. The Appellant averred that to enable the Respondent approve the bank guarantee option, it also submitted vide its letter dated on 6th May 2022, the following documents to support the application.a.The purchase order;b.Invoice for the previous shipment from the same supplier;c.Proof of payment for the previous shipment;d.Global purchase agreement;e.Invoice for the current shipment; and,f.Product description.

33. That on 9th May 2022, pursuant to Section 229 (1) of EACCMA, the Appellant applied for a review of the Respondent’s decision to uplift the import duties of entry No. 22NBOIM403407992.

34. That on 23rd May 2022, the Respondent sent an email to the Appellant attaching a letter dated 20th May 2022 indicating that the letter from the Respondent was a response to the Appellant’s unreferenced letter dated 6th May 2022. That in that letter, the Respondent claimed that the Appellant had not provided documents to support the declared values and the Respondent had therefore uplifted the shipment using transaction values of identical and similar goods.

35. The Appellant averred that the Respondent in the letter dated 20th May 2022 listed the following items as the basis for the uplift of customs value;a.Lack of proof of payment for the goods;b.Unknown terms of payment;c.Submission of unauthenticated purchase order and invoice; andd.Non submission of global purchase agreement and product description manual.

36. That the Appellant had provided the above documents in its letter dated 5th May 2022, including the global purchase agreement which provided for a credit period of 60 days after delivery and the proof of payment of the earlier shipment from the same supplier.

37. The Appellant averred that in view of the Respondent's letter dated 20th May 2022 alleging lack of documentary support for the price used by the Appellant in entry No. 22NBOIM403407992, on 30th May 2022, the Appellant re-submitted the documents to support the price declared on the import documentation.

38. The Appellant indicated that vide the email dated 30th May 2022 it also requested the Respondent for a meeting to discuss the various documents which the Appellant had submitted to support the declared customs value.

39. That the Appellant’s clearing agent confirmed that a meeting with the Respondent had been scheduled for 8th June 2022. However, on 8th June 2022, the Respondent did not attend the meeting and a subsequent meeting was scheduled for 10th June 2022.

40. The Appellant averred that on 8th June it re-submitted to the Respondent, the documents to support the customs value for entry No. 22NBOIM403407992.

41. That the Appellant and Respondent held a meeting on 10th June 2022, during which the Respondent requested for the same documentation that the Appellant had previously sent to support the declared customs value.

42. The Appellant averred that on 13th June 2022, it re-submitted documents which had previously been sent to the Respondent on 6th May 2022, on 30th May 2022 and on 8th June 2022.

43. The Appellant averred that the Respondent was mandated under Section 229 (4) of EACCMA to respond to the Appellant's application made under Section 229 (1) dated 9th May 2022 within 30 days of receipt of the letter and any further information that the Respondent had requested for.

44. That the Respondent did not respond to the Appellant’s Application dated 9th May 2022 or to the various emails sent by the Appellant attaching the supporting documentation, the last email being on 13th June 2022.

45. The Appellant averred that on 15th July 2022, it sent a letter via email indicating that since the Respondent had failed to respond to the Appellant within the 30 days mandatory period provided for under Section 229 (4) EACCMA, the Appellant’s application dated 9th May 2022 was allowed by law pursuant to Section 229 (5) of EACCMA.

46. The Appellant averred that on 28th July 2022, the Respondent vide a letter to the Appellant claimed that the Respondent’s letter dated 20th May 2022 was the Commissioner’s decision under Section 229 (4) of the EACCMA.

47. That the Respondent’s letter dated 28th July 2022 was specific that it was a response to the Appellant’s unreferenced letter dated 5th May 2022. That the only unreferenced letter that the Appellant sent to the Respondent was dated 6th May 2022 and the Respondent’s letter dated 28th July 2022 was a response to that letter.

48. That the Appellant’s letter dated 5th May 2022 was made pursuant to Section 122 (2) and (3) to request the goods to be released under a guarantee, pending the feedback on the proposed uplift of the customs value. It was not an application for review.

49. The Appellant averred that it made an application for review under Section 229 (l) of the EACCMA vide a letter reference 22037447 dated 9th May 2022 and the Respondent has not responded to this letter to date.

50. That the Respondent’s assertions that the letter dated 20th May 2022 was a response to the Section 229 application is erroneous since the Respondent’s letter dated 20th May is clear that it was only in response to the Appellant’s letter dated 6th May 2022.

51. That further, the Respondent's letter dated 20th May 2022 was on the basis that the Appellant had not provided supporting documentation.

52. The Appellant averred that the Respondent failed to submit its decision to the Appellant’s letter dated 9th May 2022 and as supported by the final documentation sent on 13th June 2022 within the mandatory period of 30 days and hence the letter dated 28th July 2022 lacked basis in law and any decision sought to be enforced through that letter was invalid.

53. That the Appellant complied with the use of Transaction Value method, that is, the price actually paid for the goods as the primary method for customs valuation for its imports in accordance with Paragraph 2 (1) of the Fourth Schedule of EACCMA.

54. The Appellant averred that the Respondent failed to provide it with a basis for rejecting the price paid for the goods as the appropriate customs valuation method. That the Respondent also failed to provide the source of the information for the computation of the uplifted prices or the supporting documentation upon which the uplifted customs value on the basis of identical and similar goods was computed.

55. The Appellant submitted that the two issues to be decided by the Tribunal are;i.Whether the Respondent violated Section 229 of EACCMA by failing to respond to the application for review dated 9th May 2022 within the statutory time of 30 days and if so, is the Appellant’s Application for Review deemed to have been allowed?ii.Whether the Respondent violated Section 122 of EACCMA and the Fourth Schedule by disregarding the Transaction Value declared by the Appellant?

56. The Appellant submitted that Respondent was mandated to respond to the Appellant’s application for review dated 9th May 2022, within 30 days as provided for under section 229 (4) of EACCMA which provides that;“The Commissioner shall, within a period not exceeding thirty days of the receipt of the application under subsection (2) and any further information the Commissioner may require from the person lodging the application, communicate his or her decision in writing to the person lodging the application stating reasons for the decision.”

57. The Appellant submitted that Section 229 (4) is couched in mandatory terms to the effect that the Commissioner “shall” within a period not exceeding 30 days issue a Review Decision in writing.

58. The Appellant submitted that the Court has held in numerous decisions that the use of the word "shall" is a mandatory term and an order that has to be complied with. In Equity Group Holdings vs. the Commissioner of Domestic Taxes CA No E069 of 2020 the Court found at paragraph 55 that:“The word shall when used in a statutory provision imports a form of command or mandate. It is not permissive, it is mandatory. The word shall in its ordinary meaning is a word of command which is normally given a compulsory meaning as it is intended to denote obligation.”

59. That Appellant submitted that the Court also upheld this principle in Associated Battery Manufacturers Limited vs. Commissioner of Customs Services TA no 1 of 2015 at paragraph 50 the Court held that;“Section 229 is couched in mandatory terms and clearly provides that the Commissioner "shall" within a period not exceeding thirty days communicate his reply to an application for review.”

60. The Appellant submitted that the Court in Associated Battery Manufacturers, supra while citing R vs. Commissioner of Domestic Taxes Ex-Parte Unilever (2005) eKLR at paragraph 50 also found that the mandatory terms couched in these provisions negates any taxpayers' consent to the delay occasioned by the Commissioner and therefore the Commissioner does not have any mandate in law to extend the time to issue a decision.

61. The Appellant submitted that it was mandatory for the Respondent to issue a written decision in respect of its application for review dated 9th May 2022 within 30 days of receipt, which was by 8th June 2022.

62. The Appellant submitted that on 8th June 2022, which was the statutory deadline to respond to the Appellant's application for review, was also the day the Respondent failed to honour the meeting which both parties had agreed upon.

63. The Appellant submitted that it is important to note that all subsequent emails after 8th May 2022 were not as a request by the Respondent for further information, but was simply a case of the Appellant re-forwarding the same information that had already been sent on 6th and 9th May 2022.

64. The Appellant submitted that by the time the meeting was rescheduled to 10th June 2022 and the subsequent emails re-forwarded to the Respondent in June, the statutory deadline had passed on 8th June 2022. That even if the subsequent emails which the Appellant sent in June were considered to be further information (which the Appellant denied), the last email that the Appellant sent was on 13th June 2022, and therefore the statutory period to respond to the Appellant’s review would have been 12th July 2022.

65. The Appellant submitted that the Respondent never responded to the Appellant’s letter dated 9th May 2022 or the email dated 13th June 2022, despite the prodding from some of the Respondent’s own employees.

66. The Appellant submitted that the Respondent having failed to issue its Review Decision within the mandatory 30 days, the application for review is deemed to have been allowed by law pursuant to Section 229 (5) of EACCMA which expressly provides that;“Where the Commissioner has not communicated his or her decision to the person lodging the application for review within the time specified in subsection (4) the Commissioner shall be deemed to have made a decision to allow the application.”

67. That Section 229 (5) uses the word “shall” therefore making it mandatory that the Commissioner’s failure to issue a written decision is deemed to be a decision to allow a taxpayer’s application for review.

68. That therefore, due to the Respondent’s failure to issue a review decision to the Appellant’s application dated on 9th May 2022, the Respondent was deemed on 8th June 2022, to have made a decision to allow the application.

69. The Appellant submitted that in the case of Republic vs. the Commissioner of Customs Services Ex-parte Tetra Pak Limited (2012) eKLR Misc. App no 221 of 2010 the Court cited Republic vs. the Commissioner of Customs Services Ex-parte Unilever Limited (2012) eKLR Misc. App no 181 of 2011 the Court held that;“non-communication of the Respondent's decision within the statutory limits of 30 days meant that the application for review had been allowed by operation of the law.”

70. The Appellant also submitted that in the case of the Republic vs. Kenya Revenue Authority Ex-Parte M-Kopa Kenya Limited JR No 599 of 2017 the Court held at paragraphs 106 and 107 that the Commissioner’s default in making a determination within the prescribed time meant that the objection was deemed to have been allowed.

71. The Appellant further submitted that in the case of Vivo Energy Kenya Limited vs. The Commissioner of Customs and Border Control and Anor JR No 346 of 2019 the Court held at paragraph 31 that;“where the Commissioner fails to make a decision on an objection within 60 days, the objection shall be allowed. Therefore, the Respondent should not have continued to demand the payment of the excise duty through the letters (issued over a four-year period). All those demands amounted to nothing in law.”

72. The Appellant submitted that the Tribunal had in another dispute between the Respondent and another taxpayer, also been called upon to address itself to a similar issue where the Respondent had failed to issue a decision following an application for review and had instead purported that another letter was its decision under Section 229 of EACCMA.

73. That in the case of Wallpaper Kenya vs. Commissioner of Customs & Border Control Appeal No 279 o/2020, the Tribunal held at paragraph 19 and 20 that:“19. The Tribunal notes that the said Respondent’s letter of 25th June 2020 makes no reference to the Appellant’s objection. Consequently, the said Respondent’s letter dated 25th June 2020 is not an Objection Decision.

20. non-communication of the Respondent’s decision within the statutory period of thirty days means that the Appellant’s application for review had been allowed by operation of the law pursuant to Section 229 (5) of EACCMA and that the Appellant did not owe the extra tax that is being demanded by the Respondent.”

74. The Appellant submitted that since the Respondent in its letter dated 20th May 2022, never made any reference to the Appellant's application for review dated 9th May 2022 or to Section 229 of EACCMA, the Tribunal, should be guided by its decision in the Wallpaper case and also find that the Respondent’s letter dated 20th May 2022 was not a response to the Appellant’s application under Section 229 of EACCMA.

75. The Appellant submitted that in the Wallpaper’s case as well, the Respondent had also argued that the Appellant had not attached documentation to support its declared values. That the Tribunal disputed this assertion and stated at paragraph 20 that;“The Tribunal notes that the Respondent claimed that the Appellant had not provided the relevant documents which included the payment details. However, a perusal of the documents provided by the Appellant indicates that a proforma invoice was issued together with copies of other shipping documents ...”

76. The Appellant submitted that in the instant Appeal, the Respondent's letter dated 20th May 2022 was on the basis that the Appellant had not provided supporting documentation, despite the Appellant having provided the information on 6th May 2022.

77. The Appellant submitted that the Respondent’s decision to uplift the customs value was in any event erroneous and not founded in fact or law as it was a violation of Section 122 and the Fourth Schedule of EACCMA.

78. That Section 122 (I) of EACCMA provides that;“Where imported goods are liable to import duty ...then the value of such goods shall be determined in accordance with the Fourth Schedule and import duty shall be paid on that value.”

79. The Appellant further submitted that at the time of importation in April 2022, it declared its import value based on the price payable to the seller as evidenced by the invoice for the goods under dispute.

80. That due to the credit period agreed between the Appellant and its supplier at the time the goods were imported, the payment to the supplier was not yet due. That the Appellant therefore provided a copy of the invoice for the previous shipment from the same supplier and proof of payment for the previous shipment from the same supplier so as to demonstrate that it pays the supplier based on the invoice value.

81. The Appellant submitted that it must be re-emphasised at this stage that Paragraph 2 of the Fourth Schedule of EACCMA states that customs value is the price actually paid or payable. Therefore, the invoice submitted by the Appellant to demonstrate the price payable ought to have sufficed and the Respondent had no basis for insisting on proof of actual payment.

82. The Appellant submitted that during the hearing, the Appellant’s witness, Ian Chengole, explained that Appellant was given a credit period within which to effect payment, which period had not expired at the time of the duty uplift. That the witness explained that was why the Appellant had gone to the length of submitting proof of payment for previous shipments despite the fact that there was no legal requirement to do so as the invoice ought to have sufficed.

83. The Appellant submitted that during cross-examination, the Respondent’s witness, Walter Kimani confirmed that the Appellant had a credit period of 60 days and also confirmed that the proof of actual payment was in fact subsequently provided by the Appellant. The Appellant submitted that the proof of payment for the invoice for the goods under dispute is as per the copy of the proof of payment annexed to the Appellant’s Statement of Facts.

84. The Appellant submitted that, having demonstrated that the Fourth Schedule of EACCMA clearly provides that the Transaction Value is the primary method for customs valuation, and the Transaction Value having been clearly stated to be the payment made or to be made by a buyer to a seller, then by virtue of the Appellant having used the price payable and later paid to its supplier, NEC Africa (PTY) Limited, it complied with the customs valuation method mandated by EACCMA. Further, the Appellant provided both the invoice as well as evidence of actual payment to the Respondent.

85. The Appellant submitted that it is important to note, that after the hearing of this matter before the Tribunal was concluded and specifically after the Respondent’s witness was cross-examined and it was evident that the Respondent had arbitrarily uplifted the Appellant’s customs value based on unsubstantiated and unsupported alleged similar goods, the Respondent in a move that was an afterthought, made an application to adduce new evidence of alleged identical and similar goods.

86. The Appellant submitted that the Tribunal in its decision dated 1st December 2023 correctly dismissed the Respondent's application to adduce new evidence, on the basis that the Respondent had failed the tests for adducing new evidence as stipulated by the Supreme Court in its decision in Mohammed Abdi Mahmud vs. Ahmed Abdullahi Mohammed which are;i.That the new evidence was not within the knowledge of the Respondent, and the Respondent could not have obtained or produced the evidence at the trial. The Tribunal relied on the Respondent’s own admission that the new evidence was in its possession during the trial.ii.The additional evidence is not utilized for the purpose of removing lacunae, filling gaps in evidence, filling up omissions or patch-up weak points in their case. The Respondent had once again admitted that it had not provided the new evidence while filing its pleadings or its witness statement and had only become cognizant of missing documentation when its witness had given evidence. The Tribunal correctly held at paragraph 48 of its decision that;“the Respondent has filed the application with a calculated intention to reopen its case with a view of filling in the gaps arising from the evidence adduced before the Tribunal and to patch up weak points in its case.”

87. The Appellant submitted that the Tribunal should be guided by its decision in Wallpaper case to find that import duty should be paid on the value of goods, which value has already been demonstrated by the Appellant beyond an iota of doubt. The Respondent therefore erred in law and fact by using prices for alleged and unsubstantiated identical and similar products in respect of which no evidence or justification has been provided by the Respondent.

88. The Appellant submitted that despite producing evidence on several occasions to prove the Transaction Value, such as invoices and proof of payment, the Respondent completely disregarded this evidence and proceeded to adjust the Transaction Value without any basis whatsoever.

89. The Appellant submitted that in other disputes, where the Respondent has adopted the same approach, the Tribunal has proceeded to dismiss the Respondent’s invalid actions.

90. The Appellant submitted that the Tax Appeals Tribunal in GlaxoSmithKline (Kenya) Limited vs. the Commissioner of Customs & Border Control (Tax Appeal no. 340 of 2020) stated at paragraph 85 that;“the Tribunal noted that the Appellant made available the Respondent GSK’s TP documentation and valuation methodology and the schedules of prices supporting the same. However. there is no evidence that this information was considered by the Respondent in arriving at its decision. “

91. The Appellant submitted that in reaching its decision on at paragraph 88 the Tribunal in the GlaxoSmithKline case thus found that;“the Respondent’s decision was arbitrary and not objective.” The Respondent has not demonstrated that relationship between the Appellant and its suppliers influenced the valuation to justify its application of an alternative method to the Transaction Value Method.”

92. The Appellant submitted that the Respondent failed to describe valuation method 2 and 3 or to justify why such methods should be used as opposed to the Transaction Value (price paid or payable), and also failed to provide any evidence of the use of these methods to arrive at the uplifted customs value. That it is trite law that he who alleges must prove. That the Respondent has not provided any proof whatsoever to back up its erroneous claims.

93. The Appellant submitted that the Respondent did not provide any explanation or documentation whatsoever, in its letters to the Appellant, in its pleadings before the Tribunal, or in its witness statement to support its use of the value for identical or similar goods. The Respondent’s witness Walter Kimani, was not able to demonstrate during cross examination which previous transactions the Respondent was referring to and was also unable to identify any similar or identical goods that had been compared to the Appellant’s product.

94. The Appellant submitted that in the case of Republic vs. Kenya Revenue Authority Ex parte Jaffer Mujtab Mohamed [2015] eKLR the High Court determined at paragraph 46 that;“a taxing authority is not entitled to pluck a figure from the air and impose it upon a taxpayer.”

The Appellant’s Prayers. 95. The Appellant prayed that;a.The Decision dated 28th July 2022 be annulled and set aside in entirety;b.The Appeal be allowed; and,c.Any other remedies that the Honourable Tribunal deems just and reasonable.

The Respondent’s Case 96. The Respondent’s case is premised on;a.Statement of Facts dated and filed on 12th September 2022 together with the documents attached thereto;b.Witness statement of Walter Kimani dated 20th March 2023 and filed on 22nd March 2023 and admitted on oath by the Tribunal as evidence in chief on 27th September 2023; and,c.Written submissions dated and filed on 10th September 2024.

97. The Respondent averred that its position as stated in the Review Decision dated 20th May 2022 and communicated to the Appellant. The Respondent averred that the decision to arrive at the additional assessments was justified and was in conformity with law under Section 122 of the EACCMA as read with the Fourth Schedule as well as Section 229.

98. That Section 122 of the EACCMA provides as follows;“(1)Where imported goods are liable to import duty ad valorem, then the value of such goods shall be determined in accordance with the fourth schedule and import duty shall be paid on that value.2. Upon written request, the importer shall be entitled to an explanation in writing from the proper officer as to how the Customs value of the importer's goods was determined.3. Where in the course of determining the customs value of imported goods, it becomes necessary for the Customs to delay the final determination of such customs value, the delivery of the goods shall, at the request of the importer be made:Provided that before granting such permission the proper officer may require the importer to provide sufficient guarantee in the form of a surety, a deposit or some other appropriate security as proper officer may determine, to secure the ultimate payment of customs duties for which the goods may be liable.”

99. The Respondent averred that it applied the identical/similar goods method for purposes of levying import duties after it established that the Appellant had undervalued the declared items.

100. That the assessment of Kshs. 11,346,250. 87 was issued in the first instance since the submitted transaction documents provided by the Appellant did not sufficiently demonstrate the declared values.

101. The Respondent averred that the Appellant, in conformity to Section 229 (1) applied for review of the said assessment vide the letter dated 9th May 2022.

102. That the Respondent however noted that the Appellant was unable to avail proof of payment of the consignment, the submitted purchase orders and invoice were unauthenticated, and terms of payment were unknown since they were not indicated in any of the documents presented.

103. The Respondent averred that it therefore upheld its assessment/value decision through the letter dated 20th May 2022 which was duly communicated to the Appellant.

104. The Respondent averred that the Appellant however, in the spirit of trade and facilitation applied for review, for the second time, vide a letter dated 30th May 2022.

105. That this, according to the Respondent was an incorrect approach to the issue, since application for review under Section 229 can only be invoked once.

106. The Respondent averred that the Appellant's recourse lay in Section 230 of the EACCMA, if it was dissatisfied with the Respondent's review decision dated 20th May 2022.

107. The Respondent maintained that the Appellant’s contention that the Respondent did not issue a decision to the second review application dated 30th May 2022 and therefore the review is deemed allowed by operation of the law is misguided and cannot hold. That the Respondent clearly communicated its decision on 20th May 2022, which was within the statutory timelines.

108. The Respondent asserted that it only agreed to engage further with the Appellant in the spirit of trade facilitation as per the Appellant's request in their letter dated 30th May 2022 and this was not re-opening the matter for review as the Commissioner had already issued its decision on 20th May 2022 which upheld the assessed values from the Valuation & Tariff JKIA office.

109. The Respondent stated that in the meeting which took place at the behest of the Appellant on 10th June 2022, which was after the Respondent had issued its Review Decision on 20th May 2022, the Appellant was requested to provide various documents. That the Appellant provided the documents but was still unable to avail proof of payment of the consignment, the submitted purchase orders and invoice were unauthenticated, and terms of payment were unknown since they were not indicated in any of the documents presented.

110. The Respondent averred that Section 59 Tax Procedures Act on production of records provides that;“For the purposes of obtaining full information in respect of the tax liability of any person or class of persons, or for any other purposes relating to a tax law, the Commissioner or an authorised officer may require any person, by notice in writing, to-a.produce for examination, at such time and place as may be specified in the notice, any documents (including in electronic format) that are in the person's custody or under the person's control relating to the tax liability of any person;b.Furnish information relating to the tax liability of any person in the manner and by the time as specified in the notice; orc.attend, at the time and place specified in the notice, for the purpose of giving evidence in respect of any matter or transaction appearing to be relevant to the tax liability of any person."

111. The Respondent averred that it has shown that in several instances, the Appellant failed to provide key information and documentation in support of its review application. That particularly, the Appellant could not provide;i.Proof of payment;ii.The terms of payment are unknown and hence the proof of payment for previous shipments could not be validated;iii.Submission of unauthenticated purchase orders and invoice; andiv.Non-submission of global purchase agreement and product description manual.

112. The Appellant averred that in absence of the above, the Respondent accurately and procedurally maintained the Valuation and Tariffs value decision issued on 20th May 2022.

113. The Respondent averred that the Appellant was misguided in lodging this Appeal since the taxes being demanded have crystalized, are due and payable and the Applicant ought to have ventilated its dissatisfaction with the Respondent's decision through the proper forum as provided for under the EACCMA.

114. The Respondent submitted that the following should be the issues for determination by the Tribunal;i.Whether the Respondent was justified in uplifting of the customs value of the imported goods.ii.Whether the Respondent erred in applying Valuation method 2& 3 over Method 1. iii.Whether the Respondent adhered to the legal procedures and timelines in handling the Appellant’s Review Applications as provided under Section 229 and 230 of the East African Community Customs Management Act.iv.Whether the Appellant was entitled to submit a second review application under Section 229 of the EACCMA.v.Whether the Respondent’s actions violated the Appellant’s constitutional rights to fair administrative action.

115. The Respondent submitted that it procedurally uplifted the customs value of the goods imported by the Appellant. That Section 221 (1) of the EACCMA provides that;“Where imported goods are liable to import duty ad valorem, then the value of such goods shall be determined in accordance with the Fourth Schedule and import duty shall be paid on that value.”

116. That the Appellant had imported machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus and had made a customs declaration for their clearance.

117. The Respondent submitted that the additional taxes were raised since the submitted transaction documents provided did not sufficiently demonstrate the declared values.

118. The Respondent submitted that the Appellant was unable to avail proof of payment of the consignment, submitted purchase orders and invoice were unauthenticated, and terms of payment were unknown since they were not indicated in any of the documents presented.

119. That the Respondent having noted the discrepancies and guided by Section 122 as read with the Fourth Schedule of the EACCMA carried out comparisons with previously accepted transactional value hence the additional taxes.

120. The Respondent submitted that the decision to uplift the customs value was due to the Appellant was due to a reasonable cause to doubt the transaction value given by the Appellant and therefore chose to use the second and third valuation method.

121. The Respondent submitted that it was necessary to do the customs uplift due to discrepancies in the documentation provided by the Appellant, such as unauthenticated invoices and missing proof of payments.

122. The Respondent submitted that EACCMA empowers it to apply the other valuation methods when the Transactional Value is insufficient.

123. That the Fourth Schedule of the EACCMA provides for the determination of value of imported goods liable to ad valorem import duty. The general notes provide that there is sequential application of the valuation methods.

124. The Respondent submitted that since the Appellant failed to provide sufficient documentation to support its Transactional value Method then it was legally mandated to use the other valuation methods.

125. The Respondent submitted that during a meeting with the Appellant, the Respondent requested them to provide the following documents;i.Evidence of price paid for previous consignment (Bank certified Swift advice);ii.Evidence of freight, vide AWB (as invoiced freight amount was too low); and,iii.Larger Bharti Airtel & NEC (Head office) contract indicating how prices were arrived at, quantity discounts, installation costs, software licensing costs, service fees, warranty fees.

126. That the Appellant provided the following documents on 13th June, 2022 for consideration;i.Copy of Customs entry NO 22NBOIM402362532;ii.Commercial invoice NO 000035819-1 dated 14th January 2022;iii.Customs duty paid payment slip 1020220000182654 dated 7th March 2022;iv.Airway bill 07451761010 with an amount of EUR 1,337. 65; and,v.Certified Bank remittance from Standard Chartered Bank.

127. The Respondent submitted that the documents provided were insufficient to prove the method used by the Appellant to declare the import.

128. The Respondent submitted that the chronology of the events was as follows;i.The Respondent physically verified the consignments on 7th April 2022 and later issued additional assessments;ii.On 9th May 2022, the Appellant sought for value review to the Respondent;iii.On 20th May 2022 the Respondent sustained the value decision and communicated the same to the Appellant;iv.On 30th May 2022 the Appellant for the second time appealed for value review to the Respondent pursuant to Section 229 (1) of EACCMA;v.On 8th June 2022, the Appellant sought for a meeting with the Respondent, which took place on 10th June 2022;vi.On 13th June 2022, the Appellant provided several documents to the Respondent; and,vii.On 15th June, the Appellant notified the Respondent of their intention to invoke Section 229 (4) & (5) of EACCMA.

129. The Respondent submitted that it acted within the legal framework by responding to the Appellant’s first review application within the 30-day timeline as required under Section 229 (4) of EACCMA and that the second review application was invalid.

130. The Respondent reiterated the position as stated in the case of Republic vs. Commissioner of Customs Services Ex-Parte Unilever Kenya Limited [2012] eKLR, where the Court in interpreting Section 229 (5) of the EACCMA held as follows;“My understanding of the above quoted section is that once a taxpayer lodges an application for review, the Commissioner of Customs who is the respondent in this case has 30 days within which to make and communicate a decision to the taxpayer. If the respondent does not communicate a decision within 30 days, then the respondent shall be deemed to have made a decision to allow the application.”

131. Consequently, the Respondent submitted that the Appellant applied for the review of the Respondent’s decision on 9th May 2022 and on 20th May 2022, the Respondent sustained the value decision, this was well within the timelines provided under EACCMA.

132. The Respondent submitted that in the Case of Nicholas Kiptoo Arap Korir Salat vs. IEBC & 6 Others [2013] eKLR, the court held that;“This Court, indeed all courts, must never provide succor and cover to parties who exhibit scant respect for rules and timelines. Those rules and timelines serve to make the process of judicial adjudication and determination fair, just, certain and even- handed. Courts cannot aid in the bending or circumventing of rules and a shifting of goal posts for, while it may seem to aid one side, it unfairly harms the innocent party who strives to abide by the rules. I apprehend that it is in the even-handed and dispassionate application of rules that courts give assurance that there is a clear method in the manner in which things are done so that outcomes can be anticipated with a measure of confidence, certainty and clarity where issues of rules and their application are concerned.”

133. The Respondent submitted that the Appellant was misadvised when it made a second review application since being unsatisfied with the Review Decision, the Appellant ought to have approached the Tribunal as the next course of action. The Respondent submitted that all the actions it undertook were within the scope of the law and at no time were Appellant’s rights violated.

134. The Respondent relied on the Court of Appeal case in Nyaga vs. Housing Finance Company Ltd of Kenya Civil Appeal No. 134 of 1987 that held that:“Where a party has a statutory right of action, the court will not usually prevent that right from being exercised except that the court may interfere if there was no basis on which the right could be exercised or it was being exercised oppressively”.

135. The Respondent also relied on the case of Dry Associates Limited vs. Capital Markets Authority & Another [2012] eKLR where the court held that fair administrative action does not mean that the decisions must favor the Applicant but rather that the process must be lawful, reasonable, and procedurally fair and stated that;“It is important to note that there is an implicit flexibility in Article 47. The primary consideration is whether the procedure adopted is fair. In this regard I adopt the sentiments of Lord Pearson in the case of Pearlberg v Varty (Inspector of Taxes) [1972] I WLR 534 at page 547 where he stated, “Fairness, however does not necessarily require a plurality of hearings or representations and counter representations. If there were too much elaboration of procedural safeguards nothing could be done simply and quickly and cheaply. Administrative or executive efficiency and economy should not be too easily sacrificed.” This is the reason why Article 47 not only has the element of procedural fairness but also provides that administrative action must be “expeditious, efficient, lawful and reasonable ...”

136. The Respondent submitted that it carried out a fair process that was expeditious as it was within the timelines provided, efficient since the Appellant was given an opportunity to provide documentation, lawful and reasonable.

The Respondent’s Prayers 137. The Respondent prayed that;a.The Appellant's Appeal be dismissed with costs;b.The additional import duties raised by the Respondent amounting to Kshs. 11,346,250. 87 be confirmed and the principal taxes and interest be found due and payable as per the objection decision rendered by the Respondent.

Issues For Determination 138. The Tribunal has considered the pleadings, documentation and submissions by the parties and is of the view that this Appeal raises the following issues for determination;i.Whether the Respondent issued a Review Decision on the Appellant’s application dated 9th May 2022;ii.Whether the Respondent was justified in disregarding the transaction value declared by the Appellant and applying other methods of customs valuation.

Analysis And Findings 139. Having established the issues for determination, the Tribunal will proceed to analyse them as herein under:

Whether the Respondent issued a Review Decision on the Appellant’s application dated 9th May 2022; 140. The genesis of this Appeal is the network equipment under entry No 22NBOIM403407992 imported by the Appellant from NEC Africa (PTY) Limited, a company registered in South Africa.

141. The Appellant declared the purchase price, which was the price payable to NEC Africa (PTY) Limited as the customs value of the goods.

142. The Appellant was unable to clear the goods, and was verbally informed that the Respondent had raised customs valuation queries on the price declared for the shipment and the matter had been referred to the Respondent's valuations team for determination.

143. Vide a letter dated on 6th May 2022, the Appellant requested the Respondent to release the shipment under a bank guarantee pending the written notification from the Respondent’s valuations team regarding the proposed uplift of the import duties.

144. On 9th May 2022, vide a letter referenced 22037447, the Appellant applied for a review of the Respondent’s decision to uplift the import duties of entry No. 22NBOIM403407992 pursuant to Section 229 (1) of EACCMA.

145. On 23rd May 2022, the Respondent sent an email to the Appellant, attaching a letter dated 20th May 2022 stating that the letter was a response to the Appellant’s unreferenced letter dated 6th May 2022.

146. In the letter dated 20th May 2022 as a response to the Appellant’s letter dated 6th May 2022, the Respondent indicated that the Appellant had not provided documents to support the declared customs value and specifically stated that the Appellant had not provided proof of payment, payment terms, the global purchase agreement or product description manual.

147. In response to the letter of 20th May 2022, the Appellant on 30th May 2022, re-submitted the documents to support the price declared on the import documentation. In the letter of 30th May, the Appellant requested for further “review and determination” of the Appeal for review.

148. The Tribunal notes that there is no dispute that on 9th May 2022, the Appellant applied for review of the Respondent’s decision. The Respondent insists that it made its Review Decision and communicated it vide the letter dated 20th May 2022. The Respondent further indicated that the Appellant’s letter dated 30th May 2022 was a second application for review of its decision.

149. On the other hand, the Appellant submitted that the Respondent has never replied to its request for review and that its application was allowed by operation of the law after 30 days.

150. The Tribunal has carefully scrutinized the documentation filed by the parties and notes the following;i.The Letter dated 20th May 2022 by the Respondent was in response to a letter by the Appellant dated 5th May 2022. So, the letter was not in response to the application for review made by the Appellant on 9th May 2022. ii.Secondly, the Tribunal notes that the letter of 20th May did not indicate that it was a Review Decision and specifically spoke how the documents submitted “could not satisfactorily demonstrate the transactional value.”iii.The Appellant’s letter of 30th May 2022 was a response to the Respondent’s letter of 20th May 2022. The Appellant re-submitted the documents they claimed to have provided to the Respondent earlier.iv.After perusing all the documents submitted by the parties, the Tribunal has not found any letter where the Respondent referred to the Appellant’s application for review dated 9th May 2024.

151. The Tribunal notes that the law requires the Respondent to reply to the Appellant’s application for review within 30 days as provided for under Section 229 (4) of EACCMA. This Section states that that:“The Commissioner shall, within a period not exceeding thirty days of the receipt of the application under subsection (2) and any further information the Commissioner may require from the person lodging the application, communicate his or her decision in writing to the person lodging the application stating reasons for the decision.”

152. The Tribunal further notes that Section 229 (4) is couched in mandatory terms to the effect that the Commissioner “shall” within a period not exceeding 30 days issue a Review Decision in writing.

153. The Tribunal is bound by the decision of the Court that the use of the word “shall” is a mandatory term and an order that has to be complied with. In the case of Equity Group Holdings vs. the Commissioner of Domestic Taxes CA No. E069 of 2020 the Court found at paragraph 55 stated that that;“The word shall when used in a statutory provision imports a form of command or mandate. It is not permissive, it is mandatory. The word shall in its ordinary meaning is a word of command which is normally given a compulsory meaning as it is intended to denote obligation.”

154. The Tribunal also notes that where the Respondent fails to issue its Review Decision within the mandatory 30 days, the application for review is deemed to have been allowed by operation of the law pursuant to Section 229 (5) of EACCMA which expressly states as follows;“Where the Commissioner has not communicated his or her decision to the person lodging the application for review within the time specified in subsection (4) the Commissioner shall be deemed to have made a decision to allow the application.”

155. Due to the Respondent’s failure to issue a Review Decision to the Appellant’s application dated on 9th May 2022, the Respondent was deemed to have made a decision to allow the application after the expiry of the statutory timeline of 30 days.

156. The Tribunal reiterates its decisions made on similar matters as follows;a.TAT case Number 279 of 2020, Wallpaper Kenya vs. Commissioner of Customs and Border Control; and,b.TAT Case Number 525 of 2020; Camusat Kenya Limited vs. Commissioner of Customs and Border Control.

157. This position has also been held by the High Court in the following cases;a.Equity Group Holdings vs. the Commissioner of Domestic Taxes CA No E069 of 2020 while citing Republic vs. Commissioner of Customs Services Ex-Parte Unilever Kenya Limited at paragraph 59;b.Republic vs. the Commissioner of Customs Services Ex-parte Tetra Pak Limited (2012) eKLR Misc App no 221 of 2010;c.Republic vs. Kenya Revenue Authority Ex Parte M-Kopa Kenya Limited JR No 599 of 2017 the Court held at paragraphs 106 and 107; and,d.Vivo Energy Kenya Limited vs. The Commissioner of Customs and Border Control and anor JR No 346 of 2019.

158. Based on the law and the case laws cited above the Tribunal holds and finds that the Respondent did not issue a Review Decision to the application made by the Appellant on 9th May 2022 and therefore the Appellant’s application for review was allowed by the operation of the law.

159. The Tribunal having held that the Appellant’s application for review was allowed by operation of the law, the Tribunal shall not delve into the other issue for determination as the same has been rendered moot.

160. Consequently, the Appellant’s Appeal succeeds.

Final Decision 161. The upshot of the above analysis is that the Appeal is merited and succeeds. Consequently, the Tribunal makes the following Orders;a.The Appeal be and is hereby allowed;b.The Respondent’s decision dated 28th July 2022 be and is hereby set aside; and,c.Each party to bear its own costs.

162. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 21STDAY OF FEBRUARY 2025ROBERT M. MUTUMA - CHAIRPERSONJEPHTHAH NJAGI - MEMBERDELILAH K. NGALA - MEMBERDR, TIMOTHY B. VIKIRU - MEMBERMUTISO MAKAU - MEMBER