https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/211

 REPUBLIC OF KENYA IN THE TRIBUNAL OF KENYA AT NAIROBI COUNTY COURT NAME: TAX APPEALS TRIBUNAL CASE NUMBER: TATC/E1038/2025 ALPHASTONE LIMITED VS KENYA REVENUE AUTHORITY JUDGMENT # BACKGROUND 1. The Appellant is a private limited company registered under the Companies Act CAP 486. The Appellant is a manufacturer that specializes in imports and trade of sugar. 2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws. Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority 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. The Respondent conducted a comprehensive post clearance audit on the Appellant's importations pursuant to Sections 234, 235 & 236 of the East African Community Customs Management Act (EACCMA) 2004. The audit identified under-declaration of customs values for sugar imports. Consequently, a demand notice was issued on 7th March 2025 for short-levied duties amounting to Kshs 12,957,283. 1. On 4 th June 2025 the Appellant requested for more time to provide supporting documents and respond to issues raised in the demand Notice. The Respondent granted the prayer. 2. The Appellant lodged a Notice of Objection against the Demand Notice on 14th July 2025. Whereas the Appellant provided commercial invoices, SWIFT payments confirmations, executed sale contracts and bills of lading to support its Objection, the Respondent noted significant discrepancies between declared customs values and actual bank remittances, indicating under-declaration. 3. Consequently, the Respondent confirmed the assessment vide Objection decision dated 7th August 2025 wherein the Respondent demanded the Appellant to pay a principal tax of Kshs 11,543,691. 4. Dissatisfied with the objection decision, the Appellant lodged this appeal vide Notice of appeal dated 18th September 2025 and filed on 19th September 2025. # THE APPEAL 1. The Appellant lodged a Memorandum of Appeal dated and filed on 19 th September 2025 on the following grounds: 1. That the Respondent erred in law and in fact in issuing a demand notice for short levied duties. 2. That the demand notice by the Respondent was done in bad faith and in contravention of the respective provisions of the law. 3. That the commissioner unjustifiably and capriciously departed from the Transaction Value method as enshrined in law. 4. That the features and payment terms of a conventional tax invoice have been visibly indicated in the availed invoices. 5. That the arbitral use of FOB value of Kshs 1000/MTis unjustified and inconsistent with the EACCMA ACT and the WTO Valuation agreement. 6. That the Commissioner failed in its duties of reasonableness by disregarding and failing to comprehensively examine the Appellant's records availed so as to determine the correct tax position. 7. That the Respondent issued an impugned objection decision without considering all the material facts provided by the Appellant. * 1. That the Respondent has acted vindictively in exercising its judgment in disallowing the objection application done by the Appellant. 2. That the amount demanded is principally incorrect and will punitively affect the business of the appellant in this harsh economic time. # THE APPELLANT’S CASE 1. In support of the appeal, the Appellant relied on statement of facts dated and filed on 19th September 2025. 2. According to the Appellant, it has been importing sugar and trading in the same commodity for over period of time and as proscribed in law and that it has been accounting and paying all the taxes due during the importation of the sugar and in accordance with all the relevant tax laws. However, on or about May 2025, the Appellant received a notice of demand for short levied duties dated 7th March 2025 for Kshs 12,597,283. 3. The commissioner conducted a Customs post clearance compliance review on the Appellant's importation of brown sugar originating from Uganda, Zambia and Malawi for the year 2021 to 2024. The audit sought to establish the accuracy of the values declared for Appellant's consignments of brown sugar. 4. The Appellant stated that it fully objected to the demand notice on 14th July 2025 providing the relevant evidence to the Respondent and in accordance with law. The Respondent then issued the impugned objection decision on 7th August 2025 where it disallowed the objection application. 5. In support of the position that Respondent's demand notice and actions were vindictive, in bad faith and ultra vires, the Appellant stated that the Tax Procedures Act Cap 469B (TPA) (Section 28 to Section 31) provides various guidelines that the commissioner/respondent should consider when issuing an additional assessment, advance assessment, and/or default assessment. 6. Whereas the Respondent averred that it conducted a customs post clearance compliance review on the appellant for the year 2021 to 2024 pursuant to the provisions of Sections 234, 235, and 236 of the EACCMA, the Appellant noted that the above provisions largely accord the Respondent/Appellant the respective guidelines that should be adhered to during production of documentation/and inspection or audit. It contended that these sections do not gear-start an audit review process; they simply supplement the audit review process. 1. The Appellant noted that it was not fully engaged nor informed of an ongoing post clearance audit process and that it was only badgered by a demand notice demanding for short levy respectively. 2. The Appellant stated that Section 31(8) of the TPA provides that when the Commissioner has made an amended assessment, he or she shall notify the taxpayer in writing of the amended assessment and specify 3. The amount assessed as tax or the deficit or excess input tax carried forward, as the case may be; 4. any amount assessed as late payment penalty payable in respect of the tax assessed; 5. any amount of late payment interest payable in respect of the tax assessed; 6. the reporting period to which the assessment relates; 7. the due date for payment of any tax, penalty or interest being a date that is not less than thirty days from the date of the taxpayer received the notice; and 8. the manner of objecting to the assessment. 9. The Appellant stated that the requirements as stipulated in Section 31(8) of the TPA are tutored in mandatory terms and therefore the Respondent is required to adhere to these requirements so as to validate the assessments issued. It stated that the Respondent did not fully adhere to the strict requirements of Section 31 (8) when issuing the averred demand notice and the demands. 10. It stated that in the Cases of **Anne Wanjiku Kahwai & another v Kenya Revenue Authority 2019 (EKLR)** and **Sukari Investments Limited v Commissioner Domestic Taxes Appeal No 81 of 2021**, the honourable court affirmed that any notice for assessment/demand must strictly comply with the TPA and the general corpus of the country's laws in Kenya. 1. The Appellant averred that Article 47 (1) of the Kenya Constitution provides that "(1) every person has the right to administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair." It stated that the actions of the Respondent from the issuance of the assessments to the disallowing of the objection applications were unlawful, unreasonable and procedurally unfair. It cited the case of **Export Trading Company v Kenya Revenue Authority (2018) eKLR** in which the Court noted that the importance of taxation and collection of taxes for any government cannot be gain said. It must however be noted that the process and the procedures leading to the collection of the said taxes must meet the relevant legal and constitutional thresholds in order to ensure the citizen's rights have not been violated or threatened with violation. 1. The taxpayer contended that in the arena of taxation, the duty to give reasons for tax-related decisions made by the Respondent is crucial if the Government of Kenya is to establish a public finance system that promotes an equitable society where the tax burden is shared equally as required by Article 201 of the Constitution. By providing a detailed and reasoned decision as required by the Constitution and the law, a taxpayer is better equipped to challenge such a decision. It cited the cases of **Joseph Muriithi Ndirangu t/a** # Ndirangu Hardware v Commissioner of Domestic Taxes (2023) KEHC 19357 (KLR); and Local Productions Kenya Limited v Commissioner of Domestic Taxes (Tax Appeals Tribunal, Tax Appeal No. 50 of 2017 to point out that the courts have affirmed that the Respondent is obligated to issue a detailed and reasoned tax decision so as to ensure compliance with the inherent right of taxpayers to enjoy the right to fair administrative action that is expeditious, efficient, lawful, reasonable, and procedurally fair. 1. The Appellant also relied on the case of **Raghubar Mandal v the State of Bihar Air 1952 PAT 235** where the court observed that the, ‘‘officer is to make assessment to the best of his judgement against a person who is in default as regards supplying information. He must not act vindictively or capriciously because he must exercise judgment in his matter. He must make what honestly, he believes to be a fair estimated of the proper figures of assessment.’’ The Appellant argued that the face value of the demand notice in issue shows that the Respondent did not exercise its best judgment in the matter and acted vindictively in issuing particular assessments. 1. In support of the argument on the transaction value method, the Appellant pointed out that the Respondent's departure from the Transaction Value Method (Primary method), as provided under the fourth schedule and Section 122 of the EACCMA, is ultra vires and indefensible. 2. It argued that unless otherwise and as lawfully provided, the customs value of imported goods should always be the transaction value which is the actual price paid or paid. It asserted that this method is the primary means of determining the customs value for the majority of imported goods worldwide. 3. The Taxpayer noted that the statement that "customs value of imported goods shall be the transaction value, which is the price actually paid or payable for the goods'’ is a fundamental principle of customs valuation, primarily based on the WTO Agreement on Customs Valuation. The transaction value represents the total payment made by the buyer to the seller for the imported goods when sold for export, adjusted for certain additions or deductions in accordance with specific rules. 4. It pointed out that the Fourth schedule of the EACCMA explains the methods of determining customs value of imported goods. It stated that the interpretative notes in part II of the Fourth schedule state that the methods are to be applied in a sequential manner and imported goods are to be valued in accordance with the provisions of the subsequent methods only where the conditions and parameters in the preceding method have not been fulfilled. Therefore, it averred that the first step towards the determination of the customs value of imported goods is the determination of its transactional value which means the purchase price of the goods. 5. The Appellant noted that the Respondent arbitrarily disputed the transaction values declared on the basis that the invoices submitted lacked features of a genuine invoice such as Incoterms neither did it state the payment terms. 6. It averred that the basis given by the Respondent is evidently malicious as the documentation availed bear the requisite features of a proper tax invoice. The invoice further avers the payment terms as appropriate. It added that the basis accorded by the Responded is not well-anchored in the law and as sequentially outlined in the Fourth Schedule of the EACCMA. 7. It was of the view that the Respondent did not even demonstrate appropriately to this which valuation method, as envisaged under schedule 4, that it used in the adjustment of the customs value is in issue. 8. The Appellant highlighted the case of **Commissioner of Customs & Border Control v Bidco Oil Refineries Limited Income Tax Appeal E011 Of 2021 (Being an appeal from the judgment of the Tax Appeals Tribunal dated 18/12/2020)** wherein the court upheld the decision of the Tribunal and dismissed the appeal by the commissioner taking note that, ‘‘the customs value of the Respondent's goods should have been made using the price actually paid for the goods and not the price insured as the goods had been over insured by 10% as agreed between the seller and the appellant as per industry practice." 1. The Appellant maintained that the Respondent erred in arbitrarily and maliciously departing from the Transaction Value method without due regard to the provisions enshrined in Section 122 and the Fourth schedule of the EACCMA. 2. With regards to the features and payment terms of a conventional tax invoice, the Appellant contended that the Respondent averred that the invoices availed by the Appellant were irregular and lacked the basic features of an invoice such as Inco terms and payment terms. Conversely, the Appellant pointed out that the invoices are not a creation of the Appellant but a creation of the Appellant's suppliers and that the Appellant has no control as to how the suppliers will design their invoices. 3. The Appellant stated that an invoice conventionally includes business's name, contact details, the customer's information, a unique invoice number, the date it was issued, a clear description of the goods or services provided with quantities and unit prices, applicable taxes, the total amount due, payment terms, and a due date. It argued that these elements provide all the necessary information for both the seller and buyer to track the transaction, ensure accurate payment, and maintain clear financial records. 4. Appellant contended that it has supplier invoices that bear all the requisite features of a conventional invoice. It maintained that for customs endeavours it is imperative that the invoice has extra features such as harmonized system codes for the imported products, shipping terms (currency & Inco terms) so as to aid the customs authorities assess duties and taxes, ensuring accurate valuation and compliance with import regulations. 5. According to the Appellant documentation has details showing the respective payment terms and shipping terms (FOB & CIF) contrary to the allegations by the Respondent. 6. It relied on the Case of **High Star Food Industries limited v Commissioner of Investigations and Enforcement Tax Appeal No 305 of 2020** in which the Tribunal in allowing the appeal reiterated that the Respondent must not be vindictive in applying a test. 1. The Appellant asserted that the Respondent acted vindictively in averring that it could not discern these terms yet they were readily available in the Appellant's documentations. 2. In relation to arbitral use of FOB value, the Appellant stated that the use of a constructed or reference FOB value of USD 1,000 per metric ton disregards the primary method of valuation, which is based on the price actually paid or payable for the imported goods. 1. It reiterated that the transaction value is the internationally recognized primary method, and its use ensures that the declared value accurately reflects the actual commercial reality of the sale. 2. According to the Appellant, the Respondent applied a fixed FOB value of USD 1,000 per metric ton over a three-year period from 2021 to 2024, without regard to actual transaction values, market conditions, or documented supplier agreements. It contended that this approach lacks both factual support and legal justification, and that it is inconsistent with the requirements of the EACCMA and the WTO Valuation Agreement, which mandates the use of the actual transaction value unless it can be proven to be unreliable or inaccurate. 3. The Appellant argued that the Respondent did not provide any comparative import data, price lists, or transactional evidence to support the rejection of the declared transaction value under Method 1. In the absence of such comparative analysis, the Appellant argued that the rejection lacks procedural and substantive merit. 4. It was of the view that the customs authority bears the burden of proving that the declared value is unacceptable, which has not been fulfilled in this case. 5. The Appellant averred that the Respondent ought to have examined the Appellant's records availed so as to determine the correct tax position. It stated that the relevant and requisite documentation was provided to the Respondent. In particular, the Appellant stated that the documents included supplier tax invoices, proforma invoices, payment confirmations, and correspondence with the supplier, which indicate the actual amount paid or payable for the goods. 6. According to the Appellant, the Respondent failed in its duties of reasonableness by disregarding and failing to fully examine the records that had been provided for review during the objection review process. 7. The Appellant argued that the Respondent issued the impugned objection decision without considering all the material facts and evidence that had been provided by the Appellant. It stated that the Objection Decision did not exhaustively address the issues and documentary evidence that had been adduced by the Appellant. 8. It relied on the case of **Republic v Public Procurement Administrative** **Review Board & 2 others Ex parte Pelt Security Services Limited (2018)eKLR**, where the court noted that, *"reaching at a decision on the basis of irrelevant considerations, or by disregarding relevant considerations, is one of the manifestations of irrationality... it is a reviewable error either to take into account of irrelevant considerations or to ignore relevant ones, provided that if the matter has been considered or the irrelevant one is ignored, a different decision or rule might (but not necessarily) have been made. Many errors of law and fact involve ignoring relevant matters or taking into account of irrelevant ones, ignoring relevant considerations or taking into account of irrelevant ones may make a decision or rule unreasonable."* 1. Apart from the foregoing, the Appellant argued that the amount demanded is principally incorrect. It noted that whereas the Respondent averred that the burden to defend that a tax decision is on the taxpayer under section 56(1) of the TPA, the Appellant argued that this provision does not give the Respondent the leeway to issue assessment in brazen breach of fundamental principles of taxation. It cited the case **High Star Food Industries limited v Commissioner** # of Investigations and Enforcement Tax Appeal No 305 of 2020 to point out that the Tribunal affirmed that the law does not accord the commissioner the license to raise assessment in total disregard of the fundamental principles of taxation that are espoused in Section 122 and Fourth Schedule the EACCMA. 1. The Appellant contended that the Respondent's action in elevating the Customs Value of its imported goods without basis or justifiable reason is arbitrary, capricious, unreasonable, unfair and contrary to the administration of justice and legitimate expectations of a taxpayer. The Appellant relied on the # case of Republic v Kenya Revenue Authority (exparte J.Mohamed) Civil **Application 312 of 2011**,where the court stated that, *‘whereas this Court is not entitled to question the merits of the decision of taxing authority, that authority must exercise its powers fairly and there ought to be a basis for the exercise of such powers. A taxing authority is not entitled to pluck a figure from the air and impose it upon a taxpayer without some rational basis for arriving at that figure and not another figure. Such action would be arbitrary, capricious and in bad faith, it would be an unreasonable exercise of power and discretion and that would justify the Court in intervening.’’* 1. The Appellant further cited the case of **Silver Chain Limited v Commissioner Domestic Tax & 3 others [2016] eKLR**, where the Court stated thus: *“The task of collecting taxes should not lead to discouraging taxpayers from carrying on with their businesses. If the taxpayers close shop, there will be no taxes to be collected. On the other hand, if no taxes are paid, there will be no funds to run government operations. This calls for a balance between the tax collectors and taxpayers whereby the process becomes inclusive as opposed to being unilateral. There must be fairness in the process of tax assessment."* # Appellant’s prayers 1. The Appellant prayed for the following reliefs: a The Respondent be compelled to vacate the demand notice issued b The Respondent to set aside demand notice issued. 1. The Respondent be compelled to revise any penalties and interests payable, 2. The cost of this Appeal is borne by the Respondent. # THE RESPONDENT’S CASE 1. In Response to the appeal, the Respondent relied on Statement of facts dated and filed on 24th October 2025 together with written submissions dated 9th April 2026. 2. On whether the Respondent erred in law and in fact in issuing a demand notice for short levied duties, the Respondent pleaded that material variances were established between invoices and bank remittances that were linked to the specific consignments under audit, undermining the reliability of declared transaction values. 3. The Respondent pleaded that resorting to Method 2 was justified as transaction value of identical goods (FOB reference: Tanzania/Uganda USD 1,000/MT, and Zambia/Malawi USD 850/MT) was applied to re-determine customs value. Short-levied duties of Kshs 11,543,691 were upheld as the Respondent sustained the demand and confirmed it payable. 4. On whether the demand notice was done in bad faith and in contravention of the respective provisions of the law, the Respondent pleaded that material variances were established between invoices and remittances that were linked to the specific consignments under audit, undermining the reliability of declared transaction values. 1. The Respondent stated that the Appellant's transactions were not supported by commercial documents, and that the amounts remitted did not reconcile with the declared invoice values hence there was need to issue a Demand Notice in respect of the variances. 2. On whether the Commissioner unjustifiably and capriciously departed from the Transaction Value Method as enshrined in law, the Respondent pleaded that the Fourth Schedule dictates that if the Customs value of imported goods cannot be determined under the provisions of Transaction value method 1, the Commissioner is allowed to use subsequent methods of valuation in a sequential manner where applicable. 3. The Respondent averred that during the post clearance audit the Respondent applied method 2 (Identical goods transaction value method) to assess compliance with the provisions of Section 122 of the EACCMA, as read together with Paragraphs 2 and 9 Fourth Schedule to the same Act. 4. The Respondent asserted that Paragraph 3 of the Fourth Schedule of the EACCMA allows the Commissioner to use the Transaction Value of Identical Goods method respectively in the event that the customs value of the imported goods cannot be determined under the provisions of paragraph 2 (Transaction Value). 5. The Respondent stated that in applying the provisions of paragraph 3, it rejected the transaction value and considered the imports of identical goods from the same country of exportation and Comparative FOB reference values were used for the following imports: Tanzania/Uganda: USD 1,000/MT; and Zambia/Malawi: USD 850/MT. 6. The Respondent maintained that resort to Method 2 was justified as transaction value of identical goods (FOB reference: Tanzania/Uganda USD 1,000/MT, and Zambia/Malawi USD 850/MT,) was applied to re-determine customs value. 7. On whether the features and payment terms of a conventional tax invoice are visibly indicated in the availed invoices, the Respondent stated that it gave the Appellant the chance to provide all source documents during the physical audit for verification to ascertain compliance with the provisions of Section 122 of the EACCMA, 2004 for the period under review, which it failed to acknowledge nor provide communication on the same. 1. It stated that Paragraph 3 of the Fourth Schedule of the EACCMA allows the Commissioner to use the Transaction Value of Identical Goods method respectively in the event that the customs value of the imported goods cannot be determined under the provisions of paragraph 2 (Transaction Value). It averred that in applying the provisions of paragraph 3, the Respondent considered the imports of identical goods from the same country of exportation. 2. On whether there was arbitral use of FOB value of Kshs1000/MT and inconsistent with the EACCMA and the WTO Valuation Agreement, the Respondent pleaded that declared transaction values were found unreliable because there were significant discrepancies between the declared customs values and the actual bank remittances made by the Respondent. 3. The Respondent averred that the comparable FOB values used to assess short levied duties were derived from imports of similar sugar products under similar conditions from Uganda, Tanzania and Malawi. Thus, the values were for identical goods imported from the same country of origin. 4. On whether the Commissioner failed in its duties of reasonableness by disregarding and failing to comprehensively examine the Appellant's records availed to determine the correct tax position, the Respondent averred that it requested the Appellant to provide records in support of its allegation. It maintained that the Appellant despite being accorded the opportunity, failed to provide critical source documents and neglected to do so thus failing to discharge the burden of proof. 5. The Respondent noted that the Appellant only provided bank statements and proforma invoices and that the Bank statements did not directly relate to the entries made for the imported goods or the entry numbers for consignments that were imported. 6. The Respondent stated that the proforma invoices provided by the Appellant confirmed the existence of the transactions, but they could not be linked to the declared invoices. The banking's established variances. As a result, the Respondent rejected the declared transaction value under Section 122(1) EACCMA and applied Method 2 (transaction value of identical goods). 7. The Respondent reiterated that Section 122(1) EACCMA was not satisfied as the transaction value did not reflect the "price actually paid or payable" as required by law. 8. The Respondent maintained that adjustments were warranted under Paragraph 9 of the Fourth Schedule since full payments exceeded declared values, and that the transaction value was deemed unacceptable under Paragraph 2. 9. On whether the Respondent issued the impugned objection decision without considering all the material facts provided by the Appellant, the Respondent contended that an opportunity to respond was granted to the Appellant to provide documents supporting the variances in the banking's with related companies but the Appellant never presented supporting documents. The Respondent then reviewed the objection as per Section 229(4) EACCMA, and findings issued. 10. The Respondent pleaded that the Objection was reviewed as per section 229(4) EACCMA and findings were formally communicated to the Appellant. 11. On whether the Respondent acted vindictively in exercising its judgement in disallowing the objection application, the Respondent stated that the audit was conducted pursuant to the provisions of (1) Section 235 & 236, which allow the Respondent to be satisfied post clearance, beyond a reasonable doubt that all customs procedures and regulations due process were followed. The Respondent stated that it was guided by the WTO TFA Article 7 paragraph 5 on PCA mandate, and was further guided by EAC PCA procedure manual. 12. The Respondent maintained that the Appellant failed to provide documents requested for verification such as commercial invoices, SWIFT payments confirmations, executed sale contracts, bills of lading, supplier correspondences, customer correspondences and supplier ledgers as extracted from the accounting system, among others. 13. It also maintained that the Appellant despite being accorded an opportunity, failed to provide critical source documents and neglected to do so thus failing to discharge the burden of proof. Thus, the short-levied duties of Kshs 11,543,691 were confirmed payable. 14. On whether the amount demanded is principally incorrect and will punitively affect the business of the Appellant in this harsh economic time, the Respondent asserted that it communicated the findings through a demand letter dated 7th March 2025, which gave the Appellant an opportunity to reconcile the variances and provide supporting documents which the Appellant failed to do. 15. The Respondent maintained that the demand for short levied taxes issued was properly, founded in fact and law, and that the review decision was fair, reasonable, and made in accordance with statutory provisions. 1. The Respondent filed written submissions dated 9th April 2026 wherein it submitted that it did not err in issuing a demand notice for short levied duties; that the demand notice was issued in good faith and in compliance with the applicable laws; and that the documents that the Appellant provided did not support reliance on Transaction Value Method therefore, the Respondent had to depart from the primary method of valuation. 2. The Respondent also submitted that the Appellant failed to provide valid and verifiable commercial documentation as required under customs law. It maintained that the Appellant’s invoices could not be verified. 3. It submitted that the use of comparable FOB values was neither arbitrary nor unlawful, but was firmly grounded in Paragraph 3 of the Fourth Schedule to EACCMA and aligned with the WTO Agreement on Customs Valuation, which Kenya has domesticated. 4. The Respondent submitted that it acted reasonably, fairly, and within the confines of the law by affording the Appellant multiple opportunities to provide supporting documentation but the Appellant failed to do so. 5. The Respondent relied on the following case laws: # Wananchi Group (K) Limited v Commissioner of Customs & Border Control [2024] KEHC E2037 (KLR); 1. **Gira Enterprises v Commissioner of Customs (2005);** 2. **Commissioner of Domestic Taxes v Trical & Hard Limited [2022]** **KEHC 9927 (KLR); and** 1. **Afya Xray Centre Limited v Commissioner of Domestic Taxes (TAT Appeal No. 70 of 2017** **The Respondent’s prayers** 1. The Respondent prayed that 2. Dismisses the Appeal in its entirety 3. Upholds the Tax Assessment as confirmed by the Objection decision 4. Orders the Appellant to pay for the costs of the Appeal. # ISSUE FOR DETERMINATION 1. The Tribunal has considered the parties’ pleadings and submissions, and has identified the single issue for its determination: **Whether the Respondent was justified in deviating from the transaction value method to the** # transaction value of identical goods method. **ANALYSIS AND FINDINGS** 1. Having identified the issue for determination, the Tribunal proceeds to analyse the same as hereunder: - # Whether the Respondent was justified in deviating from transaction value method to transaction value of identical goods method. 1. The Appellant argued that the Respondent's departure from the transaction value method as provided under the fourth schedule and Section 122 of the EACCMA, is ultra vires and indefensible. It asserted that the Respondent arbitrarily disputed the transaction values declared on the basis that the invoices submitted lacked features of a genuine invoice such as Inco terms and the payment terms. In the contrary, the Appellant stated that the Respondent was malicious as the documentation availed bear the requisite features of a proper tax invoice. 2. The Respondent on the other hand averred that the Appellant provided commercial invoices, SWIFT payments confirmations, executed sale contracts and bills of lading to support its objection. However the Respondent found significant discrepancies between declared customs values and actual bank remittances, indicating under-declaration which according to the Respondent, undermined the reliability of declared transaction values hence the deviation from Transaction Value Method. 3. Section 122(1) of the EACCMA provides for methods for determining value of imported goods liable to ad valorem import duty as follows: *Determination of value of imported goods liable to ad valorem import duty* *(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.* 1. Paragraph 2(a) of the of the Fourth Schedule to EACCMA provides for transaction value as follows: *2. (1) The customs value of imported goods shall be the transaction value, which is the price actually paid or payable for the goods when sold for export to the Partner State adjusted in accordance with the provisions of Paragraph 9…* 1. Paragraphs 2, 3, 4, 5, 6, 7 and 8 of the Fourth Schedule to EACCMA outlines various methods of determining value of imported goods liable to *ad valorem* import duty. The methods are as follows: 1. *transaction value;* 2. *transaction value of identical goods; c transaction value of similar goods;* 2. *reversal of order of application of deductive value and computed values;* 3. *deductive value;* 4. *computed value; and g fall back value.* 5. The Tribunal observes that the Appellant in principle that the above- mentioned methods are applied sequentially. In this regard, paragraph 1 of the Interpretative Notes under part II of the Fourth Schedule to EACCMA provides as hereunder: *1.Paragraph 2, 3, 4, 5, 6, 7 and 8 define how the customs value of imported goods is to be determined under the provisions of this Schedule. The methods of valuation are set out in a sequential order of application. The primary methods for customs valuation is defined in Paragraph 2 and imported goods are to be valued in accordance with the provisions of this paragraph whenever the conditions prescribed therein are fulfilled.* 1. This position was reiterated in the case of **Commissioner of Customs and Border Control v Keppel Investments Limited [2023] KEHC 18548 (KLR)** where the High Court stated as follows in relation to methods of valuation under EACCMA: *‘I therefore agree with the Tribunal that the first port of call in determining the customs value, is the transaction value and it is only when this cannot be determined or satisfied that the Commissioner can rely on other* *methods of valuation provided in the Fourth Schedule.’’* 1. The Appellant has a duty in law to prove that the Respondent erred in deviating from transaction value as declared by the Appellant. Section 223 of the EACCMA provides as follows: *223. In any proceedings under this Act—* *a. the onus of proving the place of origin of any goods or the payment of the proper duties, or the lawful importation, landing, removal, conveyance, exportation, carriage coast- wise, or transfer, of any goods shall be on the person prosecuted or claiming anything seized under this Act.* 1. Therefore, the key issue for determination is whether the Appellant demonstrated that the Respondent erred in deviating from transaction value method in favour of transaction value of identical goods method. 2. The Tribunal carefully examined the documents that the Appellant filed. The Appellant filed Single Administrative Documents (SADs), invoices, and SWIFT payments confirmations, in relation to imports from Uganda, Malawi and Zambia. 3. The Tribunal noted that some of the SWIFT payments confirmations that the Appellant filed were illegible therefore, inadmissible. 4. It was noted that in some instances, the Appellant filed SADs without accompanying invoices or invoices without applicable SADs therefore, verifying the transactions was impossible. For example, in cases of imports from Malawi, matching the invoice to respective SADs was not possible as the description marks on the all SADs were similar, and the description on the invoices were also similar. 5. The Tribunal further observes that the Appellant produced three invoices for imports from Malawi each dated 21st August 2023 and each reflecting an identical value of USD 950,000 CFR Nairobi. In the absence of any explanatory evidence demonstrating that this presented separate commercial transactions, The Tribunal found the duplication unusual and incapable of verification, further the swift payment confirmation produced a payment of only USD 200,000 made on 12th October 2023 which materially differed from the invoice amounts, no satisfactory explanation was offered to reconcile these discrepancies. The unexplained inconsistencies reasonably called into question whether the invoices reflected the actual price paid or payable as contemplated under paragraph 2 of the fourth schedule 6. Similar inconsistencies emerged with regards to the imports from Zambia, the Appellant provided one invoice dated 3rd March 2024 showing the cost of sugar was USD 615.00 per ton and that the total cost was USD 307,500. It provided two extracts of SWIFT payments confirmations one dated 18th May 2023 showing transfer of USD 106,000 and the second dated 29th August 2023 transferring USD 140,000 to Zambia. The Tribunal found that the amounts in the bank statement were lower than the figures on the invoice and that the dates on the SWIFT payment confirmations varied. Therefore, the documents availed were questionable on that basis. 1. In relation to imports from Uganda, the Tribunal noted that although the Appellant produced commercial invoices together with the relevant single administrative documents (SAD), the evidentiary record remains incomplete because the Appellant failed to produce corresponding and legitimate SWIFT payment confirmations capable of verifying that the amount declared to customs reflected the actual payment made to the suppliers. Since the transaction value method is founded upon the actual price payable the absence of verifiable payment evidence materially weakened the reliability of the declared customs value. 2. Further, in relation to imports from Uganda, the Tribunal was only able to match one SWIFT payment confirmation to the probable invoice that it is the SWIFT payment confirmation dated 2nd May 2025 for USD 21,000.00 corresponded with the commercial invoice dated 2nd May 2024 and adequately demonstrated the payment made in respect to that Importation. Unlike the remaining transactions the documentary evidence relating to this particular import was capable of verification. 3. Having found that the Appellant failed to produce reliable and verifiable documentary evidence for the remaining consignments, the Tribunal is satisfied that the Respondent possessed reasonable grounds for rejecting the declared transaction values in respect of those imports. Although the Appellant challenged the rejection of the transaction value method, it neither pleaded nor demonstrated that the Respondent improperly applied the transaction value of identical goods methods in determining the customs value. In the absence of such evidence, the Tribunal finds no basis for interfering with the Respondent’s application of the transaction value of identical goods method. 4. The Tribunal further finds that save for the single consignment supported by coherent and verifiable documentary evidence, the Appellant failed to discharge the evidentiary burden imposed under Section 223 of ECCMA, the Respondent was consequently justified in rejecting the declared transaction value of the remaining consignment and in applying the transaction value of identical goods method in accordance with the sequential valuation method prescribed under fourth Schedule of ECCMA. 1. Based on the foregoing, the Tribunal finds that the Appellant partially demonstrated that the Respondent erred in deviating from the transaction value method to the transaction value of identical goods methods. # FINAL DECISION 1. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal is partially meritorious and makes the following Orders: - 1. The Appeal be and is hereby partially allowed; 2. The SWIFT payment confirmation dated 2 nd May 2025 for USD 21,000.00 and the invoice dated 2nd May 2024 be and are hereby allowed; 3. Review decision dated 7th August 2025 is hereby varied as follows: 1. The sugar import in relation to the SWIFT payment confirmation dated 2nd May 2025 for USD 21,000.00 and the invoice dated 2nd May 2024 should be determined based on Transaction Value method; and 2. All other claims by the Appellant are hereby dismissed. 3. The Respondent is hereby directed to revise the Review decision dated 7th August 2025 to take into account order C(i) above within thirty days of this judgment; and d. Each party to bear its own cost. 1. It is so ordered. # DATED AND DELIVERED AT NAIROBI THIS 3RD DAY OF JULY 2026 SIGNED BY/FOR: **★ TH E JUDICIAR Y O F KENY A ★** **HON. EUNICE NJERI NGANGA HON. SANKALE SPENCER OLOLCHIKE** **HON. BERNADETTE MUTHIRA GITARI** **HON. BILLY GRAHAM OKUMU MIJUNGU** Tax Appeals Tribunal Tribunal Date: 2026-07-03 13:02:32