[2024] KETAT 465 (KLR)

Bluejay Limited v Commissioner of Legal Services and Board Co-ordination (Appeal E555 of 2023) [2024] KETAT 465 (KLR) (19 April 2024) (Ruling)

Neutral citation: [2024] KETAT 465 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal E555 of 2023

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

April 19, 2024

Between

Bluejay Limited

Appellant

and

Commissioner of Legal Services and Board Co-ordination

Respondent

Ruling

1. The Respondent moved the Tribunal vide the Notice of Motion application dated 18th October 2023 and filed under a certificate of urgency on 10th November 2023 and supported by an Affidavit sworn on 18th October 2023 by Angela Mwongeli, an Advocate of the Respondent, seeking for the following Orders: -a.Spent.b.That this Honourable Tribunal do issue security for the taxes amounting to Kshs. 5,272,752,325. 00 pending the hearing and determination of this application.c.That this Honourable Tribunal do issue security for the taxes amounting to Kshs. 5,272,752,325. 00 pending the hearing and determination of the instant Appeal.d.That the costs of this application be provided for.

2. The application is premised on the grounds, that: -i.The Respondent vide the Objection decision dated 10th July 2023 confirmed additional assessment of Kshs. 5,272,752,325. 00. ii.The Respondent has established that the Appellant is a foreign entity with a branch in Kenya and in the process of winding up its operations and has moved out of its registered offices.iii.On 16th October 2023, the High Court directed the Respondent in NBI HCCOMM MISC E146 of 2023 Kenya Revenue Authority vs. Bluejay Limited to seek the instant application before the Tribunal.iv.The Respondent is apprehensive that if the sums held on behalf of the Appellant are paid out, it would be left exposed as there is no other asset to hold on to secure the revenue.v.It is imperative and in the interest of justice that the Honourable Tribunal in exercise of its powers under Section 18 of TAT Act order the immediate payment of security to the tune of Kshs. 5,272,752,325. 00 from the monies held by Safaricom, Kenya Commercial Bank, Absa Bank Kenya, Stanbic Bank and Eco Bank Kenya Limited.vi.The Respondent has met the pre-conditions set out in Section 18 of the Tax Appeals Tribunal Act.vii.If the order sought are not issued, there is an impending risk of the Appellant frustrating the collection of revenue and the proceedings before the Tribunal will be an exercise in futility.viii.The application has been brought before the Tribunal expeditiously and without delay.

3. The Appellant opposed the application through a Replying Affidavit sworn by Kibet Kittony, the Director of the Appellant, on the 15th November 2023 and filed on the 21st November 2023. The grounds as highlighted in the Affidavit were as follows: -i.That the Applicant, on the 22nd July 2021 issued the Appellant with a notice of intention to conduct a system audit and requested for full and unlimited access the Appellant’s business operation systems for the period 2017 to 2021. ii.That the Appellant granted the Respondent access as was requested and the Respondent responded on 22nd August 2022 with a request for further information and subsequently issued a letter of findings dated 1st December 2022. iii.That the Respondent issued the Appellant with a letter of assessment dated 12th April 2023 relating to Corporate income tax, Withholding tax on winnings, Excise tax and betting and gaming tax amounting to Kshs. 5,272,752,325. 00, to which the Appellant lodged an Appeal on 9th August 2023. iv.That the parties to the Appeal have been exploring amicable ways to resolving the dispute.v.That the Appellant did not engage and is not engaged in a tax evasion scheme, the allegation constitutes to the commission of a crime on the part of the Appellant. The matters ought to be proved and cannot be casually made as mere statements before a judicial body with decision making authority.vi.That the Appellant vide the letter dated 18th May 2023 informed the Respondent of its cessation of business operation in Kenya, premised on the termination of the brand license agreement between the Appellant and Merryvale Limited, which is the entity that owns ‘Betway’ trademark and brand for various commercial and strategic purposes.vii.That the Appellant has been cooperating with the Respondent regarding the tax dispute and thus the Respondent is unnecessarily apprehensive that there is an impending risk of the Appellant frustrating the collection of revenue.viii.That the sentiments that the Respondent ought to be paid the sums held by third parties on behalf of the Appellant pursuant to Section 43 of the TPA are premature, unfair and procedurally flawed.ix.That the Appeal is still pending before the Tribunal and the Appellant cannot be said to be liable for the taxes in dispute.x.That the Appellant has already paid what is due in taxes through the self-assessment and the dispute before the Tribunal is one of unpaid taxes whose quantum is yet to be determined.xi.That the Appellant notes that the application is premised on Section 18 of the Tax Appeals Tribunal Act, which provides that the Tribunal is empowered to make an order for stay or otherwise affecting the operation or implementation of the decision under review as it considers appropriate, for the purposes of securing the effectiveness of the proceedings and determination of the Appeal. That the application does not seek to meet the intended objective of an application made under Section 18 of the TAT Act.xii.That the application is made in bad faith and to defeat the purposes of the proceedings.xiii.That no prejudice shall be occasioned on the Respondent and that it would be gross injustice to impose enforcement measures on the Appellant when the matter is still under dispute.xiv.The Appellant prayed for the application to be dismissed.

Written Submissions by Parties 4. The parties were directed to canvass the application by way of written submissions on the 23rd of November 2023, the Respondent did not file its written submissions.

5. The Respondent in its written submission dated 22nd November 2023 and filed on 23rd November 2023 identified three issues for determination argued under the following headings, namely;i.Whether the prayers by the Respondent/Applicant can be sustained under Section 18 of the Tax Appeals Tribunal Act, 2013;ii.Whether the application as lodged before the Honourable Tribunal is appropriate as the taxes are yet due on the Appellant; andiii.Whether the Respondent/Applicant is required to substantiate the tax evasion claims.

6. The Appellant submitted that a reading of Section 18 of the TAT Act serves to empower the Tribunal to make an order for stay or otherwise affecting the operation or implementation of the decision under review in order to preserve the dispute before it. This presupposes that a decision by the Respondent is one that can be implemented for all intents and purposes save for such an order that may be made by the Tribunal to ensure status quo and that the proceedings before the Tribunal are not a mere academic exercise.

7. The Appellant submitted that the purposes of Section 18 was to offer reprieve to taxpayers who lodge Appeals at the Tribunal to prevent any enforcement action pending the hearing and determination of the matter, and can only be invoked by the Appellant to stay the implementation of the Objection decision. The Respondent cannot purport to invoke this Section to assist it in implementing its own decision.

8. The Appellant submitted that the Tribunal doses not have the jurisdiction to grant the prayers by the Respondent based on the contents of the application. Further, that the Applicant is misinterpreting Section 18 of the TAT Act and that the Tribunal to allow the proceedings to progress unhindered by the Applicant’s sideshows.

9. The Appellant submitted that the taxes requested by the Respondent are yet to be determined and are yet to crystalize as due and payable by the taxpayer, it would therefore be a mockery of justice and an abuse of the due process if the Applicant is permitted to seek mandatory payment of the taxes in dispute while the Appeal is pending determination.

10. The Appellant submitted that the Respondent has not discharged its burden of proof in convincing the Tribunal that the Appellant is unlikely to pay any taxes should the decision be in its favour.

11. The Appellant submitted that despite closure of its operations in Kenya, it has been cooperating with the Respondent regarding the tax dispute, that it has paid all taxes through the self-assessment and is not attempting to abscond its tax obligations and not a flight risk as seemingly alleged and there is a dispute pending before the Tribunal. Further, the Appellant has local directors who are residents of Kenya and cannot disappear into thin air as suggested by the Respondent.

12. The Appellant submitted that the Respondent in its Affidavit in support of the application intentionally and unlawfully made false statements, that the Respondent’s notice of Assessment did not contain any finding on tax evasion by the Appellant, the allegations of tax evasion are new and were not outlined in the Respondent’s pleadings and is therefore introduced to mislead the Tribunal in granting the orders sought.

13. The Appellant relied on the following cases;i.Sawa Sawa Company Limited vs. Commissioner of Domestic Taxes, TAT No. 107 of 2022;ii.Subru Motors Limited vs. Commissioner of Domestic Taxes, TAT No. 109 of 2016;iii.Shop Deliver Limited vs. Commissioner of Domestic Taxes, TAT No. 141 of 2019;iv.Kenya Revenue Authority vs. Kenya Commercial Bank Limited & Another, Misc. App No. E023 of 2022;v.Chemicals Magadi Limited vs.Commissioner for Investigations & Enforcement, TAT No. 19 of 2021;vi.Kenya Power & Lighting Company Limited vs. Rassul Nzembe Mwadzaya [2020] eKLR;vii.Independent Electoral and Boundaries Commission & Another vs. Stephen Mutinda Mule & 3 Others [2014] eKLR; andviii.John Ntoribi Lentari vs. Republic [2018] eKLR.

14. The Appellant prayed for the application to be dismissed with costs.

Analysis and Findings 15. The Respondent’s application is premised on Section 18 of the Tax Appeals Tribunal Act, which Section provides that;“Order to stay or affect the implementation of the decision under reviewWhere an appeal against a tax decision has been filed under this Act, the Tribunal may make an order staying or otherwise affecting the operation or implementation of the decision under review as it considers appropriate for the purposes of securing the effectiveness of the proceeding and determination of the appeal.”

16. It was argued by the Appellant that the purposes of Section 18 is to offer reprieve to taxpayers who lodge Appeals at the Tribunal to prevent any enforcement action pending the hearing and determination of the matter, and can only be invoked by the Appellant to stay the implementation of the Objection decision or any other appealable decision and cannot be invoked to assist in the implementation of the Respondent’s decision.

17. It is noteworthy that the order sought are discretionary in nature and the Tribunal ought to exercise such discretion in a manner that does not impede the dispensation of justice or cause hardship on any party before it.

18. The Tribunal noted that the Respondent sought for the orders, as;“That the Honourable Tribunal do issue security for the taxes amounting to Kshs. 5,272,752,325. 00 pending the hearing and determination of this instant Appeal”

19. From a reading of the above order, as framed, its is not clear to this Tribunal against whom the order should be directed to other than the Tribunal itself, which is the arbiter in these circumstances.

20. Be that as it may, it is to be noted that the TAT Act as framed, does not make any express provisions or confer jurisdiction to it to entertain applications seeking for security for taxes of an Appeal before it. However, such power/jurisdiction is expressly donated to the High Court under the purview of Section 43 of the Tax Procedures Act, 2015.

21. The Respondent submitted that prior to the institution of the instant application, it had filed an application seeking similar orders before the High Court in NBI HCCOMM MISC E146 of 2023 Kenya Revenue Authority vs. Bluejay Limited and stated that it was directed to lodged the same before this Tribunal, which application was grounded on Section 43 of the TPA, Section 43 (1) and (3) of the TPA reads as follows;“(1)This section applies if the Commissioner reasonably believes—(a)that a taxpayer—(i)has made taxable supplies, has removed excisable goods, or has derived an income, in respect of which tax has not been charged; or(ii)has collected a tax, including withholding tax, that has not been accounted for; and(b)that the taxpayer is likely to frustrate the recovery of the tax.“(3)The Commissioner shall apply, in the absence of the taxpayer, to the High Court for an order against any person holding funds belonging to the taxpayer, prohibiting that person from transferring, withdrawing, disposing of or otherwise dealing with such funds.”

22. The Tribunal’s reading of Section 43 (3) of the Tax Procedures Act above, is that the jurisdiction to deal with application and to grant such orders is the preserve of the High Court and not the Tribunal.

23. The Tribunal is minded of the circumstances of the instant Appeal and the amounts in assessed taxes alluded to be due. It remains the stern duty of this Tribunal to ensure that taxes are payable where they are due on the one hand and not payable where they are not due on the other hand.

24. Having considered the application, the circumstances prevailing and in the interest of justice, it is the Tribunal position that this matter ought to be fixed for hearing and determined on a priority basis.

25. Consequently, the Respondent’s application dated 18th October 2023 and filed on the 10th November 2023 is incompetent and therefore fails.

Disposition 26. In the upshot of the foregoing, the Tribunal finds that the application is untenable in law and makes the following Orders; -a.The application be and is dismissed.b.The matter to be fixed for hearing within Thirty (30) days of the date of delivery of this Ruling.c.Each party to bear its own costs.

27. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 19THDAY APRIL, 2024ERIC NYONGESA WAFULACHAIRMANMUTISO MAKAU ABRAHAM K. KIPROTICHMEMBER MEMBERELISHAH N. NJERU EUNICE N. NG’ANG’AMEMBER MEMBER