[2024] KETAT 425 (KLR)

Brooklyn Dairies Limited v Commissioner of Domestic Taxes (Tax Appeal E005 of 2023) [2024] KETAT 425 (KLR) (22 March 2024) (Judgment)

Neutral citation: [2024] KETAT 425 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E005 of 2023

RM Mutuma, Chair, EN Njeru, M Makau, AM Diriye & B Gitari, Members

March 22, 2024

Between

Brooklyn Dairies Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a limited liability company duly incorporated under the Companies Act, Cap 486 of the laws of Kenya and is engaged in the business of water bottling and refill.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act and the Kenya Revenue Authority mandated with the responsibility for the assessment, collection and accounting for all tax revenue as an agent of the Government of Kenya. The Respondent is further mandated with the responsibility of the administration and enforcement of the statutes set out under the Schedule to the said Act.

3. The Appellant was issued with additional Excise and VAT assessments on 12th October 2022 on account of variance established by the Respondent on both Excise and VAT, arising out 69,130 Excise stamps ordered by the Appellant and issued by the Respondent but which the Appellant failed to activate as required.

4. The Appellant objected to the assessments on 25th October 2022, and the Respondent issued its Objection decision on 7th December 2022 and confirmed the assessments being ; Excise duty – Kshs 7,094,455. 20 for the period March 2022, and VAT – Kshs 7,639,208. 01 for the period March 2022, all totaling Kshs 16,601,078. 00, whose payment was demanded by the Respondent.

5. The Appellant being dissatisfied with the Respondent’s Objection decision filed the appeal herein on 6th January 2023.

The Appeal 6. The Appellant filed its Memorandum of Appeal on 6th January 2023 and set out the following grounds of Appeal;i.That the Respondent erred in assessing for Excise tax and VAT on stamps which were stolen.ii.That the Respondent erred in assessing the Appellant on basis of communication breakdown.iii.That the Respondent erred in assessing the Respondent on the basis of assumed figures rather than actual sales figures.

The Appellant’s Case 7. The Appellant has set out its case on the Statement of Facts dated 6th January 2023 and filed on same date, and the written submissions dated 27th June 2023 and filed on 29th June 2023.

8. The Appellant stated that the subject stock of stamps was stolen and the matter was validly reported both to the Respondent and the Kenya Police Service.

9. The Appellant further stated the Police is still investigating the matter and therefore it would be wrong to conclude an issue that is still under investigation.

10. The Appellant also contended that a stolen stamp cannot be treated as a sale where all the evidence is available on what transpired to the stamps.

11. The Appellant also asserted that from the Respondent’s responses it was clear that the assessments were based on the Appellant’s failure to respond to its email, which approach the Appellant contended was not justified. The Appellant further asserted that communication breakdown does not mean one is guilty and the only remedy is a tax assessment. The Respondent ought to have used other methods to reach the Appellant, including telephone contact, it stated.

12. The Appellant stated that the Respondent was wrong in assuming that the stamps were used in any way since they had already been earlier recalled thus rendering them unusable.

13. The Appellant stated that on 22nd August 2022 it lost 69,130 stamps during a vandalisation of its motor vehicle KBA473B, which incident was duly reported to the Imara Daima Police Station, and the report entered in the Police Occurrence Book on 23rd August 2022.

14. The Appellant also stated that it reported the said theft of stamps to the Respondent vide the EGMS portal on 23rd August 2022.

15. It subsequently received a notice on 6th October 2022 from the Respondent for issuance of assessments, and on 13th October 2022 a demand was issued for Kshs 16,601,078. 00, upon which the Respondent indicated the same was on account of additional assessments for Excise duty and VAT in regard to the lost unaccounted Excise stamps.

16. The Appellant asserted that it sufficiently accounted for the 69,130 subject stamps, having established that the same were lost during a theft incident on 22nd August 2022 and that the Respondent ought not to have conducted its assessment based on the assumptions of the highest SKU.

17. In its submissions, the Appellant submitted that Section 25(1) of the Excise Duty Act recognizes the extent of the Appellant’s obligations towards ensuring proper accounting of excisable goods under excise control. It maintained that it satisfied its obligations to account for the lost stamps, including all business revenue- generated or otherwise with respect to the Excise stamps.

18. It was a submission of the Appellant that the meaning of “account for” as defined by the Black’s Law Dictionary, 9th Edition at page 22 (17 c) means;-“To furnish a good reason or convincing explanation for; to explain for the cause of …” or “a statement by which someone seeks to describe or explain an event”, or “A detailed statement of the debits and credits between parties to a contract or to a fiduciary relationship; a reckoning of monetary dealings.”

19. The Appellant further submitted that in line Section 25 (1), upon demand by the Respondent for it to be furnished with documents for a thorough compliance check, the Appellant supplied the Respondent with Police abstract from Imara Daima Police station, dated 22nd August 2022 on report of loss of two rolls of 69,000 excise stamps issued by KRA, Investigation report for OB No. 12/22/08/2022, pictures of the vandalized vehicle, written statement explaining the circumstances the stamps were in the vehicle, evidence of vehicle ownership, stock movement records, sales and cash reports for the period in issue, Z-reports, bank statements indicating Mpesa transactions undertaken by the Appellant. It stated that the Respondent did not discredit the said documents indicative of the Appellant’s financial and business position during the period, to assert that no business was conducted.

20. The Appellant submitted that it has satisfied Section 27 (2) of the Excise Duty Act relating to the accounting of quantity of excisable goods;“A licensed manufacturer shall notify the Commissioner of any discrepancies between the manufacturer’s actual and recorded inventory as soon as the manufacturer becomes aware of the discrepancy.”

21. The Appellant also submitted that the Respondent has not laid any fault on the Appellant as to the procedure of notification of such loss nor indicated that any demands to be supplied with any further particulars of the loss of stamps, at the time when the Appellant reported the said loss to it.

22. The Appellant submitted that it had discharged its burden of proof under the law and cited the case of SAJ Ceramics Ltd vs. Commissioner of Domestic Taxes (2022) eKLR, where it was stated that the taxpayer need only show that an assessment is arbitrary and that the burden of proof would be on the tax authority to show existence of and the amount of any deficiency.

23. The Appellant submitted that it provided sufficient evidence as enumerated in the foregoing submissions, and the same remains unchallenged by the Respondent, and asserted that it was incumbent upon the Respondent to discharge its burden that the Appellant did not submit sufficient evidence in accounting for the excise stamps. It cited the case of KRA vs. Man Diesel & Turbo SE, Kenya (2021) eKLR, where it was stated; -“The shifting burden of proof in tax disputes flows from the presumptions of correctness which attaches to the Commissioner’s assessment or determinations of deficiency.The Commissioner’s determination of tax deficiencies is presumably correct. Although the presumption created by the above provisions is not evidence in itself, the presumption remains until the taxpayer produces competent and relevant evidence to support its position.If the taxpayer comes forward with such evidence, the presumptions vanishes and the case must be decided upon the evidence presented, with the burden of proof on the taxpayer.”

24. The Appellant therefore submitted that it accounted for the lost stamps to the extent required of it by law and that the Respondent has not raised any objection doubt as to the accounting records supplied to it. It asserted that having submitted all documents before the Respondent, in line with Section 56 of the TPA, it had satisfied its burden of proof to submit all the necessary documentation to support its case.

25. The Appellant also submitted that the Respondent’s assessment was erroneous for computing estimates, and that the assessment and Objection decision upholding the assessment is irregular, illegal and invalid.

26. The Appellant submitted that the Respondent was wrong for assessing the Appellant on assumed figures other than actual sales, VAT and Excise duty on lost stamps. The Appellant stated that it based its submission on Section 30 (b) of the TAT Act that the Objection Decision dated 7th December 2022 by the Respondent should not have been made or should have been made differently.

27. It was a submission of the Appellant that the basis of the Respondent’s computation was wrong, as it conducted its assessment using the highest SKU in reference to stamps unaccounted for, whereas the Appellant in the circumstances had accounted for lost stamps, and there was no revenue generated in the period in issue, and therefore the provision allowing computation on estimates were not applicable in the current circumstances of accounted stamps.

28. It was a further submission of the Appellant that pursuant to Section 14 (2) of the Excise Duty (Excisable Goods Management System) Regulations, the Respondent shall only compute Excise duty and other taxes on unaccounted stamps, where a taxpayer has been unable to account for the Excise stamps. Regulation 14 (2) provides;“(2)Where a manufacturer or importer of excisable goods cannot account for any excise stamps issued to him by the Commissioner, the Commissioner shall compute the excise duty and other taxes on the unaccounted stamps based on the highest excise rate of excise duty, value and volume of excisable goods manufactured or imported by the manufacturer or importer as the case may be”.

29. The Appellant therefore submitted that having sufficiently accounted for the stamps in issue, to the degree and evidentiary burden required of it, the Respondent was not entitled to cause computation of Excise duty based on assumptions and estimate of highest volumes.

30. The Appellant further relied on the cases of;-i.Republic of Kenya Ex-parte Tom Ojiambo Ojienda SC, T/A Prof. Tom Ojienda & Associates (2018) eKLR.ii.Pastoli vs. Kabale District Local Council & others (2008) 2 EA 300. iii.Testimony Motors Ltd vs. The Commissioner of Customs (URA) (2012) HC CS 212.

31. It was a further submission of the Appellant that in giving a proper account, and pursuant to the provisions of Sections 23 and 57 of the TPA, it maintained its record of documentation required to enable its tax liability to be ascertained by the Respondent. It further stated that it produced admissible and corroborated evidence relating to its affairs and the circumstances of the theft incident, thereby accounting for the lost stamps.

32. The Appellant submitted that in view of the foregoing, the Respondent was not justified to cause an assessment based on estimated assumptions on the highest volumes where the taxpayer or such indirect method of assessment to estimate tax liability. It relied on the case of Family Signature Ltd vs. The Commissioner of Investigations & Enforcement TAT 25 of 2016, where it was stated that; -“Where the Respondent is prompted to resort to an alternative method of determining the income and assessing the tax liability of a taxpayer, it has the onerous responsibility to act reasonably by exercising best judgement informed by pragmatic and reasonable considerations that do not in any manner result in a ridiculously high income margin.”

33. The Appellant further submitted that the Respondent was wrong in that it conducted its VAT and excise duty assessment based on the highest SKUs and failed to consider the material that was placed before it, proving that the Appellant did not engage in any water bottling and refilling business during the period in question, as evidenced by its bank statements, and that the stamps in issue had been stolen. The Respondent disregarded the Police Investigations report, and failed to conduct its own investigations as to the affairs of the Appellant, which would have informed the basis of their decision.

34. The Appellant in conclusion submitted that the Respondent issued its assessments and Objection decision prematurely, as the communication from the Respondent to the Appellant was not received as the emails went to the spam folder, which the Appellant produced to the Respondent to confirm the fact, but the Respondent disregarded.

Appellant’s Prayers 35. By reason of the foregoing the Appellant prayed thati.The Respondent’s Objection decision be set aside; and ii. Its Appeal herein be allowed with costs.

The Respondent’s Case 36. The Respondent has set out its case on the Statement of Facts dated 2nd February 2023 and filed on the same date, and the written submissions dated 7th July 2023 and filed on 12th July 2023.

37. The Respondent stated that it issued the Appellant with additional Excise tax and VAT assessments vide the Appellant’s iTax account on 12th October 2022.

38. It stated that the assessments were done on variance established on both VAT and Excise tax upon request of stamps by the Appellant which order was issued but the Appellant failed to activate. The Respondent further stated that it issued the Appellant with a pre-assessment notice to charge the stamps affixed and not activated using the highest stock keeping unit (SKU) of 18. 9 liters previously declared by the Appellant as per Section 14 (2) of the Excise Duty (Excisable Goods Management System) Regulations, 2013.

39. The Respondent stated that the Appellant failed to activate 69,130 Excise stamps out of the 210,000 excise stamps issued to it.

40. The Respondent further stated that it used the highest SKU declared which is 18. 9 liters to assess the Appellant: -Excise Duty Assessmenta.Unutilized stamps - 69,130b.Wastage at 1% of issued stamps - 2,100 (1% of 210,000. )c.Unaccounted stamps - 67,030d.Highest SKU declared - 18. 9 litrese.Expected activated litres - 1,266,868(unutilized /unaccounted stamps x Highest SKU declared)Expected Excise Duty (Kshs 6. 03 / litre) - 7,639,208. 00

41. The Respondent stated that it used the information above to assess the Appellant for VAT due as below: -VAT Assessmenta.Expected Activated Litresb.(unutilized/unaccounted stamps x SKU) - 1,266,867c.Estimated price per litre ( Kshs ) – 35c.Estimated sales - 44,340,345c.VAT @ 16 % - 7,094,455

42. The Respondent stated that the additional assessments were raised purely on relying on the estimates by using the highest SKU and the variances brought to charge in the respective month of March 2022.

43. The Respondent in response to the Appellant’s grounds of objection stated that:-i.The Respondent had issued a Public Notice which was to be strictly con Notice and return the V3 excise stamps by 28th March 2022. ii.Though the Appellant availed some documentation, the evidence was not conclusive as to whether the incident actually occurred.iii.The Respondent could not comprehend why the Appellant was moving around with excise stamps which had not been activated and also considering that the Appellant was no longer in production of bottled water due to untenable business.iv.The Respondent expressed its view that the law does not warrant sloppy record keeping.v.The Respondent was limited in establishing whether the Appellant had been producing and selling bottled water for the period from February 2022 to March 2022. vi.The Excise stamps were unaccounted for and the Respondent correctly issued the assessments as provided by law.

44. The Respondent further stated that though the Appellant had asserted that the subject stamps were not unaccounted for and had indeed been stolen on 22nd August 2022, nonetheless the Respondent requested for more evidence to support this breakage considering that these Excise stamps were V3 stamps and ought to have been returned earlier or accounted for. The Respondent requested the Appellant to support this theft claim by providing pictures of the vandalized car, evidence of ownership of the car, and written submission on why the Appellant was moving around with stamps. Further the Appellant was required to provide the following documents; stock movement records, bank and Mpesa statements, sales summary report, Z- reports, cash books and audited accounts for the period January 2019 to date for a though compliance check.

45. The Respondent stated that the Appellant failed to provide the said requested information within the provided timelines, which correspondence the Appellant contends was sent to its spam mail folder.

46. The Respondent submitted that according to the Public Notice issued to excisable goods manufacturers and importers, taxpayers including the Appellant who had stamps issued to it due to its engagement in supply of bottled water, was supposed to utilize the current generation (as at that time) of excise stamps by 26th January 2022 and return any unutilized old generation excise stamps being phased out by 28th March 2022.

47. The Respondent also submitted that it was guided by Regulation 13 (1) of the Excise Duty ( Excisable Goods Management System ) Regulations, 2017, which provides as follows;-“(1)A manufacturer or an importer of excisable goods shall return the unused excise stamps to the Commissioner when –i.The manufacturer stops manufacturing;ii.There are defects in the excise stamps sheets or reels;iii.There is a discrepancy between the declared and the verified imports of the excisable goods;iv.The excise stamps have been declared out of use by the Commissioner;v.The excisable goods have been excluded from the requirements of these regulations.”

48. The Respondent submitted that it had rolled out a new generation of Excise stamps for bottled water and other excisable goods and had communicated the same to the stakeholders through various public notices, emails and taxpayer engagement forums, whereby it was indicated that roll-out of excise stamps for water would be from 28th December 2021.

49. It was a submission of the Respondent that the Appellant claimed that 69,130 old generation Excise stamps were lost through a theft incident on 22nd August 2022, which is date that is five (5) months after the deadline date for it to return any unutilized old generation excise stamps.

50. It was also submitted by the Respondent that Regulation 34 of the Excise Duty (Excisable Goods Management System) Regulations, 2017 provides that;-“A person who fails to comply with the provisions of these regulations commits an offence.”

51. The Appellant failed to substantiate why it was in possession of the old generation stamps five months the set deadline after they had been withdrawn or declared out of use.

52. It was also a submission of the Respondent that it therefore proceeded to carry out an assessment based on Regulation 14 (2) of the Regulations, which provide as follows;-“(2)Where a manufacturer or importer of excisable goods cannot account for any excise stamps issued to him by the Commissioner, the Commissioner shall compute the excise duty and other taxes on the unaccounted-for stamps based on the highest rate of excise duty, value and volume of excisable goods manufactured or imported by the manufacturer or importer as the case may be.3. In computing excise duty in the case of unaccounted for excise stamps, the Commissioner shall allow for wastage and damages which shall not exceed one percent of the quantity of the issued stamps.”

53. The Respondent submitted that in one of the Appellant’s grounds of objection, the Appellant stated that it did not manufacture any bottled water from the period March 2022 and that the Excise stamps were unutilized, but at the same time stated that the stamps were in his car as he mostly operated from his car since the office location had minimal space and unreliable security.

54. The Respondent also submitted that the Appellant did not provide sufficient information to help ascertain the true position as to why the Appellant was still in possession of old generation Excise stamps in a place where it conducts its business.

55. It was a submission of the Respondent that though the Appellant stated that it reported the issue of theft to the Police and provided an investigation report, stating the matter was still under investigation, the Respondent submitted that the report is not conclusive as to whether the incident actually happened as the matter was still under investigation as at the date of the Objection decision. The Respondent was therefore not in a position to ascertain whether the Appellant produced and sold bottled water for the period February 2022 and August 2022.

56. The Respondent cited the case of TAT No. 25 of 2016 Family Signature Ltd vs. The Commissioner of Investigations and Enforcement, where one of the issues was “whether the Respondent was justified in employing an alternative method of assessing the Appellant’s estimated liability.” The Tribunal held that when the Respondent is prompted to resort to an alternative method of determining the income and in assessing the tax liability of a taxpayer, it has the onerous responsibility to act reasonably by exercising best judgement informed by pragmatic and reasonable considerations that do not in any manner result in a ridiculously high-income margin.

57. The Respondent therefore submitted that it exercised its best judgement appropriately in the circumstances thereby arriving at the tax assessment as it did.

58. The Respondent also submitted that the Appellant failed to discharge its evidential burden of proof under Section 107 (1) of the Evidence Act in demonstrating that the assessment by the Respondent was in any reasonable manner incorrect or excessive.

59. The Respondent cited the case of;i.TAT No.28 of 2018 Joycott General Contractors Ltd vs. Kenya Revue Authority.

Respondent’s Prayers 60. By reason of the submissions aforesaid the Respondent prayed that; -i.The Objection decision be upheld; andii.The Appellant’s Appeal herein be dismissed with costs;

Issues For Determination 61. The Tribunal having carefully considered the filings and submissions made by the parties is of view that the Appeal herein distils into two issues for determination, as follows: -i.Whether the Appellant sufficiently accounted for 69,130 excise stamps issued by the Respondent.ii.Whether the Respondent was justified in issuing the additional Excise Duty and VAT assessments against the Appellant.

Analysis And Determination 62. The Tribunal having established the issues for determination, it shall proceed to analyze the same as herein under;

i. Whether the Appellant sufficiently accounted for 69,130 excise stamps issued by the Respondent. 63. The dispute herein arose when the Appellant was issued with additional Excise and VAT assessments on 12th October 2022 on account of variances established by the Respondent on both Excise and VAT, on account of 69,130 Excise stamps ordered by the Appellant and issued by the Respondent, but which is contended that the Appellant failed to activate or account as required by the Excise Duty Act and Regulations thereunder.

64. The Appellant objected to the assessments on 25th October 2022, and the Respondent issued its Objection decision on 7th December 2022 in which it confirmed the Excise duty and VAT assessments.

65. The Appellant stated that the subject stamps were stolen and an appropriate report made to the police, who were investigating the matter, and it was wrong for the Respondent to conclude the matter while it was still under investigation.

66. The Appellant also contended that stolen stamps cannot be treated as a sale where all the evidence is available on what happened to the stamps. It stated that it was wrong for the Appellant to assume that the stamps were used in any way since they had already been earlier recalled thus rendering them unusable.

67. The Appellant contended that it sufficiently accounted for the 69,130 Excise stamps, having established that the same were lost during a theft incident on 22nd August 2022 and that the Respondent ought not to have conducted its assessment based on assumption of the highest SKU.

68. The Appellant submitted that it submitted to the Respondent, the police abstract from Imara Daima Police Station dated 22nd August 2022 on a report of loss of two rolls of 69,130 Excise stamps issued by the Respondent, OB No. 12/22/08/2022, among other documents, and further submitted that it had discharged its burden of proof under the law.

69. The Appellant further submitted that it had accounted for the lost stamps to the extent required of it by law, and that the Respondent did not raise any objection or doubt as to the accounting documents furnished.

70. On its part, the Respondent stated that it issued the Appellant with additional Excise duty and VAT assessments vide the Appellant’s iTax account on 12th August 2022, after the Appellant failed to activate or account for 69,130 stamps issued to it by the Respondent.

71. The Respondent stated that the assessments were done on variances established on both VAT and Excise upon the request for stamps by the Appellant, which order for 69,130 stamps was issued but the Appellant failed to activate them as required.

72. The Respondent further stated that it issued the Appellant with a pre-assessment notice to charge the Excise stamps affixed and not activated using the highest Stock Keeping Unit (SKU) of 18. 9 litres previously declared by the Appellant in line with the provisions of Regulation 14 (2) of the Excise Duty (Excisable Goods Management System) Regulations, 2013.

73. The Respondent also stated that though the Appellant had asserted that the subject stamps were unaccounted for, and had been alleged stolen on 22nd August 2022, nonetheless the Respondent requested for more evidence to support this theft, considering these were V3 stamps and ought to have been returned to the Respondent earlier or accounted for. The Respondent requested the Appellant for supporting documents for the claim by providing pictures of the vandalized car, investigation report, written submission on why the Appellant was moving around with stamps in his car, evidence of vehicle ownership, stock movement records, bank and Mpesa records, sales summary, Z-report, cash books, and audited accounts for the period January 2019 to then current date for a thorough compliance check.

74. The Respondent further stated that the Appellant failed to provide the said requested information within the timeline provided, and contended that this correspondence was sent to its spam mail.

75. It was a submission of the Respondent that though the Appellant provided the police abstract, police investigation report and pictures of the vandalized vehicle, it did not provide the rest of required information, and its evidence was still inconclusive as to whether the incident actually happened as the matter was still pending under investigation as at the date of issuance of the Objection decision, thus the Respondent was not in a position to ascertain whether the Appellant sold bottled water for the period February 2022 and August 2022, and therefore exercised its best judgement appropriately in arriving at the tax assessment as it did.

76. The statutory basis of the subject assessments is Regulation 14 (2) of the Excise Duty (Excisable Goods Management System) Regulations, 2017, which provides;-“(2)Where a manufacturer or importer of exercisable goods cannot account for any excise stamps issued to him by the Commissioner, the Commissioner shall compute the excise duty and other taxes on the unaccounted for stamps on the highest rate of excise duty, value, and volume of excisable goods manufactured or imported by the manufacturer or importer as the case may be”.

77. The other provision which is pertinent in view of the arguments submitted in the instant appeal is Section 35 of the Excise Duty Act, which provides; -“35. A licensed manufacturer or supplier of excisable goods or services shall submit an excise duty return, in the approved form and in the prescribed manner, for each calendar month not later than the twentieth day of the succeeding month, whether or not excise duty is payable for that month.”

78. The Excise Duty Act and Regulations provides a mechanism for accounting for the issued Excise stamps, which would in the Tribunal’s view entail submission of a return to the Respondent in the prescribed form and time, whether or not Excise duty is payable for that month.

79. It has been submitted by the Appellant that it did not manufacture any bottled water in the period February 2022 to August 2022 and that the Excise stamps in issue were unutilized. The Respondent similarly stated that it was unable to ascertain whether the Appellant produced and sold the bottled water in that period. This position emanated from breach of compliance with the said Section 35 of the Excise Duty Act by an excisable goods manufacturer or supplier.

80. It has also been submitted that the Respondent introduced new generation Excise stamps with effect from 28th December 2021, and the Appellant among other excise manufacturers dealing in bottled water were required to utilize the old generation stamps by 26th January 2022, and return any unutilized old generation stamps being phased out by 28th March 2022. The Appellant claimed that the subject 69,130 stamps, in the old generation category, were lost through a vehicle vandalism and theft incident on 22nd August 2022, which was five months after the deadline for the return of the said Excise stamps to the Commissioner. The Appellant failed to offer any explanation as to why it was still in possession of old generation stamps five months after they had been withdrawn or recalled by the Commissioner pursuant to Regulation 13(1) of the Excise Duty (Excisable Goods Management System) Regulations, 2017.

81. The Tribunal having considered the contentions by both the Appellant and the Respondent, is of the view that the Appellant did not provide sufficient proof that the stamps in issue were stolen, having in mind the stringent conditionalities Excise stamps are issued and managed by excisable goods manufacturers and suppliers. A police abstract is not enough as this would ordinarily be issued on the basis of a report made by a claimant. The investigation was still ongoing, to be conclusive, the investigation report thereof detailing the circumstances, corroborating evidence, and perhaps suspected culprits ought to have been submitted.

82. In addition to the foregoing, the subject stamps having been phased out by 28th March 2022, the same ceased being valid, and in the Tribunal’s view, not capable of being accounted for in the manner sought by the Appellant after the 22nd August 2022 alleged theft.

83. In light of the foregoing the Tribunal finds that the Appellant failed to sufficiently account for the subject 169,130 Excise stamps issued by the Respondent.

ii. Whether the Respondent was justified in issuing the additional Excise Duty and VAT assessments against the Appellant. 84. The Tribunal having determined that the Appellant failed to account for the 69,130 excise stamps as required, now turns to the question whether the Respondent was justified in raising the subject assessments as it did.

85. The relevant provision under which the assessment was made is Regulation 14 of the Excisable Duty (Excisable Goods Management System) Regulations, 2017, which provides;-“14 (2) Where a manufacturer or Importer of excisable goods cannot account for any excise stamps issued to him by the Commissioner, the Commissioner shall compute the excise duty and other taxes on the unaccounted-for stamps based on the highest rate of excise duty, value and volume of excisable goods manufactured or imported by the manufacturer or importer as the case may be.”

86. In assessing the Appellant, the Respondent used the highest SKU declared by the Appellant which was 18. 9 litres in line with the aforesaid provision as follows:-Excise Duty Assessmenta.Unutilized stamps 69,130b.Wastages at 1 % of issued stamps 2,100 (i.e. 1% of 210,000)b.Unaccounted stamps 67. 030b.Highest SKU declared 18. 9 litresb.Expected activated litres 1,266,868t unutilized /unaccounted stamps x highest SKU declared)Expected Excise Duty (Kshs. 6. 03/litre) - 7,639,208. 00

87. The Respondent used the foregoing assessment on Excise duty as a basis for the VAT assessment as follows: -VAT Assessmenta.Expected Activated Litres 1,266,867 (unutilized /unaccounted stamps x SKU)b.Estimated price per litre ( Kshs) 35. 00c.Estimated Sales 44,340,345 VAT @ 16% 7,094,455. 00

88. The Respondent justified the assessment by stating that the additional assessment it raised was based on the reliance of the highest SKU declared by the Appellant which was 18. 9 litres in the month of March 2022.

89. In light of the foregoing the Tribunal is satisfied that the Respondent relied on the relevant statutory provision and information provided by the Appellant, as well as its best judgement in assessing the Appellant for the additional assessments.

90. Consequently, the Tribunal holds that the Respondent was justified in issuing the additional assessments against the Appellant.

91. The upshot of the foregoing is that the Appeal is not merited and therefore fails.

Final Decision 92. The Appeal having failed the Tribunal makes the following Orders:-a.The Appeal be and is hereby dismissed.b.The Respondent’s Objection decision dated 7th December 2022 be and is hereby upheld.c.Each party to bear its own costs.

93. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 22ND DAY OF MARCH, 2024ROBERT M. MUTUMA - CHAIRPERSONELISHAH N. NJERU -MEMBERMUTISO MAKAU - MEMBERMOHAMED A. DIRIYE - MEMBERBERNADETTE M. GITARI - MEMBER