[2024] KETAT 1241 (KLR)

BSK Global Technologies Limited v Commissioner of Domestic Taxes (Tax Appeal E421 of 2024) [2024] KETAT 1241 (KLR) (9 August 2024) (Ruling)

Neutral citation: [2024] KETAT 1241 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E421 of 2024

E.N Wafula, Chair, Cynthia B. Mayaka, RO Oluoch, T Vikiru & AK Kiprotich, Members

August 9, 2024

Between

BSK Global Technologies Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Appellant vide a Notice of Motion dated 15th day of April, 2024 filed under a Certificate of urgency on the 17th April, 2024, and which is supported by an Affidavit sworn by Meshack Mbugua, a Director of the Appellant, on the 15th day of April, 2024 sought for the following Orders:-a.Spentb.That the Honourable Tribunal be pleased to extend the time allowed for the Appellant to file a Notice of Appeal, Memorandum of Appeal, Statement of Facts and tax decision.c.That the annexed Notice of Appeal, Memorandum of Appeal and Statement of Facts both dated 8th April, 2024 to be deemed as properly filed and served.d.That cost of this application be in the cause.

2. The application is premised on the following grounds:-a.That the Respondent issued the Appellant with Value Added VAT assessment on 28th November, 2022 for Kshs.25,406,660. 38. b.That the Appellant objected to the assessment vide its letter dated 16th December, 2022 and proceeded to object on itax on 22nd December, 2022. c.That the Respondent issued the Appellant with an objection decision on 16th February, 2023 with a total amended tax liability of Kshs.16,718,890. 65d.That the Appellant filed to this Honourable Tribunal its Notice of Appeal on 5th April, 2023. e.That the Appellant subsequently filed its Memorandum of Appeal and Statement of Facts both dated 20th March, 2023 and filed on 16th April, 2023. f.That the Honourable Tribunal struck out the Appellant’s Appeal on the main ground that the Appeal was invalid having been filed outside the statutory timeline and without leave of the Tribunal.g.That the failure to file the Notice of Appeal within 30 days from the date of being issued with the objection decision was occasioned by an inadvertent mistake of the Appellant’s representative which mistake should not be visited upon the Appellant.h.That the Appellant has already demonstrated the desire to challenge the Commissioner’s assessments by filing an objection to the assessments on time.i.That the delay of filing the Notice of Appeal and the Memorandum of Appeal was not inordinate as it was just 47 days.j.That the Appellant has an arguable appeal with very high probability.k.That the Appellant stand to suffer irreparable loss and damage if the orders sought in this application are not granted.l.That it is imperative in the interest of justice that the application herein be granted.m.That no prejudice shall be occasioned on the Respondent if this application is allowed.n.That the Honourable Tribunal has jurisdiction to grant the orders sought.

3. The Respondent in opposition to the application filed a Replying Affidvait sworn by Lydia Ng’ang’a an Advocate for the Respondent, on the 8th day of May, 2024 and filed on the even date in which it raised the following grounds in opposition to the application:-a.That the Tribunal in the Tax Appeal No. E132 of 2023 between the Appellant and the Respondent, struck out the Appellant’s Appeal on the grounds that the Appellant failed to lodge a Notice of Appeal within the statutory thirty (30) day timeline and further did not make any efforts to seek leave to extend time to file the Notice of Appeal.b.That the application is not merited as it seeks to revive and relitigate matters that had already been heard and determined by this Honourable Tribunal in tax Appeal No.E132 of 2023. c.That following the said determination, the Tribunal was rendered functus officio upon delivery of the Judgment on 5th April, 2024 and therefore lacks the requisite jurisdiction to hear and determine this application.d.That the Tribunal ought not to allow the application as the Appellant failed to pay due regard to the procedural requirements of filing an Appeal out of time under Section 13 of the Tax Appeals Tribunal Act prior to filing, hearing and determination of Tax Appeal N. E132 of 2023. e.That this Honourable Tribunal dismisses the application as the orders sought are a blatant abuse of the process of the Tribunal.

Analysis and Findings 4. The parties in compliance with the directions of the Tribunal to the effect that the application was to be canvassed by way of written submissions duly filed their respective submissions that were adopted by the Tribunal on the 9th May, 2024. The Tribunal has considered and has been appropriately guided by the purport of the submissions and the authorities cited therein in arriving at its findings hereinafter.

5. The Tribunal’s jurisdiction for the enlargement of time in the commencement of an appeal process is found under Section 13(2) of the Tax Appeals Tribunal Act which provides as thus:-“(3)The Tribunal may, upon application in writing, extend the time for submitting the documents referred to in subsection (2).(4)An extension under subsection (3) may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the applicant from giving notice of appeal within the specified period.”

6. The Tribunal is enjoined to determine the length and reason for the delay when considering an application for the extension of time to appeal out of time. The power to extend is discretionary and unfettered but the same must be exercised judiciously.

7. In the instant case, however, the Respondent raised an issue for the Tribunal to determine. This was whether the Tribunal has jurisdiction to grant the prayers sought in the application.

8. The Tribunal will therefore pronounce itself on the issue of jurisdiction before any other issue.

9. The Appellant contended that by virtue of the Judgment issued by the Tribunal on the 5th April, 2024, the effect of the same was to “strike out” its Appeal and not to “dismiss” it. That it was the intention of the Tribunal to allow the Appellant to regularise its Appeal so that it is properly before the Tribunal.

10. The Respondent on the other hand was of the position that the Judgment issued by the Tribunal dated the 5th April, 2024 rendered the Tribunal functus officio as the present matter has already been finalised.

11. In the nucleaus of this matter is the difference in the meaning between “Striking out” and “dismissing” of pleadings. The courts have widely pronounced themselves on this issue.

12. In the case of Enock Kirao Muhanji v Hamid Abdalla Mbarak [2013] eKLR:-“It is true… that when a suit is dismissed, one might not be allowed to file a fresh suit unlike in a situation where a suit has been struck out.The words “dismissed” and struck out” are terms of art and are not supposed to be used interchangeably in a Ruling or Judgment. However, more often than not, the terms are used interchangeably by the litigants and the courts.It is therefore incumbent that when the court is called upon… to determine whether a party can file a fresh suit after the first one has been dismissed or struck court, the court should look at the circumstances of each case to arrive at a decision. The mere fact that the trial court uses the words “dismissed” does not expressly mean that a fresh suit cannot be filed if indeed the court meant that the suit should have been “struck out” so as to allow a party to file a fresh suit.” (Emphasis Added)

13. Having gleaned through the documents filed by the parties and the embattled Judgment, and given the fact that the issue of time was not brought up by the Respondent in the later case, the Tribunal acknowledges that the Judgment had the effect of merely “striking out” the appeal and not to dismiss it. To that end, the Tribunal finds that the Tribunal has jurisdiction to hear and determine the matter

14. Given the foregoing, the Tribunal will now delve into the substantive issues brought up in the instant application.

15. In determining whether to extend time, the Tribunal was guided by the court in Joseph Ondiek Tumbo v Sony Sugar Co Ltd [2014] eKLR, where the learned Judge quoted Sir Thomas Bingham M R in Costellow V Somerset County Council (1993)1 All ER 952 where he stated that:-“The first principle is that the rules of court and the associated rules of practice, devised in the public interest to promote expeditious dispatch of litigation, must be observed. The prescribed time limits are not targets to be aimed at or expressions of pious hope but requirements to be met. The second principle is that a plaintiff should not in the ordinary way be denied an adjudication of his claim on its merits because of a procedural default, unless the default causes prejudice to his opponent for which an award of costs cannot compensate…. Further, an extension of time is an indulgence from the court by a party in default. He is not entitled to an extension. He has no reasonable or legitimate expectation of receiving one. His only reasonable or legitimate expectation is that the discretion relevant to his application to extend time will be exercised judicially in accordance with established principles of what is fair and reasonable. In those circumstances, it is incumbent on the applicant for an extension of time to provide the court with a full, honest and acceptable explanation of the reasons for the delay. He cannot reasonably expect the discretion to be exercised in his favour, as a defaulter, unless he provides an explanation for the default.”

16. On the criteria of the issues to be considered when granting an extension to file an appeal out of time, the Tribunal referred to the case of Wasike V Swala [1984] KLR 591 where the Court laid a hierarchy of factors to consider when it stated that:-“an applicant must now show, in descending scale of importance, the following factors: - a) That there is merit in his appeal. b) That the extension of time to institute and/or file the appeal will not cause undue prejudice to the respondent; and c) That the delay has not been inordinate.”

17. The Tribunal, guided by the principles set out in Wasike V Swala [1984] KLR 591, Joseph Ondiek Tumbo v Sony Sugar Co Ltd [2014] eKLR and Section 13 of the Tax Appeals Tribunal Act, 2013 used the following criteria to consider the application.a.Whether the appeal is merited.b.Whether there is a reasonable cause for the delay.c.Whether there will be prejudice suffered by the Respondent if the extension is granted.

a. Whether the Appeal is merited? 18. The Tribunal examined whether the actions complained of by the Applicant were merited and whether there was an arguable appeal before the Tribunal or the appeal was frivolous to the extent that it would only result in a waste of the Tribunal’s time.

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

20. The Appellant simultaneously with the filing of this application filed a Memorandum of Appeal and the Statement of Facts which challenged the Respondent’s objection decision dated 16th February, 2023 with regard to the additional VAT assessment that was based on a variance between the income tax returns and the VAT returns filed by the Appellant.

21. A perusal of both the Memorandum of Appeal and Statement of Facts disclose some material legal and factual issues that call for an appropriate determination of the Appeal on its proper merits. To that extent the Appellant is deserving of an opportunity to canvass its Appeal before the Tribunal.

b. Whether there is a reasonable cause for the delay? 22. The Appellant brought an appeal to the Tribunal under TAT Appeal No. E132 of 2023 dated 20th March 2023 filed on 16th April, 2023. This was replied to by the Respondent with the appeal being dispensed with subsequent to a full hearing.

23. The Tribunal pronounced itself by acknowledging that it lacks jurisdiction since the Appellant brought the Appeal 47 days out of time. The effect was that the Tribunal struck out the pleadings for lack of jurisdiction.

24. The Appellant thus brought the instant application seeking enlargement of time and requesting the Tribunal to allow it to file its Appeal out of time.

25. Given that the Appellant filed the Appeal, that was struck out, as soon as it was aware of the objection decision, and that the current application was filed after the Judgment was rendered, the Tribunal finds that there was no undue delay on the part of the Appellant.

26. In considering what constitutes as a reasonable reason for the delay, the court in Balwant Singh v Jagdish Singh & Ors (Civil Appeal No.1166 of 2006), held that:-“The test is whether or not a cause is sufficient to see whether it could have been avoided by the party by the exercise of due care and attention”.

27. The Appellant contended that the reason it was delayed from lodging an appeal on time was due to an inadvertent error on the part of its representation in the dispute.

28. The Tribunal finds the explanation and reasons raised by the Appellant as to the cause for the delay on its part in commencing the appeal process to be plausible and reasonable in all possible probabilities as sins of a professional should not be unduly visited upon their clients.

c. Whether there will be prejudice suffered by the Respondent if the extension is granted. 29. The Respondent did not demonstrate to the Tribunal how it would suffer prejudice if the extension of time is granted.

30. The Appellant's only hope for justice lies in an appeal to the Tribunal. Thus, the Appellant argued that it would suffer prejudice if it is not granted leave to file its appeal considering that the amount of money claimed is of a significant amount which would lead to failure by the Appellant to pay wages, taxes, and conduct business normally.

31. The Tribunal is thus compelled to agree with the Appellant in its argument that the Respondent would otherwise still collect the taxes together with penalties and interest should the Appellant be found to be at fault. The Tribunal, therefore, finds that the Respondent will not suffer prejudice if the extension is granted.

32. The Appellant has in the circumstances met the statutory and judicially established threshold for the grant of application for the enlargement of time to file an appeal.

Disposition 33. On the basis of the foregoing analysis the application is merited and the Tribunal accordingly proceeds to make the following Orders:-a.The application be and is hereby allowed.b.The Appellant be and is hereby granted leave to file an appeal out of time.c.The Notice of Appeal and the Appeal documents filed on the 8th April, 2024 be and are hereby deemed as duly filed and served.d.The Respondent to file and serve its Statement of Facts within Thirty (30) days of the date of delivery of this Ruling.e.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF AUGUST, 2024ERIC NYONGESA WAFULA - CHAIRMANCYNTHIA B. MAYAKA- MEMBERDR. RODNEY O. OLUOCH - MEMBERDR. TIMOTHY B. VIKIRU - MEMBERABRAHAM K. KIPROTICH- MEMBER