https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1611

BTB Insurance Brokers Ltd v Commissioner of Domestic Taxes (Civil Appeal 268 of 2020) [2026] KECA 1611 (KLR) (31 July 2026) (Judgment) Neutral citation: [2026] KECA 1611 (KLR) Republic of Kenya In the Court of Appeal at Nairobi Civil Appeal 268 of 2020 WK Korir, L Ndolo & AI Hassan, JJA July 31, 2026 Between BTB Insurance Brokers Limited Appellant and THe Commissioner of Domestic Taxes Respondent (Being an appeal from the judgment of the High Court of Kenya at Nairobi (Commercial and Admiralty Division) (Kasango, J.) dated 28th April 2020inHC ITA No. 2 of 2017) Judgment 1.This appeal arises from a dispute regarding the audit and assessment of the appellant, BTB Insurance Brokers Limited, by the respondent, the Commissioner of Domestic Taxes, where it was determined that the appellant had earned commission income of Kshs.293,732,773.00 for the period between July 2013 and September 2014, which was not subjected to excise duty. The respondent therefore issued the appellant with an assessment for Kshs.37,788,533.00 as unpaid excise duty. 2.Following the decision by the respondent, the appellant moved the Tax Appeals Tribunal (“Tribunal”), which delivered its decision on 16th November 2016, dismissing the appeal. Dissatisfied with thatoutcome, the appellant lodged an appeal at the High Court on the grounds that the Tribunal: failed to determine the core issue in the dispute; erred in its application of the Customs and Excise Duty Act and the Finance Act, 2013; failed to address all the issues in the appeal; erred in making a determination on the substantive appeal while parties had only argued the preliminary issues; erred in admitting and considering a statement of facts filed out of time; and, wrongly interpreted the Finance Act, 2013. 3.The High Court (Kasango, J.) considered the submissions filed by the parties and upheld the decision of the Tribunal in a judgement delivered on 28th April 2020. The appellant, being dissatisfied with the decision of the learned Judge filed a memorandum of appeal dated 30th June 2020 raising eleven grounds of appeal, faulting the learned Judge for: misdirecting herself by failing to correctly interpret section 137(4) of the Customs and Excise Duly Act; holding that the obligation for payment of excise duty does not lie with the insurance company as an underwriter and that the liability to pay excise duty cannot be passed to the insurance company; finding that the Tribunal erred in relying on the respondent's statement of facts filed out of time while at the same time holding that the appellant was not prejudiced; finding that the Tribunal could not be faulted for failing to consider grounds 8, 9, 10,11, 12,13 and 14 of the memorandum of appeal before it, despite upholding that the Tribunal’s finding that the appeal was not res judicata; failing to find that the proceedings before the Tribunal constituted a mistrial because the Tribunal delivered judgment onthe main appeal while the parties only argued a preliminary objection; failing to hold that the appellant’s right to fair hearing was violated and not directing that the appeal be remitted to the Tribunal for hearing; misdirecting herself by relying on the provisions of the Civil Procedure Act in an appeal from the decision of the Tribunal; and, ignoring the principle that tax laws must be construed strictly. 4.When the appeal came up for hearing on 16th March 2026, learned counsel, Ms. Maina, for the appellant and learned counsel Mr. Chabala for the respondent mainly relied on the written submissions already filed. 5.In prosecuting the appeal, Ms. Maina, relying on the submissions dated 10th March 2026, indicated that the respondent filed a preliminary objection before the Tribunal on 21st March 2016, supported by submissions. The Tribunal directed that the preliminary objection was to be dealt with first, after which the question as to whether the respondent had a right of audience, having filed a statement of defence out of time, would be considered. According to counsel, after dealing with the preliminary objection, the Tribunal ought to have considered whether the respondent had a right of audience but instead proceeded to deal with the merits of the appeal, thus violating the appellant’s right to be heard. 6.Counsel argued that having been denied a chance to address the filing of the statement of facts out of time by the respondent, and the right to be heard on the facts, the appeal ought to be remitted to the Tribunal for hearing on merit. 7.On the legality of the assessment, Ms. Maina submitted that the core issue was who, between the insurer and the broker, was to charge and collect excise duty under Part 3 of the 5th Schedule of the Customs and Excise Duty Act and the Finance Act, 2013. According to counsel, there was an element of double taxation and the appellant’s position was that it was the insurance company that was obligated to collect the excise duty as it was the body that raises the premium through a debit note to the customer at which point the obligation to pay duty arose. Ms. Maina posited that the insurer charges a premium it collects from the customer, and assessing excise duty to be collected by the broker beats the purpose, as the insurance broker does not raise debit notes and is only paid commissions. She argued that the respondent ought to have done an interrogation and found that the charging point is between the end user and the provider. 8.Turning to another ground of appeal, Ms. Maina submitted that it was erroneous for the learned Judge to hold that the appellant was not prejudiced despite acknowledging that the Tribunal erred in relying on a statement of facts filed out of time by the respondent. Counsel cited Salat vs. Independent Electoral and Boundaries Commission & 7 Others [2014] KESC 12 (KLR); W.E.C Lines Ltdvs. The Commissioner of Domestic Taxes [2022] KEHC 9858 (KLR); and Kachanja Fabricators & Metal Works vs. Commissioner Domestic Taxes [2024] KETAT 715 (KLR) for the proposition that compliance with statutory timelines is obligatory. 9. Ms. Maina, while arguing that the determination of the Tribunal was flawed for not addressing the issues raised in grounds 8 to 14 of the appeal, referred to the Tanzanian case of Scan-Tan Tours Ltd vs. The Registered Trustees Diocese of Mbulu, Civil Appeal No. 78 of 2012 (unreported) for the proposition that a court has to determine all issues placed before it. 10.Turning to the alleged failure to correctly interpret and apply the law, counsel submitted that the learned Judge failed to use the applicable principles in interpreting section 137(4) of the Customs and Excise Duty Act, thereby erroneously holding that the obligation to pay excise duty does not rest with the insurance company. Counsel additionally submitted that, whereas the Finance Act, 2013 amended the Customs and Excise Duty Act so as to impose excise duty on fees charged by financial institutions, the appellant, being a licensed broker under the Insurance Act, did not fall within the scope of providers of financial services as contemplated by the legislation. 11.Adverting to Part III of the Fifth Schedule of the Finance Act and section 6 (3) of the Customs and Excise Duty Act, Ms. Maina argued that the supply of the excisable service, being the provision of insurance coverage, occurs when the insurer issues an invoicefor the premium to the insured. According to counsel, that is the point at which excise duty becomes payable. Further, that as per section 137(4) of the Customs and Excise Duty Act, the insurer, as the supplier of the excisable service, is responsible for collecting excise duty at the point where the premium is paid. Relying on Timothy Njoya vs. Attorney General & Another [2017] KECA 264 (KLR), counsel asserted that the obligation to collect and remit excise duty lies with the insurance company and not the appellant. The Court was therefore urged to allow the appeal. 12.In opposition to the appeal, the respondent’s counsel relied on submissions dated 13th March 2026. Addressing the question as to whether the right to a fair hearing was violated, Mr. Chabala argued that the learned Judge did not err in declining to declare a mistrial and that she duly addressed the issues before her and was guided by section 16(2) of the Tax Appeals Tribunal Act, which empowers the Tribunal to receive evidence in such manner as it may direct. Further, that the appellant was accorded a fair hearing since it had filed a memorandum plus documentation in support of its position. Counsel asserted that the learned Judge addressed all the issues canvassed before her, and the appellant acquiesced to the process by submitting on the substantive issues in the appeal. 13.Mr. Chabala submitted that the learned Judge cannot be faulted for failing to send back the appeal to the Tribunal as such a step would have served no useful purpose. Additionally, counsel argued that in any event the issue raised by the appellant before the Tribunal had been determined in a constitutional petition by the High Court, which decision was binding upon the Tribunal. 14.On the claim that the appellant was prejudiced by the reliance on the statement of facts filed by the respondent out of time, counsel submitted that even without the statement of facts, the respondent was entitled to argue points of law, as is the practice in civil proceedings. According to counsel, the lack of facts would make no difference since the respondent had a strong case, which tilted the case against the appellant. 15.On the obligation to pay excise duty, Mr. Chabala posited that the amendments clarified the obligation of the appellant and confirmed that the onus of paying excise duty fell upon the appellant. The respondent therefore sought the dismissal of the appeal. 16.In considering the appeal herein, this Court is exercising appellate jurisdiction that is circumscribed by section 56(2) of the Tax Procedures Act, which provides that:“An appeal to the High Court or to the Court of Appeal shall be on a question of law only.” 17.Further, as held in Kenya Breweries Ltd vs. Godfrey Odoyo [2010] KECA 498 (KLR), on the duty of this Court:“In a second appeal however, such as this one before us, we have to resist the temptation of delving into matters of facts. This Court, on second appeal, confines itself to matters of law unless it is shown that the two courts below considered matters they should not have considered or failed to consider matters they should have considered or looking at the entire decision, it is perverse.” 18.It is our considered view that the issue that needs to be determined first is whether the appellant was accorded a fair hearing. On the right to a fair hearing, Article 50(1) of the Constitution provides that:“Every person has the right to have any dispute that can be resolved by the application of law decided in a fair and public hearing before a court or, if appropriate, another independent and impartial tribunal or body.” 19.Section 16(2) of the Tax Appeals Tribunal Act provides the manner in which the Tribunal is to receive evidence as follows:“Evidence before the Tribunal may be given orally or through affidavits or in such manner as the Tribunal may direct.” 20.Additionally, section 26 of the same Act provides that:“The Tribunal shall ensure that every party to proceedings is given a reasonable opportunity to:-a.present his case; andb.inspect any documents in relation to the proceedings and make submissions.” 21.We have considered the proceedings before the Tribunal on 22nd March 2016 when the matter was heard. On that day, the Chairman of the Tribunal directed that the issue of res judicata raised through a preliminary objection by the respondent would be dealt with first before the question as to whether the respondent had a right of audience could be addressed. The parties were then directed to file submissions on the issue of res judicata, which they did, and on 16th November 2016, the Tribunal delivered judgement dismissing the appeal in its entirety. 22.The issue as to whether the substantive appeal was heard by the Tribunal was raised before the learned Judge. In addressing this point, the learned Judge made observations as follows:“I have looked at the supplementary record of appeal wherein are typed proceedings of the Tribunal. Those proceedings are of 22nd March 2016. On that date the Respondent raised the preliminary objection, which would seem to have been made orally, rather than in writing. If indeed it was in writing, then it was not included in the record of appeal. That apart, on 22nd March 2016 the Tribunal requested the parties to do written submissions on the preliminary objection. Both parties did file their submissions. The Tribunal after receiving those submissions, it would seem, delivered a judgment, wherein it first considered the preliminary objection then proceeded to consider the substantive appeal. In that judgment the Tribunal made reference to having heard parties on the substantive issues of the appeal. Whether indeed parties were heard on the substantive appeal is not clear to me.” 23.Despite finding that it was not clear whether the parties were heard on the substantive appeal, the learned Judge made no finding on this fundamental issue which had been raised by the appellant. As we have confirmed from the proceedings, and as alluded to by the learned Judge herself, it is apparent that the substantive appeal was not heard before the Tribunal delivered its judgment. The parties expected a decision on the preliminary objection concerning the question as to whether the appellant’s case was res judicata. Instead, they received an answer on an appeal that they had not argued. Failure to give the appellant an opportunity to submit and be heard on the substantive appeal not only contravened the express provisions of section 26 of the Tax Appeals Tribunal Act but also the constitutional right to a fair hearing as guaranteed under Article 50(1) of the Constitution. In the circumstances of this appeal, it is our considered view that the learned Judge erred in failing to find that the appellant’s right to a fair hearing had been violated. 24. Time and again, courts in this country have reiterated the importance of adhering to the right to a fair hearing in proceedings before courts or tribunals. For instance, in Kidero & 4 Others vs. Waititu & 4 Others [2014] KESC 11 (KLR), the Supreme Court stressed that:“It is important to restate that a literal reading of the provisions of the Constitution show that the right to a fair hearing is broad and includes the concept of the right to a fair trial as it deals with any dispute whether they arise in a judicial or an administrative context. Comparative experience shows that the European Court has elaborated on the question regarding the scope of the right to fair trial applying the right in both civil and in criminal matters. The European Court of Human Rights (European Court) has severally explained that: “it is central to the concept of a fair trial, in civil as in criminal proceedings, that a litigant is not denied the opportunity to present his or her case effectively before the court.” (See Steel and Morris vs. United Kingdom, [2005] ECHR 103, paragraph 59).” 25.Given that the action of the Tribunal violated the sacrosanct right to a fair hearing, we see no need to delve into the merits of the other grounds of the appeal. The only recourse at this point in time is to return the matter to the Tribunal for hearing and determination of the substantive issues on merit. 26.The appeal therefore succeeds in the following terms:a.The judgment and decree of the High Court in High Court Income Tax Appeal No. 2 of 2017 is hereby set aside;b.The matter is remitted to the Tax Appeals Tribunal for hearing and determination on the substantive issues; andc.The respondent shall bear the costs of the appellant in this Court and in the High Court. DATED AND DELIVERED AT NAIROBI THIS 31ST DAY OF JULY 2026.W. KORIRJUDGE OF APPEAL..............................L. M. NDOLOJUDGE OF APPEAL..............................A.I. HASSANJUDGE OF APPEALI certify that this is a True copy of the originalSignedDEPUTY REGISTRAR