https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/210

 REPUBLIC OF KENYA IN THE TRIBUNAL OF KENYA AT NAIROBI COUNTY COURT NAME: TAX APPEALS TRIBUNAL CASE NUMBER: TATC/E1082/2025 CARGOLOG (E.A) LIMITED VS THE INVESTIGATIONS AND ENFORCEMENT DEPARTMENT - KRA JUDGMENT # BACKGROUND 1. The Appellant is a private limited liability company incorporated in Kenya and whose principal activity is logistics business of providing clearing and forwarding services. 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. Following a Post Clearance Audit (PCA) for the 1st January 2024 to 31st March 2025 review period, the Respondent issued the Appellant with a Notice of tax investigation findings on 9th May 2025 citing a misclassification of imported client’s products. 1. The Appellant objected against the tax investigation findings on 16 th May 2025. 2. On 18 th August 2025, the Respondent’s tariff classification confirmed the earlier HS code re-classification of the Appellant’s products. 3. The Appellant again on 2 nd September 2025 objected against the reclassification and the demanded additional taxes amounting to Ksh 3,912,428.00 4. The Respondent’s letter of 15th September 2025 informed the Appellant that the communication of 18th August 2025 was a Review Decision. 5. Aggrieved, the Appellant lodged its Notice of Appeal dated 16 th September 2025 and filed on 17th September 2025. # THE APPEAL 1. The Appellant’s case was founded upon its Memorandum of Appeal dated 29th September 2025 and filed on 30th September 2025 wherein the Appellant raised the following grounds: 1. That the Respondent erred in law and fact in issuing the decision dated 18th August 2025 out of statutory timelines contrary to the mandatory provisions of Section 229(4) and (5) of the East Africa Community Customs Management Act (EACCMA). 2. That the Respondent's decision having been issued outside the statutory timelines, the Appellant's application for review dated 16th May, 2025 is deemed to have been allowed by operation of the law. 3. That the Respondent erred in law and fact by wrongfully classifying the items imported by the Appellant's client described as "HPE Simplivity 1.92TB SATA RI BC MV SSD & Accessories"' under HS Code 8523,51.00 - Solid-State Non-Volatile Storage Devices instead of HS Code 8471.70.00 Storage Units for Automatic Data Processing (ADP) Machines. 4. That the Respondent erred in law and fact by reclassifying the items imported by the Appellant’s client in total disregard of the technical and functional use and description of the said imported items. 5. That the Respondent erred in fact and law by failing to consider the evidence rendered by the Appellant thereby violating the rights of the Appellant's client to fair administrative action protected under Article 47 of the Constitution. 6. That the Respondent misapplied the law and facts and therefore arrived at the wrong decision. # THE APPELLANT’S CASE 1. The Appellant’s case was anchored upon; 2. Its Statement of Facts dated 29th September 2025 and filed on 30th September 2025 together with documents attached thereto; and 3. Written submissions dated 25th May 2026 and filed on 26th May 2026. 4. According to the Appellant, the Respondent’s Post clearance Investigation in regards to its client’s (Mitsumi Computer Garage Limited) imported solid state drives, memory cards and flash drives between 1st January 2024 and 31st March 2025 led to a reclassification of the said products from HS Codes 8471.70.00, 8471.80.00 and 8471.90.00 respectively where the duty import rate is 0% to HS Code 8523.51.00 attracting an import duty rate of 10%. 1. That upon objecting against the tax investigation findings on 16th May 2025, the Appellant did not receive any communication from the Respondent until the 18th August 2025 where the impugned reclassification was upheld requiring the Appellant to make good as outstanding tax amount of Ksh 3,912,428.00. 2. That on erroneous advice of the Respondent to revert to appeal channels, the Appellant again objected to the demand for additional taxes on 2nd September 2025 against which the Respondent replied to on 15th September 2025 informing the Appellant that a Review Decision had already been rendered on 18th August 2025. 1. The Appellant fashioned the following as issues falling for determination in this Appeal; 2. Whether the Respondent's decision was issued contrary to the provisions of Section 229(4) and (5) of the EACCMA. 3. As per the Appellant, the Respondent erred in law and fact by issuing a Review decision late contrary to the mandatory provisions of Section 229(4) and (5) of the EACCMA. This is because the Appellant having objected against the tax demands on 16th May 2026, the Respondent ought to have issued its decision by 15th June 2025 but instead did so on 18th August 2025. 1. Thus, the decision was deemed as allowed by operation of the law as couched under Section 229(5) of the EACCMA more so because the Respondent itself admitted in the letter of 15th September 2025 that the decision issued on 18th August 2025 was a Review Decision pursuant to Section 229(4) of the EACCMA the same having been issued almost 94 days late, therefore invalid and should be set aside. 2. Whether the Respondent erred in law and fact by wrongfully classifying the Appellant’s imported items described as "HPE Simplivity 1.92TB SATA RI BC MV SSD & Accessories” under HS Code 8523.51.00 -Solid-State Non- Volatile Storage Devices instead of HS Code 8471.70.00 storage Units for Automatic Data Processing (ADP)Machines 3. It was the Appellant’s case that the Respondent wrongfully classified its imported items described as *"Dell 1.92TB SSD SATA Read Intensive 6Gbps 512e2.5 in Hot-plug, CUS kit, Dell 960GB SATA read intensive 6 Gpbs 512e2.5 in hot-plug, CUS Kit, Dell Pl NVME NON-FIPS SED SSD 15.36TB UG and HPE Simplivity 1.92TB SATA RI BC MV SSD & Accessories"* under HS Code 8523.51.00 *“Solid-State Non-Volatile Storage Devices”* instead of the correct HS Code 8471.70.00 which covers *“Storage Units for Automatic Data Processing (ADP) Machines.”* 4. The Appellant supported its classification under HS Code 8523.51.00 because of; 5. *Intended use & function* 6. As per the Appellant, the imported items are not stand-alone solid-state drives intended for general use but are specifically engineered as part of HPE SimpliVity Hyper converged Infrastructure systems, which integrate compute, storage, and networking into a single ADP unit. Additionally, the drivers cannot function independently, nor can they be used as generic storage media like USB drives, memory cards, or consumer SSDs. Their sole purpose is to operate within, the HPE SimpliVity enterprise environment, providing deduplication, compression, backup, and storage management functions when connected to the ADP system. 1. *Applicability of HS Code 8471* 2. It was the Appellant’s case that HPE SimpliVity storage components fully satisfy conditions set under Note 6(c) to Chapter 84 as they are solely used with an ADP system (HPE SimpliVity nodes), connect via enterprise controllers to the CPU, and deliver/accept data in a form usable only within the ADP framework. 3. *Inapplicability of the Respondent's classification under HS Code 8523.51.00* 4. As per the Appellant its imported items do not fall within the scope of HS Code 8523.51.00 which is overly broad and does not reflect their precise function. This is because the items are not designed for external or consumer use, cannot operate independently and their design and function are tied exclusively to enterprise ADP infrastructure. 5. The Appellant insisted that HS Code 8523.51.00 covers general-purpose solid- state non-volatile storage devices, such as USB flash drives, flash memory cards, and standalone SSDs, which can record data from external sources across multiple devices. 6. *GIR3(a) and Specificity* 7. That contrary to Respondent’s argument citing GIR3(a), the Appellant states that Heading 8471 is not a general description but the correct specific description for components solely used in ADP systems while HS Code 8523.51.00 is intended for universal flash storage media. 1. That by applying GIR 3(a), the Respondent overlooks Note 6(c) which expressly directs classification under 8471 when the conditions are met and aligns with the World Customs Organization (WCO) as well as various customs administrations which have consistently classified enterprise storage components used solely in ADP systems under HS 8471, not under 8523. That this established practice ensures consistency, fairness, and accuracy in tariff application and reflects the true nature and function of the goods. 2. That having provided the Respondent with evidential classification rules for consideration during the review application stage, the Appellant urged the Tribunal to consider Appeal and find the Respondent's re-classification and demand of extra taxes as unjustified. 3. In its written submissions, the Appellant identified the following as the issues falling for determination 1. *Whether the Respondent's Review decision was time barred.* 2. *Whether the Respondent misclassified the Appellant's imported items described as "HPE Simplivity1.92TB SATA RI BC MV SSD & Accessories" under HS Code 8523.51.00- Solid-State Non-Volatile Storage Devices instead of HS Code 8471.70.00 Storage Units for Automatic Data Processing (ADP) Machines.* 4. According to the Appellant, the Respondent erred in law and fact by issuing a Review decision on 18th August 2025 which was almost ninety-four (94) days late and contrary to the mandatory provisions of Section 229(4) and (5) of the EACCMA and the same was deemed as allowed by operation of law for being outside the statutory thirty (30) days period. The Appellant supported this position by relying # on the holding in Republic vs Commissioner of Custom Services Ex-Parte Tetra Park Limited [2012] KEHC 1378 (KLR). 1. As per the Appellant, classification of goods in East African Community is undertaken pursuant to the Harmonized Commodity Description and Coding System where the HS Nomenclature is done in line with the GIRs and the Explanatory Notes (EN) to the HS. 2. That in Kenya, classification of goods is governed by the East African Community Common External Tariff (EAC CET) which codified and adopted the World Custom Organization Harmonized Commodity Description Coding System and its principles of GIRs of classification of goods. That the cited rules and principles have been affirmed by the Courts as was held in **Republic v** # Commissioner General & Another Ex-Parte Awal Ltd [2008]eKLR and Beta Healthcare International Ltd v Commissioner of Customs Services [2010]eKLR . 1. That GIR1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided the headings or notes do not require otherwise, according to GIRs 2 through 6 and the Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Common External Tariff and provide the scope of each heading under the CET. 2. That the expression "provided such headings or notes do not otherwise require under GIR 1" is intended to make it clear that the terms of the Headings and any relative Section or Chapter Notes are paramount, and are the first consideration in determining classification. 3. It was the Appellant’s case that the Respondent wrongfully re-classified the imported items under HS Code 8523.51.00 instead of the appropriate HS Code 8471.70.00 which covers Storage Units for Automatic Data Processing (ADP) Machines based on their intended use and function, applicability of HS Code 8471, inapplicability of the Respondent's classification under HS Code 8523.51.00 and GIR 3(a) and specificity. 4. The Appellant asserted that HS Code 8523.51.00 is intended for universal flash storage media, which is not the case here with the Appellant's products and that the Respondent in applying GIR 3(a) overlooked Note 6(c) which expressly directs classification under 8471 when conditions are met specifically HS Code 8471.70.00 which reflects the true nature and function of its goods. 5. That having analysed the classification in accordance to the provisions of the classification rules and even provided evidence to the Respondent for consideration during review application stage, the Tribunal should consider this Appeal and find the Respondent's re-classification and demand of extra taxes as unjustified. In supporting the application of GIRs, the Appellant cited the following authorities in support of its case, **Republic vs Commissioner of Customs& Ex-** # parte Mulchand Ramii & Sons limited eKLR; Kenya Breweries Limited v Commissioner Customs and Border Control (2020) eKLR (cited in TAT 124 of 2021) Bidco Africa Limited v Commissioner of Customs and Border Control) and Canadian Court in Puratos Canada Inc v Canada (Customs and Revenue) (2004) CA CIIT) 1. The Appellant asserted that having considered the set principles and rules of classification it applied the correct HS Code 8471.70.00. That its imports are classifiable under Chapter 84 as opposed to Chapter 85 which was discussed and found appropriate by the following Indian decisions; # Fortune Marketing Private Limited Vs. Ace, Mumbai at the Customs, Exercise and service Tax Appellant Tribunal, Mumbai (2016J and Ingram Micro India Private Limited Vs. Principal Commissioner, Customs at Exercise and service Tax Appellant Tribunal, New Delhi (2022). **The Appellant’s Prayers** 1. The Appellant prayed that; 2. That this Appeal be allowed. 3. That the Respondent's decision dated 18th August 2025 be set aside in its entirety. 4. That the Appellant be awarded costs of the Appeal. # THE RESPONDENT’S CASE 1. The Respondent replied to the Appeal through its Statement of Facts dated 17th February 2025 and filed on 19th February 2026. 2. In refuting the Appellants’ grounds as laid out in the Memorandum of Appeal and Statement of Facts, the Respondent asserted that it conducted a Post Clearance Investigation pursuant to Section 235 of the EACCMA and that the tax investigation findings on entries declared during the period revealed non- compliance with Customs Laves regarding Customs tariff classification. 3. It was the Respondent’s case that the Appellant incorrectly classified storage devices including solid state drives, memory cards and flash drives under HS codes 847170.00, 847180.00 and 847290.00 where import duty is 0% instead of the appropriate HS code of 8523.51.00, which has import duty rate of 10% with additional extra taxes totalling Ksh 3,912,427.00. 4. As per the Respondent, its demand was for a specific type of storage device referred to as Solid State Drives (SSDs) and that it was from this description that it drew its assessment which aligns with the General rule of Interpretation (GRI) 1 that, *"classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes...".* 5. According to the Respondent, Heading 8471 covers devices that are solely and principally used with an automatic data processing machine (ADP), whether for internal installation in an ADP or for external use with such machines. This refers to magnetic or optical drives for dises or tapes. Therefore, pursuant to GIR 1, goods classifiable under HS code 8471 are as outlined in note 6 (c) of chapter 84. 6. That for a unit to be regarded as part of an ADP system, it must meet all of the following conditions i.e. 1. It is of a kind solely or principally used by an ADP. 2. It is connectable to the central processing unit either directly or through one or more other units 3. It is able to accept or deliver data in a form which can be used by the system. 7. The Respondent asserted that Heading 8523 and HS Code 8523.51.00 specifically refers to solid-state, non- volatile data storage devices and that explanatory notes to the heading refer to these devices as those for recording data from an external source as provided under Note 6 (a) to this chapter 85. 1. That the Appellant’s devices (also known as "flash memory cards" or "flash electronic storage cards") are used for recording data from an external source, or providing data to, devices such as navigation and global positioning systems, data collection terminals, portable anners, medical monitoring appliances, audio recording apparatus, personal communicators, mobile phones, digital cameras and automatic data processing machines. 2. Further, that these non-volatile data storage devices are comprised of, in the same housing, one or more flash memories ("FLASH EPROM/EEPROM") in the form of integrated circuits mounted on a printed circuit board, and incorporate a connecting socket to a host appliance and may include capacitors, resistors and a microcontroller in the form of an integrated circuit. 3. The Respondent stated that the imported items were described as solid-state drives (SSDs) which formed the basis for the demand because at first glance, they can be classified in both HS codes 8471 and 8523 but that however, by application of GIR 3(a) where a heading which provides the most specific description shall be preferred to headings providing a more general description, the Respondent found the most appropriate classification being HS Code 8523.51.00 given that the Appellant’s classification under HS codes 8471.70.00 was unsatisfactory. 4. The Respondent’s case was that the Appellant’s claim that the items were part of an integrated automatic data processing machine contradicted its own declaration as all other items in the respective invoices had been declared under their appropriate HS Codes. 5. The Respondent asserted that it reviewed and considered all documents availed and adjusted the assessment to the best of its judgement and vehemently refuted the allegation that the decision was time barred. # The Respondent’s Prayers 1. The Respondent prayed that the Tribunal; 2. Finds that the impugned classification ruling was proper and within the confines of the various tax laws. 3. Upholds the impugned ruling. 4. Dismisses the Appeal with costs to the Respondent as it lacks merit. # ISSUES FOR DETERMINATION 1. The Tribunal having carefully considered the parties’ pleadings, documentation and the Appellant’s submissions adduced before it notes that three issues call for determination; # Whether the Respondent’s Review Decision dated 18 th August 2025 was time barred. 1. **Whether the Respondent erred in classifying the Appellant’s imports under HS Code 8523,51.00; and** 2. **Whether the short-levied duties were justified.** **ANALYSIS AND FINDINGS** 1. The Tribunal having established three issues for determination will proceed to analyse the same as follows; # i. Whether the Respondent’s Review Decision dated 18 th August 2025 was time barred. 1. The dispute herein emanates from a post clearance audit (PCA) that resulted in tariff reclassification of Appellant’s imported products from HS Code 8471.70.00 to HS Code 8523.51.00 which yielded short levied duties amounting to Ksh 3,912,428.00. 2. The Tribunal notes the Appellant’s contention that the Respondent’s Review decision was time barred having been issued outside the legal and statutory timeframe. 3. The Tribunal notes that the chronology of events is not disputed. The Appellant having been issued with tax investigation findings on 9th May 2025 it objected on 16th May 2025. The Respondent rendered its Review Decision on 18th August 2025. 4. The Tribunal notes that the Appellant lodged its application for review on 16th May 2025 while the Respondent communicated its Review decision on 18th August 2025. The Respondent did not demonstrate that it had requested any further information from the Appellant that would have affected the commencement or computation of the statutory period contemplated under Section 229 (4) of EACCMA. 5. The Tribunal notes that Section 229 (4) of EACCMA provides as follows; *“The Commissioner shall, within a period not exceeding thirty days of the receipt of the application under subsection (2) and any further information the Commissioner may require from the person lodging the application, communicate his or her decision in writing to the person lodging the application stating reasons for the decision.”* The use of the word **“shall”** denotes a mandatory statutory obligation imposed on the Commissioner. Accordingly, unless the Commissioner requests further information contemplated under the provision, a Review decision must be communicated within 30 days of the receipt of the application. 1. In this regard, Section 229(5) of the EACCMA provides that; *“Where the Commissioner has not communicated his or her decision to the person lodging the application for the review within time specified in subsection (4) the Commissioner shall be deemed to have made a decision to allow the application.”* 1. The Tribunal reiterates that equity aids the vigilant and not the indolent. In this instance, the Respondent having issued its findings ought to have acted within the set timeframes in rendering its decision but instead rested on its laurels and the attempt at resuscitating the impugned assessments are in futility. 2. The Tribunal reiterates its position as held in the case of **Minazini Enterprises Limited v The Commissioner of Domestic taxes [**TAT No. 56 of 2016] that; *"The law assists the vigilant not the indolent...and the Respondent ought to* *have expedited and made a decision prior to the commencement date of 19th January 2016. The Respondent ought to have proceeded within the ambit and provisions of the law as stipulated under the Tax Procedure Act.* 1. The High Court has also delved in and clarified that statutory timelines are couched in mandatory terms and had this to say in the case of **Equity Group** # Holdings Limited v Commissioner of Domestic Taxes (Civil Appeal E069 & **E025 of 2020) [2021] KEHC 25 (KLR) (Commercial and Tax) (23 August** **2021) (Judgment):** *“A statutory edict is not procedural technicality. It’s a law which must be complied with. Parliament in its wisdom expressly and in mandatory terms provided the consequences of failing to render a decision within 60 days. The Objection is deemed to be allowed. That being the law, the appellant’s Objection stood allowed as a matter of law the moment the Commissioner of Domestic Taxes failed to render his decision within the 60 days. This* 1. Consequently, the time begun to run upon receipt of the Review application on 16th May 2025 and the Respondent was under mandatory statutory obligation to communicate its decision within 30 days thereof. The decision issued on 18th August 2025 was therefore communicated well outside the prescribed statutory period. The Tribunal therefore finds and holds that the Respondent’s Review Decision dated 18th August 2025 was time barred. 2. In light of the above, the other two issues for determination are hereby rendered moot. # FINAL DECISION 1. The upshot of the foregoing is that the Appeal succeeds and the Tribunal proceeds to make the following Orders: 1. The Appeal be and is hereby allowed. 2. The Review Decision dated 18th August 2025 be and is hereby set aside. 3. Each party to bear its own costs. 2. It is so Ordered. # DATED AND DELIVERED AT NAIROBI ON THIS 27TH DAY OF JULY, 2026 SIGNED BY/FOR: **★ TH E JUDICIAR Y O F KENY A ★** **HON. EUNICE NJERI NGANGA HON. BONIFACE KIBIY TERER HON. SANKALE SPENCER OLOLCHIKE** **HON. BILLY GRAHAM OKUMU MIJUNGU** Tax Appeals Tribunal Tribunal Date: 2026-07-27 11:48:39