https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/255

 REPUBLIC OF KENYA IN THE TRIBUNAL OF KENYA AT NAIROBI COUNTY COURT NAME: TAX APPEALS TRIBUNAL CASE NUMBER: TATC/E1163/2025 CHALLENGE IMPEX LIMITED VS KENYA REVENUE AUTHORITY JUDGMENT # BACKGROUND 1. The Appellant is a Limited Liability Company duly incorporated in Kenya. 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. The Respondent vide a demand notice dated 17th July 2025, subjected the Appellant to a demand for short levied duties for a sum of Kshs 33,012,176. This was in relation to import duty, VAT, IDF, and RDL. 4. Subsequently, the Appellant objected to the demand vide a letter dated 11th August 2025. 5. The Respondent issued an Objection Decision dated 9 th September 2025 confirming a total sum of Kshs 33,012,176 as taxes due and payable by the Appellant. 1. Aggrieved by the decision, the Appellant filed its Notice of appeal dated 6th October 2025 and filed on 8th October 2025. # THE APPEAL 1. The Appellant lodged its Memorandum of Appeal dated 13th October 2025 raising the following grounds of appeal: 1. That the method of arriving at the assessment was not arrived at objectively. 2. That the Commissioner ignored known principles of taxation. 3. That the assessment is contrary to the taxpayer's legitimate expectation. 4. That the Commissioner had inspected and released the Consignments at the point of importation and is therefore estopped from demanding any further taxes on the goods. 5. That the Commissioner has not demonstrated by evidence which identical goods were used to identify the transaction value. 6. That there is no specific provision under the WTO procedures and the EACCMA that requires the invoices to have a specific font. # THE APPELLANT’S CASE 1. In support of the appeal, the Appellant lodged the following: 2. Statement of facts dated 13th October 2025. 3. Witness statement of Shadrack Kuriah dated 4th May 2026 adopted as evidence in chief on 5th May 2026. 4. Written submissions dated and filed on 19th May 2026. 5. In further support of its case, the Appellant relied on the following documents: 6. Invoices and proof of payment of 2022; 7. Invoices and proof of payment of 2023; 8. Invoices and proof of payment of 2024; 9. Invoices and proof of payment of 2025; 10. Prime Bank Statement from January - December2024; 11. Prime Bank Statement from January - December2023; 12. DTB Statement from January - February 2025; 13. DTB Statement from January - February 2025 14. DTB Statement from January 15. Prime Bank Statement from January – December 2022; 16. DTB Statement from January - December 2022; 17. DTB Statement from January - December 2024; 18. DTB Statement from January - December 2022; 19. Prime Bank Statement from January - December 2022; 20. DTB Statement from January - December 2023; 21. DTB Statement from January – December 2024; 22. Prime Bank Statement from January – December 2023; 23. Prime Bank Statement from January – December 2024; 24. Prime Bank Statement from January - February 2025; 25. Objection Decision dated 9th September 2025. 26. The Appellant stated that the Respondent requested to be supplied invoices, proof of payment, letter of demand, letter of audit findings, bank statements for the audit period, purchase ledgers from January 2022 to January 2025. The Appellant stated that it physically delivered invoices and proof of payment to the Respondent. 27. It stated that it supplied the Respondent with bank statements for the audit period as requested but the Respondent still confirmed the assessments. 28. Contrary to the Respondent's claims, the Appellant stated that it has duly paid all taxes due for the period under review. It asserted that the decision to demand the said amounts is arbitrary and irrational. 29. The Appellant contended that the Commissioner’s basis for the additional assessment is erroneous on grounds that the method of aiming at the assessment was not arrived at objectively; the commissioner ignored known principles of taxation; the assessment is contrary to the taxpayer's legitimate expectation; and the Commissioner had inspected and released the consignments at the point of importation and is therefore, estopped from demanding any further taxes on the goods. 1. Based on the foregoing grounds, it asserted that the assessment ignores the interest of justice and fairness and therefore inappropriate. Consequently, it contended that the additional assessment is erroneous and ignores the interest of justice and fairness and thus the same should be vacated. 2. The Appellant asserted that it received commercial invoices from the suppliers at the agreed price and the same copies were supplied to the Commissioner. It also affirmed that the tax was calculated as per the current prevailing tax rates at the time and they were paid. Based on this, the Appellant was of the view that the additional assessment is erroneous and inappropriate. 3. That the Respondent has subjected the Appellant to unfair and improper computations in order to arrive at unlawful taxes for the Appellant. 4. The Appellant contended that it had a legitimate expectation that tax issues should be handled relatively and the Respondent failed to meet this expectation. 5. Based on the foregoing, the Appellant averred that it was improper, unfair and unprocedural for the Respondent to arbitrarily demand taxes without any legal basis to do so. 6. The Appellant submitted that the Respondent’s failure to file a Response and attend the hearing entitles the Appellant to judgment. It also submitted that the Respondent erred in law and fact in finding that the Appellant has underpaid customs duty. 7. The Appellant cited the case of **Boniface Nyaga Njiru v Board of Trustee Gichugu Water & Sanitation Trust [2014] eKLR**, where the court held that where a respondent, though served, neither enters appearance nor files any response to the claim, and further fails to appear at the hearing or file submissions, the court deems the respondent to have failed to prove its case. 1. The Appellant submitted that the fact that the Respondent relied on the invoices at the time of importation and did not raise any queries, the Respondent cannot claim that taxes were short levied. It cited the case of **Republic v Kenya Revenue Authority Ex parte Cooper K Brands Limited (2016) eKLR** to submit that the High Court ruled that KRA's prior conduct had led the taxpayer to reasonably expect that no further taxes would be due. 1. In support of its position that the Respondent breached legitimate expectation, the Appellant relied on the case **Communications Commission** # of Kenya & 5 Others v Royal Media Services & 5 Others (2014) **eKLR** where it was stated: *"Legitimate expectation would arise when a body, by representation or by past practice, has aroused an expectation that is within its power to fulfil, Therefore, for an expectation to be legitimate, it must be founded upon a promise or practice by public authority that is expected to fulfil the expectation."* 1. The Appellant submitted that it discharged its burden of proof and that the same shifted to the Respondent to also prove that indeed the Appellant had underpaid their customs duty. It cited the case **of Digital Box Limited v** **Commissioner of Domestic Taxes TAT No. 115 of 2017** where the Tribunal held that the taxpayer bears the burden of proof, which burden is discharged by adducing evidence. It also cited the decision in **Alfred Kioko Muteti v** **Timothy Miheso & Another [2015] eKLR** where the court held that the burden of proof lies on the party who would fail if no evidence at all were given by either party. 1. The Appellant relied on the decisions in the cases of **Export Trading Company v Kenya Revenue Authority (2018) eKLR; Fleur Investments Limited v Commissioner of Domestic Taxes and Another (2018) eKLR**; and **Giant Furniture Limited v Commissioner of Customs and Border Control [2023] KETAT 568 (KLR)**, to submit that the Respondent has a duty to act fairly towards taxpayers. 1. In light of the foregoing, the Appellant submitted that the consolidated consignment was incorrectly valued and assessed by the Respondent and that the Appellant should not be punished for the Respondent’s unreasonable, irregular, inaccurate, imprecise and unlawful conduct. # Appellant’s Prayers 1. The Appellant prayed as follows: 1. The entire Objection decision dated 9 th September 2025 be set aside. 2. The Respondents additional assessments be vacated. 3. The Respondent bares the cost of this Appeal. # THE RESPONDENT’S CASE 1. The Respondent did not file a response to this appeal. # ISSUES FOR DETERMINATION 1. The Tribunal having carefully evaluated the Appellant’s pleadings and submissions has identified the issue for determination as: **Whether the** # Respondent erred in deviating from the transactional value method in **favour of the transaction value of identical goods method** **ANALYSIS AND FINDINGS** 1. Having identified the issue for determination, the Tribunal proceeds to analyse the same as hereunder: - # Whether the Respondent erred in deviating from the transactional value method in favour of the transaction value of identical goods method 1. Pursuant to the Objection decision dated 9 th September 2025, it was apparent that the Respondent deviated from transactional value method in favour of transaction value of identical goods method on the basis that the invoices provided were not genuine hence the demand for underdeclared taxes. 2. The Appellant has the burden to prove that the Respondent erred in relying transaction value of identical goods therefore, no extra duty is payable. Section 223 of the East African Community Customs Management Act 2004 (EACCMA) provides as follows: ***223. In any proceedings under this Act—*** *(a) the onus of proving the place of origin of any goods or the payment of the proper duties, or the lawful importation, landing, removal, conveyance, exportation, carriage coast- wise, or transfer, of any goods shall be on the person prosecuted or claiming anything seized under this Act.* 1. The EACCMA provides for methods for determining value of imported goods liable to ad valorem import duty. Section 122(1) thereof provides that: ***Determination of value of imported goods liable to ad valorem import duty*** *122. (1) Where imported goods are liable to import duty ad valorem, then the value of such goods shall be determined in accordance with the Fourth Schedule and import duty shall be paid on that value.* 1. Paragraph 2(a) of the of the Fourth Schedule to EACCMA provides for transaction value. It provides *inter alia*: *2. (1) The customs value of imported goods shall be the transaction value, which is the price actually paid or payable for the goods when sold for export to the Partner State adjusted in accordance with the provisions of Paragraph 9…* 1. Paragraphs 2, 3, 4, 5, 6, 7 and 8 of the Fourth Schedule to EACCMA outlines sequential methods of determining value of imported goods liable to *ad valorem* import duty. The methods are as follows: 2. *transaction value;* 3. *transaction value of identical goods;* 4. *transaction value of similar goods;* 5. *reversal of order of application of deductive value and computed values;* 6. *deductive value;* 7. *computed value; and* 8. *fall back value.* 9. The abovementioned methods are applied sequentially. Paragraph 1 of the Interpretative Notes under part II of the Fourth Schedule to EACCMA provides as hereunder: *1.Paragraph 2, 3, 4, 5, 6, 7 and 8 define how the customs value of imported goods is to be determined under the provisions of this Schedule. The methods of valuation are set out in a sequential order of application.* ***The primary methods for customs valuation is defined in Paragraph 2 and imported goods are to be valued in accordance with the provisions of this paragraph whenever the conditions prescribed therein are fulfilled.*** 1. In the case of **Commissioner Investigations and Enforcement v Eastern Consulting Management Limited [2022] KEHC 12202 (KLR)** the High Court stated as follows in relation to customs valuation: *The Fourth Schedule therein further provides, in part, at Para. 2(1) that ‘’The customs value of imported goods shall be the transaction value, which is the price actually paid or payable for the goods… Whether the price of the Consignment could be determined from the documents provided as affirmed by the Tribunal is a question of fact.* 1. Further, in **Commissioner of Customs and Border Control v Keppel Investments Limited [2023] KEHC 18548 (KLR)** the Court stated as follows in relation to methods of valuation under EACCMA: *‘‘I therefore agree with the Tribunal that the first port of call in determining the customs value, is the transaction value and it is only when this cannot be determined or satisfied that the Commissioner can rely on other methods of valuation provided in the Fourth Schedule* 1. Bearing in mind the foregoing provisions of the law and precedents, the issue for determination is whether the Respondent lawfully departed from the transaction value method prescribed under Paragraph 2 of the Fourth Schedule to the EACCMA. The Tribunal must therefore determine whether the Respondent established legally sustainable grounds for rejecting the transaction value declared by the Appellant before resorting to the transaction value of identical goods method. Since customs valuation methods are to be applied sequentially, the burden rests on the Respondent to demonstrate that the primary method was unavailable or inapplicable before invoking an alternative method. 2. Although the Respondent did not participate in these proceedings, the Tribunal has nevertheless considered the reasons contained in the Objection Decision dated 9th September 2025. The Respondent’s justification for rejecting the transaction value was that the commercial invoices produced by the Appellant were allegedly not genuine because they contained differences in font style and instances of overwriting. However, beyond those observations, the Respondent neither identified any discrepancies between the declared invoice values and the actual consideration paid nor produced evidence demonstrating that the invoices had been altered, falsified or did not reflect the true price paid or payable for the imported goods. Mere suspicion arising from the appearance or formatting of an invoice, without supporting evidence demonstrating falsity or manipulation, cannot by itself justify rejection of the transaction value prescribed under Paragraph 2 of the Fourth Schedule to the EACCMA. 3. The Appellant has a duty to demonstrate that the transaction value method was applicable. Section 30 of the Tax Appeals Tribunal Act Cap 469A (TATA) states that: *In a proceeding before the Tribunal, the appellant has the burden of proving—* 1. *where an appeal relates to an assessment, that the assessment is excessive; or* 2. *in any other case, that the tax decision should not have been made or should have been made differently.* 3. Whereas the Tribunal has stated above that under Section 223 of the EACCMA and Section 30 of the TATA that the burden of proof in tax matters lies upon the taxpayer, the burden is not stationary. It oscillates between the taxpayer and the Respondent at different intervals. In **Commissioner of** **Domestic Taxes v Bosky Industries Limited (Income Tax Appeal E049 of 2022) [2025] KEHC 7965 (KLR)** the Court at paragraphs 45 and 48 of the judgment observed that: *''45. The “burden of proof” is not a static concept in tax litigation. Initially, the taxpayer must challenge an assessment by tendering evidence of legitimate transactions. Once the taxpayer has done so to a minimum level by demonstrating that the goods were paid for and ETR invoices exist, the burden shifts to the Commissioner to substantiate its allegations of fraud or fictitious transactions.* *48. This Court therefore holds that the Tribunal did not improperly shift the burden of proof. Instead, it followed the orthodox legal approach of requiring the Commissioner to counter the taxpayer’s prima facie evidence with credible evidence of its own particularly where serious charges like fraud or fictitious transactions are raised.''* 1. The Appellant produced before the Tribunal commercial invoices together with corresponding bank statements evidencing payment to its overseas suppliers for the imported goods. The Tribunal has carefully examined the documentary evidence and notes that the payments reflected in the banking records substantially correspond with the invoices relied upon by the Appellant. The Respondent did not produce any contrary documentary evidence showing that the declared consideration differed from the actual price paid or payable, nor did it demonstrate that the banking transactions were fictitious or unrelated to the imports in question. In the absence of such evidence, the Tribunal finds no factual basis for rejecting the transaction value declared by the Appellant. 2. While the Respondent’s failure to file a Response or participate in the hearing does not automatically entitle the Appellant to judgment, it nevertheless means that the Appellant’s documentary evidence remained substantially uncontroverted. The Tribunal is still required to independently evaluate whether the Appellant has discharged the burden imposed under Section 30 of the Tax Appeals Tribunal Act and Section 223 of the EACCMA. Having examined the evidence placed before it, the Tribunal is satisfied that the Appellant established, on a balance of probabilities, the authenticity of the transaction documents and the corresponding payments. Once that prima facie evidential burden had been discharged, the evidential burden shifted to the Respondent to justify its allegation that the invoices were not genuine. No such evidence was tendered by the Respondent. 1. In light of the foregoing, the Tribunal finds that the Respondent failed to establish lawful grounds for disregarding the transaction value method under Paragraph 2 of the Fourth Schedule to the EACCMA. 2. Consequently, the Respondent had no legal basis for proceeding to the secondary method of valuation based on the transaction value of identical goods. The Appellant, through the production of commercial invoices, proof of payment and bank statements, successfully demonstrated that the declared customs value represented the price actually paid or payable for the imported goods. Accordingly, the Tribunal finds that the impugned assessment was not supported by sufficient factual or legal justification and cannot therefore stand. 3. The Tribunal reiterates that customs valuation under the EACCMA is governed by a structured hierarchy of valuation methods, with transaction value being the primary method. Departure from that method must be supported by cogent evidence demonstrating that the statutory conditions for its rejection have been satisfied. 4. In the present appeal, those conditions were not established. The Respondent therefore acted contrary to the valuation framework prescribed under the Fourth Schedule to the EACCMA by prematurely resorting to the transaction value of identical goods. 5. Following the above analysis, the Tribunal finds and holds that the Respondent erred in deviating from the transactional value method in favour of transaction value of identical goods method. # FINAL DECISION 1. The upshot to the foregoing is that the Appeal is meritorious and the Tribunal proceeds to make the following Orders 1. The Appeal be and is hereby allowed; 2. The Objection Decision dated 9th September 2025 be and is hereby set aside; 3. Each party to bear its own cost. 2. It is so ordered. # DATED AND DELIVERED AT NAIROBI THIS 17 TH DAY OF JULY, **2026** SIGNED BY/FOR: **★ TH E JUDICIAR Y O F KENY A ★** **HON. EUNICE NJERI NGANGA HON. SANKALE SPENCER OLOLCHIKE** **HON. BERNADETTE MUTHIRA GITARI** **HON. BILLY GRAHAM OKUMU MIJUNGU** Tax Appeals Tribunal Tribunal Date: 2026-07-17 14:07:45