[2024] KETAT 1670 (KLR)

Chrysal Africa Limited v Commissioner of Customs and Border Control (Tax Appeal 359 of 2024) [2024] KETAT 1670 (KLR) (Commercial and Tax) (21 November 2024) (Judgment)

Neutral citation: [2024] KETAT 1670 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Tax Appeal 359 of 2024

CA Muga, Chair, BK Terer, EN Njeru, E Ng'ang'a & SS Ololchike, Members

November 21, 2024

Between

Chrysal Africa Limited

Appellant

and

Commissioner of Customs and Border Control

Respondent

Judgment

Background 1. The Appellant is a limited liability company incorporated in Kenya and whose core business is distribution of plant care products. The Appellant has been operating in the horticulture industry for the past 14 years and its business is partly regulated by the Pest Control Products Board (PCPB) which is appointed under the Pest Control Products Act, CAP 346 of the Laws of Kenya (hereinafter “PCB”).

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws(hereinafter “the Act”). 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 Appellant imports Chrysal BVB and on 1st March, 2024, the Respondent made a ruling classifying Chrysal BVB under tariff code 3824. 99. 90.

4. Aggrieved by the Respondent’s tariff ruling on 1st March, 2024, the Appellant filed its Notice of Appeal dated 27th March, 2024 on 28th March, 2024.

The Appeal 5. The Appeal was predicated upon the following grounds as laid-out in the Memorandum of Appeal dated and filed on 11th April , 2024:i.The Respondent erred in fact and law by classifying the Appellant's Chrysal BVB product under East African Community Common External Tariff (hereinafter “EACCET”) HS. Code 3824. 99. 90. ii.The Respondent erred in fact and law by failing to appreciate that Chrysal BVB is a plant growth regulator which is properly classified under EACCET HS Code 3808. 93. 90. iii.The Respondent erred in law and fact seeking to impose import duty on Chrysal BVB without any justification when the same was properly classified under EACCET HS Code 3808. 93. 90 and zero rated for import duty.iv.The Respondent erred in law and fact in ignoring the registration of Chrysal BVB by the PCPB which is Government Body and which registration was done pursuant to the PCP.

Appellant’s Case 6. The Appellant’s case is premised on its Statement of Facts were dated and filed on 11th April, 2024 together with the witness statement of Mr. Jan Janssen, the Global Regulatory and External Research and Development Manager, dated 5th August, 2024 and filed on 6th September, 2024.

7. The Appellant imports a product known as Chrysal BVB which is a plant growth regulator. The product is duly registered by the PCPB under registration number PCPB(CR)0924-p(i).

8. The Appellant averred that the active ingredient in Chrysal BVB is gibberellic acid, a well-known plant hormone that is known to influence the physiology of plants and encourage plant growth. Products containing gibberellic acid are classified as plant growth regulators in Europe and the USA and can only be marketed after obtaining a pesticide registration to ensure proper and safe handling of the product and good efficacy.

9. On 1st March 2024 the Appellant received a tariff classification from the Respondent wherein the Respondent proceeded to classify Chrysal BVB under HS Code 3824. 99. 90.

10. The Appellant stated that it was instructive to note heading 38. 24 makes no reference at all to plant growth regulators. It instead covers prepared binders for foundry moulds or cores, chemical products and preparations of the chemical or allied industries not elsewhere specified or included. As the Respondent's classification dated 1st March 2024 is erroneous, the Appellant appealed against the classification.

11. The Appellant stated that in the tariff classification dated Ist March 2024, the Respondent made no attempt to analyse the composition of Chrysal BV and that had it so, it would have found that Chrysal BVB contains gibberellic acid which is the active ingredient in the product. The said gibberellic acid is a plant growth regulator and appears in a high concentration in Chrysal BVB and the other ingredient is a solvent.

12. The Appellant further stated that the product is properly classified under HS Code 3808. 93. 90 which covers plant growth regulators and that in fact, in various countries around the world, Chrysal BVB is imported under HS Code 3808. 93 which deals with plant growth regulators. The Appellant adduced as evidence the classifications from the European Union (EU) and United States of America respectively.

13. The Respondent's classification of Chrysal BVB under HS Code 3824. 99. 90 is not correct because gibberellic acid is a plant growth regulator which is specifically provided for under HS Code 3808. 93. The Respondent erroneously ignored the fact that gibberellic acid which is the active ingredient in Chrysal BVB is a plant growth regulator and that it appears in a high concentration in Chrysal BVB and the other ingredient is a solvent. As plant growth regulators are specifically provided for under heading HS Code 3808. 93, the Respondent's classification of Chrysal BVB under HS Code 3824. 99. 90 is completely erroneous and the Respondent has no basis in law or fact to classify Chrysal BVB under HS Code 3824. 99. 90.

14. The Appellant’s witness testified that the Appellant has been operating in the horticulture industry for the last 14 years and that its business is partly regulated by PCPB which is established under the PCP. The witness explained what a plant growth regulator does by testifying that it is a chemical substance that is either natural or synthetic and that it modifies or controls one or more specific physiological processes within a plant such as auxins, gibberellins, cytokinins, ethylene and abscisic acid.

15. The Appellant’s witness stated that while plant growth regulators can be derived from plants (naturally occurring hormones like auxins) they are typically classified based on their functions as regulators of plant growth, in addition, the witness testified, the plant growth regulators are synthesized. artificially. A plant growth regulator is neither a plant nor a plant product.

16. The Appellant’s witness further testified that the product, Chrysal BVB contains gibberellin and Gibberellic acid is its active ingredient. Gibberellic acid, promotes stem elongation, induces flowering , cone initiation (in conifers, the cones are the reproductive organs) and promotes seed germination.

17. The Appellant’s witness referred to a study which showed that the use of the Gibberellic acid had been recommended to improve cut flower yield and quality (vase life) and reduce management input costs. The Appellant’s witness stated that the Gibberellic acid the active ingredient, prolongs the life of cut and loose flowers by influencing cell growth , expansion and elongation; inducing flowering; and delaying leaf senescence by delaying chlorophyll degradation. That other function of the acid includes, the improvement of the quality of flowers and leaves, stipulation of bud opening, keeping leaves firm and green preventing yellowing and promoting the vase life considerably.

18. According to the witness of the Appellant, the product, Chrysal BVB support plant growth by extending the “vase life “of flowers through improved bud opening and delayed leave senescence. It is used by growers after harvest as it mimics naturally occurring plant growth regulators which flowers do not have in good supply once cut.

19. The Appellant’s witness also stated his view that Chrysal BVB was classifiable under Heading 38. 08 for the following reasons:i.Flowers are still plants as physiological processes continue after harvesting.ii.Plant growth regulators are specifically mentioned in Heading 38. 08 of EACCET.iii.Chrysal BVB contains Gibberellic acid as the only active ingredient which is a well-known plant growth regulator and as such fully covered by the explanatory notes for heading 38. 08. iv.It is registered d by the PCBP as a plant growth regulator.

20. The Appellant’s witness further stated that in countries all over the world, Chrysal BVB is imported under HS. Code 3808. 93. The Appellant’s witness also included the data sheet and label of the products detailing the directions for use of th products and which illustrated that Gibberellic acid was the only active ingredient and the other ingredients are only present to assist in formulating the product. The Typical ingredients found in flower preservative products like sugars and biocides are not present in Chrysal BVB.

21. The Appellant’s witness disputed in toto the Respondent’s assertions and claims that the correct classification was tariff code 3824. 99. 90.

22. The Appellant made the following prayers to the Tribunal:a.That the decision dated 1st March, 2024 be annulled and set aside in its entirety;b.That the Appeal be allowed; andc.Any other remedies that the Tribunal deems just and reasonable.

Respondent’s Case 23. The Respondent replied to the Appeal through its Statement of Facts dated and filed on 9th May, 2024 together with the testimony of its witness, Mr. Thadeus Ogoti, one of its officers. The testimony of its witnessed will not be rehashed as the same was a regurgitation of the statement of facts. The Respondent stated as follows:

24. The Appellant lodged entries for the imports vide entry No. 24MBAIM400396778 on 19th January, 2024 and declared the products in 2022 EACCET HS Code 3808. 93. 90 which provides for plant growth regulators.

25. The Respondent determined the product as an immersion treatment by products in post-harvest period to enhance the ornamental value of flowers and buds which is classified in the 2022 EACCET HS Code 3824. 99. 90 based on the verification report and technical information availed vide a tariff ruling dated 1st March, 2024.

26. In response to the Appellant's first ground of Appeal, wherein the Appellant contended that the Respondent erred in fact and law by classifying its import of ChrysaL BVB under 2022 EACCET HS Code 3824. 99. 90 of Heading 38. 24. Heading 38. 24 states as follows:“Prepared binders for foundry moulds or cores; chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included."

27. Further the Appellant stated in its statement of Facts that it had properly classified the product under HS Code 3808. 93. 90 of Heading 38. 08. Heading 38. 08 states as follows:“Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and similar products, put up in forms or packings for retail sale or as preparations or articles (for example, sulphur treated bands, wicks and candles, and fly-papers)."

28. The Respondent stated that Section 4 (1) (a) of the East Africa Community Customs Management Act, 2004 (hereinafter “EACCMA”) mandates it to co-ordinate and monitor the administration of EACCET. Section 4 (1) (a) of EACCMA states as follows:“(1)Without prejudice to the generality of section 3, the Directorate shall, in relation to management and administration of Customs, coordinate and monitor-a.administration of the Common External Tariff;"

29. It was the Respondent's averment that it was guided by the provisions of the General Interpretation Notes (hereinafter “GIR”) 1 which states that classification shall be determined in accordance with the headings and any other relative section or chapter notes. GIR 1 states as follows:“The titles of Sections, Chapters and sub-Chapters are provided for ease of reference onli1; for legal purposes, classification shall be determined according to the terms of the headings and ant/ relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions:"

30. The Respondent stated that during its verification of the imports, it determined that the products were majorly used in post- harvest period to enhance the ornamental value of the flowers and buds hence it did not act as a plant growth regulator to the crops.

31. Consequently, the Respondent classified the products under the Heading38. 24instead of Heading 38. 08 which deals with chemicals that aid in the general enhancement of production of plants such as pesticides, fungicides and herbicides.

32. In Response to the (ii) Ground of Appeal, the Appellant contended that the Respondent erred in fact and in law by failing to appreciate that Chrysal BVB is a plant growth regulator and it properly classified it under the HS Code 3808. 93. 90.

33. Further the Appellant stated in its Statement of Facts that the Active ingredients in Chrysal BVB is Gibberellic Acid which is a plant hormone used to influence plant physiology and encourage plant growth. The Respondent stated that upon testing the Appellant's product, it determined that it contains citric acid, N-(PhenylMethyl)-H-Purine 6- Amine, Gibberellins and other ingredients which are beneficial in post­ harvest treatment of horticultural plants.

34. Further, the Respondent states that a look at the Appellant's Website, chrysal.com, Chrysal BVB is described as follows:“Chrysal BVB helps post-harvest problems for bulb flowers including lily and iris, such as sub-optimal vase life and leaf yellowing. This product is preferably used by growers directly after harvest. Chrysal BVB extends the vase life of flowers considerably through improved bud opening."

35. Further the Respondent stated that it is not in dispute that Chrysal BVB contains Gibberellic Acid but, it is the Respondent's position was that Gibberellic Acid is only and effective Plant Growth Regulator if used in small quantities. The Respondent states that the 'high' quantities of Gibberellic Acids in Chrysal BVB does the opposite of its intended purpose and as such it fails to act as a Plant Growth Regulator.

36. The Respondent averred that even the Appellant itself was alive to the fact that the product in question is purely used in the preservation of the flower's vase life by improving bud opening. In response to the (iii) and (iv) Grounds of Appeal, the Appellant stated in its Memorandum of Appeal that the Respondent erred in law and fact by seeking to impose import duty on Chrysal BVB without any justification when the same was properly classified under the HS Code 3808. 93. 90.

37. The Appellant in its statement of facts stated that the Respondent has no basis in law and fact to classify Chrysal BVB under HS Code 3824. 99. 90. The Respondent stated that it is the principle body tasked with the mandate of verifying and coordination of imports and exports in Kenya pursuant to the provisions of Section 4 of EACCMA.

38. The Respondent also stated that its ruling was guided by the verification findings and it solely relied on the basic principles of customs classifications under the Harmonised system.

39. The Respondent made the following prayers to the Tribunal:a.That this Tribunal upholds the Respondent’s tariff ruling dated 1st March, 2023. b.That a declaration that the correct classification for the imports is HS. Code 3824. 99. 90 rather than HS. Code 3808. 93. 90 that was declared by the Appellant.c.Costs of this suit.

Parties’ Written Submissions 40. On 11th September 2024, the Tribunal directed the parties to file their respective written submissions on or before 7th October, 2024. Both parties complied.

41. The Appellant’s written submissions were dated 4th October, 2024 and filed on 7th October, 2024 wherein the Appellant submitted on the following three issues which it had identified for determination as hereinunder:i.Whether the Respondent erred in fact and law by classifying the Appellant's Chrysal BVB product under EACCET HS Code 3824. 99. 90. ii.Whether the Respondent has substantiated its reclassification of Chrysal BVB and met the evidentiary burden required to prove that the product does not fall under HS Code 3808. 93. 90. iii.Whether the Respondent’s imposition of duty on Chrysal BVB is based on a clear understanding of the product and the use thereof.

42. Chrysal BVB is primarily formulated for use as a plant growth regulator. Its key functions and chemical composition classify it as a plant growth regulator. The Appellant has submitted as evidence, studies conducted by Franco and Han (1997) and Viera et al. (2010), attached as Appendix 1 to its witness statement, which demonstrate that Gibberellins are recommended to enhance cut flower yield and quality (vase life) while reducing management input costs.

43. The Respondent’s assertion in Paragraph 15 of its statement of facts, that Chrysal BVB is used solely to enhance the ornamental value of flowers and buds, and not as a plant growth regulator for crops, is erroneous and unfounded, lacking any substantive scientific basis.

44. Further, according to the EACCET guidelines, the product must be classified based on their primary use and chemical composition. The Respondent failed to consider the product’s intended use and therefore classified Chrysal BVB incorrectly.

45. The General Interpretative Rules (hereinafter “GIR”) of classification governs the classification of goods. According to GIR 1, classification of goods is determined according to the terms of the headings and any relative section or chapter notes, provided the headings, or not do not require otherwise, according to GIR 2 through to 6.

46. The titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions.

47. Heading 38. 08 of the CET addresses the classification of plant growth regulators, as detailed above. We have attached as Appendix I to these submissions, the Explanatory Note III to Heading 38. 08, outlining the classification of plant growth regulators which reads;“Plant growth regulators are applied to alter the life processes of a plant so as to accelerate or retard growth, enhance yield, improve quality or facilitate harvesting, etc. Plant hormones (phytohormones) are one type of plant-growth regulator (e.g., gibberellic acid). Synthetic organic chemicals are also used as plant-growth regulators.”

48. Explanatory Note III of Heading 38. 08 under the EACCET clearly states that Gibberellic acid is a plant growth regulator. However, when questioned, the Respondent’s witness Mr. Ogoti, incorrectly suggested that the formulation in Chrysal BVB does not qualify as a plant growth regulator.

49. To clarify this erroneous assertion, we direct the Tribunal to Paragraph 21 of the Respondent’s own statement of facts, which acknowledges that Gibberellic acid is indeed the active ingredient in Chrysal BVB. Thus, Mr. Ogoti's testimony in open court is not only contradictory but also perplexing, as he failed to provide any laboratory evidence to support the claim that Chrysal BVB, despite containing Gibberellic acid, cannot function as a plant growth regulator.

50. The Appellant contends that the Respondent is shifting the goalposts for its own advantage, despite the law being clear. The Appellant avers, where the law is clear it should be interpreted with the ordinary meaning of the words used. Justice GV Odunga in Republic v Kenya Revenue Authority & another Ex-parte Fontana Limited [2014], upheld the ruling in Cape Brandy Syndicate vs. Inland Revenue Commissioner [1921] 1 KB 64, where it had been held that: “In a taxing act one has to look merely at what is clearly stated… There is no presumption as to tax.”

51. The Appellant emphasized that the universal classification of Chrysal BVB as a plant growth regulator under HS Code 3808. 93 is well-established, with consistent application in countries such as the Netherlands, the United Kingdom, and the United States of America. The Respondent's deviation from international customs classifications was unsubstantiated. The Appellant attached supporting classifications for plant growth regulators under HS Code 3808. 93 from the European Union and the United States of America.

52. The Respondent's departure from established international customs practices is further illustrated by the 2010 classification of plant growth regulators under HS Code 38. 08 by the World Trade Organization (hereinafter “WTO”) Committee on Rules of Origin, as documented in its Appellant's witness statement. The Appellant presented substantial evidence indicating that Chrysal BVB contains active ingredient Gibberellic acid, a plant growth regulator primarily used for post-harvest treatment.

53. The Respondent, on the other hand, was unable to substantiate its position and has failed to provide any evidence explaining its decision to reclassify a product containing Gibberellic acid, a known plant growth regulator explicitly provided for under heading 38. 08 in the EACCET, leading the Appellant to believe this tariff classification is merely an attempt to generate higher revenue. The Respondent further failed to take time to appreciate that Chrysal BVB is used in extending the ‘vase life’ of flowers through improved bud opening and delayed leaf senescence.

54. It was therefore crucial for the Tribunal to consider the established use of Chrysal BVB in extending the vase life of flowers due to the product containing Gibberellic acid, which supports the appropriateness of the original tariff classification under Heading 38. 08 in the EACCET.

55. The Respondent's failure to substantiate its position and provide evidence regarding the reclassification of a product containing Gibberellic acid undermines both its integrity and its mandate as a public body. The Respondent's actions appear to be driven by an intent to generate higher revenue rather than a legitimate regulatory rationale and we pray that the Honourable Tribunal dismiss their attempt to reclassify a plant regulator under 38. 24 despite the law clearly stating otherwise.

Whether the Respondent has substantiated its reclassification of Chrysal BVB and met the evidentiary burden required to prove that the product does not fall under HS Code 3808. 93. 90. 56. The Respondent erred in both fact and law by failing to recognize that Chrysal BVB is a plant growth regulator. The classification under EACCET HS Code 3808. 93. 90 is specifically designed for preparations that contain active ingredients and key of them being Gibberellic acid which is regarded as a plant growth regulator used to influence plant growth. As a result, the Respondent’s oversight in this regard undermines the accuracy of the classification decision.

57. The Appellant further averred that the Respondent’s position through its witness that the composition and formulation of Chrysal BVB does not qualify to be classifiable under Heading 3808 is incorrect. The Appellant submitted that it had clearly provided evidence through labels and safety data sheets, specifically demonstrating that the product contains Gibberellic Acid, thereby supporting the classification of Chrysal BVB under Heading 3808 as a plant growth regulator.

58. The Appellant further submitted that the Respondent provided no evidence, either before the Tribunal or to the Appellant, to support its assertions. The Respondent’s witness simply claimed that Chrysal BVB lacks the composition and formulation to be classified under Heading 38. 08 which is an erroneous statement that was not backed with any evidentiary proof to substantiate such claims.

59. The Respondent’s witness further alluded to have conducted a laboratory test to ascertain the composition/formulation that informed their decision but the same was not availed to the Tribunal nor was there any evidence to support such deviation from the Appellant’s position and international practice.

60. The Appellant posited that by presenting all the requisite documentation and relevant evidence, it had succeeded in discharging its burden of proof. It is trite law that the burden of proof is not static and by virtue of providing the support documentation, the Respondent ought to disprove the Appellant’s position if in disagreement.

61. The Appellant submitted that the Respondent woefully failed in discharging this burden once it swung back to them. Upon the Appellant establishing a prima facie case and introducing credible evidence relevant to ascertaining their liability for any tax, the Respondent then has the burden of prove its position with regard to the matter.

62. In Shreeji Enterprises (K)Limited vs Commissioner of Investigations & Enforcement TAT No. 58 and 189 of 2019 the Tribunal cited with approval the case Hickman Motors Ltd. v. Canada, [1997] 2 S.C.R. 336 where the following was held:“The Appellant's initial onus of proof is met where a prima facie case is made out. The onus shifts to the Minister to rebut the prima facie case made out by the taxpayer and to prove the assumptions. The appellant adduced clear, unchallenged and uncontradicted evidence. The respondent adduced no evidence whatsoever. Where the onus has shifted to the Minister and the Minister has adduced no evidence whatsoever, the taxpayer is entitled to succeed.The Minister should be able to rebut such [prima facie] evidence and bring forth some foundation for his assumptions. The Minister does not have a carte blanche in terms of setting out any assumption which suits his convenience. On being challenged by evidence in chief he must be expected to present something more concrete than a simple assumption.” Emphasis ours.

63. InCommissioner of Domestic Taxes vs Trical and Hard Limited (Tax Appeal E146 of 2020) [2022] KEHC 9927 (KLR) (Commercial and Tax) (8 July 2022) (Judgment) the High Court held as follows:“A presumption of correctness arises from the Commissioner ‘s determination/assessment. The presumption remains until the taxpayer produces competent and relevant evidence to support his/her position. When the taxpayer comes forward with such evidence, the presumption vanishes, and the case must be decided upon the evidence presented.”

64. The Appellant submitted that it had fully discharged its burden of proof by providing all relevant documents and information within its possession, thereby shifting the evidentiary burden to the Respondent to substantiate its reclassification. It was insufficient for the Respondent, the Appellant submitted, to merely make unfounded assertions without adhering to the legal framework, which clearly delineates the classification of plant growth regulators. The onus was on the Respondent to provide compelling evidence as to why Chrysal BVB does not fall under this classification, a responsibility it has unequivocally failed to fulfil.

65. The Appellant submitted that moreover, the Respondent did not adequately apply the legal framework governing product classification, which emphasizes the importance of assessing the product’s primary purpose and active ingredients. It is accordingly provided in established regulations that products containing plant growth regulators should be classified under HS Code 38. 08. 93. 90 given its express purpose and composition.

66. To buttress the above position, the Appellant makes reliance on the case of Hygrotech East Africa Limited v Commissioner of Customs and Border Control (Tax Appeal 1376 of 2022) [2024] KETAT 116 (KLR) (2 February 2024) wherein the Tribunal stated that;“The foregoing composition of the product having been established, the HS classification of the product follows course as guided by the GIRs and the EACCET tariffs.GIR 1 states; “Classification shall be determined according the terms of the heading and any relative section or chapter notes and, provided such headings or notes do not otherwise require.”GIR 2 states; “Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance.” GIR 3 states; “mixtures, composite goods consisting of different materials, and goods put up in sets for retail sale, which cannot be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable.”The Tariff Sub-Heading 3824. 99. 90 which is preferred by the Respondent describes its class of products classifiable thereunder as; “prepared binders for foundry moulds or cores; chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products) not elsewhere specified or included.”It is clear this heading applies to products whose composition is made up of chemicals or mixtures of chemicals even with natural products, in line with the Chapter 38 – miscellaneous chemical products.”

67. Following from the above decision it was clear for a classification to happen, first there needs to be an established composition of the product. This has only been done by the Appellant through the composition provided for under the witness testimony of Jan Jansen through the safety data sheets, the products label and concurrence by the PCPB. The registration of Chrysal BVB as a plant growth regulator by the PCPB as illustrated by Chrysal BVB’s label adduced in the Appellant’s witness statement, signified that the product has met the necessary regulatory standards set forth by law. However, the Respondent relied on evidence not before the Tribunal to infer composition and formulation and thereafter infer classification which is not only unprocedural but also fallacious at best.

68. In light of the Appellant's comprehensive presentation of evidence and the Respondent's failure to provide any substantiating proof to support its reclassification, it is evident that the Respondent had not met the legal burden required to justify its decision. The Appellant however, demonstrated that Chrysal BVB is correctly classified under HS Code 3808. 93. 90 as a plant growth regulator. We therefore urge the Tribunal to uphold this classification, recognizing that the Respondent’s actions were without merit and contrary to established legal principles.

Whether the Respondent’s imposition of duty on Chrysal BVB is based on a clear understanding of the product and the use thereof. 69. The Appellant averred that the Respondent’s imposition of duty stemmed from misclassification of Chrysal BVB, whereas HS Code 38. 08. 93. 90 provides for plant growth regulators which was completely ignored by the Respondent. The Respondent has through its witness, Mr Ogoti, avowed that a flower is not a plant and, in any case, Chrysal BVB is used on flowers that have matured and no growth is anticipated.

70. These assertions are factually untrue. A plant is a multicellular organism that typically belongs to the kingdom Plantae. Plants are primarily characterized by their ability to perform photosynthesis, a process that uses sunlight, water, and carbon dioxide to produce food (glucose) and oxygen. Common examples of plants include trees, shrubs, grasses, flowers, and ferns.

71. A flower is a part of a plant. Specifically, the flower is the reproductive structure of flowering plants (angiosperms). While the plant as a whole includes roots, stems, leaves, and sometimes fruits. Section 2 of the Plant Protection Act, CAP 324 of the Laws of Kenya defines a plant as follows:“plant" means any member of the vegetable kingdom whether living or dead and includes any part of a plant, whether severed therefrom or not.

72. The Appellant posited that the argument that a flower is not a plant by the Respondent’s witness was far-fetched and implausible. It is common knowledge that there are only two main kingdoms for purposes of classification of living things: Kingdom Plantae for plants and Kingdom Animalia for animals. It is highly unlikely and unreasonable to establish that a flower is in Kingdom Animalia. The Appellant therefore submitted that flowers, which includes the stem and leaves (as produced in court by the Respondent) to which the Chrysal BVB is applied and relates to, is a plant.

73. Further, the Appellant was aware that its product Chrysal BVB is indeed a plant growth regulator based on its composition, labels, safety data sheets and the certification from PCPB in Kenya. Moreover, the Appellant rebuts the Respondent’s layman assertion that ‘growth’ ought to be in such a way that it relates to initiation of new organs for the plant.

74. The Appellant posited that growth is to be inferred from either the sensu stricto or the sensu lato. The stricto growth is an irreversible increase in cell number, biomass, plant volume, or a combination thereof while the lato growth refers to the combination of irreversible and reversible biomass or volume changes and both types of growth apply to single cells, organs or whole plants.

75. It was apparent that with the use of Chrysal BVB physiological tissue expansion occurs as in the lato growth rather than the Respondent’s alleged and inferred initiation of new organs. The Appellant submits that the Respondent is wrong in thinking that plant growth regulators should influence growth in stricto. Additionally, the functions of Chrysal BVB relate to those of a plant regulator to the following extent: Flowers are still plants as the physiological processes continue after harvesting.

Plant growth regulators are specifically mentioned in Heading 38. 08 of the EACCET.

Chrysal BVB contains Gibberellic acid as the only active ingredient, which is a well-known plant growth regulator and as such fully covered by the explanatory notes for heading 38. 08.

Items mentioned in heading 38. 08 (examples, herbicides, plant growth regulators etc.) can be used in plants and plant products either during the pre-harvest or post-harvest period.

It is registered by the Pest Control Products Board as a plant growth regulator.

76. The Appellant has provided adequate evidence as required to the Respondent to correctly classify Chrysal BVB. However, the Respondent has not provided any legal or factual basis for the imposition of duty on the product based on its classification.

77. Consequently, the Respondent has failed to demonstrate how Chrysal BVB deviates from the classification under Heading 38. 08, particularly given that Gibberellic acid, its key active ingredient, is explicitly recognized as a plant growth regulator essential for influencing plant development.

78. The Appellant submitted that there was failure by the Respondent to apply consistent standards concerning classification of Chrysal BVB in this instance undermining legal foundation of the Respondent’s position and which unequivocally raises concerns of arbitrary enforcement.

79. Imposing duty without justification not only contravened the legal principles of fairness and equity but also violates the Appellant's right to legitimate expectation. Departing from the law, altering universally recognized customs positions, and reclassifying the product without valid justification is a stance that this Tribunal should reject, as it creates significant economic harm and fosters uncertainty.

80. The Respondent submitted that the Appeal before the Tribunal relates to the tariff classification of the Appellant’s product identified as Chrysal BVB and that according to the Appellant the product was classifiable unde tariff 3808. 93 whilst the Respondent was of the view that the product is classifiable under heading 38. 24. Harmonised System Nomenclature heading 38. 24 relied on by the Respondent states as follows:“Prepared binders for foundry moulds or cores; chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included."

81. The Respondent submitted that it deemed the product in dispute as a "chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products) not elsewhere specified or included." specifically classifiable under tariff 3824. 99. 90. The Appellant's contention was that the product was classifiable under HS Code 3808. 93. 90 of Heading 38. 08 which states as follows:“Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and similar products, put up in forms or packings for retail sale or as preparations or articles (for example, sulphur treated bands, wicks and candles, and fly-papers)."

82. The Respondent submitted that the Appellant stated that the product being a plant growth regulator is classifiable under Heading 38. 08. The Respondent further submitted that from the onset, it was important to note that the terms of the Heading used bv either the Appellant or the Respondent are both specific. Whereas Heading 38. 08 relates to among others plant growth regulators, it was equally important to note that Heading 3824 specifically HS 3824. 99. 90 is equally specific to "chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products) as long as the11 hm1e not been elsewhere specified or included.

83. The rules guiding classifications of items under the HS system are no longer in dispute. Under the WCO (GIR) Rule 1, classification is determined according to the terms of the heading and any realize section and chapters notes, provided that such headings or notes do not otherwise require, according to the following provisions“The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions:"

84. The expression "provided such headings or Notes do not otherwise require" is intended to make it quite clear that the terms of the headings and any relative Section or Chapter Notes is primary, i.e., they are the first consideration in determining classification. Put simply, the product would correctly be classified in accordance with a particular chapter unless the notes or headings expressly says otherwise. The Notes to Rule 1 states as follow:“(III) The second part of this Rule provides that classification. shall be determined :a.according to the terms of the headings and any relative Section or Chapter Notes, andb.where appropriate, provided the headings or Notes do not otherwise require, according to the provisions of Rules 2, 3, 4, and 5. ”

85. The Respondent submitted that Note (V) to Rule 1 clarifies as follows:“(a)The expression "provided such headings or Notes do not otherwise require" is intended to make it quite clear that the terms of the headings and any relative Section or Chapter Notes are paramount, i.e., they are the first consideration in determining classification. For example, in Chapter 31, the Notes provide that certain headings relate only to particular goods. Consequently, those headings cannot be extended to include goods which otherwise might fall there for reason of the operation of Rule 2 (b).”The Respondent submitted that GIR 6 states as follows:"For legal purposes, classification of goods in the subheadings of all headings shall be determined according to the terms of those subheadings and ant/ related Subheading Notes and, mutatis mutandis, to the above Rules, on the understanding that onli1 subheadings at the same level are comparable. For the purposes of this Rule, the relative Section and Chapter Notes also apply unless the context otherwise require"

86. The Respondent submitted that the Appellant stated that the product (Chrysal BVB) is specifically mentioned under heading 38. 08 and therefore there would be no need to refer to heading 38. 24 as used by it and that therefore, the first port of call is determining whether the Appellant's product fits the terms of heading 38. 08 as argued by the Appellant. The Appellant avers that the product is classifiable under the said heading as plant growth regulator i.e. is used to regulate plant growth.

87. However, the Respondent submitted that parties agreed that the product is used to increase the 'vase' life of flowers from the point the flowers have been harvested to the point the flowers reaches their desired destination. Flowers are harvested from a plant whenever the plant is planted and therefore once the flowers are chopped off from the plant, the flowers lose their status of being a plant to being a plant by product. Oxford Dictionary defines a Plant as follows:“a living organism of the kind exemplified by trees, shrubs, herbs, grasses, ferns, and mosses, typically growing in a permanent site, absorbing water and inorganic substances through its roots, and synthesizing nutrients in its leaves by photosynthesis using the green pigment chlorophyll.”

88. The Respondent submitted that for anything to be considered a "plant" it has to be a living organism, which typically grows on a permanent site and which absorbs its nutrients( water and inorganic substances) through its roots and synthesis and synthesis the nutrients in its leaves through photosynthesis and that to maintain its life physiological processes, plants need light for syntheses and other nutrient absorbed through its roots. The physiological processes of a plant are only supported by the nutrients it absorbs through its roots and sunlight for photosynthesis. A flower, once chopped off from. the plant loses its living status. its status as a living organism was fully supported by the plant where it was chopped off. There is no life in an already chopped/ harvested flower. The flower neither absorbs nutrients through its roots nor does it synthesise these nutrients through the leaves. To avoid it withering away before it reaches its intended destination, the Appellant's product, Chrysal BVB is used. The purpose of Chrysal BVB is not to regulate the growth of the flower at all since the flower, itself having lost the status of a plant cannot grow.

89. The Respondent submitted that Indeed, the Appellant confirms this position at paragraph 18 of its witness statement where it states that the product is' preferably used by growers directly after harvest because it is intended to mimic naturally occurring plant growth regulators which flowers don't have in good supply once cut.' In short, the product merely mimics actual and naturally occurring plant growth regulators and is not in itself a plant growth regulator specifically in the formulation presented before the Tribunal. Plant growth in their nature are used to either retard , or enhance growth and increase crop yield. Explanatory Notes to Heading 38. 08 states as follows:“The heading further covers anti-sprouting products and plant-growth regulators intended to inhibit or promote physiological processes in plants. Their modes of application vary and their effects range from destruction of the plant to enhanced growth-vigour and improved crop-yield.”Further, Explanatory Notes to Heading 38. 08 state as follows:“The products of heading 38. 08 can be divided into the following groups:Plant-growth regulators are applied to alter the life processes of a plant so as to accelerate or retard growth, enhance field, improve quality or facilitate harvesting, etc. Plant hormones (phytohormones) are one type of plant-growth regulator (e.g., gibberellic acid). Synthetic organic chemicals are also used as plant-growth regulators.”

90. The operative word used here is that plant growth regulators is applied to alter the' life processes of the plant.' Therefore, the Respondent submitted, plant growth regulators in their nature are only applied to living plants in the plant's life cycle either to accelerate or retard growth, enhance yield, improve quality or facilitate harvesting. Once harvested, there are no' life processes' in a flower. It can only wither away unless preserved, which indeed is the purpose of the Appellant's product.

91. The Respondent submitted that the purpose of the Appellant's product is to prevent withering or yellowing of the flower before the follower reaches its destination. Put simply, the product is used in flowers to increase the vase value of the flower by maintaining the freshness of the flower until it reaches the destination.

92. The Respondent submitted that indeed, by the time the flower is being harvested, it is already matured ready for use and the purpose of the Appellant's product Chrysal BVB is not to ensure any further growth of the flower. In any case, the Tribunal would recall that nothing was demonstrated by the Appellant's witness that the Application of its product Chrysal BVB would either increase the height or the girth of the flower 111 any way. The Respondent submitted that the Appellant insists that its product is classifiable under heading 38. 08 since the Explanatory Notes refers to Gibberellic acid as a composition of the said product. For the avoidance of doubt, the composition of the product is not in dispute since there is no doubt that the said product is composed of Gibberellic acid. Explanatory Notes to Heading 38. 08 states that“The products of heading 38. 08 can be divided into the following groups:Plant-growth regulators are applied to alter the life processes of a plant so as to accelerate or retard growth, enhance yield, improve quality or facilitate harvesting, etc. Plant hormones (phytohormones) are one type of plant-growth regulator (e.g., gibberellic acid). Synthetic organic chemicals are also used as plant-growth regulators.”

93. The Respondent submitted that reference to gibberellic acid was only used as an example of what constitutes a plant growth regulator. The Notes does not state that gibberellic acid is the only formulation that results in a plant growth regulator. There are many other hormones ( phytohormones)that can be used as plant growth regulators.

94. In any case , the Tribunal would note the Respondent's witness explaining that whereas there is no dispute that the product's composition is the said gibberellic acid, the formulation the said gibberellic acid is used in the Appellant's product is not to regulate the growth of a plant.

95. The Respondent went to on analyse the fact that the formulation of the Appellant's product is merely to extend the vase life of the flower until it reaches its destination. In the formulation, herein gibberellic acid is used to maintain the freshness of the flower, a plant product but not regulate growth of the said flower. The witness gave an example of spirit which can be formulated to give rise to either alcohol or a sanitiser. Thus, the mere fact that there is spirit in a product does not conclusively mean that the product is purely alcohol or sanitiser for that matter. Spirit can be formulated to result into a sanitizer or alcohol. In this present case, even though there is gibberellic acid in the appellant's product, it is not formulated to be used as a plant growth regulator. Rather, it is formulated to be used to extend the vase life of the flower. This is due to the following summarised reasons:a.A flower once chopped off is not a plant but a by-product of a plant for example, just like a fruit can be once harvested from a plant. Further, whereas the flower can subsequently be used as a plant only if enabled to satisfy the conditions of a plant as per the definition of Oxford Dictionary, until then, it is not a plant capable of being regulated by the Appellant's product.b.There is no life processes of a flower once it is chopped off from the plant. The flower has no life in it just like for example a deceased body preserved in a mortuary. Only its vase life and freshness can be maintained through application of chemical composition.c.Contrary to the Appellant's assertions, its product does not in any way support the flowers physiological processes. To maintain its life physiological processes, plants need light for syntheses and other nutrient absorbed through its roots. The physiological processes of a plant are only supported by the nutrients it absorbs through its roots and sunlight for photosynthesis.d.The Appellant's product thus cannot be said to be a plant growth regulator used either to accelerate or retard growth, enhance yield, improve quality or facilitate harvesting.e.There was no evidence that even when used in a flower, there was increase or decrease in the height, girth etc of the flower in order to amount to a plant growth regulator.f.As formulated, product in dispute is only used for preserving the freshness of the flower until it reaches its destination and not for growth purposes.g.if the product is used in the farm either to increase or suppress the growth of a plant, only then can it be said to be a plant growth regulator

96. The Respondent submitted as follows on other ancillary issues raised by the Appellant to justify its erroneous classification of the product under heading 38. 08:

Reliance on registration by Pest Control Products Board. 97. The Respondent submitted that registration by the PCPB does not in any way results in the product being classified under heading 38. 08 as contended by the Appellant. The Board plays no role in the tariff classification of the product.

98. Under section 6 of its enabling Act, PCB, Cap 346, Laws of Kenya of 1982, its functions include:i.to assess and evaluate pest control products in accordance with the provisions of the regulations made under this Act.ii.to consider applications for registration of pest control products and to make recommendations thereon to the Cabinet Secretary;iii.to advise the Cabinet Secretary on all matters relating to the enforcement of the provisions of this Act and regulations made thereunder;iv.to facilitate collaboration with other Government agencies in matters relating to this Act to promote trade under the National Electronic Single Window System established under section 3 of the National Electronic Single Window System Act (Cap. 485D).

99. The Respondent submitted that the PCPB thus is a Statutory organization of Kenya Government established under an Act of parliament, the PCB to provide an efficient and effective regulatory service for importation, manufacture ,transportation, sale, disposal and safe use of pest control products. It plays no role in the tariff classification of the product. Its role is limited to identification of tariff for the purposes of licensing of the products but not identification of tariff under international trade as it does not issue tariff codes. Consequently, the Board plays no role in classification of the product for customs purposes. Only the Respondent is empowered by law to undertake HS classification of any product. Therefore, the Appellant's assertion and reliance of registration by the Board is unreliable and does not provide any persuasive position in so far as classification of the product is concerned.

Reliance on rulings from other jurisdictions 100. The Respondent submitted that in identification of tariff of a product under international trade, specific regard is given to the nature of the product as presented to the tax authority. Countries have been mandated to classify products entering their jurisdiction based on the information placed before them.

101. The Respondent submitted that whereas the Appellant alleges that other jurisdictions have classified the product under heading 38. 08, on cross examination, the Tribunal would recall that no evidence was placed before the Respondent or even before the Tribunal in form of particular information or samples presented in those countries to justify the tariff classification. As tariff classification is specific to disclosing the nature of information/ samples presented, absence such evidence in this case, it cannot be said that the product in dispute herein and as presented before the Respondent is similar/ same as the sample samples presented in other countries for it to attract the same tariff heading as adopted by other jurisdiction. Therefore, reliance of a tariff ruling by a different tax authorities/ jurisdiction lacks any basis in law for the following reasons:

No samples presented in those other jurisdictions were adduced to the Tribunal. 102. The Respondent submitted that the rulings were specific to plant growth regulators used for that purpose and does not relate to appellant's product which is used post-harvest of flowers purely to extend the vase life of the flowers. Rulings by another revenue authorities on a tariff classification of an item is not binding on the Respondent leave alone being persuasive. The Respondent's tariff ruling cannot be faulted on the basis that a different tax authority has issued a diverse ruling. It may as well be that it is other tax authorities' rulings that are erroneous, which the Respondent submitted they were. The only binding ruling on tariff classification matters is the ruling by the World Customs Organization.

Reliance on WTO Rules of Origin and other evidence presented with the witness statement 103. The Respondent submitted that WTO rules of origin dictate rules of origin of product and do not prescribe tariffs for HS classification purposes under the International Trade.

104. The Respondent, in its submissions opposed the samples presented by the Appellant and dismissed them as irrelevant. The Respondent submitted that having demonstrated that the product was not classifiable in the tariff codes presented by the Appellant ( 38. 08) and that the tariff heading used by it was the correct classification of the product in dispute.

105. The Respondent concluded its submissions by stating that there was no doubt that the product in dispute is a chemical composition and that indeed, the Appellant's evidence confirmed this position as its chemical description is a mixture of substances as formulated to be used in flowers post-harvest to ensure that the flower remains as fresh as possible until it reaches its destination.

Issues For Determination 106. The Tribunal having carefully considered the parties’ pleadings, documentation and submissions brought before it notes that two issues distill for its determination as follows:i.Whether the Appeal is properly before the Tribunal.ii.Whether the Respondent erred in re-classifying Chrysal BVB from 3808. 93. 90 to 3824. 99. 90.

Analysis And Findings 107. The Tribunal having established two issues for determination proceeds to analyze them as follows:

Whether the Appeal is properly before the Tribunal. 108. The instant dispute arose due to the issue of re-classification of a product imported by the Appellant from 3824. 99. 90 to 3808. 93. 90. Neither classification resulted in short levied taxes. The tariff ruling was issued by the Respondent on 1st March, 2024 and the Appellant then appealed to the Tribunal on 27th March, 2024.

109. The Tribunal notes the following provisions of Section 229 of EACCMA:“(1)A person directly affected by the decision or omission of the Commissioner or any other officer on matters relating to Customs shall within thirty days of the date of the decision or omission lodge an application for review of that decision or omission.(2)The application referred to under subsection (1) shall be lodged with the Commissioner in writing stating the grounds upon which it is lodged.(3)Where the Commissioner is satisfied that, owing to absence from the Partner State, sickness or other reasonable cause, the person affected by the decision or omission of the Commissioner was unable to lodge an application within the time specified in subsection (1), and there has been no unreasonable delay by the person in lodging the application, the Commissioner may accept the application lodged after the time specified in subsection (1). ……..”

110. The Tribunal cites the case of Equity Holdings Ltd vs Commissioner of Domestic Taxes Civil Appeal E069 and E025 of 2020(2021) KEHC 25(KLR)where it was held that express statutory edicts are not procedural technicalities and accordingly procedures outlined in a Statute must be complied with. When the Respondent issued a tariff ruling, the Appellant ought to have objected to the same and obtained a review decision pursuant to Section 229 (4) which provides as follows:“(4)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.”

111. The Tribunal has not sighted a review decision that was filed with the Appeal and it is evident that the Appellant did not adhere to the provisions of EACCMA in filing its Appeal and the Tribunal finds that the Appeal is not properly before it and is therefore incompetent and available for striking out.

Final Decision 112. The upshot of the foregoing is that the Appeal herein fails and the Tribunal accordingly proceeds to make the following Orders:a.The Appeal be and is hereby struck out.b.Each party to bear its own costs.

113. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 21ST DAY OF NOVEMBER, 2024. CHRISTINE A. MUGA - CHAIRPERSONBONIFACE K. TERER - MEMBERELISHAH N. NJERU -MEMBEREUNICE N. NG’ANG’A - MEMBEROLOLCHIKE S. SPENCER - MEMBER