[2017] KEHC 2932 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT MOMBASA

CONSTITUTIONAL PETITION NO. 50 OF 2015

IN THE MATTER OF: THE MOMBASA COUNTY FINANCE ACT 2014

BETWEEN

COAST CALCIUM LIMITED………………………….…..PETITIONER

AND

THE COUNTY GOVERNMENT OF MOMBASA…...….RESPONDENT

JUDGMENT

The Petition

1. By way of a Notice of Motion dated 28th August 2015 and brought under Articles 22, 23, 165, 196 and 209 of the Constitution of Kenya 2010 and the Provisions of the High Court Protection of Fundamental Rights and Freedoms (Practice and Procedure) Rules 2006, the Petitioners seeks the following orders:

a. A declaration that collection of cess for all of the Petitioners’ goods transiting through Mombasa County is unlawful, unconstitutional and null and void;

b. An injunction to restrain the Respondent, the Mombasa County Government from enforcing of levying cess for Lime Produce illegally and unlawfully under the Mombasa County Finance Act 2013.

c. Any other relief as this Honourable Court deems appropriate in the circumstances to grant; and

d. Costs of and incidental to this Petition.

The Petition is premised on the grounds set out therein and on the affidavit of MOHAMED KASSAM AHMED sworn on 28th August 2015.

2. The Petitioner, a limited liability company incorporated in Kenya for the purpose of carrying on business of mining and the sale of Homa Lime Produce from Kwale County, alleges that in 2013 the Respondent passed the Mombasa Finance Act 2013 relating to the levy of various charges, taxes and license fees.

3. The Petitioner claims that under the provisions of the aforementioned Act and in particular entry No. 916 in the table inserted following Section 3 thereof, the Respondent is not entitled to charge cess in respect of undefined products transiting through Mombasa County. The Petitioner further claims that it mines Homa Lime Produce in Kwale County where it pays cess and later it sells its goods to various customers within and out of Mombasa.

4. The Petitioner alleges that the Respondent has put up a cess levy barrier at the Mainland side of the Likoni Channel and is levying a fee of Kshs. 1,000 for every vehicle carrying the Petitioner’s goods including those that are transiting through Mombasa.

5. The Petitioner’s case is that the Respondent’s conduct of purporting to collect the levy is unconstitutional, null and void for want of statutory authority and is tantamount to an abuse of the Respondent’s powers as granted by law. The Petitioner further contends that the Respondent’s conduct violates the provisions of the Public Finance Management Act 2012 and the Petitioner’s right to fair administrative action under Article 47 of the Constitution of Kenya.

6. The Petitioner claims that the Mombasa County Finance Act 2014 violates the provisions of the County Government Act 2012 in that there was no public participation in the process of formulating the Act.

7. The Petitioner alleges that since it pays cess on Homa Lime Produce in Kwale County, paying cess in another county would amount to double taxation which goes against the national values and principles stipulated in Article 10, 209 (5) and 210 of the Constitution.

Response

8. The petition is opposed by the Respondent by way of a Replying affidavit sworn by JIMMY WALIAULA on 16th November 2015. The deponent, a director of legal services of the Respondent, states that the Respondent is empowered by the Constitution to impose charges for the purpose of raising revenue and that it is within this mandate that the Respondent enacted the Mombasa County Finance Act, 2014. The Respondent further claims that Sections 90 and 96 of the Act provide for the levying of cess charges and offloading fees in respect of goods or items within the county.

9. The Respondent alleges that the Petitioners mines and extracts Homa Limestone in Kwale County and these products are transported and/or sold through Mombasa County thus warranting payment of cess of Kshs. 1,000 per every truck. Further, the Respondent contends that offloading fees is also chargeable in addition to cess charges where goods or items are emanating out of Mombasa County.

10. The Respondent alleges that it is lawful for the Respondent to charge cess on the Petitioner’s goods since the said goods come into Mombasa County from Kwale County and are offloaded within Mombasa County.

11. In relation to the allegation by the Petitioner that there was no public participation in the formulation of the said Act, the Respondent claims that it considered public views, issued a notice to the public through the daily newspapers and held various consultative forums with stakeholders.

Applications

12. Two applications were filed by the Petitioner herein. The first is dated 28th August 2015 in which the Petitioner sought a conservatory order to be issued against the Respondent restraining it whether by itself, its agents, servants, employees or whosoever from unlawfully levying, charging, collecting or taxing the Petitioner for cess on Homa Lime produce under the provisions of the County Finance Act, 2013 pending the hearing and determination of this Petition. This application was abandoned on 12th June 2017 by the Petitioner.

13. The second application dated 23rd February 2017 was also brought by the Petitioner in which it sought to commit two of the Respondent’s officers/ employees to civil jail for contempt of court for allegedly violating the court order issued on 7th September 2015. A consent was entered by both parties on 31st May 2017 which essentially marked the application as settled.

Hearing and Submissions.

14. On 12th June 2017, both parties agreed to canvass the petition by way of written submissions. The Petitioner filed its submissions on 7th July 2017 while the Respondent filed its submissions on 8th June 2017. Parties identified the main issue for determination herein as being whether the Respondent can validly levy the said cess upon the Petitioner’s products entering Mombasa.

15. Mr. Khagram, learned counsel for the Petitioner, submitted that the actions of the Respondent have no footing in law as there is no provision in the Mombasa County Government Finance Act 2013 and/or Mombasa County Government Finance Act 2014 that allows the actions of the Respondent.

16. Mr. Khagram submitted that it was the duty and obligation of the Respondent to take into account the Petitioner’s objections under the Act and avail to the Petitioner its statutory basis for the charges. Counsel further submitted that the Respondent had not provided the court with any evidence to show that it had any statutory authority to formulate the Act.

17. Mr. Khagram submitted that Justice Muriithi in Misc. Application No. 846 of 2011 (JR)made a determination on fees and charges considered to be inappropriate for purposes of encouraging economic growth at the county level. Counsel stated that the learned Judge held that the Respondent therein, the Municipal Council of Mombasa, was not entitled to levy cess on transport of produce during the transit of the limestone produce from Kwale county council through the Respondent Municipal council when cess has already been paid by the applicant producer.

18. Mr. Khagram submitted that entry no. 916 in the Mombasa County Government Finance Act 2013 (a copy of the same is annexed to the affidavit of MOHAMED KASSAM AHMED sworn on 28th August 2017 and marked as “MKA-1”) recognizes that the Respondent is not entitled to charge fees in respect of undefined products transiting through the Mombasa County as the proposed charges column reads NIL while Section 90 of the Mombasa County Finance Act, 2014 (annexed to the Respondent’s affidavit and marked as “JW-1”) confirms that cess is not chargeable for vehicles on transit while Section 96 states that offloading fees is only chargeable for distribution within Mombasa County. Counsel contended that the Petitioner is not carrying out any distribution activities.

19. Mr. Khagram submitted that the collection of taxes in the form of cess is unlawful as the same finds no refuge in the purported Mombasa County Finance Act 2013 and/or 2014. Counsel cited the case of Base Titanium Limited versus County Government of Mombasa & Another [2016] eKLR where the court stated that:

‘I have come to the conclusion that there was no legal foundation for the 1st Respondent to legislate upon offloading charges on the Applicant’s goods offloaded at its private premises, to impose such charges and to enforce the levy of such charges”

“My decision finally is that there was no jurisdiction on the 1st Respondent to impose or seek to enforce the regulations towards levying offloading charges. What then follows is that the 1st Respondent ought not be allowed to persist with what has no support in law.”

20. Mr. Khagram submitted that the Respondent did not yield to the provisions of Article 196 of the Constitution as read together with Section 87 of the County Governments Act 2012 on the need to have general public participation on issues touching and/or having effect on socio-economic and political well-being. Counsel contended that while recognizing the importance of public participation, the Respondent failed and/or neglected to invite the public to share its views on the purported Act. Counsel referred the court to the case of NRB HC. PET. No. 603 of 2013- Robert N. Gakuru & others versus County Government of Kiambu & Another [2016] eKLR.

21. Mr. Khagram submitted that the Respondent has made no attempts to establish that a public participation forum was held and/or access of information, data or documents at its disposal was provided to the Petitioner during the formulation and implementation of the Mombasa County finance Act 2013 or Mombasa County Finance Act 2014.

22. While still on the issue of the implementation of Mombasa County finance Act 2013 or Mombasa County Finance Act 2014, Mr. Khagram submitted that there is an emphasis on the County Executive Committee member for Finance with the concurrence of the Governor to appoint a date when the purported Acts shall come into operation. Counsel submitted that none of the statutes was ever operationalized thus any enforcement of their provisions is a nullity.

23. Mr. Khagram submitted that if cess was chargeable by every county where goods pass through, goods would be too expensive. Counsel submitted further that while the Respondent refers to charges herein as offloading charges the same are not payable as once goods are loaded at source they have to be offloaded at the destination and if this happens it would amount to double jeopardy.

24. Miss Ngigi, learned counsel for the Respondent submitted that the Respondent is empowered by the Constitution of Kenya, Article 209 (3) to impose charges for the purpose of raising revenue and it is to this end that the Respondent enacted the Mombasa County Finance Act 2014 which law sanctions the levying of charges including offloading charges.

25. On the issue of constitutionality and public participation in the enactment of the Mombasa County Finance Act 2013 and Mombasa County Finance Act 2014, Miss Ngigi submitted that this issue was dealt with in the case of Milly Glass Works Limited & 3 others versus County Government of Mombasa & 2 others [2016] eKLR where Justice Emukule stated that:

“For those reasons, I find and hold that Item 86 of the County of Mombasa Finance Act 2013 is not unconstitutional. Having come to the above conclusion on the question of the constitutionality of the said item 86, I find no ground for considering the question of refund of any payments made by the Petitioners to the Respondents. The Finance Bill 2014 having been enacted into Finance Act, 2014, the orders of injunction sought against its enactment are now superfluous. In summary, I find and hold that there was both facilitation and public participation in the enactment of the County of Mombasa Finance Act 2013 and 2014, that item 86 of the First schedule to Finance Act 2013 is neither unconstitutional nor inconsistent with the Constitution, that there is consequently no basis for orders of injunction or refund of any payment made by the Petitioners to the Respondents.”

Counsel stated that both the Mombasa County Finance Act 2013 and the Mombasa County Finance Act 2014 were found to have been constitutional and to have gone through public participation. Counsel argued that there has been no appeal or review of the aforementioned decision.

26. Miss Ngigi dismissed claims by the Petitioner that its decision to levy offloading charges is not provided for in the Mombasa County Finance Act 2014 and stated that offloading charges are provided for under Section 96 of the Mombasa County Finance Act 2014 as follows:

OFFLOADING FEES

For distribution within Mombasa County i.e. shops, retailer & wholesalers etc. levy shall apply (to be charged at the revenue barriers and within town in addition to the Cess Fee above (for those coming out of the county)

27. Miss Ngigi submitted that for the Petitioner to be excluded from payment of offloading charges and cess within Mombasa County, the Petitioner must show proof of the point of destination by way of a delivery order. Counsel further stated that the Petitioner is earning profit from its business and it would be misguided for them to expect not to be charged any fees by the Mombasa County yet it is conducting business and earning revenue within the County.

Determination

28. I have carefully considered this Petition and the supporting documents thereto and the submissions of both parties. I have expanded the issues for determination as follows:

a) Whether the Mombasa County Finance Act 2013 and the Mombasa County Finance Act 2014 are constitutional?

b) Whether there was public participation in the formulation and enactment of the Mombasa County Finance Act 2013 and the Mombasa County Finance Act 2014?

c) Whether the Mombasa County Finance Act 2013 and the Mombasa County Finance Act 2014 provide for the collection of cess for goods transiting through Mombasa County?

d) Whether an injunction should be issued to restrain the Respondent from enforcing of levying cess for Homa Lime Produce illegally and unlawfully under the Mombasa County Finance Act 2013?

29. I will deal with the first and second issue jointly. As correctly put by the Respondent’s counsel both issues were dealt with in the case of Milly Glass Works Limited & 3 others versus County Government of Mombasa & 2 others [2016] eKLR by Justice Emukule who found that there was both facilitation and public participation in the enactment of the County of Mombasa Finance Acts 2013 and 2014. At paragraph 54 of the Judgment he stated as follows:

“In summary, I find that there was both facilitation and public participation in the enactment of the County of Mombasa Finance Act 2013 and 2014, that item 86 of the First Schedule to the Finance Act 2013 is neither unconstitutional nor inconsistent with the Constitution, that there is consequently no basis for orders of injunction or refund of any payments made by the Petitioners to the Respondent.”

30. In establishing that indeed public participation occurred Justice Emukule in the above case stated:

“In this regard, therefore, it is necessary to examine what measures were put in place to facilitate the public participation or involvement before the enactment of the County of Mombasa Finance Act 2014. From the Replying Affidavit of the Respondent’s Director of Legal Services, it is clear that public fora were held in the four sub-counties which constitute the County of Mombasa. Information regarding the conduct of public hearings of the proposed Finance Bill were made via a County Government Vehicle fitted with loud speakers and was driven around the four sub-county areas announcing the discussion of the Finance Bill and making the public to participate in the fora on various dates.

In addition, the same announcement were published in the Star newspaper, and similar announcement were placed in various Notice Boards in every county including up to Ward levels to enable the public to fully participate in those fora.

The announcements were then followed by a public meeting on 14th October, 2014, where the public were granted an opportunity to discuss the Finance Bill and raise objections and/or give their suggestions on the Finance Bill 2014 before the enactment thereof at Tononoka Hall. A list of attendees was attached to the Replying Affidavit.”

31. The said Judgment has not been appealed against nor has any party sought for its review. Therefore, I find no reason to dispute the findings in the said Judgment. I therefore hold that Mombasa County Finance Acts 2013 and 2014 are constitutional and there was public participation in the enactment of both Acts.

32. On the third issue whether the Mombasa County Finance Act 2013 and the Mombasa County Finance Act 2014 provide for the collection of cess for goods transiting through Mombasa County, Article 209 (3), (4) and (5) of the Constitution provide:

“(3) A county may impose—

(a) property rates;

(b) entertainment taxes; and

(c) any other tax that it is authorized to impose by an Act of Parliament.

(4) The national and county governments may impose charges for the services they provide.

(5) The taxation and other revenue-raising powers of a county shall not be exercised in a way that prejudices national economic policies, economic activities across county boundaries or the national mobility of goods, services, capital or labour.”

33. The Constitution through Article 209 (3) empowers counties to impose charges and taxes. However, the said charges and taxes should not prejudice national economic policies, economic activities and national mobility of goods, services, capital or labour. In this case the County Government of Mombasa enacted the County Finance Act 2013 and 2014. The Petitioner avers that there is no provision in the said Acts that provides for the payment of cess.

34. I have carefully perused the two Acts and found that the Mombasa County Finance Act, 2014 does provide for the payment of cess and offloading charges. Item 90 in the Act provides:

CESS CHARGES-ENTERING MOMBASA

(To be paid by all goods carrying vehicles entering Mombasa County and offloading in Mombasa County. Shall not apply to vehicles on transit)

While Item 96 in the Act provides:

OFFLOADING FEES

(To be levied for offloading within Mombasa County and shall not apply if offloading is done in ones private facilities (depot or warehouses)

(For distribution within Mombasa County i.e shops, retailer &wholesalers etc levy shall apply)

(to be charged at revenue barriers and within town in addition to Cess fee above (for those coming out of town)

The allegation by the Petitioner that cess fee is not provided for in the Acts is therefore untrue.

35. Item 90 in the Mombasa County Finance Act 2014 states that cess charges are payable by all vehicles carrying goods entering Mombasa County and offloading within the County and not vehicles on transit. The Petitioner herein has averred that it mines Homa Lime produce in Kwale County and then sells the same to customers within and out of Mombasa County. The assumption is thus that if the Petitioner sells his goods to customers within Mombasa County then such sale cannot happen unless the Petitioner offloads his goods. The Petitioner has not tendered any evidence to show that all its vehicles carrying its goods are on transit. Therefore, it is clear that cess is payable by the Petitioner where vehicles carrying its goods offload within Mombasa County.

36. Item 96 provides that offloading fees is levied for offloading within Mombasa County unless the offloading is done within ones private facilities (depot or warehouses) and where there is distribution within Mombasa County to shops, retailers and wholesalers. The Petitioner as stated above admits that it does sell its minerals and/or products within the county Mombasa. The Petitioner has not tendered any evidence to prove that if at all it offloads its goods within Mombasa County then the same is done in its own facilities so as to avoid offloading fees payable by the Respondent.

37. On the fourth issue whether an injunction should be issued to restrain the Respondent from enforcing of levying cess for Homa Lime Produce, it is now clear arising from the foregoing that this prayer is not available to the Petitioner. See the case of Milly Glass Works (Supra). Further, levying of cess has been provided for under Item 90 of the Mombasa County Finance Act 2014 and the Petitioner has been deemed liable to pay the same where vehicles carrying his goods offload within Mombasa County thus an injunction cannot issue to stop the Respondent from enforcing the payment of Cess.

38. For the foregoing reasons the Petition dated 28th August 2015 is dismissed. Costs shall be for the Respondent.

Dated, Signed and Delivered in Mombasa this 5th day of October, 2017.

E. K. O. OGOLA

JUDGE

In the presence of:

Mr. Kongere holding brief Mr. Khagram for Petitioner

No Appearance for Respondent

Mr. Kaunda Court Assistant