https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/11926

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT NAIROBI** **MILIMANI LAW COURTS** **COMMERCIAL AND TAX DIVISION** **TAX APPEAL NO. E023 OF 2025** **BETWEEN** **COMMISSIONER OF CUSTOMS & BORDER CONTROL………….…APPELLANT** **AND** **LIFTING EQUIPMENT COMPANY LIMITED………………………..RESPONDENT** ***(Being an appeal against the judgment of the Tax Appeals Tribunal at Nairobi dated 26th March 2025)*** **JUDGMENT** **Introduction and Background** 1. This judgment is in respect of an appeal by the Appellant (“the Commissioner”) arising from the judgment delivered by the Tax Appeals Tribunal (“the Tribunal”) and its findings that the Respondent’s imported item of *Prefab Cold Room RIR Panels* are prefabricated structures (panels) classifiable under **Harmonized System** (HS) Code94.06.90.20 and not 7610.90.99 as reclassified by the Commissioner in its review decision dated 18th March 2024. 2. The Commissioner, through its Memorandum of Appeal dated 3rd May 2025 faults the Tribunal’s judgment by stating that it failed to apply **Rules 1 and 6** of the **General Interpretation Rules** (***GIRs***) of the ***Harmonized System*** and that instead, it wrongly relied on the titles of chapters, which are meant only as a guide. That the Tribunal erred by classifying the panels under HS Code 9406.90.20 in respect of prefabricated buildings instead of HS Code 7610.90.99 in respect of aluminium structures/parts. 1. Further, that the Tribunal erred by ignoring the explanatory notes under Heading 9406, which explicitly exclude separately presented parts of buildings and equipment from that heading and that it disregarded that the Respondent imported a part of a cold room, that is, the panels rather than a complete cold room, which is excluded from Heading 9406 when presented separately. The Commissioner also faults the Tribunal for finding that the Commissioner was required to carry out a laboratory test, despite the fact that the panels’ description and composition were not in dispute. That the Tribunal disregarded that the Commissioner requested a sample simply to better appreciate and understand the panels, not necessarily for a lab test and it failed to properly appreciate the Commissioner's witness testimony, which confirmed that the classification was guided by the Explanatory Notes for HS code 9406.90.20. 2. Lastly, the Commissioner states that the Tribunal erred in its interpretation of the doctrine of legitimate expectation, particularly concerning the express provisions of the law and the ***East African Community Common External Tariff*** (EAC/CET) 2022 tariff. It prays that the Court allows its appeal and sets aside the judgment of the Tribunal, upholds its review decision of 18th March 2024 which classified the panels under HS Code 7610.90.99 and award it costs of the appeal. 3. The Respondent responded through the Statement of Response dated 2nd December 2025. It supports the judgment of the Tribunal and opposes the Commissioner's appeal, stating that the Tribunal correctly applied the law and evidence. The Respondent denies that the Tribunal erred in applying **Rules 1 and 6** of the ***GIRs*** urging that the Tribunal correctly followed the cascading order of the ***GIRs*** as established in the ***Kenya Breweries Limited v Commissioner of Customs & Border Control*** case, prioritizing the terms of the Headings and Chapter Notes. That the Tribunal correctly found that the foam core gives the panels their essential character under ***GIR 3(b),*** not the minor aluminum foil. 4. The Respondent maintains the panels are prefabricated structures, which are excluded from Chapter 76 and it states the Commissioner erred by focusing on the thin aluminum foil. It details that the panels consist of 99.6% rigid foam which provides the essential character and function as insulation and only 0.4% aluminum foil used for protection and weatherproofing. It states that classifying the panels under Chapter 76 is misleading because that Chapter covers heavy metal structures like bridges and towers and not insulated foam panels for cold rooms. The Respondent avers that in a composite good, classification must be based on the component that gives it its essential character not a minor component 5. The Respondent denies the Tribunal disregarded the Explanatory Notes stating that the panels were not separately presented as a part of a building because they were imported together with other items like a cold room in Completely Knocked Down (CKD) form as part of one consignment. That this aligns with the Explanatory Notes to Heading 9406, which cover elements *"put up as elements, presented together, to be assembled on site."* The Respondent reiterates the plastic bottle and metal cap analogy that a product's classification is determined by its primary material and function. 6. The Respondent avers that since the Commissioner's Review Decision claimed to be based on an "item analysis," it was reasonable for the Tribunal and the Respondent to expect a laboratory report as evidence. That in cases involving composite materials where composition determines the essential character under ***GIR 3(b),*** the failure to produce verifiable lab evidence undermines the Commissioner’s reclassification. The Respondent states that the Commissioner's request for a sample implied testing and the failure to share or disclose the results of any such test breaches principles of transparency and fair administrative action under the ***East African Community Customs Management Act*** (***EACCMA***). 7. The Respondent denies that the Tribunal failed to appreciate the testimony of the Commissioner's witness. It states the Tribunal correctly prioritized the application of the ***GIRs*** over the witness's selective reliance on the aluminum foil component. The Respondent avers that the Commissioner's reclassification was unjustified and violated the Respondent's legitimate expectation that the long-standing tariff classification of HS Code 9406.90.20 would be respected. That this abrupt change, without new evidence, is contrary to the principles of fairness and fair administrative action enshrined in the ***Constitution***. For the above reasons, the Respondent prays that the Court upholds the decision of the Tribunal, dismisses the appeal as unmeritorious and awards costs to the Respondent. 8. The appeal was canvassed by way of written submissions, however, only those of the Commissioner are on record. I have considered the same together with the record and I will make relevant references to them in my analysis and determination below. **Analysis and Determination** 1. From the Commissioner’s submissions, the court is being called to determine whether the Commissioner erred in classifying the panels under HS Code 7610.90.99 as opposed to HS Code 9406.90.20 and whether the Commissioner’s decision to demand for the short-levied taxes was erroneous. 2. I do not think it is in dispute that classification of goods is adopted from the said ***Harmonized System***, an internationally standardized system of names and numbers to classify traded products, that the EAC partner States agreed to adopt when they signed the Treaty for the establishment of the EAC on 30th November 1999. The parties also agree that to ascertain what code is applicable to particular goods, one has to look at the ***GIRs*** which are rules that govern the classification of goods under the ***Harmonized System*** and the *Explanatory Notes* which provide commentary on the intent and scope of provisions and as approved by the Customs Co-operation Council and constitute the official interpretation of the ***Harmonized System*** at the International level and are an indispensable complement to the ***System*** 3. It is also not lost to the court that this court is exercising appellate jurisdiction that is circumscribed by **section 56(2)** of the ***(Chapter 469B of the Laws of Kenya)*** (“the ***TPA***”) which provides that *“An appeal to the High Court or to the Court of Appeal shall be on a question of law only”*. This means that an appeal limited to matters of law does not permit the appellate court to substitute the Tribunal’s decision with its own conclusions based on its own analysis and appreciation of the facts (See **John Munuve Mati v Returning Officer Mwingi North Constituency, Independent Electoral and Boundaries Commission & Paul Musyimi Nzengu [2018] KEHC 8738 (KLR*)*]** 4. Having reviewed the record and submissions of the Commissioner, it is the court’s finding that the Tribunal's decision appears to be a reasonable and well-reasoned application of the law and facts and I will explain why. The Commissioner's main argument is that the Tribunal erred by classifying the panels under HS Code 9406.90.20 instead of 7610.90.99. However, the Tribunal stated that it considered the ***GIRs*** where **GIR 1** urges that one looks at the terms of the Headings and Chapter Notes. **GIR 3(b)** which urges one to look at the essential character meant that the polyisocyanurate foam corewhich makes up 99.6% gives the panels their essential character as insulation materials for prefabricated cold rooms and not the aluminum foil which only makes up 0.4%. I note that the Respondent relied on the Tribunal’s decision in ***Kenya Breweries Limited case (supra)*** which was upheld by this court and supports the position that chapter titles are merely guides and classification must be based on the goods' essential character. 5. The Tribunal noted that the panels were imported alongside other cold room components which aligns with the Explanatory Notes to Heading 9406, which covers elements "*put up as elements, presented together, to be assembled on site*.” The Commissioner’s witness stated that the Respondent imported various items under different entries. That Item 5 is just the panels and Item 6 was the entire cold-room including the panels and the distinction the Commissioner drew was, item 5 were additional/extras for replacement while item 6 was the complete cold-rooms. 6. I find that the distinction between Item 5 and Item 6 is a factual finding by the Tribunal which was entitled to conclude that Item 5, being 600 *PCS PIR* panels was part of a consignment that included cold room elements and therefore fell within Heading 9406. Further, the Respondent presented a physical sample whose stated composition of 99.6% foam and 0.4% aluminum foil was not disputed by the Commissioner. The Commissioner also failed to provide any laboratory analysis report to challenge this composition because admittedly, no laboratory test was conducted. The Commissioner complains that the Tribunal erred by requiring a lab test when composition was undisputed. However, the Commissioner's own review decision claimed to be based on an "item analysis and application” but no analysis was produced. In a case where essential character is the key issue, the failure to provide verifiable evidence undermines the Commissioner's reclassification 7. The Commissioner has also submitted that the Heading 9406 excludes "separately presented parts." However, the record shows that the panels were not separately presented but were part of a consignment including CKD cold room elements. The Explanatory Notes to Heading 7610 explicitly exclude prefabricated buildings of Heading 94.06 and classifying the panels under Chapter 76 would be inconsistent with the chapter's purpose covering heavy metal structures like bridges, towers and roofing frameworks. 8. It is for the above reasons that I find that the Tribunal's decision was not perverse as it was based on proper application of the ***GIRs***, consideration of the goods' essential character, evidence presented by the Respondent and the Commissioner's failure to provide contrary evidence. I find that the Commissioner is essentially asking the Court to re-evaluate the facts, which is impermissible on an appeal limited to questions of law. The Tribunal applied the correct legal principles to the facts before it and its decision is reasonable. **Conclusion and Disposition** 1. In the upshot, the Commissioner’s appeal lacks merit and it is hereby dismissed but with no order as to costs. The Tribunal’s judgment dated 26th March 2025 is upheld. **DATED SIGNED and DELIVERED virtually at MACHAKOS this 30TH DAY OF JULY 2026** **............................................................................** **J.W.W. MONGARE** **JUDGE** **IN THE PRESENCE OF** 1. Ms. Nyaringita for the Appellant. 2. Ms. Jane Migongo for the Respondent. 3. Amos/Godfrey - Court Assistant