https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/193

**REPUBLIC OF KENYA** **IN THE TAX APPEALS TRIBUNAL AT NAIROBI** **TAX APPEAL NO. E1494 OF 2025** **D.T. DOBIE AND COMPANY (K) LIMITED……………………….……………APPELLANT** **-VERSUS-** **COMMISSIONER OF LEGAL AND BOARD SERVICES……….**………………**RESPONDENT** **JUDGMENT** **BACKGROUND** 1. The Appellant is a private limited company incorporated in Kenya. The Appellant principally operates as an automotive dealership specializing in a broad range of motor related products and services such as the sale of new and used cars and trucks, as well as the provision of related after-sales services such as vehicle servicing, spare parts, and accessories. 2. The Respondent is a Commissioner exercising delegated powers and functions of the Commissioner-General and acting for and on behalf of the Kenya Revenue Authority ("the Authority"), a body established under Section 3 of the Kenya Revenue Authority Act, Cap 469 of the Laws of Kenya, and charged with the assessment, collection and accounting for revenue on behalf of the Government of Kenya, and with the administration and enforcement of the written laws set out in the First Schedule to that Act. 3. The dispute arises from the importation by the Appellant of Semi-Knocked Down kits ("SKDs") for the local assembly of motor vehicles under the Kenya Industrialization Transformation Programme. The Appellant imported the SKDs on a duty-free basis pursuant to instructions issued by the National Treasury to the Commissioner General of the Authority *vide* letter Ref. No. DFN/415/232/011 dated 19th December 2016, under which the National Treasury undertook to settle any applicable taxes on behalf of approved assemblers pending amendment of the revenue laws. 4. Following a Customs post clearance compliance review, the Respondent issued a Notice of Demand dated 23rd September 2025, Ref. KRA/CBC/PCA/627/2025, demanding unpaid duties amounting to Kshs. 1,395,796,692 on the ground that the National Treasury undertaking had not been honoured. 5. The Appellant objected to the demand by way of an application for review received by the Respondent on 22nd October 2025. 6. The Respondent issued its Review Decision on 21st November 2025, partially allowing the objection by expunging customs duties amounting to Kshs. 283,785,856 that fell before the audit period of September 2020 to May 2025 and confirming the balance of Kshs. 1,112,010,836 as due and payable. 7. Being dissatisfied with the Review Decision, the Appellant filed its Notice of Appeal dated 19th December 2025 on the same date and lodged the present Appeal. **THE APPEAL** 1. The Appeal is premised on the Memorandum of Appeal dated and filed on 24th December 2025, which raised the following grounds of appeal: 2. That the Respondent erred in law and fact by failing to appreciate that the Appellant imported Semi-Knocked Down (SKD) kits solely pursuant to the agreement between the Government of Kenya, through the National Treasury and the Ministry of Industry, Trade and Cooperatives, and Volkswagen South Africa (PTY) Limited, in which the Government of Kenya committed to ensuring duty exemption is granted to car assemblers including the Appellant, thereby issuing an erroneous demand. 3. That the Respondent erred in law and in fact by issuing a tax demand in breach of the Appellant's legitimate expectation, contrary to the assurances reflected in its prior representations and consistent implementation of the agreed framework. 4. That the Respondent erred in law and fact by demanding the unpaid taxes from the Appellant while it facilitated the importation of semi-knocked down kits by the Appellant on a duty-free basis pursuant to a directive issued by the Government, which is contrary to the principle of fair administrative action as stipulated under Section 4 of the Fair Administrative Action Act, 2015 as read together with Article 47 of the Constitution of Kenya, 2010. 5. That the Respondent erred in law and fact by adopting a restrictive interpretation of "owner" that excluded persons with a beneficial interest in the imported goods contrary to Section 2 of the East African Community Customs Management Act, and by consequently treating the Appellant as the sole owner of the goods notwithstanding the National Treasury's role in facilitating the importation and its assumption of responsibility for payment of applicable customs duties and taxes. 6. That the Respondent erred in law and fact by upholding a tax demand marred with multiple procedural improprieties. 7. That the Respondent erred in law and in fact by delaying in the issuance of a notice of demand as and when the short-levied duties arose. 8. That the Respondent erred in law and in fact by misdirecting itself on the fundamental circumstances of the Appellant, relying on a High Court decision whose facts are materially different, and thereby issuing an erroneous demand. **APPELLANT'S CASE** 1. The Appellant's case is premised on the following documents filed before the Tribunal: 2. The Appellant's Statement of Facts dated and filed on 24th December 2025, together with the documents attached thereto; and 3. The Appellant's Written Submissions dated and filed on 18th May 2026. 4. The Appellant stated that on various dates in the year 2016, the Government of Kenya, through the National Treasury and the Ministry of Industry, Trade and Cooperatives, engaged in discussions with Volkswagen South Africa (PTY) Limited ("VW") to support the implementation of the Kenya Industrialization Transformation Programme with a view to enhancing the contribution of manufacturing and industry to the national economy, and that these discussions culminated in a tripartite Letter of Commitment dated 7th September 2016 referenced MOI/CONF/1/4. 5. The Appellant stated that under Clause 3 of the Letter of Commitment, the Government of Kenya committed to ensure that SKDs imported pursuant to the agreement would be granted duty exemption, and that granting the exemption constituted a fundamental term of the commitment without which the cost of the SKDs would have risen significantly and impeded the Government's objective. 6. The Appellant stated that recognising that the existing legal framework did not permit the exemption, the National Treasury directed the Respondent, by letter dated 19th December 2016 referenced DFN/415/232/011 addressed to the then Commissioner-General, to treat SKD assemblers like Completely Knocked Down (CKD) assemblers, to process the SKDs on a tax-free basis, and to forward the corresponding unpaid taxes, including Import Declaration Fees, to the National Treasury for settlement pending amendment of the revenue laws. 7. The Appellant stated that by a memorandum dated 28th December 2016 the Respondent issued internal instructions to its officers to implement the National Treasury's directive, directing that SKD assemblers be treated like CKD assemblers and that its Chief Managers in charge of exemptions issue tax exemption codes for import duty, excise duty and IDF, and that the Respondent thereby elected to give effect to the directive without raising any reservation, advisory or qualification. 8. The Appellant stated that the Respondent was expressly mandated under Section 5(2)(b) of the Kenya Revenue Authority Act to advise the Government on all matters relating to the administration and collection of revenue, and that nothing prevented it from raising any concern at the time the directive was operationalised; instead, the Respondent actively facilitated implementation of the National Treasury's commitment and acquiesced in its instructions, fully aware that such conduct would induce VW and the Appellant to proceed with and continue performing the agreement. 9. The Appellant stated that in reliance on the Respondent's approval of the arrangement, VW engaged the Appellant as its local implementation partner, and that the Appellant structured its operations, invested capital and commenced local assembly on the understanding that any taxes arising would be settled by the National Treasury, such that but for that authorisation and commitment it would not have imported the SKDs under the framework. 10. The Appellant stated that on multiple occasions the Respondent's Customs officers relied on the memorandum capturing the National Treasury's instructions, which was uploaded onto the Integrated Customs Management System (iCMS), to authorise clearance of the imported SKDs, and that the memorandum formed the basis for consistent operational practice by the Respondent's officers at the point of entry over a sustained period. 11. On the first ground, the Appellant stated that its assessment is founded on an unsubstantiated claim that the National Treasury failed to honour its commitment; that the Respondent adduced no evidence of any communication, demand or notice addressed to the National Treasury calling for settlement of the alleged liability or notifying it of default; and that in the absence of proof that the Respondent discharged its own obligation to pursue settlement from the National Treasury, the assertion of non-payment remains unverified and cannot sustain the demand against the Appellant. 12. On the second ground, the Appellant stated that the National Treasury's directive of 19th December 2016 was a clear, unambiguous and formal written representation, reinforced by the Respondent's internal memorandum of 28th December 2016 and by the consistent issuance of exemption codes and clearance of consignments over a period exceeding six years, which created a legitimate and enforceable expectation that the SKD imports would not attract tax on the Appellant's part; and that by its statutory agency relationship the Respondent could not lawfully repudiate or contradict the acts of its principal, the National Treasury. 13. The Appellant relied on the Supreme Court decision in **Kenya Revenue Authority v Export Trading Company Limited [2022] KESC 31 (KLR)** and on **Communications Commission of Kenya & 5 Others v Royal Media Services Ltd & 5 Others [2014] KESC 53 (KLR)** for the cumulative requirements of legitimate expectation, and on **Keroche Industries Ltd v Kenya Revenue Authority & 5 Others [2007] eKLR** for the proposition that where a public authority has made a clear representation within its mandate and a taxpayer has relied upon it to their detriment, 14. the authority is estopped from resiling unless a compelling public interest justifies departure. 15. The Appellant contended that it satisfied each of the four limbs of the test, and that the National Treasury's directive did not purport to override the law but provided an administrative mechanism sanctioned by the Respondent pending legislative amendment. 16. On the third ground, the Appellant stated that the Respondent's demand violated its right to fair administrative action under Article 47 of the Constitution as read with Section 4 of the Fair Administrative Action Act, 2015; that having facilitated the granting of the exemption on behalf of the Government of Kenya, the Respondent was barred from demanding taxes on the same imports which had been cleared and entered into Kenya; 17. and that the Respondent had failed to furnish written reasons explaining why it purported to demand the taxes from the Appellant rather than forwarding them to the National Treasury for settlement as instructed. 18. On the fourth ground, the Appellant stated that Section 130 of the EACCMA must be read together with Section 2, which defines "owner" to include any person in possession of, beneficially interested in, or having control of or power of disposition over the goods; that the National Treasury structured and directed the importation, assumed responsibility for the attendant tax obligations, and procured a significant number of the vehicles; and that the National Treasury therefore held a beneficial interest and fell within the statutory definition of "owner", such that any collection of duties should, if applicable, be directed against it. 19. On the fifth ground, the Appellant stated that the demand was marred by procedural improprieties, being the Respondent's failure to adduce any evidence that it forwarded the unpaid taxes to the National Treasury for settlement as required by its own memorandum; its failure to give the fifteen-day pre-audit notice and audit questionnaire required by Paragraph 3.2.2 of the EAC Customs Post Clearance Audit Manual as read with Regulation 58 of the EAC Customs Management (Compliance and Enforcement) Regulations, 2011; 20. and the issuance of a defective Notice of Demand that failed to specify the period under review or to disclose the basis of computation, the period being disclosed only at the review stage and being inconsistent with the schedule of workings, which reflected a period of 1st September 2020 to 19th May 2023 and omitted chassis numbers and other identifying particulars. 21. On the sixth ground, the Appellant stated that Section 135(3) of the EACCMA bars a demand made more than five years after the short-levy save in cases of fraud, collusion or wilful misstatement; that the Respondent issued the Notice of Demand in September 2025, approximately nine years after the exemption framework was established and implemented in December 2016; and that the belated demand, issued after the goods had been cleared, sold and the transactions concluded, denied the Appellant the opportunity to factor any alleged duty into its pricing and was irrational and procedurally unfair. 22. It relied on **Kenya Revenue Authority v Export Trading Company Limited [2022] KESC 31 (KLR), Krish Commodities Limited v Kenya Revenue Authority [2018] eKLR** and **Bharat General Agency v Kenya Revenue Authority [2024] KEHC 9756 (KLR).** 23. On the seventh ground, the Appellant stated that the Respondent's reliance on the High Court decision in **Cale Infrastructure Ltd v Commissioner of Customs and Border Control & Another (Tax Appeal E234 of 2024)** was misplaced, because in that case the Authority was not a party to, and did not sanction or implement, the National Treasury arrangement, whereas in the present matter the Respondent was directly engaged by the National Treasury, issued an internal memorandum, uploaded exemption codes onto the iCMS, and consistently cleared the Appellant's consignments over several years, 24. so that the Appellant's reliance was induced and reinforced by the Respondent's own conduct. 25. The Appellant relied on **Muya v Tribunal Appointed to Investigate the Conduct of Justice Muya [2022] KESC 16 (KLR)** for the proposition that each case is to be evaluated on its own facts. **Appellant's submissions** 1. The Appellant filed written submissions dated 18th May 2026 that reiterated, elaborated upon and are consistent with the grounds of appeal and the averments set out in its Statement of Facts. 2. The Appellant distilled its case into six issues: whether the assessment, being founded on an unproven allegation of default by the National Treasury, is sustainable in law; whether the Respondent can lawfully issue the assessment after having sanctioned, implemented and facilitated clearance of the goods pursuant to the National Treasury's directive; whether the Respondent adopted an unduly narrow interpretation of "owner of goods" under Section 2 of the EACCMA; whether the decision in **Cale Infrastructure** is distinguishable; whether the demand is marred by procedural improprieties; and whether the demand was issued outside the prescribed statutory timelines. 3. The Tribunal has considered the submissions in full and adopts them as part of the Appellant's case without reproducing them at length. **Appellant's prayers** 1. The Appellant prayed that the Tribunal makes orders: 2. That the Respondent's Review Decision dated 21st November 2025 demanding duties amounting to Kshs. 1,112,010,836, interest and any penalties thereof be set aside in their entirety. 3. That the Appeal be allowed with costs to the Appellant; and 4. That the Honourable Tribunal be pleased to issue any other remedies that the Tribunal deems just and reasonable. **RESPONDENT'S CASE** 1. The Respondent's case is premised on the following documents filed before the Tribunal: 2. The Respondent's Statement of Facts dated and filed on 6th February 2026, together with the documents attached thereto; and 3. The Respondent's Written Submissions dated and filed on 4th May 2026. 4. The Respondent stated that the Appellant was profiled for a Customs post clearance compliance review on its importation of SKDs imported under a National Treasury undertaking, and that the National Treasury, vide letter Ref. No. DFN/415/232/011 dated 19th December 2016, issued an undertaking to pay taxes on the SKDs which had not been honoured to date. 5. The Respondent stated that it undertook a desk audit and issued a Notice of Demand dated 23rd September 2025, Ref. KRA/CBC/PCA/627/2025, amounting to Kshs. 1,395,796,692, and that the Appellant lodged an undated application for review received on 22nd October 2025. 6. The Respondent stated that whereas the National Treasury had undertaken to pay the taxes on behalf of the Appellant, this did not absolve the Appellant from the primary responsibility for payment of tax unless specifically exempted by law, and that in the event of default by the National Treasury the Respondent was entitled to recover the tax due from the Appellant as the owner of the goods. 7. The Respondent stated that the National Treasury letter expressly stated in part that "the current legal framework only allows tax-free importation in respect of completely knocked down kits and not the semi-knocked down kits", and that the National Treasury thereby confirmed, by its own admission, that SKDs are not exempt by law, such that there cannot be a legitimate expectation against clear provisions of the law. 8. The Respondent stated that all its actions were taken in accordance with the East African Community Customs Management Act, 2004 and related regulations, and relied on the following documents in support of its position: the Notice of Demand dated 23rd September 2025; the Review Application dated 22nd October 2025; the Review Decision dated 21st November 2025; and the applicable statutes and guidelines under the revenue laws and KRA regulations. 9. The Respondent relied on Section 130 of the EACCMA, which places the primary obligation to pay duty on the owner of the goods, and averred that the Appellant, being the importer as per the declarations and supporting documents and therefore the owner of the goods, bore an obligation to pay the duty. The section provides in part that: *“Where any goods are liable to duty, then such duty shall constitute a civil debt due to a Partner State and be charged on the goods in respect of which the duty is payable; and such duty shall be payable by the owner of the goods and may, without prejudice to any other means of recovery, be recovered summarily by legal proceedings brought by the Partner State.”* 1. The Respondent relied on Section 133 of the EACCMA and on the Fifth Schedule thereto for the proposition that the owner of goods is legally obligated to pay duties unless specifically exempted by law, and that an obligation incurred for the payment of duty is deemed an obligation to pay all duties payable or recoverable under the Act. Section 133 provides that: *“Where any obligation has been incurred, whether by bond or otherwise, for the payment of any duty, then such obligation shall be deemed to be an obligation to pay all duties which are or may become payable or recoverable under the provisions of this Act.”* 1. The Respondent relied on Sections 235 and 236 of the EACCMA, which mandate the Commissioner to verify the accuracy of the entry of goods or documents for a period of five years from the date of importation, exportation, transfer or manufacture of goods transacted through Customs, and averred that a smoothly facilitated cargo clearance process does not preclude a post clearance audit nor curtail the Commissioner's powers. 2. It relied on Section 135 of the EACCMA for the power to recover any amount short-levied or erroneously refunded, and on Section 229 for the application for review by any person affected by a decision of the Commissioner. 3. The Respondent contended that the Appellant, having benefited from the exemption process, ought to ensure that the undertaking is honoured by the National Treasury, and that the existence of the undertaking did not relieve it of its primary tax obligation. It further contended that the audit conducted was a desk audit, and that the requirement of a fifteen-day prior notification and issuance of a questionnaire applies only to a comprehensive field audit, such that there was no procedural flaw. 4. The Respondent contended that the notice of demand had included assessment declarations beyond five years; that the audit scope was aligned with the law from September 2020 to May 2025; and that consequently declarations outside the audit period amounting to Kshs. 283,785,856 were expunged from the demanded amount of Kshs. 1,395,796,692, leaving a total assessment of Kshs. 1,112,010,836, which it partially allowed and confirmed as due and payable. 5. The Respondent maintained that the tax assessment was properly founded in fact and law and that the objection decision was fair, reasonable, and made in accordance with the statutory provisions. **Respondent's submissions** 1. The Respondent filed written submissions dated 4th May 2026 and framed three issues for determination: whether the Respondent was justified in issuing the assessment on the Appellant; whether the Respondent breached the principle of legitimate expectation; and whether the Respondent issued the assessment outside the five-year period. 2. On the first issue, the Respondent submitted that even though the National Treasury had undertaken to pay the taxes on SKDs, this did not absolve the Appellant from liability in the event of default, and that under Section 130 of the EACCMA the primary obligation to pay duty rests on the owner of the goods, who is the Appellant. The Respondent placed reliance on **Cale Infrastructure Construction Company Limited v Commissioner of Customs and Border Control & Another [2025] KEHC 11263 (KLR)**, where the Learned Judge held as follows: *“32. The letter of undertaking did not have the legal effect of transferring the statutory liability from the appellant to the National Treasury, nor did it create an enforceable obligation on the part of the respondent to pursue payment from the Treasury in place of the appellant.* *33. The Tribunal was therefore correct in finding that the respondent, not being privy to the arrangement between the appellant and the National Treasury, was under no legal obligation to enforce the undertaking or wait for its fulfilment. In the event of default by the Treasury, the respondent was lawfully entitled to seek recovery from the appellant as the primary taxpayer.”* 1. The Respondent submitted that it was not privy to the agreement between the Appellant and the National Treasury, that the undertaking created no obligation on its part to recover payment from the National Treasury, and that the present circumstances were no different from Cale Infrastructure. Invoking the doctrine of stare decisis, the Respondent submitted that, a similar matter having been fully heard and determined by the High Court, the Tribunal is bound by the precedent so set and ought to affirm the assessment. 2. On the second issue, the Respondent submitted that it did not breach the principle of legitimate expectation; that not being a party to the agreement it owed the Appellant no such duty; that the law creates no exemption from the duty imposed on the owner of the goods; and that a claim of legitimate expectation cannot lie against clear provisions of the law. It submitted that upon the National Treasury's failure to pay, it was justified in demanding the taxes from the Appellant, on whom the obligation squarely fell as the owner of the goods. 3. On the third issue, the Respondent submitted that the assessment was well within the five-year period, encompassing September 2020 to May 2025; that the declarations outside the audit scope amounting to Kshs. 283,785,856 had been expunged during the review, leaving a confirmed assessment of Kshs. 1,112,010,836; and that the Appellant's contention that the assessment was time-barred was therefore incorrect. **Respondent's prayers** 1. The Respondent prayed that the Tribunal: 2. Dismisses the appeal in its entirety; 3. Upholds the tax assessment as confirmed by the objection decision; and 4. Orders the Appellant to pay the costs of the appeal. **ISSUES FOR DETERMINATION** 1. The Tribunal has considered the Parties' pleadings, the documents filed, and the rival submissions, and is of the considered view that the grounds of appeal and the Parties' contentions distil into the following issues for determination: 2. **Whether, in the absence of a legal framework exempting Semi-Knocked Down kits from customs duty, the duty was lawfully chargeable on the importation;** 3. **Whether the Appellant bears the incidence of the duty notwithstanding the National Treasury undertaking;** 4. **Whether the Respondent’s Review decision was justified.** **ANALYSIS AND FINDINGS** 1. Having framed the issues for determination, the Tribunal proceeds to analyse them sequentially. Before doing so, and given the prominence of the doctrine of legitimate expectation and of Article 47 of the Constitution in the Appellant's pleadings, the Tribunal considers it convenient to first delimit the scope of its inquiry and the law applicable to it. **The applicable law and the scope of the Tribunal's jurisdiction** 1. A substantial part of the Appellant's case is pleaded in the language of legitimate expectation and of the right to fair administrative action under Article 47(1) of the Constitution as read with Section 4 of the Fair Administrative Action Act, 2015. The Tribunal is a creature of statute. The vindication of constitutional rights, and in particular the grant of relief for a violation of the right to fair administrative action under Article 47, lies within the province of the High Court exercising its judicial review and constitutional jurisdiction. 2. This Tribunal accordingly declines jurisdiction to determine the fair administrative action and Article 47 grounds as stand-alone claims, and confines itself to the statutory questions properly before it under the East African Community Customs Management Act (EACCMA). It does not engage those grounds on their merits. The doctrine of legitimate expectation, however, is considered below only in so far as it bears on the correctness of the tax decision within the Tribunal's mandate. **A. Whether, in the absence of a legal framework exempting Semi-Knocked Down kits from customs duty, the duty was lawfully chargeable on the importation** 1. The starting point, and the point on which much of this Appeal turns, is whether the imported SKD kits were, in law, exempt from customs duty. The Tribunal finds, on the material before it, that they were not. 2. The exemption from customs duty is a creature of statute. Under the EACCMA, goods are exempt from import duty only where the exemption is conferred by the Act, by the Fifth Schedule thereto, or by the East African Community (EAC) Common External Tariff. Exemptions are to be strictly construed, and the party asserting an exemption bears the burden of bringing the goods squarely within the exempting provision. It is not in dispute, and indeed it is confirmed by the very instruments on which the Appellant relies, that no such exempting provision extends to Semi-Knocked Down kits. 3. The National Treasury's own letter of 19th December 2016 states, in terms, that *"the current legal framework only allows tax-free importation in respect of completely knocked down kits and not the semi-knocked down kits"*. The Respondent's internal memorandum of 28th December 2016 records that the tax-free treatment was to operate *"while the relevant GoK authorities are in the process of having the tax-free policy on SKDs entrenched in the tax laws"*, that is, pending a legislative amendment that would confer the exemption. 4. The Tribunal has not been shown, and is not aware of, any amendment to the EACCMA, the Fifth Schedule or the EAC Common External Tariff that has since conferred an exemption on Semi-Knocked Down kits. To date, therefore, SKDs are not exempt from customs duty. The anticipated legal framework never came into being. The consequence is inescapable: the duty on the imported SKDs was, and remains, lawfully chargeable. There being no exempting law, the goods were dutiable at importation, and the Respondent was correct to treat them as such. 5. The Tribunal emphasises that the tax-free clearance actually accorded to the Appellant did not rest on any exemption known to law. It rested on an administrative accommodation, whereby the goods were released without payment on the understanding that the duty would be settled by the National Treasury pending a change in the law that never occurred. An administrative accommodation of that character cannot, and does not, alter the legal character of the goods as dutiable. The duty was always due; what was deferred was its payment, not its imposition. 6. The Tribunal accordingly finds on the first issue that, in the absence of any legal framework exempting Semi-Knocked Down kits from customs duty, the duty was lawfully chargeable on the importation, and the Appellant's contention that the SKDs were exempt is unsustainable. **B. Whether the Appellant bears the incidence of the duty notwithstanding the National Treasury undertaking** 1. The duty being lawfully chargeable, the question is upon whom its incidence falls. Section 130 of the EACCMA provides that where any goods are liable to duty, the duty constitutes a civil debt due to a Partner State, is charged on the goods, and is payable by the owner of the goods, recoverable summarily by legal proceedings. The provision fixes the incidence of the duty on the owner of the goods. 2. There is no provision in the EACCMA, and none was drawn to the Tribunal's attention, that transfers the incidence of customs duty from the importer to any other person. The liability created by Section 130 of the EACCMA is a statutory liability. It may be discharged by payment from whatever source, but the person on whom the law fixes it does not change merely because a third party has promised, whether to the importer or to the Authority, to pay it. 3. Absent an express statutory mechanism for the transfer of the tax incidence, the incidence remains where the Act places it, on the owner of the goods. **Ownership of the goods under Section 2 of the EACCMA** 1. The Appellant contends that the National Treasury, having structured and directed the importation, assumed the tax liability, and procured a number of the vehicles, was a person beneficially interested in the goods and therefore an "owner" within the inclusive definition in Section 2 of the EACCMA, against whom recovery ought to be directed. The Tribunal has considered this contention and rejects it. 2. Section 2(1) of the EACCMA provides the definition of “owner” as: *“owner” in respect of – (a) …; (b) goods, includes any person other than an officer acting in his or her official capacity being or holding himself or herself out to be the owner, importer, exporter, consignee, agent, or the person in possession of, or beneficially interested in, or having control of, or power of disposition over, the goods;”* 1. The inclusive definition in Section 2 of the EACCMA extends the concept of "owner" to persons in possession of, beneficially interested in, or having control of or power of disposition over the goods. However, the Appellant's own case establishes, beyond controversy, that ownership, possession, control and the power of disposition over the SKDs rested and remained with the Appellant throughout. 2. The Appellant was the importer of record on the customs declarations; it took delivery of, held, assembled and disposed of the goods; it entered into the contract with Volkswagen and structured its own business around the imports; and it dealt with the finished vehicles as its own. The National Treasury did none of these things. Its role, on the documents, was that of a policy sponsor which committed, as a matter of fiscal facilitation, to meet the duty; it did not take title to, possession of, control over, or the power of disposition over the SKDs. 3. The commitment to pay a duty is not the same as a beneficial interest in the dutiable goods. A guarantor of a debt does not thereby acquire ownership of the property to which the debt relates. 4. The Tribunal therefore finds that ownership of the goods remained with the Appellant at all material times and never transferred, in whole or in part, to the National Treasury. The Appellant was and is the owner within Section 2 of the EACCMA, and the incidence of the duty under Section 130 of the EACCMA falls upon it. The invitation to construe the National Treasury as an "owner" so as to divert the demand away from the importer is, on the facts, without foundation. **The undertaking as a private arrangement** 1. The Tribunal notes that the National Treasury's undertaking to settle the duties does not alter this position. That undertaking was, in substance, a private arrangement between the Appellant and the National Treasury, arising out of the tripartite commitment to which the Government of Kenya and Volkswagen were parties and to which the settlement mechanism was ancillary. It was an arrangement about who, as between the Appellant and the National Treasury, would in fact bear the cost of a duty that the law imposed on the Appellant. 2. It was not, and could not be, a statutory reallocation of the incidence of the duty, for no law authorised such a reallocation. 3. The default of the National Treasury in honouring that undertaking is a matter between the Appellant and the National Treasury. In the absence of any legal framework exempting the goods or transferring the incidence, that default falls to be visited upon the importer of record, who remains the person liable in law. The Appellant's remedy, if any, for the National Treasury's failure to meet its promise lies against the National Treasury; it does not lie in resisting a duty that the EACCMA fixes upon the Appellant as owner. 4. The position is closely analogous to that of a customs clearing agent who receives duty from an importer, or undertakes to remit duty on the importer's behalf, and then fails to pay it over to the Authority. In such a case the law does not relieve the importer of the primary liability merely because it entrusted payment to the agent; the Authority is entitled to look to the importer, who could in turn pursue the defaulting agent. This also applies in this case. 5. The National Treasury having undertaken to settle the duty and having defaulted, the Respondent is entitled to look to the Appellant as the importer on record and the owner of the goods on whom the incidence of the duty rests, leaving the Appellant to pursue the National Treasury on the undertaking. To hold otherwise would be to permit a private arrangement for payment to defeat a statutory liability, which the law does not allow. **Whether the Cale Infrastructure case governs the present Appeal** 1. The Respondent relies on the decision of the High Court in **Cale Infrastructure Ltd v Commissioner of Customs and Border Control & Another (Tax Appeal E234 of 2024)**, and invokes the doctrine of *stare decisis*. The Appellant seeks to distinguish that decision on the ground that, unlike in Cale Infrastructure, the Respondent here was directly involved in and implemented the National Treasury arrangement. 2. The Tribunal has considered the asserted distinction and finds that it does not affect the operative ratio for present purposes. The core holding in the **Cale Infrastructure case** is that a National Treasury undertaking does not have the legal effect of transferring the statutory liability from the importer to the National Treasury, and that in the event of the Treasury's default the Commissioner is lawfully entitled to seek recovery from the importer as the primary taxpayer. 3. That holding rests on the legal proposition that the incidence of customs duty is fixed by statute on the owner and cannot be shifted by an undertaking; it does not depend on whether the Commissioner was or was not aware of, or party to, the arrangement. The degree of the Commissioner's operational involvement in implementing the tax-free clearance may bear on the Appellant's separate complaints of legitimate expectation and delay, but it does not alter the legal incidence of the duty. 4. On that central and dispositive point, **Cale Infrastructure** **case** is directly in point and the Tribunal, consistent with it, holds that the incidence of the duty here remained with the Appellant. 5. The Tribunal accordingly finds on the second issue that there is no governing law transferring the incidence of the customs duty from the Appellant to any other person; that ownership of the goods remained with the Appellant throughout and never passed to the National Treasury; that the undertaking was a private arrangement whose default falls to be visited on the importer of record; and that the Appellant remains liable for the duty as owner under Sections 2 and 130 of the EACCMA. **C. Whether the Respondent’s Review decision was justified.** **Legitimate expectation** 1. The Appellant's most substantial complaint is that the National Treasury's directive and the Respondent's implementation of it, over a sustained period, created a legitimate expectation that the SKD imports would not attract duty on its part. The Tribunal has already noted that a free-standing claim for breach of fair administrative action lies before the High Court. In so far as legitimate expectation bears on the correctness of the tax decision, however, the Tribunal addresses it. 2. The doctrine of legitimate expectation is subject to a settled and fundamental limitation: there can be no legitimate expectation against clear provisions of the law. This is the fourth of the cumulative requirements identified by the Supreme Court in **Communications Commission of Kenya & 5 Others v Royal Media Services Ltd & 5 Others [2014] KESC 53 (KLR)** and reaffirmed in **Kenya Revenue Authority v Export Trading Company Limited [2022] KESC 31 (KLR)**, that is, that the representation relied upon must be one which it was competent and lawful for the decision-maker to make, and that no expectation can arise contrary to a statute. 3. A public authority cannot, by representation or practice, confer an exemption from tax that the law does not permit, and a taxpayer cannot acquire, through expectation, an immunity from a duty that Parliament has imposed. 4. That limitation is decisive here. As found under the first issue, there is no legal framework exempting Semi-Knocked Down kits from customs duty. The tax-free treatment accorded to the Appellant was expressly premised, in the National Treasury's own letter and the Respondent's own memorandum, on the exemption being entrenched in the tax laws in future, an entrenchment that never occurred. An expectation that the goods would remain permanently free of a duty which the law imposed, and which no law exempted, is an expectation against clear provisions of the law. 5. However clear, consistent and prolonged the representations and practice may have been, they could not, in law, generate a legitimate expectation of exemption from a statutory duty. To give effect to such an expectation would be to allow an administrative accommodation to override the EACCMA, which the doctrine of legitimate expectation does not permit. At its highest, the Appellant's expectation was that the National Treasury would pay the duty; it was never, in law, an expectation that no duty was due. 6. That expectation, being one for payment by a third party, sounds against the National Treasury on the undertaking, and not against the Respondent in the form of an exemption. 7. The authorities on which the Appellant relies do not support its case. In each, the legitimate expectation vindicated was one that operated within, and not against, the law. In this case, by contrast, the legitimate expectation asserted is one of exemption where the law confers none. **Limitation under Section 135(3) of the EACCMA** 1. The Appellant contends that the demand is time-barred, the exemption framework having been implemented in December 2016 and the demand issued only in September 2025. Section 135(3) of the EACCMA provides that the proper officer shall not make any demand after five years from the date of the short-levy, unless the short-levy was caused by fraud. The five-year period runs from the date of the short-levy, that is, from the time the duty fell due and was not levied. 2. The Respondent expunged, at the review stage, declarations amounting to Kshs. 283,785,856 that fell outside the five-year window, and confirmed the balance of Kshs. 1,112,010,836 in respect of declarations within the audit period of September 2020 to May 2025. Measured from the Notice of Demand dated 23rd September 2025, short-levies occurring on or after 23rd September 2020 fall within the five-year period and are not time-barred, no fraud being alleged or found. The confirmed assessment relates, on the Respondent's case, to declarations within that window. 3. The Tribunal is satisfied that the assessment as confirmed is not defeated by Section 135(3) of the EACCMA, the earlier and time-barred declarations having already been removed. **Procedural regularity of the demand** 1. The Appellant complains that it was not given the fifteen-day pre-audit notice and questionnaire said to be required by the EAC Customs Post Clearance Audit Manual, and that the Notice of Demand was defective for want of particulars. The Respondent answers that the audit conducted was a desk audit, in respect of which the fifteen-day field-audit notification does not arise, and that any want of particulars in the Notice of Demand was cured by the detailed basis of assessment and schedule of workings furnished at the review stage. 2. The Tribunal is persuaded by the Respondent's position. The pre-audit notification and questionnaire are features of a comprehensive field audit, and the record discloses that the review here was a desk-based post clearance review of the Appellant's own declarations. 3. More fundamentally, the Appellant has not shown that any procedural irregularity occasioned it prejudice going to the substance of the liability: the duty was lawfully chargeable, the Appellant was afforded a full review at which the basis of assessment and the schedule of workings were disclosed, and the Appellant has exercised its right of appeal to this Tribunal and been fully heard. A procedural complaint of this character cannot, in the circumstances, displace a liability that is otherwise established in law. The Tribunal finds no procedural impropriety sufficient to vitiate the assessment. 4. It follows that the Appellant has not discharged the burden, which lies on it under Section 30 of the Tax Appeals Tribunal Act, 2013, of proving that the Review decision is incorrect. The Tribunal accordingly finds that the Respondent’s Review decision was justified. **FINAL DECISION** 1. The upshot of the foregoing analysis is that the Tribunal finds the Appeal to be without merit and accordingly issues the following Orders: 2. The Appeal be and is hereby dismissed; 3. The Respondent's Review Decision dated 21st November 2025, confirming the assessment of Kshs. 1,112,010,836 as due and payable, be and is hereby upheld; and 4. Each party shall bear its own costs. 5. It is so ordered. **DATED AND DELIVERED AT NAIROBI THIS 13TH DAY OF JULY 2026.** **……………………………..….** **ROBERT M. MUTUMA** **CHAIRMAN** **……………………………… ……..….……..……………..** **GLORIA A. OGAGA DR. TIMOTHY B. VIKIRU MEMBER MEMBER** **……………………………..….** **JIMMY M. MALLA** **MEMBER**