[2023] KETAT 945 (KLR)

Greatway Logistics Kenya Limited v Commissioner of Domestic Taxes (Tax Appeal 1475 of 2022) [2023] KETAT 945 (KLR) (Civ) (24 November 2023) (Judgment)

Neutral citation: [2023] KETAT 945 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Tax Appeal 1475 of 2022

RM Mutuma, Chair, M Makau, E.N Njeru, W Ongeti & BK Terer, Members

November 24, 2023

Between

Greatway Logistics Kenya Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a company duly registered in the Republic of Kenya and a registered taxpayer. Its core business engagement is the buying and selling of petroleum products.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya revenue Authority Act, 1995. 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 & 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 dispute in this Appeal arose when the Respondent raised an additional assessment amounting to Kshs. 4,893,588. 57 relating to VAT for the period in January 2021 on the 15th September 2021.

4. The Appellant disputed the Respondent’s findings and lodged its notice of objection to the additional assessment on 18th July 2022.

5. The Respondent disallowed the Appellant’s Objection on the 7th September 2022 and confirmed the additional assessments.

6. The Appellant being aggrieved by the decision issued by the Respondent, commenced this Appeal by filing its Notice of Intention to Appeal on the 3rd October 2022.

The Appeal 7. The Appellant’s Memorandum of Appeal dated the 3rd October 2022 and filed on the 6th December 2022 is premised on the following grounds that;a.The Commissioner erred in law and in fact by rejecting the Appellant’s Objection on refusal of insertion of valid and genuine inputs amounting to Kshs. 58,449,840. 55.

The Appellant’s Case 8. The Appellant’s case is premised on the herein under filed documents before the Tribunal;a.The Appellant’s Statement of Facts filed on the 6th December 2022 together with the documents attached thereto.b.The Appellant’s written submissions filed on 4th July 2023.

9. That the Appellant stated that it received an additional assessment for the period January 2021 for VAT in the sum of Kshs. 4,893,588. 57 on the 15th September 2021, to which the Appellant objected.

10. The Appellant stated that the Respondent rejected its Objection on the 7th September 2022 and subsequently filed a Notice of Appeal on the 3rd October 2022.

11. The Appellant averred that it was not in dispute with the additional assessment issued on the 15th September 2021.

12. The Appellant submitted that the Respondent should allow genuine custom entry form/invoices corresponding to the said sale for the period in question, these are not third-party inputs but these are VAT paid upfront, directly to the Respondent during shipping of the imports are;a.Form 147 and Customs Forms C.17 B amounting to Kshs. 29,293,512. 50 and Kshs. 24,142,493. 00, respectively, which carried VAT element at a rate of 8%.b.Invoices for both Kenya Pipeline Company and Lake Oil Limited amounting to Kshs. 3,011,838. 65 and Kshs. 2,001,996. 40 respectively which carried VAT element at a rate of 16% and 14%.

13. The Appellant contented that the Respondent will not suffer any prejudice in the event of granting the Appellant the request of the input of the said customs entries and invoices.

14. The Appellant submitted that it provided the invoice and import documents to the Respondent as proof of payment to show that the purchases were indeed made and are genuine.

15. The Appellant submitted that it relied on the Finance Act2022 Part (iv) Section 17 (b) of the VAT Act 2019 amended as “in the case of a participant in the Open Tender System for the importation of petroleum products that have been cleared through a non-bonded facility, the custom entry showing the name and PIN of the winner of the tender and the name of the other oil marketing company participating in the tender:Provided that the input tax that may have been incurred by an oil marketing company participating in the Open Tender System before the coming into force of this provision shall be claimed with twelve months after this provision comes into force.”

Appellant’s Prayers 16. The Appellant made the prayer to the Tribunal to rescind the Commissioner’s decision to asses aforementioned VAT.

Respondent’s Case 17. The Respondent’s case is premised on the herein under filed documents before the Tribunal;a.Statement of Facts dated 14th December 2022 and filed on 15th December 2022 together with the documents attached thereto.b.Written submissions dated and filed on 10th July 2023.

18. The Respondent stated that it raised an additional assessment on the 15th September 2021 and the Appellant lodged a late Objection to the same on 18th July 2022.

19. That the Respondent stated that the Appellant failed to provide sufficient records to meet the requirement of Section 17 of the VAT Act. Further, the Respondent disallowed the Appellant’s input VAT after 6 months which is contrary to Section 17 (3) of the VAT Act 2013.

20. That the Respondent stated that it disallowed the Objection on 7th September 2022 hence confirming the assessment.

21. That the Respondent averred that it identified two issues for determination, being;a.Whether the Additional Assessment was justified in law?b.Whether the Appellant can claim input VAT outside the statutory timelines of 6 months contrary to Section 17 (2) of VAT Act 2013.

22. That the Respondent contented that it was justified and had legal basis in its assessment which were premised on variances of income as per the bank statements and the income declared in VAT.

23. The Respondent stated it was not bound by the Appellant’s self-assessment returns as it is empowered to vary, make alterations and additions to original assessments the same based on any available information and Commissioner’s best judgement under the provisions of Sections 24 (2) and 31 of the Tax Procedures Act.

24. The Respondent contented that the Appellant failed to provide evidence to rectify the variances despite being requested to do so, resulting to the Respondent confirming the assessment.

25. That the Respondent asserted that it disallowed the VAT input tax claimed by the Appellant for the period January 2021 because the same was claimed outside the 6 months statutory timelines and thus did not comply with the provisions of Section 17 (2) of the VAT Act.

26. That the Respondent stated that the Appellant objected to the assessment on 18th July 2022 and claimed VAT input for the period January 2021, which input VAT ought to have been claimed on or before July 2021, the claim for input VAT ought not to be allowed.

27. The Respondent submitted that there was no valid Appeal before the Tribunal and prayed to the Tribunal to dismiss the prayers sought by the Appellant in its Memorandum of Appeal.

28. The Respondent relied on the following case law;i.Kenya Revenue Authority vs. Man Diesel & Turbo Se, Kenya [2021] eKLR.ii.Commissioner of Income Tax vs. Lerematesho Ltd [1976] eKLR.iii.Digital Box Limited vs. Commission of Investigations and Enforcement [2020].iv.Highlands Mineral Water Limited vs. Commissioner of Domestic Taxes[2021] eKLR.

Respondent’s Prayers 29. The Respondent prayed that this Honourable Tribunal;i.Upholds the Respondent’s additional assessment as proper and in conformity with the provisions of the law.ii.That this Appeal be dismissed with costs to the Respondent as the same is devoid of merit.

Issues for Determination 30. The Tribunal upon the careful consideration of the pleadings and Statements of Facts made by the parties respectively, was of the view that the issues that recommend themselves for its determination are;a.Whether the Appeal herein is validly lodged.b.Whether the Respondent’s decision rejecting the Appellant’s Objection issued on 7th September 2022 was justified.

Analysis and Findings 31. The Tribunal having identified the issues for its determination proceeds to analyse the same as herein under;a.Whether the Appeal herein is validly lodged.

32. The Appellant’s Appeal before the Tribunal flows from a decision by the Respondent rejecting the Appellant’s late objection.

33. The Respondent contented that it issued the Appellant with an additional assessment relating to VAT on the 15th September 2021 for the period January 2021, the Appellant lodged its Objection on the 18th July 2022.

34. It was the Respondent’s submission that the Appellant’s Objection was late, the Appellant was requested to furnish the Respondent with documents to support the same, however, the Appellant failed to furnish the documents as requested.

35. As a consequence, the Respondent issued the notice of rejection of the Objection on 7th September 2022.

36. The Appellant then lodged a Notice of Intention to Appeal the decision with the Respondent on 3rd October 2022 on its iTax platform.

37. It was submitted by the Respondent that there was no valid Appeal before the Tribunal to exercise its jurisdiction over.

38. The Tribunal has carefully perused the record and from the documentation presented by the Appellant, the Tribunal noted that the Appellant filed its Memorandum of Appeal on the 6th December 2022 without filing a Notice of Appeal.

39. The procedure of institution of Appeals before the Tribunal is provided for under Section 13 (1) and (2) of the Tax Appeals Tribunal Act, which provides;(1)A notice of appeal to the Tribunal shall –a.be in writing through electronic means;b.be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.(2)The appellant shall, within fourteen days from the date of filling the notice of appeal, submit enough copies, as may be advised by the Tribunal, of –a.a memorandum of appeal;b.statement of facts;c.the appealable decision; andd.such other documents as may be necessary to enable the Tribunal to make a decision on the appeal.”

40. From the reading of Section 13 (1) of the TPA, it is clear that the procedure of institution of any appeal before the Tribunal shall commence with the filing of a Notice of Appeal in writing within thirty days from the date of issuance of the Respondent’s decision.

41. It follows that, the Appellant ought to have instituted its Appeal by lodging a Notice of Appeal within thirty days of the Respondent’s decision and filed the documents outlined under Section 13 (2) of the TAT Act within fourteen (14) days of lodging such an Appeal.

42. Before the Tribunal is the Memorandum of Appeal filed on 6th December 2022, which was not accompanied nor preceded by a Notice of Appeal.

43. Whereas the default outlined hereinabove is fatal, the Appellant is not without a remedy in law and could take refuge within the provisions of Section 13 (3) of the TAT Act and seek leave of the Tribunal to regularize the indiscretion, which the Appellant has failed to exploit.

44. Section 13 (1) of the TPA is framed in peremptory terms and does not offer any room for interpretation or intendment. The statutory provision ought to be observed with strict adherence.

45. The Tribunal is guided by the case of Cape brandy Syndicate vs. LR. Commissioners [1921] 1KB (as cited by the Appellants), expressed the common law position in this area when it stated;“In a taxing Act one has to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used……This common law position is what pertains here and has been adopted by our courts as good law. In our view there cannot be an equitable construction of income tax legislation. The norm is that a taxing legislation must be construed with perfect strictness whether or not such construction is against the State or against the person sought to be taxed.”

46. Further, in the case of Equity Group Holdings Limited vs. Commissioner of Domestic Taxes [2021] eKLR, relating to strict dictates of compliance with any statute, the Court observed that: -“A statutory edict is not procedural technicality. It’s a law which must be complied with. Parliament in its wisdom expressly and in mandatory terms provided…”

47. It is the Tribunal’s position that the instant Appeal before it cannot be deemed as valid unless the same is instituted by lodging of a Notice of Appeal, such failure is fatal on the Appeal.

48. The Tribunal having established that there is no valid Appeal on record, it shall not delve into the other issue for determination as the same has been rendered moot.

49. Consequently, the Tribunal finds that the Appeal herein is incompetent and untenable in law.

Final Decision 50. The upshot to the foregoing is that the Appeal is incompetent and the Tribunal consequently makes the following orders; -a.The Appeal be and is hereby struck out.b.Each party to bear its own costs.

51. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 24TH DAY OF NOVEMBER, 2023ROBERT M. MUTUMA ........CHAIRPERSONMUTISO MAKAU..................MENBERELISHAH N. NJERU...............MEMBERDR. WALTER ONGETI.............MEMBERBONIFACE K. TERER..............MEMBER