[2023] KETAT 357 (KLR)

Hamwe Logistics and Suppliers Limited v Commissioner of Domestic Taxes (Appeal E104 of 2023) [2023] KETAT 357 (KLR) (Civ) (9 June 2023) (Ruling)

Neutral citation: [2023] KETAT 357 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Appeal E104 of 2023

E.N Wafula, Chair, Cynthia B. Mayaka, RO Oluoch, EN Njeru & AK Kiprotich, Members

June 9, 2023

Between

Hamwe Logistics And Suppliers Limited

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Ruling

1. The Appellant vide a Notice of Motion dated the 24th March, 2023 filed under a Certificate of Urgency on 27th March, 2023 and supported by an Affidavit sworn by Daniel Muiruri Kamau, a Director of the Appellant on the 24th March, 2023, sought for the following Orders:-i.Spentii.That the Tribunal be pleased to lift the Agency Notice dated 24th February 2023 sent to Co-operative Bank of Kenya as against the Applicant’s bank account.iii.That the Tribunal further grant leave to the Applicant to file the Appeal out of time.iv.That the Memorandum of Appeal and Statement of annexed to this application be deemed to have been filed and served.v.That the Applicant be at liberty to apply for further orders and the Tribunal do give any and/or any directions it deems fit and just to grant in the circumstances.vi.That cost of this application be in the cause.

2. The application is premised on the following grounds:-i.That the Appellant is a resident taxpayer based in Ngong Hills Town.ii.That the Respondent issued an assessment to the Appellant which the Applicant objected to on 6th June 2022 and the same was acknowledged by the Respondent.iii.That the Appellant’s objection has since been rejected and an objection decision issued on 29th August, 2022 and a demand notice issued on 24th January 2023. iv.That the Appellant has been served with an Agency Notice dated 24th February 2023 and cannot therefore access its funds from the bank.v.That statutorily, the Appellant is out of time within which it ought to have lodged its Notice of Appeal and substantive appeal therefore necessitating bringing out this instant application, for purposes of regularizing the process.vi.That the said demand notice is an appealable tax decision that was served upon the Appellant by the Respondent outside the statutory deadlines thereby locking it out from filing an appeal by law.vii.That the Appellant is not in any way indebted to the Respondent as per the tax decision it arrived at.

3. The Appellant stated in the supporting affidavit that the Respondent issued an assessment to the Appellant which the Appellant objected on 6th June 2022 and the same was acknowledged by the Respondent.

4. That the Respondent and the Appellant had a working meeting and demanded a tabulation and confirmation on the undeclared sales on the VAT returns for the year ended 31st December 2022.

5. That it came to the attention of the Applicant that the objection was rejected and an objection decision issued on 29th August 2022. That another correspondence titled Assessment Notice issued on 12th December 2022 and a demand notice issued on 24th January 2023.

6. That that Applicant learnt of the said correspondences when the director discovered that the company’s account cannot be assessed since it had an agency notice issued as against it.

7. That the director visited the Respondent’s offices and was supplied with a copy of the Agency Notice dated 24th February 2023 together with other correspondences.

8. That statutorily, the Applicant is out of time within which it ought to have lodged its Notice of Appeal and substantive Appeal therefore necessitating bringing out this instant application, for purposes of regularizing the process.

9. That the tax decision was served upon the Applicant by the Respondent outside of the statutory deadline thereby locking the Appellant out from filing an appeal within the time allowed by law.

10. That further, the Applicant is Constitutionally protected and its right of access to justice must not be inconvenienced by the Respondent’s ineptitude and the Applicant is not in any way indebted to the Respondent as per the tax decision it arrived at.

11. The Applicant further prayed that the Agency Notice placed upon the Applicant’s account be lifted to allow the Applicant to run its operations.

12. The Respondent opposed the application through its Grounds of Opposition dated 30th March, 2023 and supported by an Affidavit of Robert Kiboi, an officer of the Respondent, sworn and filed on 5th April, 2023, on the following grounds:-i.That the subject objection decision was issued on 29th August 2022 and the Applicant lodged an application to file its appeal out of time on 24th March 2023. That the delay of 6 months is inordinate.ii.That the Applicant has not given a reasonable cause for the delay in filing the Appeal pursuant to the provisions of Section 13(4) of the Tax Appeals Tribunal Act, 2013 and Section 10(3) of the Tax Appeals Tribunal (Procedure) Rules, 2015iii.That no sufficient reason has been given by the Applicant to warrant exercise of this Tribunal’s discretion to grant the orders sought.iv.That the agency notices were lawfully issued and are procedural according to Section 40 of the Tax Procedures Act.v.That consequently, the application dated 24th March, 2023 is ripe for striking out.

13. The Respondent stated that it conducted tax investigations on the Applicant and issued orders on 12th February 2021 and issued additional assessment amounting to Kshs 5,260,241. 76 and Kshs 5,316,217. 43, respectively.

14. That the Applicant objected to the Respondent’s assessment vide an objection application dated 6th June, 2022.

15. That despite receipt of the objection decision dated 29th August 2022 from the Respondent that declared the objection to the additional assessments invalid, the Applicant did not appeal the decision to the Tax Appeals Tribunal within thirty days of the decision as required which is the stipulated timeline.

16. That the Applicant did not appeal the decision to the Tax Appeals Tribunal within thirty days of the decision as required and only sought to file the instant application on 29th March 2023.

17. That by any standards, a delay of more than 4 months is inordinate delay by the Applicant.

18. That no credible reason has been advanced by the Applicant to warrant extension of time to file an appeal as provided at Section 13(4) of the Tax Appeals Tribunal Act.

19. That an application of this nature requires an applicant to prove his/her reasonable cause.

20. That the application as filed is incompetent, bad in law, fatally defective and is an abuse of the Tribunal’s process.

21. That the Notice of Motion application discloses no reasonable cause of action and is totally unfounded and ought to be dismissed with costs to the Respondent.

22. That the application is an afterthought and a delay tactic by the Applicant meant to delay the conclusion of the matter, which holds substantial Government revenue.

23. That the Applicant has not demonstrated it deserves favourable discretion of the Tribunal and the application should be dismissed with costs to the Respondent.

Analysis and Findings 24. In compliance with the directions of the Tribunal to the effect that the application was to be canvassed by way of written submissions, the Respondent filed its submissions dated 13th April 2023 and filed on the same date while the Appellant filed its submissions dated 12th April 2023 and filed on 14th April 2023. The Tribunal has duly considered the written submissions in arriving at its determination in this Ruling.

25. The application is primarily praying to the Tribunal for extension of time to file an appeal out of time.

26. The power to expand time for filing an Appeal is donated by Section 13(3) of the Tax Appeals Tribunal Act which provides that:“The Tribunal may, upon application in writing, extend the time for filing the Notice of Appeal and for submitting the documents referred to in subsection (2).”It is therefore a discretionary power and not a right to be granted to the Applicant.

27. In determining whether to expand time, courts have in the past considered a number of factors. These factors were discussed in Leo Sila Mutiso v Rose Hellen Wangari Mwangi, Civil Application Nai. 251 of 1997 where the Judge held that:“It is now settled that the decision whether to extend the time for appealing is essentially discretionary. It is also well stated that in general the matters which this court takes into account in deciding whether to grant an extension of time are, first the length of the delay, secondly the reasons for the delay, thirdly (possibly) the chances of the appeal succeeding if the application is granted and fourthly the degree of prejudice to the respondent if the application is granted.”

28. The court in WasikevSwala [1984] KLR 591 provided the hierarchy of the factors to consider when it stated that:“an applicant must now show, in descending scale of importance, the following factors: -a)That there is merit in his appeal.b)That the extension of time to institute and/or file the appeal will not cause undue prejudice to the respondent; andc)That the delay has not been inordinate.”

29. The Tribunal, guided by the principles set out in Leo Sila Mutiso v Rose Hellen Wangari Mwangi, Civil Application Nai. 251 of 1997, WasikevSwala [1984] KLR and Section 13 of the Tax Appeals Tribunal Act 2013 used the following criteria to consider the application:a.The merits of the complained action.b.Whether there is a reasonable cause for the delay.c.Whether there will be prejudice suffered by the Respondent if the extension is granted.

The Merits of the Complained Action.

30. The Tribunal considered whether the matter under dispute was frivolous to the extent that it would be a waste of the Tribunal’s time, or it was material to the extent that it deserved its day in the Tribunal.

31. The test is not whether the case is likely to succeed. Rather, it is whether the case is arguable. This was the finding in Samuel Mwaura Muthumbi v Josephine Wanjiru Ngungi & Another (2018) eKLR where the court stated that:-“Looking at the draft Memorandum of Appeal filed, I am unable to say that the intended Appeal is in arguable. Of course, all the Applicants have to show at this stage is arguability- not high probability of success. At this point the Applicant is not required to persuade the Appellate court that the intended or filed appeal has a high probability of success. All one is required to demonstrate is the arguability of the Appeal, a demonstration that the Appellant has plausible grounds of either facts or law to overturn the original verdict. The Applicants have easily met that standard. I believe that the Applicant has discharged this burden.”

32. The Tribunal was further guided by the findings of the court in Kenya Commercial Bank Limited v Nicholas Ombija (2009) eKLR where it was held that:“An arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court.”

33. Similarly, in Kenya Commercial Bank Limited v Nicholas Obija (2009) eKLR it was stated that “ an arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court” That was also the position held in Stanley Kangethe Kinyanjui v Tony Keter & others (2013) eKLR where the court held that “on whether the appeal is arguable, it is sufficient if a single bonafide ground of appeal is raised, .. an arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court: one which is not frivolous.”

34. The Respondent in this case issued the objection decision on 29th August, 2022 that required the Applicant to settle tax amounting to Kshs 10,576,459. 00 which the Applicant is disputing. Looking at the grounds raised in Appellant’s Memorandum of Appeal filed on the 24th March, 2023, the Tribunal noted that the Applicant raised four (4) substantive grounds of appeal which require rebuttal by the Respondent. Although it was not mandatory to have more than one ground, the Tribunal was of the view that the Applicant had demonstrated existence of sufficient grounds for appeal as set out above in the Stanley Kangethe Kinyanjui v Tony Keter case.

35. Consequently, based on the existence of these grounds of appeal the Tribunal finds that the Applicant has an arguable case and therefore deserves its day in the Tribunal.

Whether there is a reasonable cause for the delay.

36. Regarding delay, the Respondent contended that the Applicant had not given a reasonable cause for the delay in filing the Appeal pursuant to the provisions of Section 13(4) of the Tax Appeals Tribunal Act, 2013 and Section 10(3) of the Tax Appeals Tribunal (Procedure) Rules, 2015

37. That no sufficient reason has been given by the Applicant to warrant exercise of this Tribunal’s discretion to grant the orders sought.

38. The powers to extend time is donated to the Tribunal by Section 13(3) & (4) of the Tax Appeals Tribunal Act which provides as follows;“(3)The Tribunal may, upon application in writing, extend the time for submitting the documents referred to in subsection (2).(4)An extension under subsection (3) may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the applicant from giving notice of appeal within the specified period.”

39. In the instant case, the objection decision was issued by the Respondent on 29th August 2022. Therefore, the Applicant ought to have filed a Notice of Appeal on or before 28th September 2022. The Applicant in this case approached the Tribunal with this Notice of Motion on 27th March 2023 which is six months late.

40. The Applicant stated that the tax decision was served upon it by the Respondent outside of the statutory deadline thereby locking the Applicant out from filing an appeal within the time allowed by law. That it only learnt of the decision when it discovered that the company’s account cannot be accessed since it had an agency notice issued as against it. That its director visited the Respondent’s offices and was served with the copies of correspondences including the decision and the Agency Notice.

41. Although the Tribunal noted that the Applicant did not provide any evidence to support these averments, the Tribunal did not find the delay of six months to be inordinate.

42. The Tribunal’s in its finding is persuaded by the Ugandan Case of Ojara v Okwera (Miscellaneous Civil Application-2017/23) [2018] UGHCCD 42 it was stated that;“An order for enlargement of time to file the appeal should ordinarily be granted unless the applicant is guilty of unexplained and inordinate delay in seeking the indulgence of the Court” Whether the Respondent will suffer prejudice if the extension is granted.

43. The courts have held that in considering whether to extend time, due regard must be given to whether the extension will prejudice the opponent. In determining this, the judge in Patrick Maina Mwangi v Waweru Peter [2015] eKLR quoted the finding in United Arab Emirates V Abdel Ghafar & Others 1995 IR LR 243 in which it was stated that:-“…….a plaintiff should not in the ordinary way be denied an adjudication of his claim on its merits because of a procedural default, unless the default causes prejudice to his opponent for which an award of cost cannot compensate………”

44. The test, therefore, as set out in the case above is whether the Respondent will suffer irreparable prejudice if the application is granted.

45. Although the Respondent had stated that the application was an afterthought and a delay tactic by the Applicant meant to delay the conclusion of the matter, which holds substantial Government revenue, the Tribunal did not find anything to demonstrate how the Respondent would suffer irreparable prejudice that cannot be compensated by award of interest if the application was granted.

46. It was the view of the Tribunal that the Appellant’s recourse to justice lies in an appeal to the Tribunal. Thus, the Appellant would suffer prejudice if it is not granted leave to file its appeal. In any event, the Respondent would still collect the taxes inclusive of penalties and interest should it be found to be due and payable.

47. The Tribunal therefore finds that the Respondent will not suffer prejudice if the extension is granted.

Disposition 48. Based on the foregoing, the Tribunal finds that the application has merit and proceeds to make the following Orders:

i. The Applicant be and is hereby granted leave to file an Appeal out of time.ii. The Memorandum of Appeal, Statement of Facts and Tax Decision filed on 27th March 2023 be and are deemed as duly filed and served.iii. The Respondent to file its Statement of Facts within Thirty (30) days of the date of delivery of this Ruling.iv. Agency Notices dated 24th February 2023 be and are hereby lifted unconditionally.v. No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF JUNE, 2023. ………………………………………..ERIC N. WAFULACHAIRMAN………………………………………..CYNTHIA B. MAYAKAMEMBER………………………………………..RODNEY O. OLUOCHMEMBER………………………………………..ELISHAH NJERUMEMBER………………………………………..ABRAHAM K. KIPROTICHMEMBER