[2025] KETAT 156 (KLR)

Hanse Agrostore Africa Limited v Commissioner of Customs and Border Control (Tax Appeal E275 of 2024) [2025] KETAT 156 (KLR) (Commercial and Tax) (14 February 2025) (Judgment)

Neutral citation: [2025] KETAT 156 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Tax Appeal E275 of 2024

CA Muga, Chair, BK Terer, EN Njeru, E Ng'ang'a & SS Ololchike, Members

February 14, 2025

Between

Hanse Agrostore Africa Limited

Appellant

and

Commissioner of Customs and Border Control

Respondent

Judgment

Background 1. The Appellant is a limited liability company duly incorporated in Kenya. Its business consists of, inter alia, the importation and installation of cold stores and steel construction in Kenya and Africa.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws (hereinafter “the Act”). 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 and 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 Appellant imported one complete modular building unit of steel and classified it under HS Code 9406. 20. 20. The Respondent upon verification, issued a tariff ruling dated 14th August 2023 classifying the item under 2022 EAC/CET Code 9406. 20. 90 by application of GIR1, and 6.

4. Aggrieved by the re-classification, the Appellant lodged a late application for review of the tariff classification decision vide a letter dated 20th December 2023. The Respondent issued a late appeal ruling dated 25th January 2024 wherein the Respondent declined to enlarge time to consider the Appellant's Review Application.

5. Aggrieved by the Respondent’s decision, the Appellant lodged this appeal vide the Notice of Appeal dated 21st February 2024 and filed on 22nd February 2024.

The Appeal 6. The Appellant filed its memorandum of appeal dated 4th March 2024 on 6th March 2024 raising the following grounds of appeal:a.That the Respondent erred in law and in fact in failing to consider evidence demonstrating that the Appellant's sole director was out of the Country (Kenya) since 16th February 2023 and had not returned to Kenya when the tariff classification ruling was issued thus occasioning delay in applying for a review.b.That the Respondent erred in law and in fact, by failing to consider the fact that even though the tariff classification ruling was communicated to the Appellant's clearing and forwarding Agent, who lacked instructions to apply for review.c.That the Respondent erred in law and in fact, by failing to consider that the Appellant's delay in filing the application for review was not unreasonable in the circumstances as provided for under section 229(3) of East African Community Customs Management Act, 2004 (hereinafter “EACCMA”).d.That the Respondent erred in fact and law by failing to consider the fact that the Appellant has a prima facie case, and unless the tariff classification ruling is reviewed and determined on merit, the Appellant will unfairly be condemned to paying 35% custom duty.

Appellant’s Case 7. In support of the appeal, the Appellant filed its statement of facts dated 4th March 2024 on 6th March 2024. The Appellant also relied on the testimony Christian Jean Ramos witness statement dated 25th September 2024 and filed on even date was adopted as evidence in chief by the Tribunal during the hearing on 13th November, 2024. In compliance with the directions of the Tribunal, the Appellant also filed its written submissions dated 26th November,2024 on 27th November, 2024.

8. The Appellant stated that sometime in June 2023, it imported a complete cold store for potato (Cold Store) for potato preservation as a disassembled unit under Tariff Code 9406. 20. 20 of the East Africa Community Common External Tariff (hereinafter “EACCET”). The Respondent disputed the classification and sought to classify the Cold Store under tariff code 9406. 20. 90.

9. The Respondent verified the components imported, and via a tariff classification ruling dated 14th August 2023, held that the structural elements did not include any cooling apparatus consistent with the cold rooms under tariff code 9406. 20. 20 and therefore, classified potato cold store under tariff code 9406. 20. 90. By classifying the cold store under tariff code 9406. 20. 90, the complete cold store import attracts an import duty of 35% instead of zero under tariff code 9406. 20. 20.

10. The Appellant stated that the said tariff classification ruling was sent to the Appellant's agent on 15th August 2023 via electronic mail but that since the Appellant's director was out of the country, there was a communication lapse, and an application for review under the provisions of Section 229(1) of the EACCMA was inadvertently presented outside the 30-day statutory timeline.

11. Aggrieved by the decision of the tariff classification ruling, the Appellant submitted an application dated 20th December 2023 seeking an extension of time pursuant to the provisions of Section 229(3) of EACCMA requesting the Respondent to consider a late review and, secondly, seeking a substantive review of the tariff classification ruling.

12. The Respondent issued a late appeal ruling dated 25th January 2024 and declined to enlarge time on account that the said tariff classification ruling had been served upon the Appellant's clearing agent, (Momo Clearing and Forwarding Ltd) a Kenyan resident, and secondly, that the passport pages of the director annexed did not give the exact duration when the Director was absent from Kenya and was hence inadmissible. For these reasons, the Appellant filed this appeal.

13. The Appellant asserted that the Respondent failed to consider the fact that the Appellant's sole director was out of the Country during the time the ruling was issued, resulting in a lapse in communication with the Kenyan agent thus occasioning delay. The Appellant argued that this was contrary to the provisions of section 229(3) of the EACCMA.

14. The Appellant argued that based on section 229(3) of the EACCMA and in line with the Appellant's CR12, the sole director of the Appellant, Ms. Maria Cornella De Jonge, a resident and national of the Netherlands has been out of the Country (Kenya) since 16th February 2023 and has never returned to Kenya as of the date of filing the application for review. As a result, there was a communication lapse with the team in Kenya, mainly the clearing agent, thus resulting in a delay in applying for a review of the tariff classification ruling.

15. It added that the review application clearly stated that since 16th February 2023, the said director has been out of the country and had not subsequently visited. Therefore, having not returned to Kenya, the evidence of leaving the country is sufficient to demonstrate that as of 15th August 2023, she was out of the country, which resulted in a lapse in communication with the Kenyan clearing agent, thus occasioning the delay in seeking review.

16. It added that if the Respondent found it integral to establish whether the director has indeed returned to the country after exiting on 16th February 2023, it should have made further inquiries. The Appellant cited the provisions of Section 229 (4) of the EACCMA which envisages a situation where the Respondent can call for further information, which was evidently not done in this case.

17. To address challenges that come with key decision makers being out of the country, the Appellant asserted that it had embarked on increasing capacity in its office to ensure they had adequate personnel to run its day-to-day operations to mitigate such cases in the future.

18. Furthermore, the Appellant averred this was the first time it had a dispute with the Respondent and, therefore, was not familiar with the dispute resolution mechanisms. It asserted that the Appellant was not able to receive advice on the immediate and future impact of the review on its business to timeously apply for review.

19. The Appellant stated that the Respondent erred in law and in fact by failing to consider the fact that even though the tariff classification ruling was communicated to the Appellant's clearing and forwarding Agent, the agent lacked instructions to apply for review.

20. The Appellant averred that the Clearing Agent did not have the powers to apply for a review of the tariff classification ruling since its role was limited to clearing and forwarding. Therefore, even though the agent received the ruling, it could only appeal after getting instructions from the Appellant's director, who was out of the country at the time, thus resulting in a communication lapse.

21. The Appellant stated that the agent does not understand the key components and technology used in making potato cold stores, which would generally require direct input from the Appellant's director and other technical personnel. Therefore, the Appellant prayed that the Tribunal would find that the communication lapse between the Agent and the Appellant's sole director and the fact that applying for review was outside the scope of the clearing agents as a reasonable cause to occasion the delay and allow a late application under section 229(3) of the EACCMA.

22. The Appellant also stated that the Respondent erred in law and fact by failing to consider that the Appellant's delay in filing the application for review was not unreasonable in the circumstances as provided for in section 229(3) of EACCMA.

23. The Appellant averred that the delay in filing the Appeal was not unreasonable in the circumstances provided for under section 229(3) of EACCMA. It added that the tariff ruling was issued on 14th August 2023 and shared with the Appellant on 15th August 2023. The 30-day window lapsed on 1st September 2023, and the Appeal was lodged in about three months. During this period, there was no change of circumstances to occasion prejudice on the Respondent. According to the Appellant, no enforcement measures have been instituted beyond the issuance of the tariff classification ruling. As a result, the Appellant maintained that the Respondent will not suffer any prejudice in considering the review application.

24. Further, the Appellant argued that in the event the said ruling is not reviewed, the Appellant will suffer irreparable harm as its right to a fair hearing will be violated. Furthermore, it asserted that the Appellant will be condemned to paying more taxes for the current imports and future imports, a situation that threatens the success and competitiveness of its business, especially since, through the cold stores, the Appellant seeks to prevent post-harvest losses using advanced technology.

25. In its written submissions, the Appellant identified a single for determination which was whether its application for review outside the 30-day statutory timeline met the statutory threshold under section 229(3) (a) of EACCMA.The Appellant submitted that the delay of about three months was not unreasonable. It relied on the case of Jin Le Enterprises Co Limited v Commissioner Domestic Taxes (Appeal 1476 of 2022) [2023] KETAT 160 (KLR) (10 March 2023) (Ruling), where the Tribunal found that a four-month delay in filing an appeal was reasonable.

Appellant’s Prayers 26. The Appellant prayed for the following reliefs:a.That this Appeal be allowed and the Respondent's Ruling on Late Appeal dated 25th January 2024 be quashed and/or set aside;b.That the Appeal against the tariff classification ruling be considered properly filed before this Tribunal;c.That the Appeal against the Tariff Classification Ruling be allowed and the Respondent's Tariff Classification dated 14th August 2024 be quashed and/or vacated;d.A declaration that the appropriate Tariff Code for the Appellant's complete potato cold stores is Tariff Code 9406. 20. 20;e.That the Respondent, its employees, agents, or any other persons purporting to act on behalf of the Respondent be barred and estopped from demanding/enforcing/recovering any import duty assessed under Tariff Code 9406. 20. 90; andf.That the Tribunal awards the costs and any other remedies that it deems just and reasonable to the Appellant.

Respondent’s Case 27. In response to the appeal, the Respondent filed its statement of facts dated 5th March 2024 on even date. The Respondent also relied on the testimony of one of its officers, Mr. Thadeus Ogoti whose witness statement dated 14th October, 2024 and filed on 15th October, 2024 was admitted in evidence during the hearing on 13th November, 2024. The Respondent failed to file its written submissions.

28. The Respondent stated that the Appellant imported complete modular building unit of steel that was described as "One Complete Cold Store for Potato Preservation" and classified it under HS Code 9406. 20. 20 that provides for the classification of cold room modular building units of steel.

29. The Respondent stated that upon verification, found that the structural elements did not include any cooling apparatus that is consistent with essential elements of cold rooms and cold storages viz heating and air conditioning or cooling apparatus. On 14th August 2023, it issued a tariff ruling classifying the item under 2022 EACCET Code 9406. 20. 90 by application of GIR1, and 6.

30. It noted that the Appellant lodged a late application for review dated 20th December 2023 seeking to review the tariff classification contained in decision dated 14th August 2023. In a letter dated 25th January 2024, the Respondent responded to the said late application communicating failure to adhere to timelines for lodging of Appeals pursuant to the provisions of Section 229 of the EACCMA.

31. The Respondent stated that the ruling was copied to the representative of the Appellant being the forwarding and clearing agent a vide letter ref. KRA/C&BC/BIA/THQ/604/08/2023 dated 14th August 2023. It argued that for all customs purposes the clearing agent is the alternative importer of the goods for Customs purposes.

32. The Respondent stated that its Customs and Border Control Department has trained all clearing and forwarding agents on the provisions of EACCMA and tariff classification. Therefore, it maintained that it was not justifiable for the Appellant to claim that the agent is not conversant with the provisions of Section 229 of the EACCMA.

33. The Respondent asserted that it is a prequalification or registration of Clearing Agents for customs purposes to have undergone customs training and cited section 229 (1) EACCMA which provides as follows:“A person directly affected by the decision or omission of the Commissioner or any other officer on matters relating to Customs shall within thirty days of the date of the decision or omission lodge an application for review of that decision or omission."

34. The Respondent maintained that the Appeal was lodged outside the timelines provided for contrary to section 229 of EACCMA. It added that reviewing the appeal outside the stipulated timeliness will be a breach of the Law. It argued that the tariff classification vide letter referenced KRA/C&&BC/BIA/THQ/604/08/2023 was issued on 14th August 2023 and the appellant objected to the decision vide letter dated 20th December 2023.

Respondent’s prayers 35. The Respondent prayed that the Tribunal be pleased to dismiss the appeal with costs to it.

Issues For Determination 36. The Tribunal having considered the parties’ pleadings witness testimonies, documentary evidence and the Appellant’s written submissions is of the view that this matter distils into the following single issue for determination:Whether Respondent erred in rejecting the Appellant’s late application for review dated 20th December 2022

Analysis And Findings 37. The Tribunal having identified the single issue falling for its determination proceeds to analyse it as hereunder:Whether Respondent erred in rejecting the Appellant’s late application for review dated 20th December 2022

38. The Respondent issued a tariff ruling dated 14th August 2023 classifying the Appellant’s import under 2022 EACCET Code 9406. 20. 90 by application of GIR1, and 6 instead of HS Code 9406. 20. 20 that the Appellant had declared. The Appellant applied to the Respondent for review of this decision and seeking enlargement of time vide a letter dated 20th December 2023. The Respondent issued a ruling dated 25th January 2024 wherein the Respondent declined to enlarge time to consider the Appellant's review application. The Appellant was aggrieved by the rejection hence it filed this appeal.

39. The Tribunal must first determine whether it is clothed with the requisite jurisdiction to determine this matter. The Jurisdiction of the Tribunal flows from the Constitution and from other statutes. In a locus classicus case of Owners of the Motor Vessel “Lillian S” v Caltex Oil (Kenya) Ltd [1969] KLR, Nyarangi JA held, inter alia as follows:‘‘…Jurisdiction is everything. Without it, a court has no power to make one more step. Where a court has no jurisdiction, there would be no basis for a continuation of the proceedings pending other evidence. A court of law downs its tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.”

40. The view of the Tribunal is that the applicable law in this matter, is EACCMA which has provisions concerning jurisdiction of this Tribunal. In particular, section 230 (1) of EACCMA provides that ‘a person dissatisfied with the decision of the commissioner under section 229 may appeal to a tribunal established in accordance with section 231. ’ Therefore, the Tribunal has the jurisdiction to hear and consider all decisions made by the Respondent pursuant to the provisions of Section 229 of EACCMA.

41. Section 229 (1) of the EACCMA provides as follows:“A person directly affected by the decision or omission of the Commissioner or any other officer on matters relating to customs shall within thirty days of the date of the decision or omission lodge an application for review of decision or omission.’’

42. Pursuant to the cited provisions of Section 229 of the EACCMA, the Appellant ought to have lodged an application for review within 30 days of the date of the decision dated 14th August 2023. The Appellant lodged its application for review on 20th December 2023 and did not therefore comply with the provisions of Section 229 (1) of EACCMA.

43. The Tribunal notes that whereas the Appellant delayed in filing its application for review, Section 229(3) of EACCMA donates provisions for the enlargement of time to file such an application for review where the Respondent finds that a taxpayer has valid reasons. Section 229(3) of EACCMA provides as follows:‘‘(3)Where the Commissioner is satisfied that, owing to the absence from partner state, sickness or other reasonable cause the person affected by the decision or omission of the commissioner was unable to lodge an application within the time specified in subsection (1), and there has been no unreasonable delay by the person in lodging the application, the Commissioner may accept the application lodged after the time specified in subsection (1).’’

44. The view of the Tribunal is that from a reading of the provisions of Section 229(3) of EACCMA, the Appellant must meet the two conditions namely, it must first prove that the addressee of the decision dated 14th August 2023 was not in Kenya, and second that there was no unreasonable delay in lodging the application for review. These two conditions must be met and failure to meet any of them means that the application for review, fails.

45. The Tribunal notes that the Appellant averred that the sole director of the Appellant was out of the country at the material time and supported its averment by adducing documentary evidence namely; the director’s passport and travel itinerary. The Appellant stated as follows at paragraphs 6 and 12 of its statement of facts:‘‘6. The said Tariff Classification Ruling was sent to the Appellant's agent on 15th August 2023 via email. However, since the Appellant's Director was out of the country, there was a communication lapse, and an application for review under section 229(1) of the EACCMA was inadvertently not presented within the 30-days statutory timelines.12. Based on the foregoing section, in line with the Appellant's CR12, the sole Director of the Appellant, Ms. Maria Cornella De Jonge, a resident and national of the Netherlands of passport No. NNKHDD373 has been out of the Country (Kenya) since 16th February 2023 and has never returned to Kenya as of the date of filing the Application for Review…As a result, there was a communication lapse with the team in Kenya, mainly the clearing agent, thus resulting in a delay in applying for a review of the Tariff Classification Ruling. The review application clearly stated that since 16th February 2023, the said Director has been out of the country and has not subsequently visited. Therefore, having not returned to Kenya, the evidence of leaving the country is sufficient to demonstrate that as of 15th August 2023, she was out of the country, which resulted in a lapse in communication with the Kenyan clearing agent, thus occasioning the delay in seeking review.’’

46. The Tribunal examined the documentary evidence including a copy of the passport belonging to the Appellant’s director which indicated that the Appellant’s director entered Kenya on 11th February 2023 and left Kenya on 16th February 2023. Further, the Tribunal perused the affidavit of the Maria Cornella De Jonge the director of the Appellant notarized on 4th March 2024 and filed on 6th March 2024 indicating that the said director was out of Kenya. Based on the evidence sighted and reviewed, the Tribunal finds that the Appellant’s director was out of Kenya at the material time.

47. The second condition pursuant to the provisions of Section 229(3) of EACCMA is that the Appellant had to prove that there was no unreasonable delay in lodging the application. In the case Joseph Odide Walome v David Mbadi Akello [2022] eKLR, the court stated as follows:‘‘where a party is aggrieved and wishes to pursue an appeal, it would be fair to exercise discretion in his favour and especially where the delay in filing the appeal is not inordinate or even if the delay is inordinate, it is explained to the satisfaction of the court and the adverse party will not be prejudiced in any way.’

48. In the instant Appeal the Tribunal finds that there was a delay of three months and accordingly, the view of the Tribunal is that the delay was not inordinate and furthermore, the reason for the delay was well explained.

49. The Tribunal notes the Respondent’s averment that it served a copy of the ruling dated 14th August 2023 upon Momo clearing and forwarding agent. The Appellant’s witness stated under oath that the said agent did not have authority to act for and on its behalf. The Tribunal notes that pursuant to the Companies Act Cap. 486 of the Laws of Kenya (hereinafter “Companies Act) directors, being the agents of a company are capable of binding a company in law unless otherwise proven. The Respondent did not adduce evidence indicating that Momo clearing and forwarding agent had authority to bind the Appellant.

50. In the circumstances, the Tribunal is of the view that the Appellant satisfied the provisions of Section 229(3) of EACCMA and that therefore the Respondent ought to have allowed its request to file a review application out of time vide the letter dated 20th December 2023.

51. Consequently, the Tribunal finds and holds that the Respondent erred in rejecting the Appellant’s late application for review dated 20th December 2022.

Final Decision 52. The upshot of the foregoing is that the Tribunal finds the Appeal to be meritorious and proceeds to make the following Orders:a.The Appeal be and hereby allowed.b.The Respondent’s review decision dated 25th January 2024 be and is hereby set aside.c.Each party to bear its own cost.

53. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 14TH DAY OF FEBRUARY, 2025. CHRISTINE A. MUGA - CHAIRPERSONBONIFACE K. TERER - MEMBERELISHAH N. NJERU - MEMBEREUNICE N. NG’ANG’A - MEMBEROLOLCHIKE S. SPENCER - MEMBER