https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/287

REPUBLIC OF KENYA IN THE TAX APPEALS TRIBUNAL AT THE NAIROBI TAX APPEAL NO. E256 OF 2026 HAPAG-LLOYD KENYA LIMITED...................................................................APPELLANT VERSUS COMMISSIONER OF DOMESTIC TAXES...................................................RESPONDENT JUDGMENT BACKGROUND 1. The Appellant is a shipping agent of Hapag-Lloyd AG (the Principal), a non-resident shipping line registered in Germany pursuant to an agency agreement which became effective on 1st March 2021. Its Principal operates worldwide liner services and provides worldwide door to door multi-model transportation. 2. The Respondent is the principal officer appointed under Section 13 of the Kenya Revenue Authority Act. The Kenya Revenue Authority is an agency of the Government of Kenya mandated with the duty of collecting and receipting all tax revenue, and the administration and enforcement of all tax laws set out in Parts 1 & 2 of the First Schedule to the Act, for the purposes of assessing, collecting, and accounting for all tax revenues in accordance with those laws. Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 1 of 26 3. On 21st November 2025, the Appellant applied for a refund of VAT input tax credits for January 2025-October 2025. 4. On 20th January 2026, the Respondent wrote to the Appellant directing it to re-apply for the refund. 5. The Appellant, being dissatisfied with the Respondent’s response in the letter dated 20th January 2026, lodged this Appeal vide its Notice of Appeal dated 19th January 2026. THE APPEAL 6. The Appeal is premised on the Appellant’s Memorandum of Appeal dated and filed on 5th May 2026, setting out the following grounds of appeal: - a. The Respondent's failure to process the Appellant's claim for the refund of input Value Added Tax contravenes section 17 of the Value Added Tax Act, 2013, and regulation 8 of the Value Added Tax Regulations, 2017, which entitles a person to claim input tax or a refund upon meeting the requirements specified therein. b. The Respondent erred in law by failing to apply the binding decision of the High Court delivered in Income Tax Appeal E009 of 2025 (as heard together with ITA E230 and E231 of 2024), in which the High Court pronounced itself on the validity of the Appellant's refund applications, raising similar issues. c. The Respondent's directive that the Value Added Tax refund application and ascertainment process await the determination of other ongoing matters contravenes section 47 of the Tax Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 2 of 26 Procedures Act, 2015, which prescribes the Value Added Tax refund process as a time-bound process. d. The Respondent's decision rejecting the Appellant's Value Added Tax refund application violates the Appellant's right to fair administrative action in light of the Respondent's letter of 17th September 2024 purporting to appoint the Appellant as a withholding Value Added Tax agent. APPELLANT’S CASE 7. The Appellant’s case is grounded in its Statement of Facts, dated and filed on 5th March 2026, and written submissions, dated 12th May 2026. 8. It premises its appeal under the headings itemised hereunder: I. The Respondent's failure to process the Appellant's claim for the refund of input Value Added Tax contravenes section 17 of the Value Added Tax Act, 2013, and Regulation 8 of the Value Added Tax Regulations, 2017, which entitles a person to claim input tax or to a refund upon meeting the requirements specified therein. 9. It was its case that it provides taxable services to its Principal, an International sea carrier resident in Germany, which services are zero- rated for VAT purposes pursuant to Paragraphs 6 and 23 of Part A of the Second Schedule to the VAT Act 2013. 10. That having supplied VAT zero-rated services to its Principal, it was entitled to a VAT refund having met the requirements set out under Section 17(5)(a) of the VAT Act, 2013, as read with Regulation 8 of the Value Added Tax (VAT) Regulations, 2017. Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 3 of 26 11. The Appellant stated that it met the requirements set out both in section 17 of the VAT Act 2013 and regulation 8 of the VAT Regulations 2017 since: a) It is a VAT-registered person. b) It made purchases from suppliers during the periods of 1st January 2025 to 31st January 2025 and 1st March 2025 to 31st October 2025. The purchases were made on account of overhead expenses, hiring suppliers, and purchasing of goods. c) It was charged VAT by its suppliers. The invoices from the suppliers clearly delineated the consideration charged on the supply of VAT (input VAT) while settling the suppliers' invoices. That this was undisputed. d) It incurred input VAT for the purposes of making supplies to the Appellant's Principal, which services are listed under Article 2 of the agency agreement. e) None of the services listed under Article 2 of the agency agreement are exempt supplies since none of them is listed in the First Schedule to the VAT Act, 2013. f) All the said services qualify as taxable supplies as defined under section 2(1) of the VAT Act, 2013. g) The services supplied by the appellant to the Principal are zero- rated supplies. That this was undisputed. 12. It was its view that, having met the above requirements, it lodged its VAT refund application for Kshs 3,010,513/- on 21st November 2025, which was well within the 24 months’ period from the date the input tax was paid, as required under section 17 (5) (d) of the Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 4 of 26 VAT Act, 2013, making its application a proper refund claim which the Respondent ought to have considered. 13. The Appellant stated that the Respondent's singular contention in the refund decision issued on 20th January 2026 was that the taxpayer should reapply for its VAT refund upon the determination of the pending legal issue. That the implication of this is that the Respondent did not find fault with the merits of the application or with the application's compliance with the laid-down procedure, but it was nevertheless directed to reapply at a later date. 14. The Appellant averred that the Respondent's directive and ultimate VAT rejection decision was tainted with unreasonableness and is, at the very least, absurd. II. The Respondent erred in law by failing to apply the binding decision of the High Court delivered in Income Tax Appeal E009 of 2025 (as heard together with ITA E230 and E231 of 2024), in which the High Court pronounced itself on the validity of the appellant's refund applications, raising similar issues. 15. The Appellant stated that the High Court delivered judgment in Income Tax Appeal E009 of 2025 (as consolidated with ITA E230 and E231 of 2024) involving Hapag-Lloyd Kenya Limited v Commissioner of Domestic Taxes) on 26th September 2025, that the said decision is relevant to this appeal as: a) the parties are identical; b) the disputes concern the rejection of the appellant’s input VAT and VAT refund claims arising from the same agency agreement; and Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 5 of 26 c) the Respondent’s grounds for rejecting the refund claims are materially similar. 16. That, in allowing the consolidated appeals, the High Court held that: a) the services supplied by the Appellant to its principal qualify as zero-rated supplies under the VAT Act, 2013, including under Paragraph 6 of the Second Schedule; b) once a VAT-registered person makes zero-rated supplies, section 17 of the VAT Act, 2013 entitles that person to deduct input tax and to a refund of excess input VAT; c) the Appellant, as a distinct legal entity registered for VAT in Kenya, incurs input VAT in its own right, and VAT invoices are issued in its name, thereby creating a statutory relationship between the Appellant and the Respondent independent of the agency agreement; d) the terms of the agency agreement cannot extinguish or override the Appellant’s statutory entitlement to input tax deduction and refund under section 17 of the VAT Act, 2013; and e) reimbursement of costs by the principal does not negate the Appellant's statutory right to recover input VAT attributable to zero-rated supplies. 17. That the issues determined by the High Court mirror the issues in the present appeal. Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 6 of 26 18. That contrary to the principle of stare decisis, the Respondent has disregarded the binding precedent and proceeded to issue a refund decision dated 20th January 2026, directing the Appellant to reapply at a later date upon determination of other matters, a position that is inconsistent with and contrary to the holding of the High Court. III. The Respondent's directive that the Value Added Tax refund application and ascertainment process await the determination of other ongoing matters contravenes section 47 of the Tax Procedures Act, 2015, which prescribes the Value Added Tax refund process as a time- bound process. 19. The Appellant contended that Section 47 of the Tax Procedures Act (TPA), 2015 requires the Respondent to substantively and conclusively consider an application for a VAT refund that has been lodged in the prescribed form. 20. That the above provision of law is couched in mandatory terms and obligates the Respondent to determine, in absolute terms, the substantive status of a taxpayer’s VAT refund application. 21. That it does not give the Respondent the discretion to hide behind the veneer of awaiting the outcome of other ongoing appeals, as the Respondent has purported to do in its refund application of 20 th January 2026. 22. That the Respondent has not made an absolute and substantive refund decision as envisaged under Section 47(2) of the TPA, 2015, and it cannot purport to do so now, having kickstarted and triggered this appeal. Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 7 of 26 23. That the Respondent cannot resuscitate the process of issuing a refund decision having inconclusively and unprocedurally rendered a defective decision on 20th January 2026. 24. It was its view that Section 47(3) of the TPA, 2015 should take its course and that the Appellant's refund application should be deemed to have been allowed on merit. On this ground alone, the appeal should be allowed and the Respondent's refund decision be vacated in its entirety. IV. The Respondent's decision rejecting the Appellant's Value Added Tax refund application violates the Appellant's right to fair administrative action. 25. The Appellant stated that the Respondent, vide a letter dated 17th September 2024 informed it that it was eligible to be appointed as a Withholding Value Added Tax ("VAT") Agent ("WHT VAT agent") under section 42A of the TPA, 2015. 26. That it was clear in that letter that the Respondent had unequivocally admitted that the Appellant purchases taxable supplies and consequently incurs input tax, and hence the reason why the Respondent intended to appoint it as a WHT VAT agent. 27. That the Respondent cannot now be heard to say that the Appellant did not incur the input VAT costs upon which its VAT refund applications are anchored. 28. It averred, on a without prejudice basis, that it is inconceivable how the Respondent can draw parallels between those other ongoing appeals and the refund application dated 21st November 2025, despite the contents of its letter dated 17th September 2024. Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 8 of 26 29. The Appellant identified the following as the issues falling for determination in this appeal: a) Whether the Respondent acted in contravention of section 17 of the Value Added Tax Act, 2013, and regulation 8 of the Value Added Tax Regulations, 2017, by failing to process the Appellant’s claim for a refund of input Value Added Tax. b) Whether the Respondent erred in law by failing to apply and give effect to the binding decision of the High Court in Income Tax Appeal E009 of 2025 (as consolidated with ITA E230 and E231 of 2024) c) Whether the Respondent breached section 47 of the Tax Procedures Act, 2015 by suspending the VAT refund ascertainment process pending indeterminate proceedings. d) Whether the Respondent breached the Appellant's right to fair administrative action by rejecting the VAT refund application after purporting to appoint the Appellant as a withholding VAT agent. I. Contravention of section 17 of the Value Added Tax Act, 2013, and regulation 8 of the Value Added Tax Regulations, 2017. 30. The Appellant affirmed that the above provisions of law create a clear statutory entitlement to a refund of excess input VAT where: a) the taxpayer is VAT registered; b) the input VAT is incurred in making taxable supplies; c) the supplies in question are zero-rated; and Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 9 of 26 d) the refund application is lodged within the statutory timeline. 31. That the Appellant’s input VAT was incurred in the provision of services to HLA, an international sea carrier outside Kenya. That the services rendered fall squarely within Paragraphs 6 and 23 of Part A of the Second Schedule of the VAT Act, 2013. 32. It was asserted that these services are zero-rated and that none of the services provided by the Appellant fall within the category of exempt supplies under the First Schedule of the VAT thereby making the supplies taxable supplies within the meaning of section 2 of the VAT Act. 33. That the directive to re-apply ignored the fact that the VAT refund application is a time-bound process, while the time for determination of a legal issue is indeterminate. 34. Its conclusion was that the Respondent's approach prejudiced its statutory right to a refund and could extinguish the claim altogether. II. Whether the Respondent erred in law by failing to apply and give effect to the binding decision of the High Court in Income Tax Appeal E009 of 2025 (as consolidated with IA E230 and E231 of 2024). 35. The Appellant stated that the Tribunal should uphold the High Court's decision in the following consolidated cases in their entirety since they are binding on the Tribunal and there is no compelling reason warranting departure from them: a) ITA E009 of 2025, Hapag-Lloyd Kenya Limited v Commissioner of Domestic Taxes; Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 10 of 26 b) ITA E230 of 2024, Hapag-Lloyd Kenya Limited v Commissioner of Domestic Taxes; and c) ITA E231 of 2024, Hapag Llyod Kenya Limited v Commissioner of Domestic Taxes. III. Whether the Respondent breached section 47 of the Tax Procedures Act, 2015, by suspending the VAT refund ascertainment process pending indeterminate proceedings. 36. The Appellant stated that the Respondent's directive, conveyed in its decision of 20th January 2026, that the Appellant's VAT refund application process should await the determination of other pending matters is wholly unsupported by statute. 35. That the refund decision should be vacated in its entirety under Section 47 (3) of the TPA. It supported its position with the case of Commissioner of Domestic Taxes v Sony Holdings Limited (2021) KEHC 7071 (KLR). IV. Whether the Respondent breached the Appellant's right to fair administrative action by rejecting the VAT refund application after purporting to appoint the Appellant as a withholding VAT agent. 36. The Appellant asserted that there must be certainty in tax administration. That it was therefore absurd for the Respondent to appoint it as a VAT WHT agent with one hand and deny that it was engaged in the supply of taxable services with the other hand. It supported the need for certainty in tax administration with the following cases: Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 11 of 26 a) Ecobank Kenya Limited v Commissioner of Domestic Taxes (2012) eKLR, Commercial Civil Case 8 of 2010. b) Mount Kenya Breweries Limited v Commissioner of Investigation & Enforcement (Tax Appeal EMI of 2023) (2024) KETAT 746 (KLR) (24 May 2024) (Judgment). c) Republic v Commissioner of Domestic Taxes, Large Taxpayers’ Office, Ex-Parte Barclays Bank of Kenya Ltd [2012] KEHC 1988 (KLR). Appellant prayers 37. The Appellant prayed for orders that: a. The appeal be allowed; b. The refund rejection decision made on 20th January 2026 be set aside; and c. The Respondent's refund decision dated 20th January 2026 be substituted with a finding that the Appellant's refund application dated 21st November 2025 has been deemed allowed by operation of the law; and d. The costs of this appeal be awarded to the Appellant. RESPONDENTS CASE 38. In opposing the appeal, the respondent grounded its case on its Statement of Facts dated 6th April 2026 and Written Submissions dated 21st May 2026. 39. The Respondent identified the following issues for determination in this appeal: Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 12 of 26 a) Whether the Respondent contravened section 17 of the Value Added Tax Act, Cap. 476, and Regulation 8 of the Value Added Tax Regulations, 2017 in rejecting the Appellant's Application for Refund. b) Whether the Respondent is bound to apply or implement a decision which it has appealed. c) Whether the Appellant's Application for Refund should await the Court of Appeal's determination of the Respondent's Appeal. 40. The said issues were discussed as follows: 41. The Respondent asserted that on 20th January 2026 and pursuant to section 47(4A) of the Tax Procedures Act, Act, Cap. 469B, it declined the refund application and communicated to the Appellant that the Refund Application could not be processed in light of the pending legal issue at the Court of Appeal and that the Appellant would only reapply once the issue is resolved. 42. The Respondent stated that it was served with the Appellant’s Appeal documents on 6th March 2026. That Therefore, the thirty (30) days for responding to the Appellant’s Appeal started running from 7th March 2026, as provided under sections 15(1) of the Tax Appeals Tribunal Act, Cap. 469A and Rule 12 of the Tax Appeals Tribunal (Procedure) Rules, 2015. 43. In response to the grounds set out in paragraphs No. 1, 2 and 3 of the Appellant's Memorandum of Appeal, the Respondent averred that it did not err in disallowing the Refund Application of Kshs. Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 13 of 26 3,010,513.00 on the basis of the existing and ongoing tax dispute if similar nature. Further, the Respondent stated that: a) The services provided by the Appellant to Hapag-Lloyd Aktiengesellschaft (hereinafter to be referred to as 'the Principal) are in the nature of Agency Services. b) The term “agency” is defined in Black's Law Dictionary, 10th edition, as a relationship that arises when one person (who is the Principal) manifests assent to another (who is an agent) that the agent will act on the principal's behalf, subject to the principal's control, and the agent manifests assent or otherwise consents to do so. c) To establish the nature of services provided by the Appellant, the Respondent reviewed Article 2 of the Agency Agreement between the Appellant and the Principal. d) The Agency Agreement highlights the services to include all duties customarily performed by a shipping agent representing a container carrier, including but not limited to the following services; i. Supervision of all activities of the Principal the territory of Kenya and Uganda. ii. Marketing and sales services. iii. Conference representation (if required) iv. Canvassing and booking of cargo and issuing of bills of lading. v. Advertising and public relations work. vi. Organization and loading/discharging activities for vessels of the Principal and/or feeder vessels serving Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 14 of 26 under a contract with the principal, including documentation in accordance with the Principal's specific instructions. vii. Adhere to the Principal's "Abandoned Cargo Procedure" as published or any other applicable procedure as advised by the Principal for any uncollected boxes. viii. Ship's husbandry/dispatch (if required) ix. Supervision and coordination of all activities of port and inland agents (if applicable) x. Treatment of the Principal's operational EDP systems (if requested) xi. Freighting and collection of freights and other charges according to the relevant tariffs in the name and for the account of the Principal xii. Payment of operational costs, which have to be borne by the Principal (in accordance with the Instructions) xiii. Accounting (p. 32). e) Further, it reviewed Article 8 of the Agency Agreement, which provides for the remuneration of the Appellant for all the services rendered by it on behalf of the Principal. f) Having ascertained that the Appellant provided services on behalf of the Principal and is compensated for all expenses save for the income tax liabilities as highlighted in the provision above, the Respondent maintains that the Appellant cannot claim an input VAT refund as the costs of the services was incurred by the Principal. Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 15 of 26 g) It supported its position with the case of: i. Commissioner of Domestic Services v Dutch Flower Group Kenya (2021) KEHC 23 (KLR). ii. Nairobi TAT Appeal No. 74 of 2016, Cofftea Agencies Limited vs The Commissioner of Domestic Taxes. i) In light of the above, it is submitted that the Appellant has no basis for applying for an input tax refund claim, as the input is borne by the person who incurred the cost; in this instance, it was the Principal. Therefore, it is only the Principal who may deduct input VAT made to an agent on its behalf. j) The Tribunal in Nairobi TAT Appeal No. E952 of 2023, and in Nairobi TAT Appeal No. E444 of 2023, Hapag-Lloyd Kenya Limited vs Commissioner of Domestic Taxes had held that “In the circumstances of this case, it is the finding of the Tribunal that the VAT cost ought to have been borne by the person who incurred the cost of the service rendered or the goods purchased in this case Hapag Llyod AG. The Appellant could not claim to have incurred the cost, as it was the principal who bore or ought to have shouldered the VAT cost.” Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 16 of 26 k) This is the position in decisions involving similar tax disputes, including the Tribunal's Decisions in Nairobi TAT Appeal No. 74 of 2016 Cofftea Agencies Limited vs The Commissioner of Domestic Taxes and the High Court Decision in the Nairobi High Court Commercial Income Tax Appeal No. E101 of 2020 Commissioner of Domestic Services vs Dutch Flower Group Kenya. l) From the foregoing, the Respondent reiterates that the services provided by the Appellant were supplied as an agent of the Principal with an agency reimbursement for all the costs it incurs in its activities plus a mark-up of 2%. Therefore, the Appellant was not entitled to a refund from the Respondent. m) Whereas the Judgment of the Tribunal in Nairobi TAT Appeal No. E952 of 2023 has been subsequently set aside by the High Court, the Respondent has appealed to the Court of Appeal. n) Therefore, the issues in dispute are yet to be determined with finality. The High Court is not the final arbiter in tax disputes and thus there is still a possibility that the High Court's Judgment in Nairobi High Court Commercial Income Tax Appeal No. E-099 of 2025 could be overturned by the Court of Appeal, or the judgment of the Tribunal be reinstated. o) It supported this position with the case of Diversey Eastern and Central Africa Limited v Commissioner of Domestic Taxes, Tax Appeal No. E292 of 2023. Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 17 of 26 44. The Respondent asserted that it applied its powers under Article 47 of the Constitution lawfully and fairly as affirmed in the High Court in the case of Ericsson Kenya Limited v AG and Others (2013) eKLR, Nairobi Petition No. 506 of 2013. Respondent’s Prayers 45. The Respondent prayed to the Tribunal for the following orders: - a) That its Refund decision dated 20th January 2026 be held valid and in conformity with Section 47(5) of the TPA. b) The appeal lacks merit and it should be dismissed with costs: ISSUES FOR DETERMINATION 46. Having considered the pleadings by both parties and the records before it, the Tribunal is of the view that the issues that fall for its determination are as follows: - a) Whether the Refund decision dated 20th January 2026 was valid and in conformity with Section 47 (2) of the TPA. b) Whether the issue in dispute concerning the refund of excess input tax has been heard and determined by the High Court. c) Whether the Respondent’s decision was justified. ISSUES FOR DETERMINATION 47. Having considered the pleadings by both parties and the records before it, the Tribunal is of the view that the issues that fall for its determination are as follows: - Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 18 of 26 A. Whether the Refund decision dated 20th January 2026 was valid and in conformity with Section 47 (2) of the TPA. 48. Parties herein cannot agree on the applicability of Section 47 of the TPA to their dispute. Each party has therefore opted to interpret the law in a manner that suits its position. 49. Section 47(1) provides as follows regarding an application for a tax refund and how the said refund is supposed to be processed by the Appellant: “(1) Where a taxpayer has overpaid a tax under any tax law, the taxpayer may apply to the Commissioner, in the prescribed form— tax (a) to offset the overpaid tax against the taxpayer's future liabilities; or (b) for a refund of the overpaid tax within five years, or six months in the case of value added tax, after the date on which the tax was overpaid. (2) The Commissioner shall ascertain and determine an application under subsection (1) within ninety days and where the Commissioner ascertains that there was an overpayment of tax— (a) in the case of an application under subsection (1)(a), apply the overpaid tax to such future tax liability; and (b) in the case of an application under subsection (1)(b), refund the overpaid tax within a period of two years from the date of the application.” 50. The bottom line, therefore, is that in the case of VAT, the application must be made within 6 months after the date on which the Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 19 of 26 tax was overpaid. And the Respondent must issue its refund decision within ninety days. 51. The model, style, content or what that response must look like is not described in law. Accordingly, the Respondent is at liberty to issue the decision in the manner that it prefers, while taking note that when its jurisdiction is invoked, the Tribunal or courts of law would have the right to interrogate the propriety of such decisions. 52. Considering that the decision herein complied with the provision of Section 47(2) to the extent that it was issued in time and it was clear that it had declined the Appellant’s application for a refund. B. Whether the issue in dispute concerning the refund of excess input tax has been heard and determined by the High Court. 53. Both parties are in agreement that this issue of excess refund has been determined by the High Court in the consolidated appeals of Hapag-Lloyd Kenya Limited v Commissioner of Domestic Taxes (Income Tax Appeal E009 of 2025 & E230 & E231 of 2024 (Consolidated) [2025] KEHC 13331 (KLR) (Commercial and Tax) (26 September 2025) (Judgment). 54. The Tribunal has read this decision, and it is clear that: a) The argument by the respondent in the said case, just as it was in this case, was that: i. Being an agent, it was not entitled to claim the refund since the economic burden of the input VAT fell on its foreign principal. Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 20 of 26 ii. Provisions of the agency agreement between the Appellant and its principal as justification for its decision. iii. The agency arrangement disentitled the Appellant from seeking VAT refunds since the economic incidence of the expenses rested with the foreign principal. b) The argument by the appellant in the said case, just as it was in this case, was that: i. The sum in issue represents excess input VAT incurred in the course of making zero-rated supplies. ii. The respondent failed to recognize it as a distinct legal person within the meaning of section 2 of the VAT Act. iii. Misapplied the facts relating to the agency agreement. iv.Appellant, being a registered taxpayer in Kenya, had incurred VAT in its own name and was therefore entitled to a refund when such VAT arose from zero- rated supplies. 55. The High Court in the consolidated appeal identified the central issue for determination: “whether the Appellant, in its capacity as an agent of a foreign principal but also as a registered person in Kenya, is entitled in law to claim a refund of input VAT attributable to its zero- rated supplies”. 56. The court held as follows in this dispute: Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 21 of 26 “Consequently, I find that the Tribunal erred in law by failing to correctly apply the definition of a "registered person" under the VAT Act and by allowing the commercial terms of a private agency agreement to override the clear statutory right to an input tax credit granted by Section 17. The Appellant, as a distinct legal entity making zero-rated supplies, has met the conditions for a refund under Section 17(5) of the VAT Act.” 57. The analysis by the Tribunal of the consolidated appeals and this appeal leads it to the conclusion that: a) The parties in both disputes were the same. b) The issues arising in both disputes are the same. c) The issue of the agency between the appellant and its principal, as contained in its agency agreement, and the interpretation and refund of excess tax arising from zero-rated supplies under Section 17 of the VAT Act was determined in the consolidated appeal. 58. The Respondent’s decision for regarding this decision to which it had preferred an appeal to the Court of Appeal. The Tribunal has, over the years, listened and received weird justifications for justifying an assessment, but this one beats them all. How could an institution, the calibre of the Respondent, and represented by counsel, justify the disregard of a decision of the court to which a stay has not been obtained on the premise that it has preferred an appeal, rank very high in utter display and disregard of the law by a public entity. Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 22 of 26 59. This is more so because it is settled that a decision of the court is a source of law, and as long as it has not been overturned, it remains the law. A party cannot therefore stand on a pedestal and openly disregard the law while clinging on a non-existent legal justification. 60. Article 163(7) of the Constitution, which embodies the doctrine of stare decisis. It is a constitutional requirement that this Tribunal abides by the decisions of the Court of the Superior Courts, as was asserted in Asanyo & 3 others v Attorney-General [2020] KESC 62 (KLR) where the court stated that: “Article 163(7) of the Constitution establishes the principle upon which rests the authority of judicial decisions as precedent in subsequent litigation, guiding Judges who are bound to follow the same. Courts and tribunals exercising judicial authority are duty-bound to follow this principle.” 61. The same position was also adopted in Jasbir Singh Rai & 3 others v Tarlochan Singh Rai & 4 others Supreme Court Petition No 4 of 2012, [2013] eKLR, “Adherence to precedent should be the rule and not the exception ...; the labour of judges would be increased almost to breaking-point if every past decision could be reopened in every case, and one could not lay one’s own course of bricks on the secure foundation of the courses laid by others who had gone before him.” 62. The above precedents and constitutional dictates make it clear that the Tribunal is bound and must strictly adhere to the principle of Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 23 of 26 judicial precedent and more so the decisions of the superior courts on any question of law. 63. Accordingly, the issue in this dispute of “whether the Appellant, in its capacity as an agent of a foreign principal but also as a registered person in Kenya, is entitled in law to claim a refund of input VAT attributable to its zero-rated supplies” has been determined by the High Court and cannot be re-opened for consideration by the Tribunal. 64. Based on the findings of the consolidated appeals in Hapag- Lloyd Kenya Limited v Commissioner of Domestic Taxes (Income Tax Appeal E009 of 2025 & E230 & E231 of 2024 (Consolidated)[2025] KEHC 13331 (KLR) (Commercial and Tax) (26 September 2025) (Judgment), the Tribunal finds and holds that the issue in dispute concerning the refund of excess input tax has been heard and determined by the High Court in favour of the Appellant and it is accordingly entitled to a refund of the input claim attributed to its supplies. 65. Having determined that the Appellant is entitled to a refund claim and that the reason provided by the Respondent is not justifiable or lawful, it follows that the third issue falling for determination has been rendered moot. DISPOSITION 66. In light of the foregoing, the Tribunal finds that the appeal has merit and proceeds to make the following orders: a) The appeal be and is hereby allowed. Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 24 of 26 b) The Respondent’s refund decision dated 20th January 2026 be and is hereby set aside. c) The Respondent is directed to expeditiously process and issue a decision on the appellant’s refund claim within 90 days from the date of this Ruling. d) Each part to bear its own costs. 67. It is so ordered. DATED and DELIVERED at NAIROBI this ………31st …..…... day of ……… July....… 2026 ..........................………………………. DR. RODNEY ODHIAMBO OLUOCH CHAIRPERSON .…..….……………………. ..…. ………………………. DR. ERICK KOMOLO CYNTHIA B. MAYAKA MEMBER MEMBER Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 25 of 26 ……………………………… ABDULLAHI DIRIYE MEMBER Judgement TAT No. E256 of 2026 Hapag – Lloyd Kenya Limited V Commissioner of Domestic Taxes Page 26 of 26