[2023] KETAT 935 (KLR)

Highlands Drinks Limited v Commissioner of Customs & Border Control (Appeal 1364 of 2022) [2023] KETAT 935 (KLR) (Commercial and Tax) (20 December 2023) (Judgment)

Neutral citation: [2023] KETAT 935 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Appeal 1364 of 2022

E.N Wafula, Chair, D.K Ngala, CA Muga, GA Kashindi, AM Diriye & SS Ololchike, Members

December 20, 2023

Between

Highlands Drinks Limited

Appellant

and

Commissioner of Customs & Border Control

Respondent

Judgment

Background. 1. The Appellant is a limited liability Company incorporated in Kenya whose principal business activity is manufacture and sale of bottled drinking water, cordials and carbonated soft drinks.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of the laws of Kenya. 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 Respondent conducted a Customs Duty Remission Scheme compliance check (hereinafter ‘CDRSCC’) of the Appellant pursuant to Sections 140,235 and 236 of the East African Community Customs Management Act, 2004 (hereinafter ‘EACCMA’) and EACCMA (Duty Remission) regulations, 2008. The CDRSCC focussed on imports under the Duty Remissions Scheme for the periods, 2017 to 2021.

4. Through a letter dated 14th June, 2022 the Respondent raised additional import duty and Value Added Tax (VAT) amounting to Kshs. 30,889,231. 00 which according to it, was the result of the CDRSCC. The Appellant challenged the findings of the Respondent in a letter dated 23rd June, 2022.

5. After electronic mails and various letters exchanged between the parties and a meeting to discuss the additional VAT assessment, the Respondent issued a demand vide a letter dated 4th August, 2022. The Appellant lodged an application for review of the demand on 2nd September, 2022.

6. The Respondent issued its review decision on 30th September, 2022 and the Appellant, being aggrieved by the review decision of the Respondent, filed its Notice of Appeal on 28th October, 2022.

The Appeal 7. The Appeal as contained in the Memorandum of Appeal dated and filed on 11th November 2022 is premised on the following grounds:i.That the Respondent erred in law and fact in its decision to demand Import duty and Value Added Tax on the. Appellant's importation of sugar that was validly granted remission of Import duty in accordance with Section 140 of the East African Community Customs Management Act, 2004 (EACCMA) and Regulation 6 of the East African Community Customs Management (Duty Remission) Regulations, 2008. ii.That the Respondent erred in law and in fact by failing to recognise that the Appellant was granted remission of duty on its importation of sugar and gazetted under Legal Notice EAC/14'3/2018 for the period of 12 months from 9 October 2018 to 8 October 2019 in accordance with the law.iii.That the Respondent erred in law and in fact by failing to recognise that the National Treasury issued its approval for the importation of the Appellant's approved import quantities, under the gazette notice, on 5 September 2019 and 12 September 2019 which was within the 12 months remission period.iv.That the Respondent erred in law and in fact by failing to find that the Appellant's importation of sugar was within the approved import quantities granted remission under the Gazette Notice and imported within the remission period of 12 months from 9 October 2018 to 8 October 2019. v.That the Respondent erred in law and in fact in failing to recognise that under Section 140 of EACCMA it is the approved quantities of goods that are granted remission of import duty for a period of 12 months from gazettement therefore any approved quantity of goods that is processed and granted approval within the 12 months period enjoys the remission of duty.vi.That the Respondent erred in law and in fact in using the date of entry of the goods to claim that the Appellant's imports are not within the 12 months remission period.vii.That the Respondent erred in law and in fact by failing to exercise its administrative functions in an expeditious, efficient, lawful, reasonable, and procedurally fair manner as the country's revenue collector, since the Appellant had a legitimate expectation that by obtaining the approval and consent of the National Treasury to import the sugar under the Duty Remission Scheme, the imports would be subjected to import duty at a rate of 10% as was gazetted in Legal Notice No. EAC/143/2018. viii.That the Respondent erred in law and in fact by disregarding the evidence, explanations, and supporting documentation provided by the Appellant, and instead proceeded to issue its review decision dated 30 September 2022.

The Appellant’s Case 8. The Appellant set out its case in the Statement of Facts dated and filed on 11th November, 2022.

9. The Appellant stated that as part of its business it imported industrial sugar for manufacture of its products and had applied and received remission for the importation of industrial sugar for various periods under the Essential Goods Production Support Programme (hereinafter ‘EGPSP’).

10. That the Respondent conducted a compliance check on its sugar importation for the period of 2017 to 2021 under the Duty Remission Scheme (hereinafter ‘DRS’) and shared its findings with it by way of a letter dated 14 June 2022.

11. That in the compliance check findings letter, the Respondent stated that it had imported two batches of sugar outside the gazetted periods under the DRS, namely consignment control Numbers 12817 and 12792, respectively, and demanded import duty and VAT totalling to Kshs. 30,889,231. 00.

12. The Appellant stated that in its response dated 23rd June 2022 it clarified the compliance check findings indicating that both consignments of sugar had been imported under the DRS and had been issued valid C60 forms by the Tax Remission for Exports Office (hereinafter "TREO").

13. It further indicated that batch control number 12817 received a valid C60 form and approval on 12 September 2019 whilst batch control number 12792 received a valid C60 form and approval on 5 September 2019 which was well ahead of the expiry of the twelve-month gazette period on 8 October 2019.

14. In addition to clarifying the compliance check findings, it disclosed in the letter that the Respondent’s entries for the two consignments in question had been successfully done and the relevant duty paid at the gazetted rates under the DRS.

15. That in response to its said letter, the Respondent issued its CDRSCC findings vide a letter dated 19th July 2022, in which the Respondent further reiterated its position that the two consignments of sugar were imported outside the gazetted period and were ineligible for the DRS and its preferential duty rates.

16. That through the said letter, dated 19th July, 2022, the Respondent invited it for a meeting with a view to engaging in further discussion on its compliance findings. The said meeting was held on 29th July 2022 at the Respondent's offices and it then further elaborated its position as indicated in its response dated 23rd June 2022.

17. That inspite of its response and explanations, the Respondent proceeded to issue a demand letter to it seeking payment for the taxes allegedly owed for the importation of the two consignments of sugar in question, amounting to KShs. 30,889,231. 00 payable in 30 days and this amount was analysed as follows:a.Import duties of Kshs. 26, 628,647. 00, andb.VAT of KShs. 4,260,584. 00, within thirty (30) days.

18. That in the demand letter the Respondent reiterated its stance that the imported sugar consignment control numbers 12817 and 12792 had been imported outside the gazetted periods, and the batches were therefore subject to Import duty at the prevailing rates as opposed to the rates under the DRS.

19. That on 2nd September 2022, it responded through its tax agents thereby objecting to the demand letter and applying for its review whilst citing the enabling provision in Section 229 of EACMMA. In its said application, it annexed and referred to Legal Notice No. EAC/143/2018 as the gazette notice which granted it the authority to import 4,000 metric tonnes of industrial sugar under the DRS at a duty rate of 10% for the succeeding twelve-month period between 9th October 2018 and 8th October 2019.

20. According to the Appellant, both import consignment control numbers 12817 and 12792 fell within the purview of the DRS.

21. That in addition to the gazette notice, the Appellant also provided copies of the proforma invoice dated 27th August 2019 pertaining to the importation of the respective industrial sugar consignments in question, to provide further evidence that the product was indeed imported well before the expiry of the twelve-month duty remission period.

22. That it also annexed to its said application for review, copies of the National Treasury's approval of its importation of industrial sugar under the DRS, for both consignment control numbers 12792 and 12817, that were approved on 5th September 2019 and 12th September 2019, respectively, within the twelve-month duty remission period.

23. The Appellant stated that it was then issued with a review decision vide a letter dated 30th September 2022, through which the Respondent rejected its application and upheld the demand for the Appellant's remittance of taxes amounting to Kshs.30,889,231. 00.

24. The Appellant averred that in the said objection review decision, the Respondent also posited that its imports of industrial sugar through the batches in question did not qualify for the DRS, owing to the expiry of the gazetted period, and that therefore it was not entitled to duty remission.

Appellant’s Prayers 25. In view of the foregoing, it prayed for the following orders from the Tribunal:a.The Respondent's compliance check findings through its letters dated 14th June 2022 and 19th July 2022, along with its demand letter and review decision in the letters dated 4th August 2022 and 30th September 2022 respectively, be struck out in their entirety;b.The Respondent be estopped from demanding any additional Import duty exceeding the gazetted ten (10%) percent rate and other additional taxes including Value Added Tax, through injunctive orders;c.The costs of this Appeal be granted to it; andd.Any other remedies that the Honourable Tribunal deems just and reasonable.

Respondent’s Case 26. The Respondent’s case was as set out in its Statement of Facts dated 9th December 2022 and filed on 16th December, 2022.

27. The Respondent stated that conducted a CDRSCC on the Appellant in accordance with Section 140,235 and 236 of EACCMA; which focused on imports under the Duty Remission Scheme for the period 2017 to 2021 in line with EACCMA Customs Management (Duty Remission) Regulations,2008.

28. That it established from the CDRSCC that there were incidences of importation of sugar outside the gazette periods and subsequently raised additional duty and VAT of Kshs. 30,889,231. 00 as outlined in its letter dated 14th June 2022.

29. The Appellant stated that it reverted on 23rd June, 2022 alleging that the C60 were submitted within the period the gazette notice was still valid. Upon further engagement vide electronic mail, correspondence and engagement meeting during which it explained to the Appellant the basis for the additional assessment, it issued a demand for the taxes vide letter dated 4th August 2022.

30. That on 2nd September, 2022, the Appellant, aggrieved by the additional demand, lodged an application for review of its decision as contained in the said letter dated 4th August, 2022. Having reviewed the Appellant's grounds for review it rendered its review decision through a letter dated 30th September,2022 in which it upheld the decision in its letter dated 4th August, 2022.

31. That in response to the Appellants Ground no. (i) of Appeal it was of the view that contrary to the Appellant's allegation, from the onset when it conducted the compliance check and shared its findings, it explained to the Appellant the reasons for raising the additional duty and VAT. It did not therefore dispute the fact that that Section 140 of EACCMA gives the Council authority to grant remissions of duty on goods imported for the manufacture of goods in a partner state. The said provision states as follows:“Section 140 :1. The Council may grant remission of duty on goods imported for the manufacture of goods in a Partner State.2. The Council may prescribe regulations on the general administration of the duty remission under this section.3. The manufacturer, and the approved quantity, of the goods with respect to which remission is granted under this section shall be published by the Council in the Gazette.’

32. That according to it the Appellant was misinterpreting Section 140 of EACCMA as read together with Regulation 6(1) as the provision is subject to further approval by the National Treasury and the granting of the approval itself by the National Treasury does not automatically conclude the importation process as the importation itself is left at the discretion of the importer.

33. It maintained that seeking approval was a different process all together from importation and once the same was granted, importation of the sugar ought to have taken place within the gazetted period. Contrary to the Appellant's allegation that time of entry of goods is irrelevant, the Respondent avers that time of importation and entry of goods is key since this is the time the remitted duty is determined and must be within the gazetted timelines.

34. That according to it the dispute at hand emanated from the Appellant seeking approval within time, but failing to import the goods within the gazetted period. The Appellant having obtained the approval, sat on its rights and only exercised the same after the period granted for remission had expired. The process of importation is different from the process of obtaining approval for remission.

35. The Respondent averred that though the Appellant may have obtained approval from the relevant authority in time, the Appellant delayed the importation of the goods making them time barred and outside the gazetted period.

36. The Respondent demonstrated the process of importation of goods into Kenya by explaining the same as follows:-a.First, the importer makes a purchase order and obtains from the supplier, the commercial invoice, bill of lading or airway bill and in some cases, insurance documentation;b.Second, having obtained all the requisite documentation, the importer is then able to raise the Import Declaration Form (IDF);c.Third, upon arrival of the consignment at the port of entry, the importer or his agent completes an entry form;d.Fourth, in addition to the documents above, the importer prepares a Single Administrative Form (Form C17B), which indicates a summary of the nature of the imports thereby enabling the appropriate tax classification i.e.; the nature of the importation hence the Customs Processing Code (CPC), the value of the imports and any exemption code applicable if any;e.Fifth, it computes the taxes payable on the entry using the automated Simba System;f.Sixth, its customs officers then verify the consignment at the point of entry to ascertain the value of the goods, tariff classification and quantity among other requirements. During this verification it checked the accuracy of the value of the goods and the sufficiency of the description thereof which enabled it verify the correct tariff code having regard to the particulars of the goods as shown in the commercial invoice. For purposes of import of industrial sugar for the manufacture of products, the Appellant and other importers in the industry, the exemption code assigned by it and verified by its custom officials; andg.Finally, all taxes including import duty, Value Added Tax (VAT) and the assessed IDF fees would then be paid at that point and thereafter a customs clearance certificate is issued and the goods released.

37. That in the Appellant's case, the approval from Treasury and the first two steps of placing the order and raising Import Declaration Form (IDF) were done within the gazetted period of 12 months from 9th October 2018 to 8th October 2019. The Appellant obtained the invoices, IDF and Approval from National Treasury in August and September respectively. However, initiating the importation process is not the actual importation.

38. That Section 120 of EACCMA is very clear that determination of duty is at the time of entry and the remission was only considered upon entry of the goods. It states as follows:“(1)Subject to subsection (3) and section 94, import duty shall be paid at the rate in force at the time when the goods liable to such duty are entered for home consumption:i.Provided that in the case of goods imported overland, the time of entry of such goods for home consumption shall be deemed to be the time when the import duty on the goods is paid.ii.Where goods are entered in accordance with section 34 before the arrival at the port of discharge of the aircraft or vessel in which such goods are imported, the import duty upon the goods shall be paid at the rate in force at the time of arrival of such aircraft or vessel at such port of discharge.”

39. That in view of the above provisions it maintained its position remission of duty is on duties/taxes payable and the same are determined upon entry/arrival of the goods. Further, it maintained that the import process was initiated by the Appellant within the period but remission was not granted based on initiation of the importation process but at the end of the process when the goods are considered imported (upon arrival) when taxes and duties are payable.

40. According to it, Entry No. 12817 arrived on 2nd December, 2019 whilst entry no.12792 arrived on 17th October 2019 after expiry of the gazetted period which lapsed on 9th October 2019. It therefore held and maintained that at the time when the consignment arrived which was the time the taxes were payable; the gazetted period had already lapsed and the goods did not qualify for remission of duties that were payable.

41. That contrary to the Appellant’s allegations, it acted in an expeditious manner as the law permits it under Sections 235 and 236 of EACCMA to conduct PCA within 5 years and the period under review was within the 5 years' purview. It also invited the Appellant for meetings to discuss its findings and offered explanations on why the issued additional assessment on import duty and VAT.

42. That accordingly, and in conclusion, there cannot be a legitimate expectation against clear provisions of the law or the Constitution. In addition, there wasno express, clear and unambiguous promise given by the Respondent since the approval was granted by the National Treasury to apply within the gazetted period.

43. The Respondent stated that the allegations of the Appellant as laid out in its Memorandum of Appeal and Statement of Facts unless where in agreement by the Respondent were unfounded in law and not supported by evidence.

Respondent’s Prayers 44. In view of the foregoing the Respondent prayed that the Appeal be dismissed with costs to it and that the additional import duty and VAT of Kshs 30,889,231. 00 raised by it was due and payable in accordance with its rendered review decision.

Submissions By The Parties 45. The submissions of the Appellant dated and filed on 22nd February, 2023 and those of the Respondent dated 28th February, 2023 and filed on 2nd March, 2023 were adopted during the hearing on 27th September, 2023.

The Appellant submitted as follows in its written submissions: 46. That it had identified two issues for determination and each has been identified and analysed as shown below:

i.Whether its imports (consignment control number 12792 and 12817) were validly imported under DRS? 47. Section 140 of EACMMA as read with Regulation 6 of EACMMA (Duty Remission) Regulations 2008 form the statutory basis for DRS in Kenya and the East African Community Partner states. Section 140 of EACMMA provides as follows:“(1)The Council may grant remission of duty on goods imported for the manufacture of goods in a Partner State.(2)The Council may prescribe regulations on the general administration of the duty remission under this section.(3)The manufacturer, and the approved quantity, of the goods with respect to which remission is granted under this section shall be published by the Council in the Gazette.”

48. Regulation 6 of EACCMA (Duty Remission) Regulations 2008 stipulates as follows:“6(1) Remission of duty granted under these Regulations shall be valid for a period of twelve months from the date of publication.(2)The Council may on the application by a manufacturer, grant remission on such further quantity of goods to be imported by the manufacturer under these Regulations….”

49. Accordingly, as published by the Council of Ministers on the East African Community Gazette through Legal Notice Number EAC/143/2018 on 9th October, 2018, its importation of 4000 metric tonnes of sugar for industrial use were approved. Further, in line with Regulation 6 of EACCMA (Duty Remission) Regulations 2008 the Council approved its importation under DRS for 12 months from the publication date such that the approval would have lapsed sometime on 8th October, 2019.

50. It ordered industrial sugar within the remission period and was issued with invoices dated 27th August, 2019 for consignment control number 12792 and 12817. It then applied for importation of the approved quantities on 2nd and 11th September, 2019 respectively in accordance with the National Treasury internal process for monitoring quantities approved by gazette for importation of raw materials under DRS. The National Treasury approved its applications on 5th and 12th September,2019 through its Form, C.60.

51. Its interpretation of Section 140 of EACMMA read together with Regulation 6(1) of EACCMA (Duty Remission) Regulations 2008 is that Section 140 provides that remission can be grated on imported goods whilst Regulation 6(1) provides that such remission is normally valid for 12 months. As such, as a manufacturer it was granted remission duty for the period of 12 months from the date of the gazette notice. Accordingly, any importation that it processed and for which it was granted approval, would enjoy remission of import duty within the 12-month period.

52. It met all the conditions under law to qualify for remission. On the issue of Section 120 of EACMMA, it was of the view that the applicable import duty rate was 10% and the same was rightfully charged to it during entry of consignment batch numbers 12792 and 12817 into the customs territory and no further duty was payable.

53. The Respondent failed to consider that the purchase and trade of its imports were underlined by Cost and Freight (CFR) Incoterms developed and coined by the International Chamber of Commerce commercial trade rules which made the seller responsible for provision and payment of transportation of the goods and freight. The seller upon transporting the goods to a port with proximity to the purchaser was expected to furnish the purchaser with documents to enable it collect cargo from the carrier.

54. It therefore had minimal control of the loading and shipping process and the Respondent failed to appreciate this fact. It placed orders on 27th August, 2019 well in advance of the lapse of the DRS validity on 8th October, 2019. C.60 forms issued by TREO for consignment batch numbers 12792 were granted on 5th September, 2019 and the approval for 12817 was granted on 12th September, 2019 well in advance of the DRS on 8th October, 2019.

55. It was irrational and unreasonable to penalise and demand Customs Duties from it for consignment of sugar arriving later than scheduled despite it not having any control over the loading and shipping of the cargo by the vendor and any other tribulations that may have been suffered by the vessel and cargo at sea. In Kenya Revenue Authority Vs Export Trading Company Limited (Petition No. 20. of 2020) [E021 of 2020] the Supreme Court upheld the decision of the Court of Appeal and the High Court in confirming the unfair actions of the Respondent in demanding additional taxes and customs duties for importation of rice 4 years after importation which had been imposed at the original rate of 35% and not 75% due to an error attributable to the Respondent’s Tradex Simba System.

56. In the stated case, the principle of legitimate expectation and its connection to fair administrative action were cemented. Accordingly, in respect of its Appeal, it observed that the Respondent was involved in the clearance process at the time of importation in 2019 creating a legitimate expectation by applying the 10% import duty rate on the consignment of sugar in accordance with Legal Notice No. EAC/143/2018 the time of clearance and allowing shipment to be transported inwards to the customs territory for its industrial use as envisaged. The demand for additional taxes 4 years after clearance of transportation of the imports breached its legitimate expectation regarding computed taxes.

57. Its legitimate expectation and its right to fair administrative action as entrenched in Article 47 of the Constitution, 2010 and the Fair Administrative Actions Act, 2015 were breached as the Respondent’s additional demand for taxes due to a procedural technicality amounted to procedural unfairness.

58. To buttress its position on its legitimate expectation it also cited the Supreme Court holding in Communication Commission of Kenya & 5 others Vs. Royal Media Services and 5 Others [2014] eKLR. In this case the principles of legitimate expectation were set out as follows:“(269)The emerging principles may be succinctly set out as follows:a.There must be an express, clear and unambiguous promise given by a public authority;b.The expectation itself must be reasonable;c.The representation must be one which it was competent and lawful for the decision-maker to make; andd.There cannot be a legitimate expectation against clear provision of the law or Constitution.”

59. The Appellant’s submitted that it would rely on the doctrine of legitimate expectation as its name was published in the East African Gazette wherein the Council of Ministers approved its application to import industrial sugar for the use in manufacture of cordials and carbonated drinks for a period of 12 months pursuant to Section 140 of EACMMA. It further observed that the introduction of DRS and TREO were primarily to promote merchantability and competitiveness of Kenyan exports by reduction of customs duty payable on the exports.

60. It also cited Republic V Commissioner of Customs Services & 2 Others exparte Candy Kenya Limited [2016] eKLR in which the High Court observed that:“In 2006, the East African Community Council of Ministers (the ‘EAC Council’) published a decision in Gazette No. Vol. AT-1-No. 003 being Legal Notice Number EAC/10/2006 granting 90% tax remission for import duty on industrial sugar used as raw material for manufacture of goods. The 90% duty remission rate continue to apply in 2007,2008 and 2009. On 1s May, 2008 the East Africa Community Customs Management (Duty Remission Regulations, 2008, came into force. The applicable remission on imported industrial sugar for use of manufacture of goods continued to be 90% until 26th November, 2009 when the EAC Gazette was mended and 100% duty remission granted on imported sugar for industrial use for manufacture of goods for export.”

61. Its view was that the foregoing is that the DRS on essential inputs used in manufacture of crucial products had always been at the forefront to the EAC Council of Ministers intention to promote the competitiveness of the EAC partner state exports in the international market. As such, allowing the Respondent’s additional demand for import duty and VAT would only serve to trifle the competitiveness of its products in the local and international markets, thereby setting a bad precedent in the promotion and improvement of Kenya’s economy.

(ii) Whether it is liable to pay the additional import duty and VAT amounting to Kshs. 30,889,231. 00. 62. In view of its supposition that sugar consignments were validly imported under DRS, it was not liable to payment of additional import duty and VAT. To buttress its position, it cited Republic V Commissioner of Customs Services & 2 Others exparte Candy Kenya Limited [2016] eKLR in which the High Court being faced with a similar matter to that in this Appeal prohibited the Respondent from demanding additional tax.

63. Its further view was that the imposition of additional import duties would affect the competitiveness of its products in the international and local market vis a vis imported substitutes. It had made its contribution to the Kenyan economy for decades by paying its dues to the Respondent, employing Kenyans (directly or indirectly) and increasing brand visibility of Kenyan products through its exports as well as the country’s Gross Domestic Product.

64. It urged the Tribunal to vacate the import duty and VAT assessments on the grounds that it had elucidated in its pleadings.The Respondent submitted as follows in its written submissions:

65. It reviewed the prayers of the Appellant and identified 2 issues for determination as outlined below:-

i. Whether the Appellant’s-products were brought into the Country within the gazetted period to qualify for duty remission? 66. According to it, the dispute at hand emanated when the Appellant sought approval for the remission of duty on imported sugar within time, but failed to import the goods within the gazetted period. It conducted a CDRSCC of the Appellant in accordance with Sections 140,235 and 236 of EACCMA.

67. The CDRSCC focused on imports under DRS for the period 2017 to 2021 in line with EACCMA Customs Management (Duty Remission) Regulations,2008 and from it, it established that there were incidences of importation of sugar outside the gazetted periods. Subsequently, it raised additional duty and VAT of Kshs. 30,889,231. 00 vide its letter dated 14th June 2022.

68. It does not dispute the fact that Section 140 of EACCMA gives the Council authority to grant remissions of duty on goods imported for the manufacture of goods in a partner state. It however states that the application of Section 140 of EACCMA is subject to further approval by the National Treasury though the granting of approval did not automatically conclude the importation process as the importation of goods is left at the discretion of the importer.

69. The Appellant obtained the invoices, IDF and Approval from National Treasury in August and September, 2019 respectively. The approval from National Treasury and the first two steps of placing the order and raising Import Declaration Form (IDF) were done within the gazetted period of 12 months from 9th October 2018 to 8th October 2019. However, initiating the importation process is not the actual importation. Although the Appellant may have obtained approvals from the relevant authority on time, it delayed in importing the goods making them time-barred and outside the gazetted period.

70. Importation was not a single event but a process which would be completed within the prescribed period if at all there were timelines to be adhered to. The Black’s Law Dictionary defines ‘importation’ as the act of bringing goods and merchandise into a country from a foreign country. It then outlined the process of importation.

71. In instances where the Appellant would have qualified for remission or exemption the process would have been as follows:a.Entry registration: This involved capturing the data necessary for declaration of the shipment to Customs as per the importation documents. While capturing the data, the appropriate Customs Processing Code (CPC) for duty exemption under the 5th schedule of EACCMA was selected and outlined in form C490. The exemption code was also declared on column (n-preference code) of the single Administrative Document commonly referred as C17B.b.Once it was satisfied that all the details had been correctly captured, the entry was registered and the exemption code was declared, the VAT payable was remitted.c.Payment of entry dues- At this stage the clearing agent settled all other payments due including the Government of Kenya Processing Fee, Railway Development Levy and Merchant Shipping Services levy.d.When the payments reflected on the entry in Simba System, its Document Processing Officer (DPO) to whom the entry was allocated prompted the clearing agent through a system message to seek exemption approval of the amount which was remitted at the time of declaration.e.At that point a Customs folder was prepared with a full set of all original importation documents and presented at the Customs exemption office in the region whilst clearance was taking place at the Port, in this case the Mombasa Port.f.Exemption approval: On presentation of the Customs folder, the file was referred to the Respondent's Verification Officer at the physical location where the shipment is, for pre-verification to ascertain if what was being imported was actually the product in the Entry. Upon satisfying itself that the declaration was in accordance with the physical cargo, its Verification Officer input an online message confirming the description of the commodity and quantities shipped. The customs folder was then returned to the clearing agent who took it back to the exemption office.g.The Respondent's Exemption Officer then went tthrough the file against the exemption documents within their offices to establish whether the item for which exemption was sought qualified. After it was satisfied that the item qualified for exemption, it sent a message online in the system approving the exemption and inscribed the exemption message number on the folder. The customs folder was then returned to the clearing agent to enable it to communicate with the DPO so that the entry could be processed.h.All taxes including import duty, Value Added Tax (VAT) and the assessed IDF fees were then paid at that point after which a customs clearance certificate would have been issued and the goods released.

72. Section 120 of EACCMA was very clear that the determination of duty is at the time of entry of the goods for home use and states as follows;‘Subject to subsection (3) and section 94, import duty shall be paid at the rate in force at the time when the goods liable to such duty are entered when the import duty 011 the goods is paid.Where goods are entered in accordance with section 34 before the arrival at the port of discharge of the aircraft or vessel in which such goods are imported, the import duty upon the goods shall be paid at the rate in force at the time of arrival of such aircraft or vessel at such port of discharge.’

73. Remission of duty was applicable at the exact point where the Appellant was liable to pay duty. It has taken the position that the Appellant which was exempted from paying any duty should have provided documentation demonstrating that it had obtained remission for the duty at the time when it ought to have paid the duty should there have been no remission. Pursuant to ection 120 of EACCMA, the time of paying duty is the time of entry of goods for home consumption.

74. It maintained that remissions of duty were on duties/truces payable and the same were determined upon entry/arrival of the goods. Whilst batch entry number 12817 arrived on 2nd December 2019, entry no.12792 arrived on 17th October 2019 after the expiry of the gazetted period which lapsed on 9th October 2019. Remission was not granted based on the initiation of the importation process but at the end of the process when the goods were considered imported (upon arrival ) when taxes and duties were payable.

75. It held and maintained that at the time when the consignment arrived which was the time the taxes were payable, the gazetted period had already lapsed and the goods did not qualify for remission of duties that were payable and if at all the Appellant experienced any challenge that hindered the entry of the goods within the prescribed time, it ought to have made an application to the National Treasury. for an extension.

76. To buttress its position, it cited the case of Kenya Revenue Authority & 2 others v Darasa Investments Limited [2018] eKLR where the court found that:“where the Taxpayer together with other 13 companies wrote to the Cabinet Secretary of the Ministry of Agriculture, livestock and Fisheries, had opted to take advantage of the exemption had also not managed to get their sugar consignments into the country within the exemption period for one reason”

77. Though the Appellant cited the Export Trading Company's limited case, it would have clarified that the issues in these two matters were different and very distinct. Whereas in Export trading the issue in dispute was the Respondent's action of changing the applicable rate in the Simba system then applying the same retrospectively; in the current dispute, the issue for determination is the time of entry of goods which were subject to remission.

78. Accordingly, the dispute before the Tribunal was in respect to the Appellant's non-compliance with the conditions prescribed in the Legal Notice and it wanted he Tribunal to countenance its non-compliance by compelling the Respondent to forego the duty. Its humble submission was that by the time the Appellant's goods entered into the Country, the gazetted remission period had lapsed and the Appellant did not qualify for remission.

ii. Whether the Respondent erred in demanding duty on the Appellant's products and as a result breached the Appellant's legitimate expectation. 79. The Respondent submitted as follows regarding this issue for determination:-

80. It acted in an expeditious manner as the law permits pursuant to Sections 235 and 236 of EACCMA to conduct PCA within 5 years and the period under review was within the 5-year purview. The Appellant cannot be protected against the law if theits actions were within the law. The Appellant raised issues of legitimate expectation however, the same must be within the confines of the law.

81. The Appellant could not be allowed to benefit from its own inaction on account of legitimate expectation. The principles guiding the doctrine of legitimate expectation were laid out in Communications Commission of Kenya and 5 others v Royal Media Services Limited and 5 others [2014] eKLR.

82. In the case of Republic v Commissioner of Customs Services & 2 others Ex-parte Candy Kenya Limited [2016] eKLR where the court held that:'Whatever promise was made to the Applicant, and I agree there was indeed a promise made by authorities with powers to make the promise, was not in compliance with the law. The Applicant cannot thus rely on it.’

83. It had invited the Appellant for meetings to discuss its findings and offered explanations on why it issued additional assessment on import duty and VAT. It further maintained that seeking approval for remission was a completely different process altogether from importation and once the approval was granted, importation of the sugar ought to have taken place within the gazetted period.

84. Contrary to the Appellant's allegations that the time of entry of goods is irrelevant, the time of importation and entry of goods was key since this was the time the remitted duty was determined and must be within the gazetted timelines. The Appellant having obtained the approval, sat on their rights and only exercised the same after the period granted for remission had expired.

85. Since duty on the imported sugar was due and payable it was obligated under the law to collect all taxes due provided that this was done within the confines of the law. To fortify its position above, it relied on the case of Republic vs. Kenya Revenue Authority Ex-parte Bata Shoe Company (Kenya) Limited [2014] eKLR, where the Court expressed itself as hereunder:“This brings me to the role and interpretation of tax laws. Payment of tax is an obligation imposed by the law. It is not a voluntary activity. That being the case, a taxpayer is not obliged to pay a single coin more than is due to the taxman. The taxman on the other hand is entitled to collect up to the last coin that is due from a taxpayer.”

86. The Appellant had argued in its pleadings and submissions that imposition of duty will negatively impact their business as they would be less competitive but it was important to consider the fact that the law does not favour a private entity on account of their own misgivings and does not render the legal requirements moot or inapplicable.

87. There cannot be a legitimate expectation against clear provisions of the law or the Constitution. In addition, there was no express, clear and unambiguous promise given by the Respondent since the approval was granted by the National Treasury to apply within the gazetted period.

88. It urged the Tribunal to find that the Appeal was devoid of merit and dismiss the same with costs to it.

Issues For Determination 89. The Tribunal having carefully considered the parties’ pleadings, documentation and Submissions finds that there is a single issue that calls for its determination as follows:i. Whether the additional tax assessment in respect of Import Duty and VAT was lawful and justified.

Analysis And Findings 90. The Tribunal has noted that sometime in 2018, the Appellant applied and was successfully granted remission of duty on importation of sugar for purposes of manufacturing cordials and carbonated drinks. The Remission was granted through Legal Notice Number EAC/143/2018 which was Gazetted on 9th October, 2018. The import duty payable by the Appellant under this Legal Notice was 10% and it was allowed to import 4,000 metric tonnes of industrial sugar.

91. Whilst Section 140 of EACCMA provides as follows:“(1)The Council may grant remission of duty on goods imported for the manufacture of goods in a Partner State.(2)The Council may prescribe regulations on the general administration of the duty remission under this section.(3)The manufacturer, and the approved quantity, of the goods with respect to which remission is granted under this section shall be published by the Council in the Gazette.”

92. Regulation 6 of EACCMA (Duty Remission) Regulations 2008 stipulates as follows:“(1)Remission of duty granted under these Regulations shall be valid for a period of twelve months from the date of the publication of the grant in the Gazette.(2)The Council, may on the application by a manufacturer, grant remission on such further quantity of goods to be imported by the manufacturer under these Regulations.(3)The Council may, on application by a manufacturer, extend the period referred to in sub regulation (1) for a further period of six months.”

93. The Tribunal finds that since the Appellant was granted duty remission on 9th October, 2018, in accordance with Regulation 6 of EACCMA (Duty Remission) Regulations 2008, the Remission was valid for a year and would have expired on 8th October, 2019.

94. The Tribunal notes that the Appellant also applied successfully to the National Treasury for approval of the quantities of sugar that it would import and was granted the same on 5th and 12th September 2019, respectively. It was granted permission to import 4,000 tonnes of industrial sugar to use in manufacturing cordials and carbonated drinks. The imported items comprised consignment control numbers 12817 and 12792 which arrived in Kenya on 17th October, 2019 and 2nd December, 2019 respectively.

95. The Tribunal further notes that the Appellant placed the order and raised the Import Declaration Form (IDF) thereby independently assessed and verified the value of the imported goods that were subject to duty remission.

96. On 30th September, 2022 the Respondent issued a review decision demanding additional import duty and Value added tax amounting to Kshs. 30,889,231. 00 almost 5 years after the goods had been imported. The Tribunal notes that the Appellant found that the post clearance audit conducted by the Respondent was unfair as the industrial sugar had been imported under the DRS and this had enabled the Appellant to sell its goods competitively both in Kenya and Internationally.

97. In the case, Car and General Trading Limited Vs. Commissioner of Customs & Border Control [ TAT Appeal No. 83 of 2021] the Tribunal held that:-“At this point, the Tribunal found it necessary to reiterate that the fact that the Commissioner had accepted a declaration from a taxpayer in the past does not estop him from reviewing that decision and issuing a fresh assessment as and when new facts on the imported goods emerge. Similar position was held in the case of Tarmal Industries Ltd v. Commissioner of Customs and Excise [1968] EA 471 where it was held that “The fact that he failed to do so cannot stop him from carrying out his duty when he discovers the original error.”

98. The Tribunal is of the view that upon carrying out the PCA, the Respondent found that the Appellant did not import the industrial sugar within the stipulated timelines of 12 months i.e.; between 9th October, 2018 and 8th October, 2019. The consignments arrived outside the stipulated timelines of the gazetted period.

99. Whereas Section 2(1) of EACMMA defines the term import as meaning:“to bring or cause to be brought into the Partner States from a foreign country’.Section 120 (1) of EACMMA provides as follows:‘Subject to subsection (3) and section 94, import duty shall be paid at the rate in force at the time when the goods liable to such duty are entered for home consumption:Provided that it the case of goods imported overland the time of entry of such goods for home consumption shall be deemed to be the time when the import duty on the goods is paid.”

100. The Tribunal therefore finds that importation is deemed to have taken place when the goods are ‘entered’ for home consumption or brought into the Partner states from a foreign Country. Accordingly, it is only goods that have arrived in the Country that are considered as having been imported. The time of entry of the goods into the Country is therefore an essential element in determining whether or not importation has taken place.

101. The Tribunal further finds that pursuant to Section 120 of EACMMA, the time of entry of the goods determines the rate of duty applicable. The consignments arrived on 17th October, and 2nd December, 2019, respectively.

102. The Tribunal notes and observes that pursuant to Regulation 6 of EACCMA (Duty Remission) Regulations 2008 the Appellant had the option of being granted remission for a further quantity of goods to import OR it could have applied for extension of the period for a further six months such that when the industrial sugar arrived, the Appellant would have benefited under the Duty Remission Scheme.

103. The Tribunal notes that under the terms of exemption the Appellant had the option of applying for extension of the Duty Remission period having been fully aware of when the two consignments were due to arrive in the country but it failed or neglected to do so.

104. The Tribunal therefore finds that the additional tax assessment in respect of Import duty and VAT was lawful and justified.

Final Decision 105. The upshot of the foregoing is that the Appeal lacks merit and the Tribunal accordingly proceeds to make the following Orders:a.The Appeal is hereby dismissed.b.The Respondent’s review decision dated 30th September, 2022 be and is hereby upheld.c.Each party to bear its own costs.

106. It is so ordered.

DATEDAND DELIVERED ATNAIROBITHIS 20TH DAY OF DECEMBER, 2023. ERIC NYONGESA WAFULA............CHAIRMANDELILAH K. NGALA..........MEMBERCHRISTINE A. MUGA..........MEMBERGEORGE KASHINDI............MEMBERMOHAMMED A. DIRIYE...........MEMBERSPENCER S. OLOLCHIKE............MEMBER