[2023] KETAT 968 (KLR)

Imara Steel Mills Limited v Commissioner, Investigation & Enforcement (Tax Appeal E015 of 2023) [2023] KETAT 968 (KLR) (Civ) (1 December 2023) (Ruling)

Neutral citation: [2023] KETAT 968 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Tax Appeal E015 of 2023

E.N Wafula, Chair, M Makau, AK Kiprotich, EN Njeru & E Ng'ang'a, Members

December 1, 2023

Between

Imara Steel Mills Limited

Applicant

and

Commissioner, Investigation & Enforcement

Respondent

Ruling

1. The Applicant moved the Tribunal vide a Notice of Motion application dated 20th September 2023 and supported by an Affidavit sworn by Kuria Mwangi, an Advocate on record for the Applicant, seeking the following Orders:-a.That this Honourable Tribunal be pleased to grant leave to the Applicant/Appellant to file a Supplementary Statement of Facts.b.That the Supplementary Statement of Facts annexed hereto be and is hereby deemed as duly filed and served.c.That the Respondent be at liberty to file a response if it so wishes.d.That the cost of this application be in the cause.

2. The application is premised on the following grounds:-i.That the Applicant filed its Memorandum of Appeal and Statement of Facts on 13th February 2023. ii.That the Supplementary Statement of Facts intends to bring evidence of contradictory assessments made by the Respondent over the same tax period as the subject of this Appeal.iii.That the Supplementary Statement of Facts also seeks to introduce correspondences between the parties inadvertently omitted in the Statement of Facts.iv.That the Respondent will have a chance to respond to the Supplementary Statement of Facts and will therefore have an opportunity to respond to the evidence produced.v.That there will be no prejudice to the Respondent if the Supplementary Statement of Facts is admitted.vi.That the Tax Appeals Tribunal Procedure Rules 2015 allows the Applicant to amend its pleadings at any time before closure of the case.vii.That it’s therefore in the interest of justice that the Applicant be granted leave to file its supplementary Statement of Facts and the draft annexed be deemed to be fully filed.

3. The Respondent opposed the application through a Replying Affidavit sworn by Justus Kiuvu, an officer of the Respondent, on the 26th September 2023 and filed on the 27th September 2023. The grounds of opposition as highlighted in the Affidavit were as follows: -i.That the Applicant’s documents attached thereto are new and have never been produced at the first instance of request by the Respondent hence the Applicant cannot purport to introduce new documents that the Respondent did not have the privilege to consider before the issuance of the decision dated 24th June 2022. ii.That there is good and sufficient cause for the new documents to be disallowed as the Respondent’s claim for Kshs. 681,350,937. 00 contained tin the Objection decision of 24th June 2022 would be stifled and the Respondent suffer irreparable loss.iii.That the Respondent would suffer gross prejudice, injustice and irreparable loss if the prayers sought are granted, further the Applicant’s application is misplaced and without merit as it seeks to introduce new documents without any valid explanation or supporting evidence regarding why the same was never produced when the same were requested for.iv.That the Applicant acknowledged receipt of the assessment and sought more time to gather the supporting documents, however, the Applicant neither provided evidence to support its Objection nor explained why it provided documents partially.v.That the Applicant’s decision to seek to invoke the Tribunal’s powers vide its application is an abuse of the Tribunal process as it has failed to prove why the evidence it seeks to admit now will be beneficial in aiding this Tribunal arrive at a just determination of issues.vi.That the Applicant had knowledge at the Objection stage on what evidence would aid in discharging the tax demands up to it and it is now illegal and an abuse of this Honourable Tribunal’s time to use the Appeal stage to seek to fill those gaps at the expense of the Respondent and its mandate legally vested in it.vii.That the money being demanded herein is money that belongs to the general public good and it is meant to be used for the general public, further the amount is payable as a debt due to the Government in accordance to section 32 (1) of the Tax Procedures Act.viii.That by granting the orders in the application, the Respondent stands to suffer a prejudice which this Tribunal ought to protect it from such an inadvertence as it may unnecessarily change the scope and substratum of the dispute.ix.The Respondent prayed for the application to be dismissed with costs.

4. The Applicant in rebuttal of the contents in the Replying Affidavit, filed its Supplementary Affidavit on the 5th October 2023, which was sworn by Kuria Mwangi on 3rd October 2023, the issues as highlighted in the affidavit were;i.That contrary to the assertions by the Respondent the documents sought to be introduced were correspondences between the parties during the Objection period.ii.That contrary to the assertions by the Respondent, part of the documents sought to be introduced are neither new documents nor ones that have not been already presented to the Respondent at the Objection stage.iii.That in fact the Supplementary Statement of Facts will appraise the Tribunal on the fact that the Respondent is conducting two separate taxation processes against the Appellant even after the filing of this Appeal involving the same assessment of taxes.iv.That the documents could not have been introduced earlier as they came to the Appellant’s attention in the month of July 2023, further the documents emanate from the Respondent as such it is highly suspicious that it would want the same excluded in this Appeal.v.That there is absolutely no prejudice on the Respondent as the documents introduced are already in its possession and does not involve a new or strange series of events as intimated by the Respondent.vi.That unless and until the prejudice is revealed by the Respondent emanating from the specific documents presented the Tribunal ought not consider an amorphous response that does not point out any specific instances of prejudice from the documents presented.

Applicant’s Submissions 5. The Applicant in its written submissions dated 3rd October 2023 and filed on the 4th October 2023, submitted that it identified two issues for determination, being;a.Whether the Appellant should be allowed to put a Supplementary Statement of Facts?b.Who should bear the costs of this application?

6. The Applicant submitted that the Tribunal has the power to allow for amendment of pleadings which power can be exercised at any stage of the proceedings before judgement, the Appellant relied on Rules 21 and 27 of Tax Appeals Tribunal Rules (2015).

7. The Applicant contented that the filing of the Supplementary Statement of Facts does not raise new issues, that it solely seeks to appraise the Tribunal of issues that involve the assessment made by the Respondent post filing of this Appeal.

8. The Applicant submitted that the documents sought to be introduced are not new documents, they are in the possession of the Respondent and will assist the Tribunal in making an informed decision on this Appeal.

9. The Applicant further submitted that the amendment will enable the Tribunal to determine the real issues in dispute.

10. The Applicant stated that under the circumstances of the case no prejudice will be occasioned upon the Respondent, who has failed to substantiate any prejudice that may be suffered if the amendment is allowed. Article 159 of the Constitution as well as the Oxygen principle advocates for substantive justice as opposed to technical justice.

11. The Applicant submitted that costs must follow the event and the it is entitled to costs of the application.

12. The Appellant relied on the following case law:-a.Bullen and Leake & Jacob’s precedents of pleadings, 12th Edition.b.Halsbury’s Laws of England, 4th Ed. (re-issue), Vol. 36(1) at paragraph 76. c.Central Kenya Limited vs. Trust Bank Limited [2000] 2 EA 365. d.Eastern Barkery vs. Castelino [1958] 1 EA 461 (CAK).e.General Manager E A R & H A & Thierstein [1968] 1 EA 354 (HCK).

Respondent’s Submissions 13. The Respondent in its written submission dated 26th September 2023 and filed on 27th September 2023 and the further written submissions dated 6th October 2023 and filed on 9th October 2023, submitted that the Applicant’s intention to adduce the documents as well as amend its pleadings at this juncture is engineered to avoid paying taxes that are due to the Respondent.

14. The Respondent contented that the Appellant failed to place all the documents demanded by the Respondent for scrutiny to establish whether they supported the Appellant’s assertions in its Objection dated 27th April 2022 against the tax demands.

15. The Respondent argued that since the Appellant did not proffer any explanations to its failure to produce the documents at the Objection stage as demanded, the Tribunal should be slow to allow any obstacle that would prevent scrutiny into challenge of the Respondent’s exercise of tax collection.

16. The Respondent submitted that the prayers sought by the Appellant would amount to taking it by surprise through the introduction of new documents that it was not given an opportunity to scrutinize before making the Objection decision.

17. The Respondent stated that there were two pre-conditions for adducing additional evidence being; that the evidence sought to be adduced could not be obtained with reasonable diligence during the cause of the trial; and, that it will have an important influence and is credible enough.

18. The Respondent urged the Tribunal to find that there was no good reason presented by the Appellant for the need to- produce new documents at this stage requiring the Tribunal’s intervention, nor is there confusion from the totality of the evidence on record that the Appellant did not understand the basis of the Respondent’s demand for taxes and subsequent demand of documents made.

19. The Respondent urged the Tribunal to find that the application has no merit and dismiss the same with costs to the Respondent.

20. The Respondent relied on the following cases;a.Knightsbridge Trading Limited vs. Commissioner of Investigations & Enforcement.b.Dakianga Distributors (K) Ltd vs. Kenya Seed Company Limited [2015] eKLR.c.Supreme Court of India, Union of India vs. Ibrahim Uddin & Another [2012] 8SCC 148. d.The Adminstrator of His Highness the Aga Khan Platinum Jubilee Hospital vs. Munyambu C.A No. 18 of 1983. e.Dorothy Nelima Wafula vs. Hellen Nekesa Nielsen and Paul Fredrick Nelson [2017] eKLR.f.Mzee Wanje and 93 Others vs. A.K Saikwa (1982 – 88) 1 KAR 463. g.Civil Appeal Number 191 of 2019 Dharmagha Patel and Akshar Autospares Ltd vs. TA (A minor suing through the mother and next friend HH).h.National Cereals and Produce Board vs. Erad Supplies & General Contracts Ltd (CA 9 of 2012).i.Walter Joe Mburu vs. Abdul Shakoor Sheikh & 3 Others Civil Appeal No. 195 of 2002 [2015] eKLR.j.Nairobi Civil Appeal No. 2 of 2018 Nayan Mansukhlal Salva vs. Hanikssa Nayan Salva.k.Adamson vs. Attorney Generall.Cape Brandy Syndicate vs. Inland Revenue Commisisoners [1920] 1 KB 64. m.T.M Bell vs. Commissioner of Income Tax Ex parte SD Transami.n.Paleah Stores Limited vs. Commissioner of Investigations and Enforcement [2022] eKLR.o.Fibre Link Limited vs. Star Television Production Limited [2015] eKLR.p.Tarmohamed & Another vs. Lkhani & Co. [1958] E A 567.

21. The Respondent prayed for the Applicant’s application to be dismissed with costs to the Respondent.

Analysis and Findings 22. The Appellant’s application is premised on Rules 21 and 27 of the Tax Appeals Tribunal (Procedure) Rules 2015.

23. Rule 21 of the Tax Appeals Tribunal (Procedure) Rules 2015, provides that;“A party may at any time before the closure of the case, orally apply to amend its pleadings and the Tribunal may, at its discretion, allow such application on such terms and conditions including granting leave to the other party to amend its pleadings provided the amendments do not raise new issues”

24. Further Rule 27 of the Tax Appeals Tribunal (Procedure) Rules 2015, provides that;“The Tribunal may determine an appropriate procedure where there are no applicable procedures under these Rules or the Act.”

25. The Orders sought by the Applicant herein for leave to file a Supplementary Statement of Facts together with documents attached thereto. Such leave is premised on the discretion of the Tribunal which is to be exercised judiciously, on plain and obvious cases.

26. The Tribunals’ jurisdiction to entertain applications of this nature is donated by Rule 10 as read together with Rule 21 of the Tax Appeals Tribunal (Procedure) Rules 2015.

27. Rule 10 (3) of the Tax Appeals Tribunal (Procedure) Rules 2015 provides for the grounds upon which the Tribunal may be guided by while considering an application of the nature herein, which Rule provides as thus:-“The Tribunal may grant the extension of time if it is satisfied that the applicant was unable to submit the documents in time for the following reasons-(a)absence from Kenya;(b)sickness; or(c)any other reasonable cause.”

28. The application sought for leave to file a Supplementary Statement of Facts, and from the foregoing the ground for consideration by this Tribunal is anchored under Section 10 (3) (c) being any other reasonable cause.

29. The Appellant submitted that it had sufficient and reasonable grounds for the delay and outline the same as follows:a.That the documents were omitted on the basis of inadvertency on the part of the Appellant.b.That some of the documents could not have been present as were generated by the Respondent during the subsistence of the Appeal herein.c.That the documents generated by the Respondent were not made available in good time.

30. The Respondent submitted that the Appellant desires to furnish it with new documents, which it did not present before the Objection stage despite being requested to so do. Further, that the Appellant has not proffered any explanations as to why the same were not produced at the time of lodging the Appeal as is prescribed in law.

31. The principles that guide the Tribunal in determining applications for leave to either amend the Memorandum of Appeal or files a Supplementary Statement of Facts can be analysed from the case of Elijah Kipngeno Arap Bii vs. Kenya Commercial Bank Limited [2013] eKLR, which principles include;a.The application should be made timeously that is before the conclusion of the matter;b.The amendments or supplementary Statement of Facts ought not introduce new issues to the Appeal or a new cause of action.c.No prejudice ought to be suffered by the other party if the application is granted.d.If granted, the Respondent ought to be given an opportunity to amend its pleadings in view of the Applicant’s amendments.

a. On whether the application should be made timeously that is before the conclusion of the matter; 32. The Appellant presented its Appeal on 13th February 2023 against the Respondent’s Objection decision, that the Appellant filed the present application on the 20th September 2023, which period apart is seven (7) months.

33. The instant Appeal is yet to be heard by the Tribunal, and the Tribunal take the view that the above cited period is not inordinate coupled with the fact that the Appeal is yet to be heard, deems the application as presented timeously.

b. On whether the amendments or supplementary Statement of Facts ought not introduce new issues to the Appeal or a new cause of action. 34. The Applicant in its application and supporting affidavit advanced grounds and offered explanations as to the cause of the delay as alluded hereinabove.

35. The Tribunal has taken the liberty to peruse through the Applicant’s draft Supplementary Statement of Facts as well as the documents sought to be introduced, the Tribunal notes that the documents are generated by either the Appellant or the Respondent, which documents include;a.Respondent’s correspondence to the Appellant dated 17th December 2020. b.Appellant’s correspondence to the Respondent undated, but in response to Respondent’s correspondence of 17th December 2020. c.Appellant’s correspondence to the Respondent dated 17th March 2021. d.Appellant’s correspondence to the Respondent dated 14th August 2021. e.Respondent’s correspondence to the Appellant dated 26th August 2021 in response to Respondent’s correspondence of 14th August 2020. f.Three (3) Assessment Orders issued by the Respondent to the Appellant dated 25th February 2022. g.Two (2) Objection application acknowledgement receipts made by the Appellant to the Respondent dated 10th March 2022. h.Three (3) Notices of Confirmation of Assessment issued by the Respondent to the Appellant dated 20th June 2023

36. Upon evaluation of the Supplementary Statement of Facts and documents to be attached thereto, neither do the same constitute the introduction of any new issue or issues nor are the documents new. The documents relate to correspondences between the parties and other documents generated by the Respondent, which the Respondent cannot claim not to have had sight of.

37. Further, the documents marked as “LWA 7” on the Applicant’s Affidavit in support of the application are dated 20th June 2023, which date is after the filing of the Appeal documents.

38. It is impractical for the Respondent to have expected the Applicant to present such documents either before it at the Objection stage or at the time of lodging its Appeal documents.

39. It is the Tribunal’s position that the proposed averments in the proposed Supplementary Statement of Facts and documents thereof will in fact aid the Tribunal in determining the real questions in issue and/or controversy.

40. Having considered the grounds advanced by the Applicant in support of the order sought, the Tribunal appreciates the same as reasonable and adequate. Further the Supplementary Statement of Facts and documents attached thereto do not introduce any new issues or new cause of action to the Appeal.

c. On whether any prejudice may be suffered by the Respondent, if the application is granted. 41. The Respondent submitted that it will irreparably suffer prejudice on account of the orders sought being granted, founded on the fact that Commissioner for Domestic Taxes has not reviewed the documents or scrutinized the documents.

42. Further, the Respondent submitted that the application is an attempt to achieve trial by ambush, as the Respondent has not had any opportunity to consider the documents during the Objection stage, the documents having been generated by the Respondent cannot deem to be prejudicial.

43. That the additional documents sought to be produced were in the Applicant’s possession, and therefore, there were plausible reasons as to why the same were not produced earlier for inspection and interrogation by the Respondent.

44. The Tribunal observes that no prejudice will be suffered by the Respondent, the Respondent shall have an ample opportunity to peruse the same and to respond to the Supplementary Statement of Facts and additional documents.

45. The Tribunal having considered rival submissions finds that there will be no prejudice to be suffered by the Respondent, as the Respondent shall have an opportunity to review and respond to the said amendments and documents.

46. The Tribunal finds that the application herein meets the statutory threshold and it is persuaded to exercise its discretion in favour of the Applicant.

Disposition 47. Consequently, the Tribunal finds that the application is merited and makes the following Orders; -a.The Appellant be and is hereby granted leave to file a Supplementary Statement of Facts and additional documents restricted to the documents indicated in the application.b.The Applicant to file and serve the Supplementary Statement of Facts and the additional documents within Seven (7) days of the date of delivery of this Ruling.c.The Respondent be and is hereby granted a corresponding leave to file a Supplementary Statement of Facts and any additional documents within Fifteen (15) days of being served by the Appellant.d.No order as to costs.

48. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 1ST DAY DECEMBER, 2023ERIC NYONGESA WAFULA - CHAIRMANMUTISO MAKAU - MEMBERABRAHAM K. KIPROTICH - MEMBERELISHAH N. NJERU - MEMBEREUNICE N. NG’ANG’A - MEMBER