[2025] KETAT 20 (KLR)

Kenafric Beverages & Bottling Limited v Commissioner of Legal Services & Board Coordination (Tax Appeal E432 of 2024) [2025] KETAT 20 (KLR) (24 January 2025) (Ruling)

Neutral citation: [2025] KETAT 20 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E432 of 2024

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

January 24, 2025

Between

Kenafric Beverages & Bottling Limited

Applicant

and

Commissioner of Legal Services & Board Coordination

Respondent

Ruling

1. The Applicant moved this Tribunal vide a Notice of Motion dated 22nd November 2024 and supported by affidavit sworn by Emma Gwako on 22nd November 2024 seeking the following Orders:a.Spent.b.That the Respondent be cited for contempt of the judgment of this Tribunal delivered on 20th September 2024. c.That the Respondent be ordered to immediately and unconditionally remove the tax liabilities on the Applicant’s i-Tax Portal.d.Costs of this Application be provided for.

2. The Application was based on the following grounds:a.That the Tribunal, vide a judgment dated 20th September 2024, allowed the Applicant's appeal; set aside the Respondent's objection decision dated 22nd June 2023; and ordered every party to bear their own costs.b.That pursuant to the said judgment, the Respondent was mandated to unequivocally and unconditionally remove all the tax liabilities that were reflecting on the Applicant's i-Tax portal.c.That the Respondent notified this Tribunal of its intent to file an appeal against the whole judgment of this Tribunal vide a notice of Appeal dated 18th October 2024. d.That the notice of appeal has never been served upon the Applicant and the Applicant accessed it accidentally on the Case Tracking System (CTS) portal.a.That the said notice of appeal was not properly on record and ought to be struck out for violation of the mandatory nature of the provisions of Section 32(1A) of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”) that requires the prospective Appellant to compulsorily serve the notice of Appeal to the prospective respondent within two days of filing.b.That the attempts by the Applicant's advocates on record, Messrs Rachier & Amollo LLP, to request the removal of the wanton unlawful and illegal tax liabilities have been contemptuously ignored by the Respondent. This has made it practically impossible for the Applicant to seek its tax refunds from the Respondent.c.That the Respondent's continuous disobedience and ignorance of the judgment and orders of this Tribunal violates the cardinal principle of rule of law which makes it incumbent for all persons, including the Respondent, to respect valid court and/or tribunal’s orders at all times.d.That the Respondent had not obtained any valid orders staying the execution of the judgment. That the lodging of a notice of Appeal and/or institution of a substantive appeal is not an automatic stay of execution of judgment and the Respondent ought to religiously adhere to the Judgment of this Tribunal.e.That it was for the foregoing reasons that the Respondent ought to be cited for contempt of valid orders of this Tribunal.f.That it was in the best interests of justice and protection of the Applicant’s right to enjoy the fruits of the judgment issued in its favour that this matter be placed before the Tribunal forthwith, certified urgent and directions issued.

3. In response to the Application, the Respondent filed a Preliminary Objection dated 2nd December, 2024 on even date together with a Replying Affidavit sworn by its officer Fred Ndeleva on 2nd December 2024 stating the following as its grounds of opposition:Preliminary Objectioni.That the Applicant had not exhausted all external mechanism available (High Court) as this “Tribunal has down its tools and cannot relook into the matter unless there’s an error apparent on the record which they seek review.ii.That the Application was incompetent, legally unsuitable and amounts to forum shopping and as such an abuse of the court process as there is no Jurisdiction before the Tribunal.iii.That the Tribunal lacked jurisdiction to hear the Application as it was functus officio as it delivered its Judgement on 20th September, 2024 in TAT NO. E432 OF 2023. iv.That this Application was fatally defective as it offends the mandatory provisions of the laws.v.That this Application was therefore fatally defective for want of compliance with the law and that the Application was a misconception and ought to be dismissed with costs.Replying Affidavitvi.The Respondent carried out a review of the Applicant’s excise returns with a view to verify the accuracy of the declarations for the period June 2022 to January 2023. vii.Upon conclusion of the exercise, the Respondent established that despite being in the business of manufacturing bottled water and beverages, the Applicant made claims of packaging material (Bottles and preform bottles) contrary to the provisions of Section 14 of the Excise Duty Act, CAP, 472 of the Laws of Kenya (hereinafter “EDA”).viii.The Tribunal heard this matter conclusively and delivered its Judgement on 20th September 2024 thus downing its tools and becoming functus officio.ix.The Applicant had not exhausted all external mechanism available (High Court). As this Tribunal had downed its tools and cannot relook into the matter unless there is an error apparent on the record which they seek review.x.The Application was incompetent, legally unsuitable and amounts to forum shopping and as such an abuse of the court process as there is no Jurisdiction before the Tribunal.xi.The Tribunal lacked jurisdiction to hear the application as it was functus officio as it delivered its Judgement on 20th September 2024 in TAT No. E432 of 2023. xii.This Application was fatally defective as it offends the mandatory provisions of Section 53 of the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”). The Application is therefore fatally defective for want of compliance with the law therefore the Application is incompetent.xiii.That without prejudice to the above, the orders sought in this Application were not in the memorandum of Appeal filed and that the Respondent is not defiant of the Judgement of the Tribunal.xiv.The Applicant wanted to fraudulently seek orders which were not originally prayed for in the finalised Appeal and wants to use this Tribunal to sanitise their pleadings in granting orders that were not even prayed for.xv.That in order to succeed in civil contempt proceedings, an Applicant has to prove the terms of the order; knowledge of these terms by the Respondent and failure by the Respondent to comply with the terms of the order.xvi.The Applicant had not proved in its Application that the Respondent has flouted the decision issued by the Tribunal.xvii.The Respondent relied on the case of Hadkison v Hadkison [1952] All ER 567 where the Court held that the plain and unqualified obligation of every person against whom an order was made is to obey it unless the order is discharged and disobedience of the order would result to being in contempt.xviii.The Applicant was putting the Tribunal in an untidy situation in these proceedings as it had already pronounced itself and closed the file and there is no error apparent on record.xix.If the Applicant seeks further orders or feels that there is disobedience then the right court to move is the High Court. However, it did the reverse and have now rushed to this Tribunal seeking orders they had not prayed for.xx.That a quick glance at the Application showed that there is no specific person and reason the Applicant seeks to cite for contempt because there was no order directed against any officer of the Respondent and that the Applicant did not extract or serve the Order upon the specific officers.xxi.The Applicant has not exhausted all the external mechanisms available according to the Law after a judgement is delivered.xxii.The Respondent in this case was working not with the intent to violate the rights of the Applicant but has filed an Appeal at the High court to challenge the said decision.xxiii.That the decided cases have ruled that an Appeal filed at a higher court is a stay enough as the issues of the Judgement are contested and a party needs not to apply for stay when they have appealed.xxiv.The Respondent is acting well within the Law and acting to safe guard the interests of the Kenyan government.xxv.That if the said prayers are granted by the Tribunal the implications can be grave as without pronouncement from the High Court on the Appeal filed by the Respondent will suffer prejudice.xxvi.That if the said prayers are granted then the Tribunal will be setting a bad precedent and there will be a risk of all litigant filling frivolous Applications after the Tribunal has rendered its Judgement and if the orders are granted the Respondent will not have any recourse to the Applicants.xxvii.Under the circumstances, the Application is a misconception and ought to be dismissed with costs to the Respondent.

4. On 28th November, 2024 Parties were directed by the Tribunal to file their respective written submissions on or before the 16th of December, 2024. There were consequences for failure to strictly comply with the directions of the Tribunal. The Applicant failed to comply with the Tribunal’s directions and accordingly, its submissions were not considered.

5. In its submissions, the Respondent identified two issues for determination. The first was whether the Tribunal has jurisdiction to determine the instant application; and the second was whether the Respondent was in contempt of Court.

6. In relation to the first issue, the Respondent submitted that upon delivery of Judgment by a Court, the jurisdiction of the Court terminates and transfers to the appellate Court should the parties decide to appeal. The Respondent cited the case of Subru Motors Limited v Commissioner of Domestic Taxes (Tribunal Appeal 109 of 2016) where it was held as follows:“the Tribunal considers itself functus officio upon delivery of its judgment or ruling except where it is moved to exercise its powers to review its decision to correct an error or a mistake.’’

7. The Respondent also submitted that the doctrine of functus officio was set out by the Court of Appeal in the case of Telkom Kenya Ltd v John Ochanda [2014] eKLR as follows:“Functus officio is an enduring principle of law that prevents the reopening of a matter before a court that rendered the final decision thereon. It is a doctrine that has been recognized in the common law tradition from as long as the later part of the 19th Century.”

8. On whether the Respondent was in contempt of Court, the Respondent submitted that it was not in contempt because it filed an Appeal which has not been heard and determined.

9. In support of its case, the Respondent cited a number of case laws including Sheila Cassat Issenberg & Another vs Anthony Macharia Kinyanjui (2021) eKLR; Samuel M.N Mweru & Others vs National Land Commission & 2 others (2020) eKLR; Republic v Ahmad abolfathi Mohamed & another (2018) eKLR; and Abdiaziz Sheikh Maad & 3 others v Governor, Mandera County & 2 others [2021] eKLR.

10. The Respondent prayed for the Tribunal to find that the Applicant’s Notice of Motion was not merited and that the Applicant was not deserving of the audience of the Tribunal. The Respondent prayed that the Applicant’s Notice of Motion dated 22nd November 2024 be dismissed with costs.

Analysis and Findings 11. Having examined the Application and grounds of opposition, and the Respondent’s written submissions parties’ written submissions, the Tribunal is of the view that there were two main issues for its determination namely:a.Whether the Tribunal has jurisdiction to hear and determine the Application dated 22nd November 2024. b.Whether the Application dated 22nd November 2024 was merited.

12. On Whether the Tribunal has jurisdiction to hear and determine the Application dated 22nd November 2024, the Tribunal notes that the Applicant moved the Tribunal for a determination that the Respondent be cited for contempt of the Judgement of the Tribunal delivered on 20th September, 2024. The Applicant also prayed for orders that the Respondent immediately and unconditionally be ordered by the Tribunal to remove the tax liabilities on its i-Tax portal.

13. The facts in this matter were not disputed. Both parties concur that this Tribunal issued its judgment delivered on 20th September 2024 in Tax Appeal No. E432 of 2023 Kenafric Beverages & Bottling Limited V Commissioner of Domestic Taxes where the Tribunal allowed the Applicant's appeal, set aside the Respondent's objection decision dated 22nd June 2023 and ordered every party to bear their own costs.

14. The Tribunal notes that the Respondent filed a preliminary objection to this Application opposing it on the grounds that the Tribunal has no jurisdiction to hear this Application since the Tribunal is “functus officio’ having already rendered its Judgement on the matter on 20th September 2024. The Respondent decried the fact that the Application was therefore fatally defective and ought to be struck out. The Respondent in its Replying Affidavit sought to further its deportment on the preliminary objection and recommended that the remedy for the Applicant was to file an Appeal at the High Court.

15. In view of the preliminary objection and the Respondent’s vehement opposition to the Application on the basis that the Application is defective because the Tribunal is “functus officio” the Tribunal finds it necessary to delve into the issue of whether it has jurisdiction to hear the Application at all.

16. The Tribunal notes that among the Orders sought by the Applicant there were two that are of utmost importance that ought to be considered. First that the Respondent ought to be cited for contempt of the Judgement delivered on 20th September, 2024 and second that the Respondent be Ordered to immediately and unconditionally remove the tax liabilities on the Applicant’s i-Tax portal. In the case of Telkom Kenya Ltd v John Ochanda [2014] eKLR the Court held as follows regarding the principle of “functus officio”:“Functus officio is an enduring principle of law that prevents the re-opening of a matter before a court that rendered the final decision thereon. It is a doctrine that has been recognized in the common law tradition from as long ago as the latter part of the 19th Century. In the Canadian case of Chandler vs Alberta Association of Architects [1989] 2 S.C.R. 848, Sopinka J. traced the origins of the doctrines as follows (at p. 860);“The general rule that a final decision of a court cannot be re-opened derives from the decision of the English Court of Appeal In re St. Nazaire Co., (1879), 12 Ch. D. 88. The basis for it was that the power to rehear was transferred by the Judicature Acts to the appellate division. The rule applied only after the formal judgment had been drawn up, issued and entered, and was subject to two exceptions:1. Where there had been a slip in drawing it up, and,2. Where there was an error in expressing the manifest intention of the court. See Paper Machinery Ltd. v J.O. Rose Engineering Corp., [1934] S.C.R. 186. ”

17. The Tribunal also cites the case of Raila Odinga & 2 Others v. Independent Electoral & Boundaries Commission & 3 Others [2013] eKLR, where the court had cited with approval a passage in an article by Daniel Mala Pretorius entitled “The Origins of the functus officio Doctrine, with Special Reference to its Application in Administrative Law”, in South African Law Journal, Vol. 122 (2005), at p. 832, in the following terms:“The functus officio doctrine is one of the mechanisms by means of which the law gives expression to the principle of finality. According to this doctrine, a person who is vested with adjudicative or decision-making powers may, as a general rule, exercise those powers only once in relation to the same matter…. The [principle] is that once such a decision has been taken, it is (subject to any right of appeal to a superior body or functionary) final and conclusive. Such a decision cannot be reviewed or varied by the decision-maker.”

18. In Subru Motors Limited v Commissioner of Domestic Taxes (Tribunal Appeal 109 of 2016) the Tribunal at paragraph 11 held as follows:the Tribunal considers itself functus officio upon delivery of its judgment or ruling except where it is moved to exercise its powers to review its decision to correct an error or a mistake.’’

19. The Tribunal’s view is that in the first instance, the Applicant prayed that the Respondent would be cited for contempt. The view of the Tribunal is that it has jurisdiction to consider that prayer as made in the Application in view of the following provisions of Section 21 of the TATA which provides for an offence known as ‘Contempt of Tribunal’’:“Any person who—a.insults a member or an employee of the Tribunal in relation to exercise of powers and functions under this Act, orb.interrupts the proceedings of the Tribunal; orc.creates a disturbance or takes part in creating a disturbance in or near a place where the Tribunal I sitting; ord.does any other act or thing that would, if the Tribunal were a court of law, constitute a contempt of that court, commits an offence and shall be liable on conviction [emphasis ours]to a fine not exceeding five hundred thousand shillings or to imprisonment for a term not exceeding six months, or to both.’’

20. The Tribunal, pursuant to the preceding provisions of the TATA has jurisdiction to determine whether a party to proceedings has acted in contempt of its Orders and it is to that extent the Tribunal is not “functus officio” as the Respondent has so adamantly outlined in its grounds of opposition. More particularly, the view of the Tribunal is that the filing of an Appeal by the Respondent at the High Court is not an automatic stay of the proceedings at the Tribunal.

21. The Tribunal view and finding is that until such time as the High Court would issue Orders to stay its proceedings, it has jurisdiction to determine if the Respondent has acted in contempt of its Orders and furthermore, it has the jurisdiction to so cite the Respondent for contempt if it finds that the Respondent wilfully disobeyed the Orders that it issued vide its Judgement dated 20th September,2024. The Tribunal will therefore delve into this issue by first alluding to the following holding of Hon. Justice Ibrahim (as he then was) in the case of Econet Wireless Kenya Limited Vs Minister for Information and Communication of Kenya Authority [2005] eKLR:“It is essential for the maintenance of the rule of law and order that the authority and the dignity of our courts are upheld at all times. The Court will not condone deliberate disobedience of its orders and will not shy away from its responsibility to deal firmly with proved contemnors. It is the plain and unqualified obligation of every person against whom an order is made by court of competent jurisdiction, to obey it unless and until the order is discharged. The uncompromising nature of this obligation is shown by the fact that it extends even to cases where the person affected by the order believes it to be irregular or void.’’

22. In T.N Gadavarman Thiru Mulpad v Ashok Khot and Another [2005] 5 SCC, the Supreme Court of India in emphasizing the dangers of disobeying court orders held as follows:“Disobedience of this Court's order strikes at the very root of the rule of law on which the judicial system rests. The rule of law is the foundation of a democratic society. Judiciary is the guardian of the rule of law. Hence, it is not only the third pillar but also the central pillar of the democratic State. If the judiciary is to perform its duties and functions effectively and remain true to the spirit with which they are sacredly entrusted to it, the dignity and authority of the Courts have to be respected and protected at all costs. Otherwise, the very corner stone of our constitutional scheme will give way and with it will disappear the rule of law and the civilized life in the society. That is why it is imperative and invariable that Court's orders are to be followed and complied with.’’

23. The Tribunal notes that pursuant to the above provisions of section 21 of the TATA, contempt of the Tribunal is an offence and the same must be handled with care because a Contemnor may end up in jail. In Gatharia K. Mutikika – vs Baharini Farm Ltd [1985] KLR 227 it was held that as follows:“A contempt of court is an offence of a criminal character. A man may be sent to prison. It must be proved satisfactorily. It must be higher than proof on a balance of probabilities, almost but not exactly, beyond reasonable doubt. The standard of proof beyond reasonable doubt ought to be left where it belongs, to wit criminal cases. It is not safe to extend it to offences which can be said to be quasi-criminal in nature.’’

24. In light of the seriousness of the personal consequences that would ordinarily flow from a finding of contempt, evidence must be adduced that the Order in question was brought to the attention of the alleged contemnor as proof that he/she/it had personal knowledge of said Order. In Oilfield Movers Ltd v Zahara Oil & Gas Limited [2020] eKLR the court stated as follows:“It is important however that the court satisfies itself beyond any shadow of a doubt that the person alleged to be in contempt committed the act complained of with full knowledge or motive of the existence of the order of the court forbidding it. The threshold is quite high as it involves possible deprivation of a person’s liberty.”

25. The Tribunal is of the view that since contempt may deprive someone of their constitutional liberties, it is necessary that number factors have been satisfied before deciding on contempt. To this end, in the case Samuel M. N. Mweru & Others v National Land Commission & 2 others [2020] eKLR, the court held as follows outlining the conditions that ought to be met in order for a contempt proceeding to succeed:“It is an established principle of law that in order to succeed in civil contempt proceedings, the Appellant has to prove (i) the terms of the order, (ii) Knowledge of these terms by the Respondent, (iii). Failure by the Respondent to comply with the terms of the order. Upon proof of these requirements the presence of willfulness and bad faith on the part of the Respondent would normally be inferred, but the Respondent could rebut this inference by contrary proof on a balance of probabilities.”

26. These principles are discussed hereunder in relation to the first prayer of the Applicant. The Tribunal notes that in regard to the first principle, the Applicant has been able to demonstrate that the Tribunal made an Order. In regard to the second principle, the Tribunal is certain that the Respondent was made aware of the decision of the Tribunal since it has mentioned the same in its Replying Affidavit. Finally, upon a review by the Tribunal of the Respondent’s grounds of opposition the Tribunal notes that the Respondent knew the terms of the Orders that the Tribunal issued.

27. On 20th September, 2024, the Tribunal issued the following Orders:“a)That the Appeal be and is hereby allowed;b)The Respondent’s Objection Decision dated 22nd June , 2023 be and is hereby set aside; andc)Each party to bear its own costs”

28. The Tribunal is of the view that the implication or meaning of setting aside of the objection decision dated 22nd June, 2023 is that the impugned assessment was disregarded and/or quashed and that therefore the Respondent could not demand from the Applicant the assessed taxes. The Applicant did not adduce evidence to prove that the Respondent wilfully and in bad faith failed to comply with the Orders of the Tribunal delivered vide its Judgement on 20th September, 2024. The finding of the Tribunal in this regard is that the Respondent was not in contempt of the Order of the Tribunal to set aside its objection decision dated 22nd June 2023. The consequence of this finding is that the Tribunal cannot cite the Respondent for Contempt.

29. The Applicant also sought Orders for the Respondent to immediately and unconditionally, remove the tax liabilities on its i-Tax portal. The Tribunal has jurisdiction to review its Orders and/or Decrees pursuant to section 29A of the TATA under the following conditions as set out in the said Section 29A of the TATA: The Application for a review of the decree or Order may be made.

The Application for a review of the decree or order if made, may be made within seven days from the date that the Decree or Order was made by the Tribunal.

The review of the Decree or Orders are made by the Tribunal upon consideration of such an Application within 14 days and such an Application may be made for the following reasons:i.Upon discovery of new and important matter or evidence which could not be produced by the Applicant at the time when the Decree was passed and the Order was made.ii.On account of some mistake or error apparent on the face of the record.iii.For any other sufficient reason.

30. The Tribunal finds that it does not have jurisdiction to issue the additional Orders sought by the Applicant for the Respondent to immediately and unconditionally, remove the tax liabilities on its i-Tax portal. The basis of this finding by the Tribunal being that granting this additional Order amounts to a review of its Orders and/or Decree which review the Applicant though entitled to, failed to apply for, thereby relinquishing its rights as a taxpayer. Instead, the Applicant sought the Order through the instant Application in disregard of the clear provisions of section 29A of the TATA. The Tribunal notes that the Applicant did not pray for or seek this Order during its Appeal whose Judgement was delivered on 20th September, 2024 and further notes that in the said Judgement, the Applicant was granted all its prayers.

31. Accordingly, the Tribunal finds and holds that in regard to the second prayer of the Applicant which was for the Respondent to immediately and unconditionally, remove the tax liabilities on its i-Tax portal; it is “functus officio” and has downed its tools as required and held in the case of Owners of The Motor Vessel “Lillian S” vs. Caltex Oil (Kenya) Limited (Civil Appeal No. 50 of 1989.

32. The second issue for determination is rendered moot by the Tribunal’s findings.

Disposition 33. The upshot of the foregoing is that the Tribunal finds that this Application fails and accordingly proceeds to make the following Orders:a.The Application be and is hereby dismissed.b.No orders as to costs.

34. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 24TH DAY OF JANUARY, 2025. CHRISTINE A. MUGA - CHAIRPERSONBONIFACE K. TERER - MEMBERELISHAH N. NJERU - MEMBEREUNICE N. NG’ANG’A - MEMBEROLOLCHIKE S. SPENCER - MEMBER