[2025] KETAT 18 (KLR)

Kenafric Industries Limited v Commissioner of Domestic Taxes (Tax Appeal E916 of 2023) [2025] KETAT 18 (KLR) (24 January 2025) (Ruling)

Neutral citation: [2025] KETAT 18 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E916 of 2023

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

January 24, 2025

Between

Kenafric Industries Limited

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Applicant moved the Tribunal vide a Notice of Motion dated 20th November, 2024 and filed on 21st November, 2024 seeking the following Orders:a.Spent.b.That the Respondent be cited for contempt of the Judgment of this Tribunal delivered on 1st August 2024. c.That the Respondent be ordered to immediately and unconditionally remove the tax liabilities on the Applicant’s i-Tax portal.d.That the costs of this Application be provided for.

2. The Application which was supported by an Affidavit sworn by the Legal Compliance Officer of the Applicant, Ms. Emma Gwako on the 20th day of November, 2024 was premised on the following grounds:a.That this Tribunal, vide a Judgment dated 1st August, 2024, allowed the Applicant's Appeal; set aside the Respondent's objection decision dated 29th November 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 reflected 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 vide a notice of Appeal dated 21st August, 2024. d.That the Respondent thereafter instituted its Appeal vide a Memorandum of Appeal dated 29th August 2024. e.That despite instituting an appeal against the impugned judgment, the Respondent has never made any application, either before this Tribunal or at the High Court, seeking for stay of execution of thereof.f.That in the absence of any valid orders staying the execution of the Judgment, the Respondent has continuously, persistently and capriciously refused to remove the tax liabilities that were successfully challenged by the Respondent before this Tribunal.g.That the institution of an appeal is not an automatic stay of execution of a judgement.h.That the attempts by the Applicant’s advocates on record Messrs Rachier and Amollo LLP to request the removal of the wanton, unlawful and illegal tax liabilities have been contemptuously ignored by the Respondent.i.That the Respondent adamantly and stubbornly instead that it will only remove the said liabilities after the determination of the Appeal in the High Court, despite the absence of any orders staying the execution of the impugned judgement.j.That the wanton, unlawful and illegal tax liabilities are still reflected on the Applicant's i-Tax portal. The continued reflection has been prejudicial to the smooth operation of the Applicant's business operations including obtaining tax refunds from the Respondent.k.That it was for the foregoing reasons that the Respondent ought to be cited for contempt of valid orders of this Court.l.That it was in the best interests of justice and protection of the Appellant'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.m.That it was in the best interest of justice that the orders prayed herein would be granted.

3. In response to the Notice of Motion, the Respondent filed both a preliminary objection to the Application on 2nd December, 2024 together with its Replying Affidavit sworn by its officer, Mr. Fred Ndeleva and filed on 2nd December, 2024 2024 on the following grounds:Preliminary Objection:i.That the Applicant had not exhausted all external mechanisms available as this Tribunal has downed its tools and cannot relook into the matter unless there's an error apparent on the record which they seek review.ii.The Application is 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.The Tribunal lacked jurisdiction to hear the Application as it is functus officio as it delivered its Judgement on 1st August, 2024 in TAT No. E916 of 2023. iv.That the Application is fatally defective as it offends the mandatory provisions of the laws.v.That this Application is therefore fatally defective for want of compliance with the law.vi.That under the circumstances this Application was a misconception and ought to be dismissed with costs to the Respondent.Replying Affidavitvii.That under Part 1 of the First Schedule to the Kenya Revenue Authority Act, Cap 469 Laws of Kenya (hereinafter “the Act”) the Respondent enforces tax laws inter alia the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”).viii.That the Applicant is a company incorporated within the Republic of Kenya and is a manufacturer and trader of varied categories of non-alcoholic beverages that include bottled water, ready to drink, carbonated soft drinks and energy drinks.ix.That the Respondent carried out a review of the Applicant’s excise returns with a view to verify the accuracy of the returns declared for excise tax purposes for the period September 2021 to June 2022. x.That the Tribunal heard this matter conclusively and delivered its Judgement on 1st August 2024 thus downing its tools and becoming functus officio.xi.That the Applicant has not exhausted all external mechanism available (High Court). As this Tribunal has down{sic} its tools and cannot relook into the matter unless there's an error apparent on the record which they seek review.xii.That the Application is 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.xiii.That the Tribunal lacks jurisdiction to hear the application as it is functus officio as it delivered its Judgement on 1st August, 2024 in TAT No. E916 of 2023. xiv.That this Application is fatally defective as it offends the mandatory provisions of Section 53 of the TPA.xv.That this Application is therefore fatally defective for want of compliance with the law and that under the circumstances, this Application was a misconception and ought to be dismissed with costs to the Respondent.xvi.That without prejudice to the above the orders being sought in this Application were on in the Memorandum of Appeal filed and that the Respondent is not defiant of the Judgement of the Tribunal.xvii.That the Applicant wants to fraudulently seek orders which were not originally prayed for in the finalised Appeal and wants to use this Tribunal to sanitise its pleadings in granting orders that were not even prayed for.xviii.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.xix.That the Applicant has not proved in its Application that the Respondent has flouted the decision issued herein.xx.That the Respondent lays emphasis on 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.xxi.That the Applicant was putting the Tribunal in an untidy situation in these proceedings as they have already pronounced themselves and closed the file and there's no error apparent on record.xxii.That if the Applicant seeks further orders or feels that there's disobedience then the right court to move is the High Court. However, it did the reverse and has now rushed to the Tribunal seeking orders they had not prayed for.xxiii.That a quick glance at the Application there's 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.xxiv.That the Applicant has not exhausted all the external mechanisms available according to the Law after a judgement is delivered.xxv.That the Applications before the Tribunal are incompetent, legally unsuitable and amounts to forum shopping and as such an abuse of the court process.xxvi.That the Respondent in this case is 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.xxvii.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.xxviii.That the Respondent is acting well within the Law and acting to safe guard the interests of the Kenyan government.xxix.That if the said prayers are granted by the Tribunal-the implications can be grave as without pronounced from the High Court on the Appeal filed the Respondent risks to suffer a lot of prejudice.xxx.That also 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.xxxi.That further if the orders are granted the Respondent will not have any recourse to the Applicant.xxxii.That issuance of the orders at this stage will be detrimental as the Appeal at the High Court will be already spent.xxxiii.That under the circumstances, this Application is a misconception and ought to be dismissed with costs to the Respondent.

4. The Tribunal directed parties to file their respective submissions on or before the 16th of December, 2024. The Respondent complied with the directions of the Tribunal whilst the Applicant did not. As directed, the Tribunal will only consider the submissions of the Respondent in this regard.

Analysis and Findings 5. The Applicant moved this Tribunal for a determination that the Respondent be cited for contempt of the Judgement of the Tribunal delivered on 1st August, 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.

6. 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 it since the Tribunal is “functus officio’ having already rendered its Judgement on the matter on 1st August, 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.

7. 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. The Tribunal notes that among the Orders sought by the Applicant there are 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 1st August, 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. ”

8. 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.”

9. 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.’’

10. 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 part of the Application in view of the following provisions of Section 21 of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “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.’’

11. 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 that 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 of the Tribunal.

12. The Tribunal is of the view and finding 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 1st August, 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 Authority of Kenya [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.’’

13. 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.’’

14. The Tribunal notes that pursuant to 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.’’

15. In the light of the gravity 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.”

16. The Tribunal is of the view that since contempt may deprive someone of their constitutional liberties, it is necessary that a number of 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 wilfulness 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.”

17. 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 regurgitated 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.

18. On 1st August, 2024, the Tribunal issued the following Orders:“a)That the Appeal be and is hereby allowed;b)The Respondent’s Objection Decision dated 29th November, 2023 be and is hereby set aside; andc)Each party to bear its own costs”

19. The Tribunal is of the view that the implication or meaning of setting aside of the objection decision dated 29th November, 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 1st August, 2024.

20. 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 29th November, 2023. Accordingly, the Tribunal will not cite the Respondent for Contempt.

21. 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: 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.

On account of some mistake or error apparent on the face of the record.

For any other sufficient reason.

22. 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 which review the Applicant though entitled to, failed to apply for, thereby squandering its rights as a taxpayer. Instead, the Applicant sought the Order furtively through the instant Application in disregard of the clear provisions of section 29A of the TATA.

23. The Tribunal notes that the Applicant did not pray for or seek this Order during its Appeal whose Judgement was delivered on 1st August, 2024 and in the said Judgement, the Applicant was granted all the prayers that it made. 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.

Disposition 24. 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.

25. It is so Ordered.

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