[2025] KETAT 177 (KLR)

Kenya Breweries Limited v Commissioner of Domestic Taxes (Tax Appeal 706 of 2021) [2025] KETAT 177 (KLR) (21 March 2025) (Judgment)

Neutral citation: [2025] KETAT 177 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 706 of 2021

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

March 21, 2025

Between

Kenya Breweries Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a limited liability company, duly licensed in Kenya to carry out the business of manufacturing and distribution of both non-alcoholic and alcoholic drinks.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws (hereinafter “the Act”). 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 and 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 raised an additional assessment on 24th March, 2021 in respect of excise duty and VAT wherein it disallowed the excise duty rebate claimed by the Appellant of Kshs. 416,023,756. 00; disallowed a prepaid excise duty of Kshs. 66,147,027. 00 and indicated that a variance of 1,192,631 litres ought to be brought to charge. With regard to VAT, the Appellant was charged an amount of Kshs. 62,130,534. 00 in respect of sales that it made to DEFCO. In addition, the Respondent disallowed excise duty in respect of one of the consignments.

4. The Respondent, based on the assessment determined that the tax liability in respect of excise duty to be Kshs. 575,919,363. 00 whilst that in respect VAT was Kshs. 92,147,098. 00 and demanded immediate payment from the Appellant of Kshs. 668,066,461. 00.

5. The Appellant objected to the first assessment on 28th March, 2021 and in response, the Respondent issued an additional assessment on 12th April, 2021. The Respondent amended the assessments downward to Kshs. 365,751,538. 00 in respect to excise duty whilst VAT increased to Ksh. 106,369,688. 00.

6. On 10th May, 2021, the Appellant lodged an objection against the second assessment. After several correspondence between the parties, the Respondent made its objection decision dated 23rd August, 2021 against the second assessment and demanded the sum of Kshs 486,284,863. 00 inclusive of principal taxes and interest in respect of excise duty and VAT.

7. Aggrieved by the Respondent’s objection decision, the Appellant filed its Notice of Appeal dated 8th October, 2021 on even date.

8. The Appellant applied for review of the Judgment delivered on 28th February, 2025 pursuant to the provisions of Section 29(A) of the Tax Appeals Tribunal Act, CAP 469A of Kenya’s Laws (hereinafter “TATA”) and by orders issued by the Tribunal on 17th March, 2025, the Judgment delivered on 28th February, 2025 was set aside and the matter referred back for determination on its merits which determination the Tribunal will proceed to render herein.

The Appeal 9. The Appellant filed its Memorandum of Appeal dated 4th November, 2021 on 10th November, 2021, which Appeal was premised on the ground that the excise duty assessment amounting in the sum total to Kshs. 376,724,084. 00 inclusive of interest be set aside on the following grounds:a.It was not in law, open for the Respondent to make any assessment on the Appellant for excise duty on the following basis that:Excise duty rebate:i.Section 7(1) of the Excise Duty Act, CAP 472 of the Laws of Kenya (hereinafter “EDA”) provides as follows:“Subject to this section, no Excise Duty shall be charged on he following….(b) excisable goods exported under customs control , including as stores…”In accordance with the above stated provision of the law, the Appellant claimed excise duty rebate amounting to Kshs.38,880,996. 00 on its exports.ii.The Respondent in its objection decision asserted as follows:“…: you are in agreement that the entries quoted by KRA were no in your name. This means that the rebate was sought for based on exports not done by you. Introduction of the new entries only confirms underdeclaration.”iii.While in its notice of objection the Appellant inadvertently included entries that did not relate to it, this was corrected before the Respondent raised the second assessment, a fact overlooked in the objection decision. Contrary to the Respondent's position: upon such rectification, it was clear that the Appellant had properly claimed, and was entitled to rebates on the basis of the exports it had made as demonstrated in its schedule setting out the details of the correct export entries and the corresponding export documentation in support of the rebate that were provided to the Respondent as part of its objection and afterwards during the review process.iv.The Respondent erred in disregarding the documentation provided to it in support of the Appellant's excise duty rebate claim of Kshs 38,880,996. 00 and further claiming that the correct entries provided by the Appellant were ostensibly 'new entries' and a confirmation that there was an under declaration of excise duty.Certificate of Export not issuedv.The Respondent in its objection decision erred in stating that'...certificate of export were not presented, the same were req11ested for... ' This was notwithstanding the fact that the Appellant, as part of its objection, provided it with the schedule of export entries showing the corresponding certificates of exports and/or certificates of exit in support of the excise duty rebate and copies of Certificates of Exports for Kshs.260,723,515. 00. vi.The Respondent erred in relying on the provisions of the Value Added Tax Act, CAP 476 of the Laws of Kenya (hereinafter “VAT Act”) as a basis for denying the Appellant a rebate it is entitled to under the EDA. In particular, the objection decision explicitly relied on Regulation 12(3) of the VAT Regulations, 2013 (sic­ regulation 13(3) of the VAT Regulations, 2017) to deny the Appellant the rebate claim as “certificate of landing and T1 entries were requested to confirm the actual landing of the goods to the country of destination in cases where the exports were made to third parties i.e.; South Sudan, the aforementioned documents were not provided….”vii.Indeed, so far as material, Regulation 13(2)(c)(iii) of the VAT Regulations, 2017 expressly disclaim the application of those provisions (i.e. the VAT Regulations) from excise duty­ “for excisable goods, the documents shall be in accordance with the provision of the Excise Duty Act, 2015…”viii.Regulation 13(2)(c)(i) and (ii) of the VAT Regulations, 2017 provides as follows:“The documentation relation to a supply required as proof of an exportation of goods or services shall be –(c)for goods, a copy of –(i)the bill of lading, road manifest, or airway bill, as the case may be;(ii)the export or transfer entry certified by a proper officer of Customs at the port of exit;”ix.Regulation 13(3) of the VAT Regulations, 2017, provides as follows:“...Where the Commissioner has reasonable grounds to believe that goods treated by a registered person as exported may have been exported-a.the Commissioner may, by notice in writing, require the registered person lo produce, within the time specified in the notice, a certificate signed and stamped by a competent authority outside Kenya slating that the goods were duly landed and entered for home consumption at a place outside Kenya;b.the supply shall not be treated as an exportation until the certificate referred to in paragraph (a) has been provided to, and accepted by, the Commissioner...”x.Even assuming, the VAT Regulations, 2017 apply, the objection decision was still invalid because of the following reasons:a.The notice as stipulated by the said regulation as not given to the Appellant by the Respondent before it issued the impugned assessment confirmed by the. objection decision. The requests came only after the Appellant had lodged its objection.b.The Respondent failed to demonstrate that it had reasonable grounds to believe that the goods were not exported. A mere request for documentation made on electronic mail without any justification as to why the request was being made did not suffice.c.In any event, as requested, the Appellant provided the Respondent's compliance team with most of the certificates of exports save for a few which the Appellant was still in the process of retrieving and would be able to furnish the Respondent with the same.Pre-paid excise duty claimed on raw materialsxi.Appellant claimed pre-paid excise duty incurred in the importation of raw materials under custom entry number 2021MSA7745039 correctly classifying them under tariff code 2106. 90. 20. xii.Even though it was aware that the matter was pending adjudication before this Tribunal, the Respondent sought to pre-empt such determination by raising the impugned assessment confirmed by the objection decision.xiii.The question of whether apple cider concentrate was a raw material, or a finished product was definitively settled by this Tribunal in its judgment delivered on 25th June 2021 in Tax Appeal No.282 of 2020, Kenya Breweries Limited v The Commissioner of Customs and Border-Control, holding that the correct classification for apple cider concentrate is 2106. 90. 20 as it is a raw material.xiv.Notwithstanding such an authoritative determination, the Respondent erred in its objection decision in upholding its earlier wrongful re-classification of the apple cider concentrate imported by the Appellant under tariff classification 2206. 00. 90 as a finished product despite the fact that it is, and has been held to be, a raw material. By section 14(1) of the EDA, having imported excisable raw material, the Appellant was entitled to claim the pre-paid excise duty. It provides as follows:“Where Excise Duty has been paid in respect of excisable good imported into or manufactured in Kenya by a licensed manufacturer and which have been used as raw materials in the manufacture of other excisable goods (hereinafter referred to as “finished goods”), the Excised Duty paid on the raw materials shall be offset against the Excise Duty payable on he finished goods”.VAT on Disallowed excise dutyxv.It was not in law, open for the Respondent to make any assessment on the Appellant for VAT on the basis of the disallowed excise duty.xvi.The Respondent's VAT assessment is erroneously based on an unlawful and/or otherwise wrongful excise duty assessment.

Appellant’s Case 10. The Appellant’s relied on its statement of facts dated 4th November, 2021 on 10th November, 2021, supplementary statement of facts dated and filed on 3rd February, 2023 and the testimony of Ms. Esther Kinuthia whose witness statement and supplementary witness statement were both adopted during the hearing on 13th November, 2024. The Appellant also complied with the Tribunal’s directions on 13th November, 2024 to file its written submissions on or before 29th November, 2024 and the same have therefore been considered.

11. The Appellant vide its letter dated 28th March, 2021, objected against the first assessment dated 24th March, 2021 on the following grounds:a.The excise duty rebate did not relate to items that were subject to excise duty under section 7 of the EDA. Supporting documentation in the form of invoices and a schedule of the goods was provided.b.The issue of classification of the import under tariff code 2106. 90. 20 of the East African Community Common External Tariffs (hereinafter “EACCET”) was still pending before the Tribunal as Tax Appeal Number 282 of 2020. c.The Variance between the Excisable Goods Management System (hereinafter “EGMS”) report and the Appellant’s returns was as a result of differenced in timing between actual production and recognition of volumes in the EGM. The correct amount of excise duty was remitted at the time the goods left the factory as required by Section 6 of the EDA.d.The VAT assessment was erroneous and unjustified.

12. On 21st April, 2021 the Respondent issued yet another additional assessment and whilst the EGMS query was dropped the aggregate sum of Kshs. 486,284,863. 00 was demanded and the Respondent contended that the Appellant ought to amend its excise duty rebate amount as set out in its excise duty returns to reflect DEFCO sales as well as exports made during the month; that the excise duty rebate of Kshs.38,880,996. 00 had been disallowed as out of these 31 entries were not made in the Appellant’s name; that excise duty rebate of Kshs. 260,723,515. 00 in respect of 183 entries were disallowed as Certificates of Export were not issued; that the prepaid excised duty claimed in respect of customs entry number 2021MSA7745039 amounting to Kshs. 66,147,027. 00 was wholly disallowed as it is a finished product and finally, that the entries disqualified as exports under excise duty were treated as local sales and subjected to VAT at 16%.

13. On the same date, that is; 12th April, 2021, the Respondent uploaded assessment order numbers KRA 20210582196 and KRA202106082471 for the excise duty and VAT assessments, respectively on the Appellant’s i-Tax platform.

14. The Appellant lodged an objection on 10th May, 2021, against the second assessment dated 12th April, 2021 on the basis that the rebates related to goods that were not subject to excise duty (with the correct entries retrieved and provided) and secondly thought it needed more time to provide copies of certificates of export for entries amounting to KShs 7,574,218. 00 it provided the schedule of export entries and certificates of export to the Respondent’s audit team. The Appellant also demonstrated that customs entry number 2021MSA7745039 was an importation of raw materials and not a finished product.

15. The Appellant provided the following documents with its notice of objection dated 10th May, 2021:a.Schedule of excise duty rebate amounting to Kshs. 38,880,996. 00;b.Export documentation for the excise duty rebate;c.Schedule of export entries showing the corresponding certificate of exports to support excise duty rebate of Kshs. 260,723,515. 00; andd.Certificates of export for the above export entries.

16. In respect of the VAT assessment, he Appellant concluded that it declared and remitted the correct amount of VAT at all times and that there were ongoing engagements between the Appellant and the Respondent’s officers on this issued and the collation of documents. In its letter dated 16th June, 2021, the Appellant wrote to the Respondent requesting assistance in obtaining copies of the Certificates of Exports for exports made to South Sudan.

17. The Respondent replied on 22nd June, 2021 requesting detailed export data, supporting schedules and the statement of facts in TAT Appeal No. 282 of 2020. Vide an electronic mail dated 30th June, 2021, the Respondent requested certificates of landing for each of the exports annexed in the objection to be provided within seven days.

18. The Appellant, on 1s July, 2021 Responded d and forwarded the documents and/or information requested by the Respondent including a schedule of the excise duty rebate amounting to Ksh. 38,880,996. 00 and schedule of the export entries showing the corresponding certificates of export to support the excise duty rebate of Kshs. 260, 723,515. 00. In respect of the copies of certificates of export and export documents, the Appellant informed the Respondent that though it was unable o forward the same in soft copy vide electronic mail, the same would nonetheless be provided.

19. On 27th July, 2021, the Respondent requested T1 entry numbers for some entries and on 23rd August, 2021, the Respondent issued its objection decision to the 2nd notice of objection confirming the 2nd Assessments and demanding the aggregate sum of principal and interest amounting in the sum total to Kshs. 486,284,863. 00 in respect of excise duty and VAT for February, 2021.

20. The basis of the objection decision was the prepaid excise duty was claimed on raw materials yet the same had been classified as a finished product. Second that with regard to excise duty rebate, entries were not in the Appellant’s name, the exports were not by the Appellant and the new entries confirmed under declaration. Third and finally, the certificates of exports were not presented.

21. The Appellant stated that the Respondent explained as follows:“Based on Regulation 13(3) of the VAT Regulations, introduced through Legal Notice No. 54 issued on 30th March, 2017 which provides that:“where the Commisisoner has reasonable grounds to believe that goods treated by a registered person is exported may not have been exported-a)the Commissioner may by notice in writing require the registered person to produce within time specified in the notice a certificate signed and stamped by a competent authority outside Kenya stating that the goods were duly landed and entered for home consumption at a place outside Kenya;b)the supply shall not be treated as an exportation until the certificate referred to in paragraph (a) has been provided to and accepted by the Commissioner…”There is a need to verify landing certificates to verify that the goods actually landed to the country of destination. Kindly note that the tax amounts objected to Kshs. 486, 284,863 remains due and payable…”

22. In the objection decision the Appellant noted the following statement by the Respondent:“tariff classification 2206. 00. 90- Beverages, spirits and vinegar: other fermented beverages….; mixture of fermented beverages and non-alcoholic beverages not elsewhere specified or included…. This has been classified in customs Harmonised System (HS) Code as a finished product…”

23. Vide a Ruling delivered on 20th January, 2023, the Appellant was granted leave to file additional documents and supplementary statement of facts, the Respondent opposed the Application and appealed against the decision of the Tribunal at the High Court. On 13th May, 2024 the High Court dismissed the Respondent’s Appeal. Further, by a Ruling of the Tribunal delivered on 11th October, 2024, an Application by the Respondent seeking to expunge the additional documents that the Appellant had filed was dismissed and the Appellant’s additional documents therefore formed part of the documentary evidence adduced by the Appellant and which the Tribunal has considered in making its determination.

24. In her witness statement, the Appellant’s witness reiterated the Appellant’s statement of facts and the same will not be rehashed whilst in her supplementary witness statement, the witness testified on the tax compliance procedures followed by the Appellant and indicated the export procedures followed by the Appellant in issuing invoices to customers who appoint licensed agents, how the Appellant generates customs entries and road manifests. The Appellant’s witness also testified that goods are inspected and sealed by the Respondent’s officers before export and joint verification occurs at the border with Ugandan authorities.

25. The Appellant’s witness also testified that the Appellant provided supporting documentation relating to export procedures and the that the documents included sample export documentation, T1 entries and payment receipts, exit notes and certificates of exports which are issued based on the destination of goods and that the Appellant had included additional documents with its supplementary statement.

26. The Appellant submitted that the objection decision was based on incorrect regulations and failed to comply with statutory requirements since the Respondent failed to cite the correct provisions of the VAT Regulations introduced through Legal Notice Number 54 of 2017.

27. The Appellant also submitted that the classification of apple cider concentrate as a finished product and cited Commissioner of Customs and Border Control v Kenya Breweries Limited (Tax Appeal E157 of 2021) [2022] KEHC 14570 (KLR) (Commercial and Tax) (31 October 2022) (Judgment) in which Justice Majanja upheld the decision of the Tribunal, TAT No. 282 of 2020 that apple cider was to be classified as a Raw material.

28. With regard to excise duty rebate the Appellant submitted that it corrected the data entry errors in customs entries and this should not have disqualified them from receiving rebates. Finally, the Appellant submitted that the required certificates of export were provided and that the Respondent demanded additional documents that are not typically in the possession of exporters.

29. The Appellant sought the following prayers from the Tribunal:a.That the Appeal be allowed with costs.b.That the objection decision dated 23rd August 2021 be reversed and substituted with an Order setting aside:i.The Respondent’s assessment made on 12th April, 2021; andii.The assessment order numbers KRA20210582196 and KRA202106082471 for excise duty and VAT assessments respectively, uploaded on the Appellant’s i-Tax platform on 12th April, 2021. c.Such other and /or further relief as the Tribunal may deem fit and proper to grant.

Respondent’s Case 30. In response to the appeal, the Respondent filed its statement of facts dated 3rd December, 2021 on even date. The Respondent was also granted leave by the Tribunal, on 23rd January, 2023 to file its supplementary statement of facts within 14 days.

31. The Tribunal notes that the Respondent filed its supplementary statement of facts outside of the timelines stipulated and accordingly the Respondent’s supplementary statement of facts dated 17th February, 2021 and filed on 21st February, 2021 were expunged from the record. In addition, the Respondent’s statement of facts dated 22nd October, 2024 and filed on 30th October, 2024 were similarly expunged from the record as the same was lodged without leave of the Tribunal having first been obtained. The Respondent did not rely on the testimony of a witness.

32. The Respondent complied with the Tribunal’s directions issued on 13th November, 2024 to file and serve its written submissions on or before 29th November, 2024. Since it complied, its written submissions have been considered by the Tribunal.

33. The Respondent stated that it carried out a review of the Appellant’s excise duty and VAT returns for the month of February, 2021 and issued its objection decision on 23rd August, 2021 and that the Appellant then instituted an Appeal against its objection decision.

34. In its statement of facts, the Respondent identified 2 issues for determination which it analysed as follows:

(i) Whether the Respondent can make any assessment on the Appellant for Excise duty/Whether the Respondent’s assessment are[sic] justified in law 35. The Respondent, with regard to this issue referred to the EDA and reproduced the title of the EDA which states as follows:“An Act of Parliament to provide for the charge, assessment and collection of Excise Duty to make administrative provisions relating thereto, and for connected purposes.”

36. The Respondent stated that it is managed by the EDA to make assessments as regards excise duty and further it relied on the Act to indicated that its position is harnessed by section 5 (1) of the Act. It further averred that the collection of revenue is a process which encompasses issuance of assessments.

37. With regard to the Appellant’s claim for excise rebate pursuant to Section 7 (1) (b) of the EDA, the Respondent stated that exportation of goods under section 7 of the EDA is subject to customs control requiring a licensee to execute an excise duty bond for purposes of security of taxes and that such a bond is discharged upon proof to the satisfaction of the Commisisoner that the goods have reached their declared destination.

38. The Respondent averred that the Appellant sought rebate based on exports that were not in its name, which action, the Respondent sated suggested elements of under declaration. The Appellant failed to satisfy the Respondent that indeed the goods were exported and that they reached their declared destination and that hence the claim was disallowed.

39. The Respondent stated that in its objection, the Appellant stated that therebates related to sales that are not subject to excise duty and therefore not chargeable in accordance with section 7 of the Excise Duty Act’…yet the Appellant had included the 31 entries in is excise return.

40. The Respondent stated as follows in relation to the new entries introduced by the Appellant:a.That the Appellant could only introduce other entries purported to have been in its name by amending the return o reflect this position. It was the Respondent who pointed out to the Appellant that it had claimed rebates using entries that were not in its name, it had done so or indicated an intention to do so.b.Kenya operates a self-assessment regime where the taxpayer files its returns. Including the exports not in the Appellant’s names misled the Respondnet in determination of the correct excise duty payable.c.The Appellant agreed that the entries quoted by the Respondent were not in its name. This meant that the rebate was sought based on exports not done by the Appellant, introduction of the new entries only confirmed under declaration but did not remove the claim based the entries not in the Appellant’s name.

41. The Respondent stated that it correctly disallowed the excise duty rebates for the 31 entries and assessed excise duty on the same. With regard to the certificates of export not issued, the Respondent stated that it informed the Appellant, through its letter dated 12th April, 2021 that the certificates of exports were found not to have been issued on 183 entries with an excise rebate value of Kshs. 260,723,515. 00. The Respondent attached a schedule of the said entries disallowing the same. In its objection decision on 10th May, 2021 the Appellant did not provide all the requested certificates of exports and requested time to retrieve the same. According to the Respondent, the Appellant admitted to not havening the certificates of exports for the said entries as requests.

42. The Respondent averred that it further requested certificates of landing and T1 entries to confirm the actual landing of the goods to the country of destination in cases where the exports were made to third parties and emphasised that the aforementioned documents were not provided.

43. The Respondent relied on the provisions of Section 51 (3) of the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter "TPA”) to describe what would entail a valid objection. The Respondent proceeded to cite the specified section as follows:“A Notice of Objection shall be treated as validly lodged by a Taxpayer under subsection 2 if;a)……………………….b)………………………..c)All relevant documents relating to an objection have been submitted.”

44. The Respondent stated that on several occasions, through electronic mail correspondence, requested the certificate of export bu the same were never issued. The Respondent also stated that it requested the documents based on Regulation 12(3) of the VAT Regulations, 2013, introduced through Legal Notice No. 54 of 2017. The Respondent cited the provisions of the said Legal notice.

45. The Respondent stated that a certificate of export, certificate of landing and T1 entries are documentation that are used to ascertain that the goods were indeed exported. Any taxpayer claiming to have exported the goods so as to either claim rebates under excise duty law, or claim the goods are to be zero rated under the VAT Act or even apply for cancellation of a Security bond.

46. The Respondent asserted that the Appellant’s explanations were inadequate and that it was reluctant to avail the requested documentation pursuant to section 51 (3)(c) of the TPA and that this cast ‘question marks’ on whether the Appellant’s goods were exported. Furthermore, the Respondent was in its view, prompted to invoke the dictates of VAT Regulation 12 (3).

47. The Respondent relied on section 23 (1) of the TPA which mandates he Appellant o keep records o enable its tax liability to be ascertained and proceeded to cite the same as follows:“A person shall-(a)maintain any document required under a tax law, in either of the official languages;(b)maintain any document required under a tax law so as to enable the person’s tax liability to be readily ascertained; and(c)subject to subsection (3), retain the document for a period of five years form the end of the reporting period to which it relates or such shorter period as may be specified in a tax law.”

48. The Respondent also relied on the provisions of Section 59 of the TPA which empowers it to seek any information relation got he ascertaining of the correct tax liability of a taxpayer. The Respondent re-produced the section as follows:“59. Production of records(1)For the purposes of obtaining full information respect of the tax liability of any person or class of persons, or for any other purposes relating o a tax law, the Commissioner or an authorised officer may require any person, by notice in writing, to-(a)produce for examination, at such time and place as may be specified in the notice, any documents (including in electronic format) that are in the person’s custody or under th person’s control relating to the tax liability oaf any person;..”

49. The Respondent averred that the Appellant failed to provide the requested documentation and that accordingly it confirmed its assessment. The Respondent further averred that the Appellant did not provide the documentation as requested and its averment that it did were erroneous.

50. the Respondent further stated that the certificates of export, certificate of landing and T1 entry are customs documents used to show that documents have exited the country. For the reason the said documents are recognised under the East Africa Community Customs Management Act, 2004 (hereinafter “EACCMA”).

51. In response to the Appellant’s assertions, the Respondent stated that it was only upon proof of export that the Appellant could claim rebates. The Tribunal was implored to note that the excisable goods the Appellant sought rebates on were vatable and it was erroneous for the Appellant to claim hat the VAT regulations are inapplicable. The Tribunal was requested to also note that the assessment in dispute was for both excise duty and VAT and all relate to whether or not the taxable goods were exported so that rebates could be claimed or the Appellant could claim zero rating pursuant to the VAT Act.

52. The Respondent stated that the Appellant had advanced an erroneous interpretation of the VAT regulations 2017 in relation to a certificate of landing and requested the certificates of landing prior to issuance of its objection decision.

53. The Respondent also stated that the Appellant’s pleadings reflected an erroneous appreciation of the law. The Respondent stated hat in its electronic mail of 30th June, 2021 it requested certificates of landing for each of the certificates of export annexed in support of the Appellant’s objection. According to the Respondent the Appellant did not provide certificates of exports for the 183 entries.

54. The Appellant, in the view of the Respondent, had admitted in its appeal that it did not provide the certificates of exports as requested by the Respondent. The Respondnet stated that its decision in relation to the entries was arrived at in accordance with the law.

55. With regard to pre-paid excise duty claimed on raw materials the Respondent relied on section 30 of the Tax Appeals Tribunal Act CAP 469A of the Laws of Kenya (hereinafter “TATA”) which provides as follows:“In any proceedings before the Tribunal, the Appellant has the burden of proving:a)……b)In any other case, that the tax decision should not have been made or should have been made differently.”

56. The Respondent reiterated that the correct tariff classification of apple cider concentrate is HS 2206. 00. 90, a finished product for which pre-paid excise duty cannot be claimed pursuant to Section 14 of the EDA. The Respondent invited the Appellant to demonstrate to the Tribunal that the Respondent’s decision ought to have not been made or that it ought to have been made differently as provided by section 30 (b) of the TATA.

57. The Respondent section 14 (1) of the EDA provides relief on excise duty for raw materials used in the manufacture of other excisable goods herein referred o as finished goods and provides as follows:“where excise duty has been paid in respect of excisable goods imported into, or manufactured in Kenya by a licensed manufacturer and which have been used as raw materials in the manufacture of other excisable goods (hereinafter referred to as “finished goods”), the excise duty paid on the raw materials shall be offset against the excise duty payable on the finished goods.”

58. The Respondent stated that the Appellant failed to demonstrate how it uses the apple cider concentrate as a raw material in the production of other excisable goods for it to qualify for excise duty relief. The Respondent stated that the Appellant was misleading the Tribunal in relying on a matter that had been appealed and was currently before he High Court to persuade the Tribunal to decide in its favour. TAT NO. 282 of 2020 was on Appeal at the High Court and that until the matter had been determined at the High Court only then can a decision be referred to, if only for its persuasive attribute.

59. With regard of VAT in disallowed excise duty, the Respondnet stated hat it explained in its assessment, reasons why the VAT assessment was raised, in its letter dated 24h March, 2021, the Respondent raised an inconsistency issue based on the fact that the vatable amount was comprised of excise duty among other items.

60. The Respondent state that its VAT assessment was raised in accordance with the law and was well reasoned. The Appellant’s grounds for appeal were insufficient. From he fact of the case, the Appellant did no provide any evidence contrary to the basis of the Respondent’s assessment.

61. In its submissions, the Respondent analysed the following 7 issues for determination:a.Whether Appellant complied with section 51 (3) (c) of the TPA.b.Whether the documentary evidence adduced by the Appellant through its supplementary statement of facts dated and filed on 3rd February, 2023 were relevant admissible and prejudicial.c.Whether the Appellant validly claimed excise duty rebates in the absence of corresponding exports declaration in the excise return.d.Whether the Appellant validly claimed excise duty rebates amounting to Kshs. 38,880,996. 00. e.Whether the Appellant provided certificates of export /exit to prove the excise duty rebate amounting to Ksh. 260,723,515. 00. f.Whether the Respondent was justified in issuing a VAT assessment; andg.Whether the Appellant has discharged its burden of proof.

62. The Respondent submitted that the Appellant did not comply with the mandatory requirement to produce all relevant documents and ​introduced new documents at the appeal stage, which were not considered at the objection review.

63. The Respondent avowed that the Appellant's failure to provide all requested documents contravened sections 51(3)(c) and 59(1) of the TPA and asserted that the Appellant’s documentary evidence was irrelevant inadmissible and prejudicial.

64. The Respondent prayed that the Tribunal would uphold its assessment decision as proper and in conformity with the provisions of the Law and that the Appeal be dismissed with costs to it as the same was devoid of merit.

Issues for Determination 65. The Tribunal having carefully considered parties’ pleadings documents and submissions is of the view that the following two issues call for its determination:a.Whether the Appellant was entitled to prepaid excise duty claimed on raw materials.b.Whether the Appellant discharged its burden of proof pursuant to section 56 (1) of the TPA and section 30 of the TATA.

Analysis and Findings 66. The Tribunal will proceed to analyse the issues as hereinunder:

(a) Whether the Appellant was entitled to prepaid excise duty claimed on raw materials. 67. The genesis of this dispute is the exportation by the Appellant of a consignment and the resulting assessment due to the Respondent’s observation that there was poor or no documentation to support the exports and calculations and a miscalculation of rebates and refunds by the Appellant.

68. Section 14 (1) of the EDA provides as follows:“14. Relief for raw materials(1)Where excise duty has been paid in respect of excisable goods imported into, or manufactured in Kenya by a licensed manufacturer and which have been used as raw materials in the manufacture of other excisable goods (hereinafter referred to as "finished goods"), the excise duty paid on the raw materials shall be offset against the excise duty payable on the finished goods.”

69. The Tribunal notes that in its statement of facts, the Appellant did not delve into the details of the imported and exported items and did not indicate how it determined the amount of rebate due. It did not provide a background on the circumstances leading to the assessment but merely provided a chronology of the events namely, the assessment dates, objection dates and the date of the objection decision. However, the Tribunal can deduce, from the documentation reviewed that the Appellant imported “fermented apple compound” a critical ingredient used in the manufacture of apple cider and thereafter exported the manufactured drinks.

70. The Respondent averred that though the Tribunal in TAT No. 282 of 2020 had classified “fermented apple compound” as a raw material, the Appeal against the decision of the Tribunal in the said matter was pending at the High Court. The Tribunal however notes that the High Court upheld the decision of the Tribunal in Commissioner of Customs and Border Control v Kenya Breweries Limited (Tax Appeal E157 of 2021) [2022] KEHC 14570 (KLR) (Commercial and Tax) (31 October 2022) (Judgment) and declared that “fermented apple compound” is a raw material.

71. The Tribunal is established pursuant to Article 162 (4) of the Constitution of Kenya, 2010. Its decisions are to be complied with and the filing of an Appeal against a determination by the Tribunal is neither an automatic stay of the Tribunal’s proceedings nor an automatic upending of a determination of the Tribunal. The Respondent’s assertions in its pleadings, that the Tribunal could not hear the matter were fallacious to say the least and showed a misunderstanding of the judicial process, the hierarchy of courts, decisions of the courts and was a complete disregard of the Appellant’s right to be heard.

72. The Tribunal’s determination that “fermented apple compound” is a raw material stands and subsequently, the finding of the Tribunal is that the Appellant is entitled to prepaid excise duty claimed on raw materials.

(b) Whether the Appellant discharged its burden of proof pursuant to section 56 (1) of the TPA and section 30 of the TATA. 73. The Tribunal notes that all the other issues raised by the parties, namely the excise duty rebates claimed by the Appellant and the VAT assessment arose due to a perception by the Respondent that there was under declaration of excise duty due and payable and this was because the Respondent was adamant about the fact that the supporting documents including certificates of export were not provided. The Respondent averred that some items were not in the name of the Appellant and were disallowed.

74. Section 56 (1) of the TPA and Section 30 of the TATA provide as follows:“(1)In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”30. Burden of proofIn a proceeding before the Tribunal, the appellant has the burden of proving—(a)where an appeal relates to an assessment, that the assessment is excessive; or(b)in any other case, that the tax decision should not have been made or should have been made differently.”

75. The Tribunal has on several occasions pronounced itself on the interpretation of the provisions of Section 56(1) of the TPA and Section 30 of the TATA. The Tribunal cites the case of Mbuthia Macharia vs. Annah Mutua Ndwiga & Another Civil Appeal No. 297 of 2015 [2017] eKLR where the Court of Appeal when dealing with the issue of burden of proof observed as follows:“The legal burden is discharged by way of evidence, with the opposing party having a corresponding duty of adducing evidence in rebuttal. This constitutes evidential burden. Therefore, while both the legal and evidential burdens initially rested upon the Appellant, the evidential burden may shift in the course of trial, depending on the evidence adduced. As the weight of evidence given by either side during the trial varies, so will the evidential burden shift to the party who would fail without further evidence”.

76. The Tribunal delivered a Ruling on 20th January, 2023 where it allowed the Appellant to adduce additional documents to support its case. The Respondent averred that this was prejudicial to it. The Respondent unsuccessfully appealed against the said Ruling at the High Court.

77. The Tribunal notes that it is not disputed that the Appellant, in its pleadings, admitted that at the point of lodging its objection it had erred and requested time to provide additional documentation. The Respondent made no allowances to the Appellant and therefore, at the appeal stage the Appellant filed an application requesting if it could be allowed to file additional documentary evidence to support its case and it was granted leave by the Tribunal to do so. The Respondent has not taken into consideration, those documents, in spite of the decisions of the Tribunal and High Court in respect of the interlocutory applications. During the hearing, the Respondent continue to belabour the fact that the documents were inadmissible yet the Appellant was granted leave to file the documents in the Rulings delivered by the Tribunal on 20th January, 2023, 11th October, 2024 and the Judgement by the High Court on 13th May, 2024.

78. The Tribunal, having reviewed the schedules and other supporting documents notes and finds that the Respondent cannot decry the unavailability of documents but must instead review the documentary evidence that has been adduced as evidence by the Appellant and correct itself.

79. Consequently, the Tribunal finds and holds that the decision of the Respondent dated 23rd August, 2025 was incorrect and excessive because the Appellant discharged its burden of burden of proof pursuant to the provisions of Section 56 (1) of the TPA and Section 30 of the TATA.

Final Decision 80. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal is meritorious and makes the following Orders:a.The Appeal be and is hereby allowed.b.The Respondent’s objection decision dated 23rd August, 2021 be and is hereby set aside.c.Each party to bear its own cost.

81. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 21ST DAY OF MARCH, 2025. …………………………………CHRISTINE A. MUGA - CHAIRPERSON…………………………BONIFACE K. TERER - MEMBER…………………………ELISHAH N. NJERU - MEMBER…………………………EUNICE N. NG’ANG’A - MEMBER…………………………OLOLCHIKE S. SPENCER - MEMBER