[2023] KETAT 354 (KLR)

Kifaru Enterprises Limited v Commissioner of Customs & Border Control (Appeal 635 of 2022) [2023] KETAT 354 (KLR) (9 June 2023) (Judgment)

Neutral citation: [2023] KETAT 354 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal 635 of 2022

E.N Wafula, Chair, Cynthia B. Mayaka, AK Kiprotich, Grace Mukuha & Jephthah Njagi, Members

June 9, 2023

Between

Kifaru Enterprises Limited

Appellant

and

Commissioner of Customs & Border Control

Respondent

Judgment

1. The Appellant is a limited liability company incorporated in Kenya under the Companies Act. Its principal business is the importation of hardware materials.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Act, Cap 469 of the laws of Kenya and the Kenya Revenue Authority is mandated with the responsibility of collection and accounting for Government revenue and connected purposes.

3. The Appellant imported Hot Rolled Chequered Plates and declared it under HS Code 7208. 40. 00 in January 2022.

4. The Respondent issued tariff ruling on 8th April 2022 declaring that the hot rolled chequered plates was classifiable under Tariff Code HS Code 7225. 40. 00. the Appellant disputed the Respondent’s classification vide a letter dated 20th April 2022.

5. Vide a letter dated 27th April, 2022, the Respondent replied to the Appellant’s letter of 20th April, 2022 insisting that the Appellant’s product was classifiable under HS Code 7225. 40. 00.

6. The Appellant wrote to the Respondent appealing the tariff ruling vide a letter dated 17th May, 2022. The Respondent responded vide a letter dated 23rd May, 2022 upholding its decision to classify the Appellant’s product under HS Code 7225. 40. 00.

7. On 30th May 2022, the Respondent issued a demand letter for Ksh. 2,395,868. 00 being extra taxes resulting from the new classification. The Respondent further wrote to the Appellant on 10th June, 2022 in response to the Appellant’s letter of 31st May, 2022 reiterating its ruling.

8. Being dissatisfied with the Respondent’s decision, the Appellant filed a Notice of Appeal on 7th June 2022.

The Appeal 9. The Appellant’s Appeal is premised on the hereunder grounds as stated in the Memorandum of Appeal dated and filed on 15th July, 2022. That:-i.The Respondent erred in law and in fact by failing to consider the Mill Test Certificate issued by Rizhao Steel on the Appellant’s goods in which the proper result of the chemical analysis was provided.ii.The Respondent erred in law and in fact by failing to consider that the aforementioned Mill Test Certificate clearly established that the item “HotRolled Chequered Plates” contained carbon, silicon, manganese, phosphorous and Sulfur; therefore, no trace of taxable ‘Boron’ was found.iii.The Respondent erred in law and in fact by failing to consider that as no taxable trace of ‘Boron’was found; it is clear confirmation that the declaration of HS Code7108. 40. 00 on the above description of goods was the correct classification to be applied.iv.The Respondent erred in law and in fact by failing to consider the existence of clear and notable discrepancies revealed on the analysis tested on the Appellant’s goods by the Kenya Revenue Authority’s Inspection and Testing Center which confirmed presence of Boron.v.The Respondent erred in law and in fact by relying on the above discrepancy and as a result the proper officer mistakenly thereby assessed a duty amount of 10% instead of 0%.vi.The Respondent erred in law and in fact by failing to take into account that based on the description of the goods and the proper scientific analysis conducted, the rate in force should be 0% and not 10% as erroneously placed by the Respondent’s proper officer.vii.The Respondent erred in law and in fact by applying the wrong rate, and further enforcing payments of duty on goods that were in actuality zero rated.viii.The Respondent erred in law and in fact by failing to consider the issue substantively when the Appellant raised this error with subsequent letters to the Respondent requesting for a review of the above decision.ix.The Respondent erred in law and in fact by failing, despite requests to the Respondent, to forward the samples to credible accredited independent laboratories for a second technical opinion.x.The Respondent erred in law and in fact by relying on the erroneous scientific assessment and making a ruling upholding the said erroneous scientific assessment and the resultant classification.xi.The Respondent erred in law and in fact by demanding, despite clear discrepancy being raised, for payment for the amount of Kshs 2,395,868. 00, as of 30th May, 2022. xii.The Respondent erred in law and in fact by failing to make a determination, based on the evidence provided, that the Appellant’s goods did not contain boron above the amount of 0. 0008% and therefore should be classified under HS Code 7208. 40. 00 instead of HS Code 7225. 40. 00. xiii.The Respondent erred in law and in fact by failing to base its decision on the law applicable; which law provides that the Appellant’s goods were zero rated and should not have been taxed or attracted duty; which duty is being demanded by the Respondent.xiv.The Respondent erred in law and in fact by applying the duty rate of 10% as opposed to the correct duty rate of 0% as was provided in the East African, Common External Tariff 2017 version.xv.The Respondent erred in law by seeking to disallow the Appellant’s Objection yet under the circumstances the Appellant’s imports attract a duty of 0%.xvi.The Respondent erred in law and fact by seeking to recover taxes for goods that were zero rated at the point of entry.xvii.The Respondent erred in law and in fact by failing to acknowledge its involvement in review, verification and approval of the imports made by the Appellant.xviii.The Respondent erred in law and in fact in classifying imports made by the Appellant under the wrong HS code as the said items were zero rated at the point of entry.xix.The Respondent erred in law and in fact in failing to consider the evidence before them which clearly indicated a lack of the requisite value and amount of boron to alter the HS Code hence the goods imported by the Appellant were zero rated at the point of entry.xx.While the Respondent accorded the Appellant the right to respond to its review, it only did so as a ‘checkbox’ but did not take any of the Appellant’s comments, information or requests into account in issuing the review decision.xxi.The proper officer misapprehended the various issues of fact and law before her, and did not do justice and equity to the Appellant.xxii.The proper officer failed to consider and take into account the extensive material placed before her, touching on the pertinent and substantial points of fact and law, so as to arrive at a just and fair decision.xxiii.That as a result of these discrepancies, the Appellant has been adversely affected and the payments to the demand which was as a result of an improper scientific analysis by the proper officer in the office of the Respondent will cause the Appellant losses.xxiv.This Appeal to the Tribunal is the only avenue left to the Appellant and is therefore at the mercy of the Tribunal.

Appellant’s Case 10. The Appellant’s case is premised on the hereunder filed documents and proceedings before the Tribunal:i.The Appellant’s Statement of Facts dated 15th July, 2022 together with the documents attached thereto.ii.The Appellant’s written submissions filed on 1st November, 2022.

11. The Appellant submitted that the description of the imported goods was bundles of hot rolled chequered plate 1. 5mmx1220mmx2440mm were duly declared in the entry no. 22MBAIM400010834 dated the 3rd January, 2022.

12. The Appellant averred that entry cleared indicated HS Code 7208. 40. 00. this code and the goods under its classification attract an import duty rate of 0% as per the EAC Common External Tariff 2017 version.

13. That at the time of entry, the import duty rate for the said items was also rated at 0% and the payable amounts due outlined as follows;

Tax Type Tax Amount

1002/Import Duty 0. 00

1102/Excise Duty 0. 00

1202/VAT Imports 3,304,647. 00

1801/IDF Fees (3. 5%) 722,892. 00

6001/Kenya Railway Development Levy (RDL)

6401/Merchant Shipping Superintendent (MSS) Levy 8,684. 00

Total Tax Due: 4,449,304. 00 14. That the Appellant promptly made payment of the above amount (Kshs 4,449,304) via Co-operative Bank on the 4th of January 2022.

15. That despite the above prompt payments, further taxes were thereafter demanded by the Respondent outlined as follows;Tax Type Tax Amount

25% Duty 2,104,428. 96

16% VAT 3,703,794. 97

3. 50% IDF Fees 736,550. 14

WEIGHT X 1. 50X E.RATE

WEIGHT X 1. 75 X E.RATE 8,684. 00

2. 00% RAILWAYS LEVIES 420,885. 79

TOTAL 6,974,343. 85

PAID 2,525,039. 85

PENALTY 50,501. 00

16. That the above demand for import duty was as a result of a claim by the Respondent that the imported items attract an import duty amount of 10%. The Respondent had requested for the analysis of the Appellant’s imported goods to make a determination of its composition to determine what HS Code it would be classified under and did so vide a letter dated 30th March 2022.

17. That the Appellant objected to the above laboratory analysis and requested for the same to be reviewed and assessed through independent laboratories through its letter dated 20th April, 2022.

18. That the Appellants letter dated the 20th April, 2022 contained evidence from the supplier including a Mill Certificate from Rizhao Steel. That the aforementioned Mill Test Certificate clearly established that the item “Hot Rolled Chequered Plates” contained Carbon, Silicon, Manganese, Phosphorous and Sulpur; therefore, no trace of taxable ‘Boron’ was found.

19. The Appellant averred that the Respondent responded on the 27th of April 2022 and upheld the classification of the Appellant’s goods under Hs Code7225. 40. 00 instead of HS Code 7208. 40. 00 and thus insisting that the Applicant owed taxes for the goods that were imported.

20. The Appellant averred that the proper officer relied on the wrong HS Code classification when computing the additional taxes payable whereas the Respondent maintains that the code relied upon was proper. That in particular, the Respondent relied on HS Code 7225. 40. 00 which applies to items that contain elements of boron higher than 0,0008% rather than the proper HS Code of 7208. 40. 00.

21. The Appellant reiterated that its goods were assessed and tested by “Rizhao Steel” of China and a Mill Test Certificate issued in which the proper result of the chemical analysis was provided. That as no taxable trace of boron was found; it was clear confirmation that the declaration of HS Code 7208. 40. 00 on the above description of goods was the correct classification to be applied.

22. That the demand for additional payment was therefore done so improperly as the assessment and classification of the goods of the Appellant were done do erroneously leading to the said amount.

23. The Appellant added that it was evident there are clear and notable discrepancies revealed on the analysis tested on the Appellant’s goods by the Kenya Revenue Authority’s Inspection and Testing Centre which confirmed presence of Boron.

24. That as a result of the above discrepancy the proper officer mistakenly thereby assessed a duty amount of 10% instead of 0%. Nonetheless, based on the description of the goods and the proper scientific analysis conducted, the rate in force should be 0% and not 10% as erroneously placed by the Respondent’s proper officer.

25. The Appellant stated that as wrong rate was used, the Respondent erred in law in enforcing payments of duty on goods that were in actuality zero rated. That the Appellant raised this error with subsequent letters to the Respondent requesting for review of the above decision.

26. That despite requests to the Respondent to forward the samples to credible laboratories such as Kenya Bureau of Standards or any other accredited Government laboratory for a second technical opinion, the same fell on deaf ears.

27. It added that the above requests were necessitated by the discrepancies over the analysis by the Respondent and Kenya Revenue Authority and the analysis by Rizhao Steel. That there was also confirmation by local laboratory tests that indicate the level of Boron, if any, is lower than what is taxable amount of 0. 0008%.

28. That the Respondent purportedly conducted the review and relied on the erroneous scientific assessment making a ruling upholding the said erroneous scientific assessment and the resultant classification.

29. That the Respondent is now demanding payment in the amount of Kshs. 2,395,868. 00 as of 30th May 2022, whilst threatening to levy distress on the Appellant’s goods.

30. It was the Appellant’s contention that its goods do not contain boron above the allowed amount of 0. 0008%, or any at all for that matter, and therefore should be classified under HS Code 7208. 40. 00 instead of HS Code 7225. 40. 00.

31. That based on the law applicable, the Appellant’s goods were zero rated and should not have been taxed or attracted duty; which duty is being demanded by the Respondent’s proper officer. It added that the payments pursuant to the demand which was as a result of an improper scientific analysis by the proper officer in the office of the Respondent will no doubt cause the Appellant losses.

32. The Appellant further averred that the actions of the Respondent’s proper officer were sure to cause financial losses to the Appellant since the demand notice was received several months later and the Appellant had not factored in the taxes before selling the imported items.

33. That the Appellant proceeded on the assumption that the duty payable was zero rated and sold the imported items at a cheaper price. That the imported goods were sold at a small margin therefore there was no window for price adjustments to factor in the demand for additional taxes.

34. That it is general principal in tax laws that tax laws are to be strictly construed and in the event of any ambiguity, it must be resolved in favor of the taxpayer as highlighted in the case of Cape Brandy Syndicate vs. I.R. Commissioners [1921] 1KB 64.

35. That enforcing a report where there is an ambiguity and discrepancy would be procedurally unfair and in contravention of Article 47 of the Constitution of Kenya, 2010 on fair administrative action and therefore the Tribunal ought not to allow the enforcement of such an illegal decision.

36. It was Appellant’s position that any claim by the Respondent for additional taxes, with no independent and credible scientific analysis, would greatly harm the business of the Applicant as it shall be forced to pay taxes based on a report that contains discrepancies.

37. The Appellant urged the Tribunal to disallow the Respondent’s claim for duty at the rate of 10% relating to the Appellant’s import items that were zero rated at the point of entry.

38. The Appellant was adamant that the proper officer relied on a report that had discrepancies which led to classification under the wrong HS Code and therefore ended up providing a biased and improper demand for duty payable on the Appellant’s imported goods.

39. That as there were discrepancies brought to the attention of the Respondent, the Respondent’s proper officer should have undertaken an independent analysis and assessment of the Appellant’s goods by a 3rd party accredited laboratory.

40. That the Respondent therefore had a statutory responsibility to entertain the concern raised and conduct an independent analysis with an accredited 3rd party laboratory.

41. The Appellant averred that the Respondent was under a statutory obligation to be efficient and fair and where it does not do so, the same is liable to be struck out as amounting to abuse of power. That the High Court has on numerous occasions, had the opportunity to address this same issue for example in the case of Noor Maalim & 4 Others vs. Minister of State for Planning, National Development and Vision 2030 & 2 Others [2012] eKLR.

42. That the Respondent in its assessment of the duty payable relied on a laboratory report that had numerous discrepancies and hence relied on the wrong HS Code 7225. 40. 00 instead of the correct HS Code 7208. 40. 00.

43. The Appellant insisted that the Respondent relied on a laboratory report that had numerous discrepancies and the wrong HS Code whereas the Respondent maintains that the laboratory report was proper and the correct HS Code was used.

44. It stated that it believed that the proper officer relied on the wrong laboratory analysis based on the fact that the Kenya Bureau of Standards’ Certificate of Conformity provides the correct information including the HS Code which is HS Code 7208. 40. 00.

45. The Appellant averred that it raised concern that the Respondent is involved in the assessment of the chemical composition of the imported goods especially where there is a concern regarding the authenticity of the same.

46. The Appellant believed that since the imported goods were rated 0% and approved by the officers of the Respondent, the said assessment was proper. That the Appellant therefore relied on this and sold the imported items at cheaper prices without factoring in any taxes as the same were zero rated at the point of entry. To support its arguments, the Appellant cited that case of Keroche Industries Limited vs. Kenya Revenue Authority & 5 Others Nairobi [2017] eKLR.

47. The Appellant stated that given that the goods were actually cleared as being zero rated, the Respondent should be stopped from claiming any further duty and/or taxes touching on this specific transaction.

48. That the Respondent failed to address or acknowledge the points of fact, additional information or clarifications provided by the Appellant. That by failing to consider information provided or any evidence provided by the Appellant, the Respondent breached the Appellant’s right to be heard and the right to adduce evidence which are key tenets of the rules of natural justice.

49. That further, the Respondent’s action constituted a contravention of Article 47 of the Constitution of Kenya 2010 on the right to fair administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair. The Appellant averred that it was therefore not supposed to make any further payments as duty as it has made payments of all tax due to the Respondent.

Appellant’s Prayers 50. The Appellant prayed for orders against the Respondent that:-a.A declaration that the applicable duty rate at the point of entry of the imported goods by the Appellant as per the East African Community, Common External Tariff 2017 version was 0% and not 10%.b.A declaration that the demand for payment dated 30th May, 2022 and any similar demands is null and void.c.The Respondent’s decision dated 27th April, 2022 be declared null and void and be vacated in its entirety.d.The Assessment Report conducted by the KRA Inspection and Testing Center, dated 30th March, 2022, be vacated and be deemed inconclusive.e.In the alternative and without prejudice to the above prayers, this Tribunal orders that the subject Appellant’s goods be assessed by an independent, credible and accredited laboratory and a decision be done thereof.f.The Appeal be allowed with costs to the Appellant.g.Any other remedies that the Tribunal deems just and reasonable.

Respondent’s Case 51. The Respondent’s case is premised on the hereunder filed documents and proceedings before the Tribunal:i.The Respondent’s Statement of Facts dated 8th July, 2022 and filed on the same date together with the documents attached thereto.ii.The Respondent’s written submissions dated 20th September, 2022 and filed on the same date.

52. The Respondent opposed the Appeal and held that it conducted lab analysis on the samples of the imported hot rolled chequered plates imported by the Appellant and declared under HS Code 7208. 40. 00 and re-classified the same under Hs Code 7225. 40. 00. That this was because the lab analysis report showed the composition of the product as iron (99. 62%m/m), chromium (0. 03896m/m), manganese (0. 14%m/m), Boron (0. 001396m/m) and trace amounts of copper.

53. It was the Respondent’s opinion that the issue for determination was whether it was right in classifying the Appellant’s product under HS Code 7225. 40. 00. It averred that the classification of goods in Kenya was governed by the East Africa Common External Tariff (EAC CET).

54. It averred that the EAC CET General Interpretation Rules for the classification of goods states that;“Classification of goods in the nomenclature shall be governed by the following principles:……”

55. That further Rule 6 of the General Rules of Interpretation states that;

“That this means that when faced with more than one possible heading under which a good is to be classified, when comparing and making decision as to where the good is to be classified, you can only compare subheadings at the same level”. 56. The Respondent submitted that the Kenyan tax regime operates a self-declaration basis whereby, the taxpayer makes declarations and pays taxes on the items that they import themselves or through their agents. That this creates a legitimate expectation that the taxpayer will classify the imports under the proper tariff and pay the correct taxes.

57. The Respondent averred that laboratory analysis on samples of the imported product confirmed the composition of the product as iron (99. 62%m/m), chromium (0. 03896m/m), manganese (0. 14%m/m), boron (0. 001396m/m) and trace amounts of coper.

58. That the Appellant declared the product under tariff 7208. 40. 00. That Heading 72. 08 covers flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, hot-rolled, not clad, plated or coated. That Hs Code 7208. 40. 00 covers- Not in coils, not further worked than hot-rolled, with patterns in relief -Other, not in coils, not further worked than hot rolled.

59. It averred that it re-classified to Hs Code 7225. 40. 00. That Heading 72. 25 covers flat-rolled products of other alloy steel, of width of 600 mm or more. 7225. 40. 00- Other, not further worked than hot-rolled, not in coils.

60. The Respondent submitted that Note 1(f) of Chapter 72 covers other alloy steels not complying with the definition of stainless steel and containing by weight one or more of the following elements in the proportion;-0. 3% or more aluminum0. 0008% or more of boron-0. 3% or more chromium--0. 4% or more copper-0. 4% or more of lead-1. 65% or more manganese--0. 1% or more of the other elements (except Sulphur, phosphorous, carbon and nitro

61. The Respondent contended that the sample analyzed in the laboratory specified to be hot rolled chequered plate had 0. 001396m/m of boron, thereby the product is “other alloy” as it was above the threshold indicated in Note 1(f) of Chapter 72.

62. That further, the sample presented for laboratory analysis was in plates with patterns in relief, measuring 1220 x 2440 mm and a thickness of 1. 5mm. That Heading 72. 25 covers classification of flat rolled products of other alloy steel of width 600mm or more.

63. The Respondent contended that the hot rolled chequered plate is a flat rolled product of other alloy steel with traces of iron, chromium, manganese, boron and trace amounts of copper classified under 2017 EAC CET HS Code 7225. 40. 00.

64. That the Respondent’s decision was informed by the sample tested and material information presented and it was its submission that the classification under HS Code 7225. 40. 00 was correct. That there was no report or evidence contrary to the findings by the Respondent.

65. To support its case, the Respondent cited the provisions of Section 223 of the EACCMA, 2017 regarding proof in proceedings.

Respondent’s Prayers 66. The Respondent prayed thata.The Appellant’s Appeal lacks merit.b.The Appeal be dismissed with costs to the Respondent

Issue For Determination 67. After careful consideration of the submissions of both parties, the Tribunal was of the view that the only issue falling for its determination is; Whether the Respondent erred in classifying the Hot Rolled Chequered Plates imported by the Appellant under Heading 7225.

Analysis And Findings 68. The main gist of this dispute was that the Appellant classified the goods under HS Code 7208. 40. 00 while the Respondent classified the same under HS Code 7225. 40. 00.

69. In determining the applicable HS Code the Tribunal was guided by the General Rules of Interpretation of the Harmonized Code reproduced hereunder:“General Interpretation Rules for The Classification ofGoodsClassification of goods in the Nomenclature shall be governed by the following principles: 1. The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions:

2. (a)Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this Rule), presented unassembled or disassembled.

(b)Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3. 3. When by application of Rule 2 (b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:

(a)The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.(b)Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3 (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.(c)When goods cannot be classified by reference to 3 (a) or 3 (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. 4. Goods which cannot be classified in accordance with the above Rules shall be classified under the heading appropriate to the goods to which they are most akin.

5. In addition to the foregoing provisions, the following Rules shall apply in respect of the goods referred to therein:(a)Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This Rule does not, however, apply to containers which give the whole its essential character.(b)Subject to the provisions of Rule 5 (a) above, packing materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision is not binding when such packing materials or packing containers are clearly suitable for repetitive use.

6. For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related Subheading Notes and, mutatis mutandis, to the above Rules, on the understanding that only subheadings at the same level are comparable. For the purposes of this Rule the relative Section and Chapter Notes also apply unless the context otherwise requires.

70. The Tribunal noted that the main issue of contention leading to the dispute was a laboratory analysis conducted by the Respondent which indicated that the hot rolled chequered plates imported by Appellant contained more than 0. 0008% m/m of Boron.

71. Heading 72. 08 covers “Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, hot-rolled, not clad, plated or coated.”

72. Under HS Code 7208. 40. 00 covers “- Not in coils, not further worked than hot-rolled, with patterns in relief.Other, not in coils, not further worked than hot-rolled:” this attracts duty at the rate of 0%

73. On the other hand, Heading 72. 25 covers: “Flat-rolled products of other alloy steel, of a width of 600 mm or more.”under HS code 7225. 40. 00 - Other, not further worked than hot-rolled, not in coils. This attracts duty at the rate of 10%.

74. Explanatory notes for Chapter 72 provides as follows at Note 1(f);“(f)Other alloySteels not complying with the definition of stainless steel and containing by weight one or more of the following elements in the proportion shown:- 0. 3% or more of aluminum- 0. 0008% or more of boron…- 0. 1% or more of other elements (except sulphur, phosphorus, carbon and nitrogen), taken separately.” 75. As provided for under the explanatory Note 1(f) above, it follows that where Boron content is above 0. 0008% then the steel would be classifiable under “Other alloy”

76. The Appellant had averred that the proper officer relied on the wrong HS Code classification when computing the additional taxes payable whereas the Respondent maintains that the code relied upon was proper. That in particular, the Respondent relied on HS Code 7225. 40. 00 which applies to items that contain elements of Boron higher than 0,0008% rather than the proper HS Code of 7208. 40. 00.

77. The Appellant reiterated that its goods were assessed and tested by “Rizhao Steel” of China and a Mill Test Certificate issued in which the proper result of the chemical analysis was provided. That has no taxable trace of boron was found; it was clear confirmation that the declaration of HS Code 7208. 40. 00 on the above description of goods was the correct classification to be applied.

78. The Respondent on the other hand stated that it conducted lab analysis on the samples of the imported hot rolled chequered plates imported by the Appellant and declared under HS Code 7208. 40. 00 and re-classified the same under HS Code 7225. 40. 00. That this was because the lab analysis report showed the composition of the product as iron (99. 62%m/m), chromium (0. 03896m/m), manganese (0. 14%m/m), boron (0. 001396m/m) and trace amounts of copper.

79. That the sample analyzed in its laboratory specified to be hot rolled chequered plate had 0. 001396 m/m of boron, thereby the product is other alloy as it was above the threshold indicated in Note 1(f) of Chapter 72.

80. Note 1(f) of Chapter 72 states as follows regarding other alloy steels;“Other alloy Steels not complying with the definition of stainless steel and containing by weight one or more of the following elements in the proportion shown:- 0. 3% or more of aluminum 328- 0. 0008% or more of boron- 0. 3% or more of chromium- 0. 3% or more of cobalt- 0. 4% or more of copper………….- 0. 1% or more of other elements (except sulphur, phosphorus, carbon and nitrogen), taken separately” (Emphasis added)

81. It follows from the above notes that where the product contains more than 0. 0008% m/m of boron then it is excluded from the classification under HS Code 7208. In the instant case, while the Appellant relied on the Mill Test Certificate from its suppliers, the Respondent on the other hand relied on the lab analysis from samples it collected from the Appellant’s imported product which result was indicated as showing that the product contained 0. 00139% which would exclude the product from Heading No. 72. 08.

82. The Tribunal however noted that although the Appellant was questioning the Respondent’s test analysis, the Mill Test Certificates attached by the Appellant to its pleadings clearly did not indicate whether boron content in the product was included in the initial test and in particular the exact content of boron in the items imported. Indeed, the Tribunal noted that the Mill Tests Certificates submitted by the Appellant did not contain any results for boron.

83. In addition, the Tribunal noted that the Appellant attached a document titled “Base: Fe|MS/CS/LAS: 1. 5MM Chaquered Plate | Customer Name: Kifaru Enterprises” which indicated a different content of boron from that of the Respondent. The document signed by Tononoka Rolling Mills Ltd is not dated and does not indicate what batch of product was being tested. The Tribunal therefore could not rely on the same.

84. The Appellant’s averments and documentation attached were not enough as set out in Section 107 of the Evidence Act which provides that:“Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.”

85. The Tribunal noted that pursuant to the Chapter Notes, the chemical composition/elements of the product was the critical factor in determining the applicable HS Code for tax purposes.

86. Based on the Rules of Interpretation, from the First Rule which is of the most specific description, the most specific description can be found in the laboratory analysis of the product. The laboratory analysis established that the Appellant’s imported product had a boron content of 0. 001396% m/m which is above the threshold for classification under Heading 72. 08.

87. In making this determination the Tribunal is guided by the Notes to Chapter 72 which provides that it covers iron and steel and at Note 1(f) Other alloy steel – steels not complying with the definition of stainless steel and containing by weight one or more of the following elements in the proportion shown :“-0. 3 % or more of Aluminum.-0. 0008 % or more of Boron.…”

88. Consequently, the Tribunal finds that the Appellant’s consignment of “Hot Rolled Chequered Plates” imported from Rhizao Steel based in China were correctly classified by the Respondent under HS Code 7225. 40. 00.

Final Decision 89. The upshot of the foregoing is that the Appeal lacks merit and the Tribunal accordingly proceeds to make the following Orders:a.The Appeal be and is hereby dismissed.b.The Respondent’s review decision dated 23rd May 2022 be and is hereby upheld.c.Each party to bear its own costs.

90. It is so ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 9TH DAY OF JUNE, 2023. ERIC N. WAFULACHAIRMANCYNTHIA B. MAYAKA ABRAHAM K. KIPROTICHMEMBER MEMBERGRACE MUKUHA JEPHTHAH NJAGIMEMBER MEMBER