[2023] KETAT 159 (KLR)

Lamrinet Kenya Limited v Commissioner of Domestic Taxes (Tribunal Appeal 1373 of 2022) [2023] KETAT 159 (KLR) (Civ) (10 March 2023) (Ruling)

Neutral citation: [2023] KETAT 159 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Tribunal Appeal 1373 of 2022

E.N Wafula, Chair, Cynthia B. Mayaka, RO Oluoch, EN Njeru & AK Kiprotich, Members

March 10, 2023

Between

Lamrinet Kenya Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Appellant vide a Notice of Motion application dated 9th November, 2022 and filed under a certificate of urgency on the 15th November, 2022 sought for the following Orders:-a)Spentb)That pending the hearing and determination of this application, an order be issued to vacate the Agency Notice conveyed by the Respondent to Standard Chartered Bank of Kenya on 7th February 2022. c)That this Honourable Tribunal do grant leave to the Applicant to file the appeal out of time.d)That pending the hearing and determination of the substantive Appeal, the Respondent, its agents and/or workers be barred from accessing, interfering and/or withdrawing and/or issuing future Agency Notices against the Applicant.e)That pending the hearing and determination of the substantive Appeal, the Respondent, its agents and/or workers be barred from attaching any movable and immovable assets of the Applicant.f)That the Applicant be at liberty to apply for further orders and the Honourable Tribunal do give any directions it deems fit and just in the circumstances.g)That cost of this application be in the cause.

2. The application which is supported by an Affidavit sworn Johana Too, a Director of the Appellant, on the 9th November, 2022 is premised on the following grounds:a)That the Applicant’s business is premised in Nakuru and is involved in tendering and suppliers.b)That on 27th October, 2022 the Applicant was notified by its Bank that the account had been restricted by the Respondent and that – it could not draw or honor any obligations for the Applicant.c)That the Applicant queried the Respondent and was informed that its application for late objection had been denied and confirmation issued.d)That on the same day to wit the 27th October 2022, upon the Applicant visiting the Respondent’s offices, received a correspondence dated 15th September 2021, which notified the Applicant that its application for extension of time to lodge a notice of objection had been denied.e)That the said Tax Decision was served upon the Applicant by the Respondent outside of the statutory deadlines thereby locking it out from filing an appeal within the time allowed by the law.f)That further, the Applicant is Constitutionally protected and it’s right to privacy protected by the Bank that was issued with the Agency Order owing to the fiduciary trust placed on it as custodians of its financial property.g)That the Applicant is not in any way indebted to the Respondent as per the Tax Decision it arrived at.

3. In its skeleton Written submissions dated 2nd December, 2022 and filed on 5th December, 2022 the Applicant while relying on its Notice of Motion and in support thereof identified several issues for consideration and made submissions thereon as hereunder:-a)The Applicant submitted that it has an arguable appeal and locking it out from presenting its appeal at the interlocutory stage would grossly prejudice it. In addition to other previous Tribunal rulings on the subject, the Applicant invited the Tribunal to consider the case of Wameer Wholesalers & Distributors Ltd v The Commissioner of Domestic Taxes [Misc. TAT No. 111/2022] and further to the case of Paul Musili Wambua v Attorney General & 2 Others [2015] eKLR, where the Court of Appeal set out the following for consideration in an application for the extension of time;“… the reasons for the delay, the chances of the appeal succeeding if the application is granted, degree of prejudice to the respondent if the application is granted.”b)It argued that it should not escape the eyes of the Tribunal that the Respondent does have long avenues to still collect the taxes and accrued penalties, should the Applicant be found at fault in the Appeal.c)It cited the case of Wildlion Investment Ltd v The Commissioner of Domestic Taxes [TAT Misc. No. 7/2022] to show that the Respondent would not suffer prejudice should the Applicant’s case proceed to be heard on merit.d)The Applicant submitted that this Tribunal finds the need to lift the Agency Notices lodged as against its banks to allow for operations of the Applicants and for its health to be sustained otherwise by continued clamping of the bank accounts, the Applicant continues to suffer damages in terms of dishonoured cheques to its suppliers, payment of salaries and other utility bills and also financing of activities. The Applicant supported this by reminding the Tribunal of a similar application, Danros (K) Limited v The Commissioner of Domestic Taxes [TAT Misc. No. 181/2021] where it was held:“… to preserve the Applicant’s right of appeal and in the absence of prejudice suffered by the Respondent the lifting of Agency Notice will serve a larger interest”e)The Applicant humbly submitted that this Tribunal allows all prayers in this application and accord the Applicant an opportunity to be heard on merit.

4The Respondent filed a Replying Affidavit sworn by Erick Cherutich, an officer of the Respondent on the 24th November 2022, and filed on 25th November 2022 citing the following as the grounds for opposition to the applications.a)That on 16th July 2021, the Applicant lodged late objections via iTax to additional assessments of Value Added Tax that had been issued by the Respondent for disallowed invoices following a verification exercise by the Commissioner.b)That on 15th September 2021, the Respondent issued an Objection Decision confirming the assessment as the Applicant did not provide documentary evidence in support of its objection ground.c)That it is not true that the Appellant was never issued with the objection decision as alleged in its application since the Respondent served the Appellant on 15th September 2021. d)That electronic service is a valid form of service by virtue of Section 74 (1) (c) of theTax Procedures Act.e)That upon lapse of the statutory timelines to lodge an appeal at the Tribunal, the Respondent vide a letter dated 7th February 2022 sought to institute enforcement measures.f)That the Agency Notices placed on the Applicant’s account are lawful since the Applicant has never appealed against the Respondent’s Objection Decision dated 15th September 2021. g)That the Respondent issued the enforcement measures as provided under Section 42 of the Tax Procedures Act 2015which allows it to place agency notices where tax due has crystallized and the taxpayer has failed to make payment.h)That the Applicant is guilty of latches and has been indolent in the disposal of this matter and thus the Honourable Tribunal should not come to its aid.i)That the Respondent stands to suffer prejudice if the Agency Notices are lifted unconditionally, since it has shown that it followed the laid down procedure in placing the Agency Notices.j)That without prejudice, if the Tribunal is inclined in any way to allow the Appeal out of time, to direct that the Applicant to furnish security as a condition for lifting the Agency Notices in order to balance and protect the interests of both parties.k)That the application be dismissed with costs.

5. In its written submissions dated and filed on 30th November 2022, the Respondent opposed the application in its entirety and submitted that the following were the issues for determination:i.Whether the Applicant’s Application offends/flaunts the statutory provisions of Section 13 of the Tax Appeals Tribunal Act2015; andii.Whether there are reasonable circumstances demonstrated to warrant an order for enlargement of time.i)Whether the Applicant’s Application offends/flaunts the statutory provisions of Section 13 of the Tax Appeals Tribunal Act2015a)The Respondent submitted that the Applicant had not complied with the provisions of Section 13 (1) & (2) of the Tax Appeals Tribunal Act which gives the ingredients of a Notice of Appeal. The Respondent went on the argue that for the Applicant to succeed, it must satisfy that owing to sickness or other reasonable cause; it was prevented from presenting its Memorandum of Appeal within the permitted period; and there was no unreasonable delay on its part.b)The Respondent submitted that in the case of Northern Province Labour Utilization Board v The Commissioner of Income Tax [1960] EA 1015 cited in the case of AO Menya v McCreas Ltd [1978] eKLR where is was held that:“.. predominant intention of the legislature gathered from the apparent purpose of the express provision of rule 3 is that in an application under rule 3 other matters not amounting to something which physically impeded an intending appellant from preferring the appeal should not be taken into account”c)The Respondent argued that the above ruling attempts to explain the definition of the term “any other reasonable cause” which the Applicant relies on in filing its application urging the Tribunal to be thus guided.d)The Respondent further argued that the Applicant being and Advocate, an officer of the law and is well aware of the laws was negligent as shown in its laxity in filing and prosecuting its case waiting 1 year and 2 months to lodge this application. That equity aids the vigilant, not those who slumber on their rights.e)That this Appeal is an afterthought to be frowned on by the Tribunal and allowing it would amount to setting a negative precedence against the definition of other reasonable cause.f.The Respondent avers that it is not true that it did not serve the Applicant with the Objection Decision.ii.Whether there are reasonable circumstances demonstrated to warrant an order for the enlargement of time.a)The Respondent quoted the Section 13(3) and (4) of the Tax Appeals Tribunal Act and cited Rule 10 of the Tax Appeals Tribunal (Procedure) Rules and added the case of Commissioner of Domestic Taxes v Mayfair Insurance Company Limited [2017] eKLR where the court held that:“One of the reasons stated under the Rule is that the court may extend time where there is reasonable cause for the delay. Effectively, the court’s powers and discretion to extend time is unlimited. It is however not to be capriciously exercised. Time, in other words, is not to be extended as a matter of right. Each case is to be reviewed sui generis and on its own circumstances and facts. The starting point is that the Applicant ought to advance sufficient and reasonable grounds for any delay on its part.”b)The Respondent argued that the reason given by the Applicant was misleading as the Respondent had demonstrated that it had served the Objection Decision and that it only resorted to enforcement measures as required by the law since the Appellant’s tax liability had crystalized.c)The Respondent submitted that no substantial loss would be occasioned to the Applicant in the event that the orders being sought are not granted because the same is monetary and has not been alleged or proven that in the event of recovery of taxes, the Respondent will be unable to refund the same or will result in a state of affairs that will irreparably affect or negate the very essential core of the Applicant as the successful party in the Appeal. The Respondent supported this point with the case ofJames Wangalwa & Another v Agnes Naliaka Cheseto (Misc Application 42/2011) 2002 eKLR where Gikonyo J. stated:-“No doubt, in law the fact that the process of execution has been put in motion, or is likely to be put in motion, by itself, does not amount to substantial loss. Even when execution has been levied and completed, that is to say, the attached properties have been sold, as is the case here, does not in itself amount to substantial loss.”

Analysis and Findings 6. The Tribunal is enjoined to determine the length and reason for the delay when considering an application for the extension of time to appeal out of time. The power to extend time is discretionary and unfettered but the same must be exercised judiciously and it is not a right to be granted to the Applicant.

7. In determining whether to extend time, the Tribunal was guided by the court in Charles Karanja Kiiru v Charles Githinji Muigwa[2017] eKLR, where the learned Judge stated that:“It is trite that extension of time is not a right of a party. It is an equitable remedy that is only available to a deserving party, at the discretion of the Court”

8. On the criteria of the issues to be considered when granting an extension to file an appeal out of time, the Tribunal referred to the case of Odek, JJ. A in Edith Gichugu Koine v Stephen Njagi Thoithi [2014] eKLR, where the Court laid out the factors thus:“Nevertheless, it ought to be guided by consideration of factors stated in many previous decisions of this Court including, but not limited to, the period of delay, the reasons for the delay, the degree of prejudice to the respondent if the application is granted, and whether the matter raises issues of public importance, amongst others...”

9. Further, in Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd [2020] eKLR, the court held that:-“The Court considers the length of the delay; the reason for the delay; the chances of success of the intended appeal, and the degree of prejudice that would be occasioned to the respondent if the application is granted.”

10. The Tribunal, guided by the principles set out in John Kuria v Kelen Wahito, Nairobi Civil Application Nai 19 of 1983 April 10, 1984 referred to by the judges in the case of Wasike v Swala [1984] KLR 591, Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd (supra) and Section 13 of the Tax Appeals Tribunal Act, 2013 used the following criteria to consider the application.a)Whether there is a reasonable cause for the delay.b)Whether the appeal is merited.c)Whether the application for extension has been brought without undue delay.d)Whether there will be prejudice suffered by the Respondent if the extension is granted.a)Whether there is a reasonable cause for the delay.

11. In considering what constitutes a reasonable cause for the delay, the court in Silas Kanyolu Mwatha v Josephine Kavive James [2021] eKLR, held that:“The time stipulation is a requirement of the law as clearly stated ... In short, parties cannot, either unilaterally or by agreement between them, metaphorically, waive away the rules of the court. The rules of the Court are meant to achieve timely and orderly commencement, progress and proper determination of litigation of proceedings. Given the statutory limit, principally, the delay is inexcusable unless the applicant shows sufficient cause to justify the delay and that any such extension shall not prejudice the respondent.” (Emphasis added).

12. The Applicant contended that it was delayed in lodging the appeal because it only became aware of the Respondent’s decision on 27th October 2022, upon the Applicant visiting the Respondent’s offices where it received a correspondence dated 15th September 2021, which notified the Applicant that its application for extension of time to lodge a Notice of Objection had been denied.

13. That the said Tax Decision was served upon the Applicant by the Respondent outside of the statutory deadlines thereby locking it out from filing an appeal within the time allowed by the law..

14. The Respondent on its part asserted that it issued an Objection Decision confirming the assessment on 15th September 2021 and that it is not true that the Appellant was never issued with the objection decision as alleged in its appeal since the Respondent served the Appellant on 15th September 2021 And that electronic service is a valid form of service by virtue of Section 74 (1) (c) of the Tax Procedures Act.

15. The Respondent argued that the reason given by the Applicant was misleading as the Respondent had demonstrated that it had served the Objection Decision.

16. Supporting the Respondent’s Replying Affidavit was attached a copy of an email and addressed [to] suggesting that the Applicant was served with the Tax Decision. That this evidence has not been challenged by the Applicant.

17. The Tribunal finds that this excuse by the Applicant is therefore defeated for lack of evidence show that it did not receive the Respondent’s Objection Decision until 27th October 2022 when it went to the Respondent’s office.

18. Having established that there was no reasonable cause for delay, the Tribunal shall not consider the substantive matter of the extension of time as the same has been rendered moot.

19. With the Appellant having been denied leave to file an appeal out of time, which leave would have otherwise sanitized the Appeal filed herein, the Appeal as filed is incompetent and unsustainable in law.

Disposition 20. The Tribunal was in the circumstances not persuaded to exercise its discretion in favor of the Applicant and accordingly makes the following Orders:-a) The application for the extension of time be and is hereby dismissed.b) The Appeal be and is hereby struck outc) No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 10TH DAY OF MARCH, 2023. .............................ERIC N. WAFULA CHAIRMAN.............................CYNTHIA B. MAYAKAMEMBER.............................RODNEY ODHIAMBOMEMBER.............................ELISHAH NJERUMEMBER.............................ABRAHAM K. KIPROTICHMEMBER