https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1529

London Distillers [K] Limited v Commissioner of Domestic Taxes (Civil Appeal E770 of 2022) [2026] KECA 1529 (KLR) (31 July 2026) (Judgment) Neutral citation: [2026] KECA 1529 (KLR) Republic of Kenya In the Court of Appeal at Nairobi Civil Appeal E770 of 2022 SG Kairu, GV Odunga & MB Kairaria, JJA July 31, 2026 Between London Distillers [K] Limited Appellant and Commissioner of Domestic Taxes Respondent (An appeal from the Ruling of the High Court of Kenya at Nairobi (A. Mabeya, J.) Dated 16th September, 2022 in High Court JR Misc. App No. E004 of 2022) Judgment 1.By this appeal, London Distillers (K) Limited [the Appellant] urges us to; set aside the decision made by the High Court [Hon. A. Mabeya J] on 16th September, 2022, dismissing with costs, the Appellant’s notice of motion application dated 1st April, 2022 [Nairobi HC JR NO. EOO4 of 2022] and substitute it with an order allowing that application with costs. The Appellant also seeks costs of the appeal. 2.The judicial review proceedings before the High Court were triggered by the Respondent’s letter dated 2nd March, 2022 to the Appellant by which the Respondent informed the Appellant that the decision of the Cabinet Secretary National Treasury dated 20th January, 2022 abandoning 80% of Appellant’s self-assessed and declared excise duty and requiring it to pay only the 20% balance had been rescinded following consultations in government and requiring the Appellant to pay the tax in full within seven (7) failing which enforcement would ensue. 3.The Appellant first moved the High Court for leave to apply for orders of certiorari, prohibition and mandamus by Chamber Summons dated 23rd March 2022 and after the requisite leave was granted took out the notice of motion application dated 1st April 2022 seeking the three reliefs as follows:a)An Order of Certiorari to quash the Respondent’s decision contained in the letter dated 2nd March, 2022 demanding payment of Ksh517,118,680.b)An Order of prohibition against the Respondent’s enforcement of that decision andc)An Order of Mandamus to compel the Respondent to comply with the decision of the CS National Treasury dated 20th January, 2022 and accept the continued payment of Ksh 80,0000,000. 4.The application was founded on grounds on the face of the motion supported by the statement of facts and the affidavit of Mohan Galot. Essentially the Appellant contended that: it sought abandonment of Ksh 517,118,680 in excise tax from the CS National Treasury by letter dated 15th September, 2021; the National Treasury allowed and approved 80% of the outstanding tax and waived 100% of penalties and interest under sections 37 and 89 of the Tax Procedures Act 2015 and communicated that decision to the Respondent by letter dated 20/1/2022; the Respondent acknowledged that outcome by email dated 2/2/2022 and demanded payment of Ksh 80,000, 000, being 20% balance on the Appellant’s Self -Assessed and declared excise duty tax liability; the Appellant negotiated a weekly instalment payment plan of Ksh 7,500,000 effective 2/2/2022 and commenced payment as agreed; the Respondent reneged on that arrangement in a letter dated 2/3/2022 and demanded payment of the entire Ksh 517, 118,680 within seven 7 days failure to which it would face enforcement measures because the abandonment decision made on 20/1/2022 had been rescinded. 5.The Appellant further stated that: it had not received any communication from the National Treasury rescinding the decision on the 80% abandonment and 100% waiver on interest and penalties on the outstanding Excise tax for the period January 2020 to August 2021; the Respondent had acted unilaterally, arbitrarily and in excess of its powers by reaching a decision at odds with that of the National Treasury. Lastly the Appellant contended that Respondent had wrongfully assumed the powers of the National Treasury, its decision was unlawful, ultra vires, null and void ab initio. 6.On its part the Respondent denied any wrong doing. It asserted that all it did in making the demand complained of was to follow the strict letter of the law in particular Sections 37 and 89 of the Tax Procedures Act, in exercise of its mandate under Section 5[2] of the Kenya Revenue Authority (KRA) Act. It sought the dismissal of the application with costs. In a replying affidavit sworn by Victor Mino sworn on 8/04/2022 the Respondent set out the chronology of events leading to the filing of the judicial review application in a bid to show that it acted within the law and why the court should not accede to the Appellant’s application. In brief the deponent averred that the Appellant filed self-assessment and returns for the period January 2020 to August, 2021 in which it disclosed a tax liability in the sum of Ksh 895,000,000 in collected excise duty tax. The Appellant paid a portion of that tax leaving a balance of Ksh 529,278,680. The Respondent then made a demand for payment. The Appellant resisted and challenged it in a dispute before the Tax Appeals Tribunal. The parties negotiated and reached a consent for payment of the tax due by agreed scheduled instalments. The Appellant dishonoured the consent and failed to pay. The Appellant then applied to the CS National Treasury for abandonment of the tax. The PS National Treasury sought the Respondent’s views and comments on the application to enable him advise the CS appropriately. The Respondent gave its views. Counsel argued that the application did not meet the requirements of the law, advised against abandonment and recommended that the application be declined and the Appellant remits the tax due which it had collected from customers as a tax collecting agent for onward transmission to government. On 20th January, 2022 National Treasury informed the Respondent that the CS had approved 80% abandonment on the principal tax due and 100% waiver on interest and penalties. The Respondent asked Treasury to reconsider the decision as it was against the law. The Attorney General advised the CS that the abandonment decision be rescinded. There were consultations within the relevant institutions including Treasury and it was agreed that the CS’s abandonment decision be rescinded. The Respondent communicated that decision to the Appellant and demanded payment of the full outstanding tax by letter dated 2nd March, 2022. The Appellant did not heed the demand but challenged it in court. 7.The case was heard by Mabeya J of the High Court who upon considering the affidavit evidence, the parties’ rival submissions, the relevant statutory provisions and case law, found that the Respondent’s decision of 2/3/2022 demanding payment of Ksh 517,118,680 was lawful and not illegal, irrational or unprocedural as contended in the application. Consequently, he dismissed it with costs in a ruling dated 16th September, 2022. 8.The reasoning of the trial court leading to the dismissal begins with the identification of the issue for consideration at par. 24 and ends at par. 37 in the impugned ruling. The issue identified by the judge at par. 24 is “Whether the decision of the Respondent dated 2/3/2022 to demand full taxes despite Treasury’s decision to abandon part of the taxes was irrational, illegal, unreasonable and untenable.” Upon considering the undisputed facts, the relevant statutory provisions and case law he concluded that the Respondent’s decision of 2/3/2022 demanding payment of Ksh 517,118,680 was lawful and not illegal, irrational or unprocedural as contended, because:a)The Respondent is the one mandated by law to administer taxes, such administration includes assessment and collection by all means possible as provided by law and he can only demand the tax that has been properly imposed by law and is due. [Par. 24]b)It was not in dispute that the Appellant made returns based on self -assessment that taxes amounting to Ksh 529,278,680 had been collected by it and was due to the Respondent for the period January 2020 and August, 2021 and instead of paying the same the Appellant applied to Treasury for abandonment.c)It was clear that Section 37 of the Tax Procedures Act on abandonment of taxes only applies where the Commissioner himself determines the three grounds set out therein exist; namely that it is impossible to recover unpaid tax, or there is undue difficulty or expense in recovery of unpaid tax, or hardship or inequity in relation to recovery of the unpaid tax. [par.29]d)There can be no application for abandonment under that section unless the Commissioner determines the existence of any of those three conditions.e)That only the Commissioner and no one else, can invoke that provision [s.37] and start the process of tax abandonment by referring the matter to the Cabinet Secretary National Treasury for approval.[par.30]f)In the instant case the Treasury had no business to purport to allow the abandonment of 80% of the admitted taxes on the application of the Appellant. It was extreme abuse of power and office on the part of Treasury. Treasury exercised a power it did not have and the abandonment was void ab initio. [par.31]g)That decision was illegal and could not confer any right whatsoever on the Appellant or any obligation on the Respondent and no legitimate expectation could arise from an illegality as was held in Republic vs Kenya Revenue Authority Exparte Shake Distributors Limited [2012] eKLR . [Par. 32]h)The Respondent was not acting maliciously in making the demand for full payment of the taxes due from the Appellant because it had correctly advised the CS that none of the reasons given by the Appellant met the conditions under Section 37 of the Act, a position supported by the A.G.i)The Respondent had properly explained to Treasury that the taxes sought to be abandoned were taxes arose from self -assessment for the period Janaury, 2020 and August, 2021, constituting taxes collected by the Appellant for onward transmission to the Respondent, the Appellant was a going concern and able to pay the full amount and in those circumstances did not recommend abandonment of tax.j)The Respondent was following the law when making the demand for full payment of the taxes due from the Appellant and his decision cannot be said to be unlawful or irrational like that of Treasury and was not bound by the illegal decision of Treasury as per dicta in Republic vs Kenya Revenue Authority & Ano. Ex- Parte Bear Afric [K] Limited. 9.Ultimately the learned judge reasoned at paragraphs 37, 38 and 39:“37.The Respondent ought not be put in a position whereby it complies with ministerial directives which are illegal or unlawful. The Respondent being the master of taxes and tax laws, had a duty to evaluate the application for abandonment of taxes against the statutory requirements to be met before such approvals are issued. He similarly had a duty to confirm that the right procedure had been followed.38.Accordingly, the Respondent’ decision of 2/03/ 22 demanding payment of Ksh 517, 119,680/= was lawful and not illegal, irrational or un- procedural as contended.39.In view of the foregoing, the application dated 1/4/2002 is without merit and is hereby dismissed with costs to the Respondent.’’ 10.The Appellant is aggrieved by those findings and is now before us on this first appeal challenging the High Court’s decision on the nine [9] grounds of appeal set out in its memorandum of appeal dated 4th November, 2022. Those grounds were merged and argued together as one ground in the Appellant’s written submissions dated 20th February, 2026 and in the oral highlights by M/S Awiti Advocate at the virtual hearing on 4th March 2026. The Appellant contends that the learned judge of the High Court erred in law and fact by:a)dismissing the application with costs;b)failing to appreciate the evidence adduced and disregarding crucial evidence in support of the petition;c)holding that an application for abandonment of taxes can only be made by the Commissioner and not the Cabinet Secretary ,National Treasury;d)holding that the National Treasury had no mandate to allow abandonment of taxes;e)holding that in allowing abandonment of taxes as signified in the letter dated 20th January, 2022 ,the National Treasury engaged in extreme exercise of power and office;f)considering irrelevant issues and facts that were not in issue and not before the court;g)holding that the decision of the National Treasury dated 20th January,2022 was illegal and of no effect;h)holding that the Respondent was not bound to comply with the decision of the National Treasury;i)making a decision that is contrary to the law, pleadings, evidence and precedent. 11.We heard the appeal on 4th March, 2026. Ms. Awiti Advocate appeared holding brief for Mr. George Gilbert advocate for the Appellant while Ms. Otieno Advocate appeared for the Respondent. Both adopted their respective written submissions which they highlighted orally. In support of the appeal counsel for the appellant compressed the nine grounds into one main ground. She submitted that the High Court erred when it held that the decision by the CS treasury on the Appellant’s Application for abandonment of tax and waiver on interest and penalties as communicated by the National Treasury PS to KRA in the letter dated 20th January, 2022 was illegal, null and void. 12.By way of background counsel highlighted the sequence of events from the Appellant perspective from the time it applied to CS Treasury for abandonment of tax, the request for KRA’S comments and views on the subject application, KRA’S response, the decision to abandon 80% of taxes and waive 100% of the interest and penalties due from the Appellant, the communication of the decision and acknowledgement of receipt by KRA. This was closely followed by the agreement to pay the remaining 20% tax by instalments to KRA and the subsequent rescission of that decision as communicated to the National Treasury by KRA in the letter of 2nd March 2022, which was the subject of challenge in the dismissed Judicial Review application. 13.She told us that the Appellant applied to the National Treasury for abandonment of all the taxes by letter dated 15th, September, 2021. The National Treasury forwarded that application to KRA under cover of a letter dated 1st October, 2021 for their review and comments. KRA responded and made recommendations to Treasury by letter dated 22nd December, 2022. The National treasury then acted on KRA’S recommendation and issued a decision allowing the request for abandonment on condition that LDKL pay 20% of the amounts applied to be abandoned or waived. That decision was then communicated to KRA by letter dated 20th January 2022. KRA acknowledged the outcome of the application for abandonment and demanded payment of 20% of the abandoned tax. KRA computed the figure and came up with and demanded Ksh 80 million. They entered into a payment plan for payment of that amount and started making payments. But on 2nd March 2022, the Respondent purported to rescind the decision of the National Treasury its principal and demanded for full payment of taxes due including the 80% tax which had been abandoned and the 100% interest and penalties which had been waived. 14.Counsel added that the Appellant believes that KRA acted in bad faith in its 2nd of March 2022 demand for full payment of the tax due, after acknowledging Treasury’s abandonment and waiver decision, ratifying it, computing and demanding the tax payable based on that decision, entering into a payment program and receiving payments under that arrangement. 15.In its written submissions the Appellant essentially contends that the judge erred in law and fact in dismissing the judicial review application in its entirety after finding that; there was no legitimate expectation created by Treasury’s decision to abandon tax and waiver of interest and penalties, upon the learned judge finding that decision to be contrary to law on tax administration; the Appellant’s rescission of that decision was lawful and that the process leading to that rescission did not violate the principles fair administrative action. It was argued that the impugned decision of the High Court flies in the face of binding precedents of this Court and the Supreme Court. The Appellant’s counsel then asserted that the simple issue for determination before us is:“whether a decision initially made by another body becomes lawful upon ratification by a competent authority and whether the authority may thereafter rescind the same arbitrarily and long after the Appellant has relied on the ratified and adopted decision.’’ 16.The Appellant complained that by making the demand for full payment of the abandoned tax the Respondent illegally and unlawfully turned its back on a decision it had ratified and adopted and unilaterally made an irrational decision to rescind the Treasury’s decision on its abandonment of tax application in the absence of the parties. 17.Turning to issues of law counsel submitted that the Appellant had made out a case for the grant of judicial review orders. On the principles that govern the grant of judicial review orders, Counsel cited the following cases in support of the appeal; Patoli vs. Kabole District Local Government & Others [2008] 2 EA 300, Municipal Council of Mombasa vs. Republic, Umoja Consultants Ltd , Nai Civil Appeal No.185 of 2001[2002] eKLR, The National Examination Council vs. Republic Exparte Geoffrey Gathenji Njoroge [1997] eKLR, Onyango Oloo vs. Attorney General [1986-1989] EA and asserted that the Respondent’s decision to rescind the ministerial order by the Cabinet Secretary was made without affording the Appellant an opportunity to be heard in violation of the constitutional and administrative law requirements of the right to fair hearing. She added that the Respondent could not rescind a decision which it had ratified and had been relied upon by the Appellant and concluded by asserting that since the letter dated 20th January, 2022 had not been expressly revoked by the Cabinet Secretary, the tax demanded by the Respondent in the letter of 2nd March, 2022 stood extinguished and the Respondent’s action was actuated by ulterior motive. 18.In opposition to the appeal MS Otieno Advocate, for the Respondent relied on the Respondent’s written submissions dated 27th February, 2026 which she highlighted orally. She submitted that the Respondent is being condemned for doing the right thing namely upholding the rule of law. That the Appellant’s application to the Cabinet Secretary for abandonment of tax did not meet the legal requirements under section 37[1] of the Tax Procedures Act and the Cabinet Secretary’s decision to grant the Appellant’s request was contrary to the law and hence null and void ab initio. That under Section 37[1] only the Commissioner KRA can determine to abandon tax based on the criteria set thereunder and if he determines that abandonment is desired, apply to the CS Treasury for approval. That in the instant case the application was made by the tax payer directly to the CS. The Respondent did not initiate it and in fact advised the CS that the application was legally untenable and unacceptable. That notwithstanding that advice, the CS nevertheless granted abandonment and notified the Respondent of that decision by letter dated 20th January, 2022. The Respondent asked the CS to reconsider that decision because it was contra -statute. That section 37[1] is meant to relief the Respondent of the burden of following payment of taxes where he determines that the subject tax is either irrecoverable or the costs of recovery is too expensive. Only then can the Commissioner seek approval of the CS to abandon taxes. Subsequently the Attorney General advised the CS that the decision was contrary to the law and guided the CS to rescind the decision. She maintained that the CS’S tax abandonment decision did not create a legitimate expectation as it was against the law and the Respondent was not legally obliged to act on the said decision blindly and the decision was lawfully rescinded as communicated in the Respondent’s letter of 2nd March, 2026. Further that the said letter was written in exercise of its statutory mandate to collect taxes and its action was consistent with its duty to advise government in matters relating to tax administration and collection. 19.Counsel explained that in the instant case the LDKL a taxer payer manufacturer of excisable drinks, manufactured products, charged excise duty on those products over and above their costs, passed the cost to consumers and failed to remit to KRA about half a billion Kenya Shillings. The Appellant then self-assessed and self-declared its excise duty liability to KRA and was expected but failed to remit about half a billion Kenya shillings. That it is the Appellant who acted in bad faith in applying directly to the CS after a consent had been reached and recorded for settlement of the full outstanding tax. 20.Counsel submitted that though National Treasury was the Principal and KRA was the agent for purposes of collection of taxes, KRA as agent was bound to comply with the rule of law and express statutory provisions. The Respondent cited R vs Commissioner of Customs in support of the proposition that the Commissioner cannot act blindly and authorize that which is illegal or unlawful merely because CS National Treasury directs him to do so. Counsel added that if the Commissioner were to comply all the directives, including the ones that are contra statute, then the Government will never collect any revenues because all that taxpayers would require to escape from their tax obligations is to know someone at the National Treasury and their taxes would be abandoned. In conclusion the Respondent’s counsel implored us to look at the law as it is and uphold it and not punish the Respondent for standing its ground and demanding full payment of the excise tax due from the Appellant. Based on those submissions and the cited case law the Respondent urged us to dismiss the appeal with costs and uphold the ruling of the High Court dismissing the Appellant’s judicial review application with costs. 21.Upon considering the grounds of appeal, the record of appeal, the elaborate rival submissions eloquently presented by the parties advocates and cited case law we discern that at the core of the parties’ dispute both at the High Court and before us, are two broad and fundamental questions in the area of tax administration. In particular the dispute concerns the respective mandates of the National Treasury and the Kenya Revenue Authority in determining abandonment of tax and waiver of accrued interest and penalties under Sections 37 and 89 of the Tax Procedures Act. Foremost is the question, who as between the Cabinet Secretary National Treasury and the Commissioner General Kenya Revenue Authority has the legal mandate under section 37[1] and 89 of the Tax Procedures Act 2015 to:i.determine the abandonment of tax and waiver of penalties and interest following failure and default to pay the tax disclosed by a taxpayer in self-assessment and declaration of tax return[s].ii.initiate the process of such abandonment of tax and remission of interest and penalties on such tax. 22.The second related question is:i.whether excise duty tax collected by a taxpayer who is a manufacturer of statutorily excisable products, from consumers of those goods, [as an agent] for onward transmission to KRA on behalf of the National Treasury for the Government of Kenya can lawfully be abandoned and waived by the CS Treasury at the request of the defaulting tax payer; andii.whether KRA is legally bound obey a decision by the CS Treasury to abandon tax and waive interest and penalties and act on it notwithstanding that it is procedurally and substantively unsound in law and is issued against KRA ‘s advice to the government [CS] in exercise of its statutory mandate under Section 5[2] of the Kenya Revenue Authority Act and in the face of written legal opinion and guidance by the Attorney General of the Republic to the CS that the decision to abandon the subject tax and waive penalty and interest levied thereon, is not anchored in law and should be rescinded. 23.This being a first appeal our bounden duty according to the dicta in the often cited Selle vs. Associated Motor Boat Company Ltd [1968] EA, is to retry the case by reconsidering the evidence on record, re-analysing and re-evaluating it and independently drawing our own conclusions the facts and the law keeping with the caveat that we must keep in mind that unlike the trial court we never heard nor saw the witnesses and giving due allowance for that fact. That caveat is of course unnecessary in the circumstances of the appeal before us, where the hearing before the trial court proceeded on the basis of affidavit evidence and no witnesses testified in court before the judge at all. 24.From the record the essential background facts leading to the dispute culminating in this appeal are not contested. Indeed the accounts of events given by the parties in their written submissions and the oral highlights differ only in detail but not in the overall substance. In many ways the material facts are common ground. London Distillers Kenya [Ltd] a company registered in the Republic in the business of manufacturing and sale of excisable alcoholic spirits did a self-assessment returns and declared Ksh. 529,278,680 excise duty payable by the Appellant to the Kenya Revenue Authority[KRA] the principal tax collection Agency of the National Treasury for the GOK. The returns were for the period January, 2020 to August 2021 and the amount comprised of Ksh 415,000,000 principal tax, Ksh 21,199,753 penalties and Ksh 93,078,927 interest made up as follows: Period Principal Penalty Interest Total Jan. 2020-Dec 2020 360,000,000 21,199,753 62,160,293 443,360, 060 Jan 2021-Aug 2021 535,000,000 - 30,918,634 565,918,634 Paid 480,000,000 - - 480,000,000 Net Total 415,000,000 21,199,753 93,078,927 529,278,680 25.The Appellant did not remit the self - assessed amount as required by law when it fell due and challenged the demands for payment by the Respondent before the Tax Appeals Tribunal following which the parties engaged in negotiations and entered into a consent dated 12th May, 2021 for the settlement of the excise duty taxes capped at Ksh 500,000,000 by eight [8] instalments as follows: Instalment Payment Date Amount 1st Instalment On or before 10th May, 2021 Ksh 38,000,000 2nd Instalment 24th May, 2021 Ksh 37,000,000 3rd Instalment 24th June, 2021 Ksh 75,000,000 4th Instalment 24th July, 2021 Ksh.75,000,000 5th Instalment 24thAugust, 2021 Ksh 75,000,000 6th Instalment 24th September, 2021 KSh 75,000,000 7th Instalment 24th October, 2021 Ksh 75,000,000 8th Instalment 24th November, 2021 Ksh 50,000,000 26.Instead of honouring the agreed instalment payments the Appellant on 18th June, 2021 informed the Respondent that they were unable to pay the full amount for the month of May, requested to be allowed to pay 30% of the total tax due for the month of May by 19th June, 2021 and clear the 70% balance the next month. KRA rejected that request for extension of time in a letter dated 18th June, 2021 and insisted that the Appellant fulfil its part of the consent failing which enforcement measures would be engaged. 27.After a lull of about three months the Appellant applied to the Cabinet Secretary National Treasury and Planning for abandonment of all its excise tax liabilities amounting to Ksh 895 Million by letter dated 15th September, 2021. Upon receipt of that application, the PS National Treasury by letter dated 1st October, 2021 requested the Commissioner General [KRA] to review the issue and provide his views and comments to enable them advise the Cabinet Secretary appropriately. In response to that request KRA in a letter dated 22nd December, 2021 informed the CS that the Appellant’s application did not meet the requirements for abandonment of tax under Section 37(1) of the Tax Procedures Act and therefore KRA did not recommend abandonment of tax. Where material the said letter states:“Department’s ObservationsThe Law governing the procedure and conditionality for abandonment of taxes is set out under Section 37 of the Tax Procedures Act (TPA) as quoted:“37.Relief because of doubt or difficulty in recovery of tax.(1)This section applies where the Commissioner determines that-:a)it may be impossible to recover an unpaid tax;b)there is undue difficulty or expense in the recovery of unpaid tax;c)there is hardship or inequity in relation to the recovery of unpaid tax ;ord)there is any other reason occasioning inability to recover the unpaid tax.”It is our considered view that the taxpayer’s mitigating grounds do not meet any of these conditions.From the foregoing, we wish to state as follow:a)The excise Tax for which the taxpayer is seeking abandonment arose from Self- assessments covering the period between January 2020 to August 2021. Self - Assessments are made up of actual sales made by the tax payer. Excise Tax is an Agency Revenue meaning that the actual payers of the tax are the consumers of LDK products. LDKL is an agent of the Government and is mandated to collect and remit the Excise Tax. Abandoning the Excise Tax will be akin to the Government allowing a taxpayer to finance its operations using taxes paid by its clients/customers.b)The tax payer has been filing Self-Assessment Declarations on Excise but is not current in making payments (folio 3).c)The tax payer has not cooperated with Kenya Revenue Authority (KRA) and has taken KRA to court three times on the tax in question. Further, the taxpayer has on several occasions negotiated for payment plan agreements with KRA but later regened. When KRA tried to enforce the same the taxpayer went to court but subsequently agreed to settle the issue out of court by entering into a new payment plan with KRA. The tax payer is now requesting for the same taxes to be abandoned.d)Granting such a request would set a perilous precedent where taxpayers would willingly decline to pursue other available payment arrangements provided by Revenue Acts by opting to seek abandonment of the taxes.Recommendations:a)LDKL is a going concern. It has not demonstrated its inability to pay the outstanding Excise Tax of Kshs. 529,278,680 and therefore we do not recommend abandonment of tax.b)KRA is ready to engage the taxpayer and negotiate on flexible payment plan to recover the outstanding tax.c)The taxpayer is at liberty to apply for waiver of the outstanding penalties and interest upon payment of the principal taxes.’’ 28.Following KRA’s advice and recommendations, the PS National Treasury wrote a letter dated 20th January, 2022, to the Commissioner General KRA informing him that after due consideration of the analysis by KRA and the documents submitted in support of the request for abandonment, the CS had approved the abandonment of 80% of the outstanding principal excise tax and waiver on 100% penalties and interest in accordance with Sections 37 and 89 of the Act. In response KRA wrote a letter dated 31st January, 2021 in which it reiterated that the Commissioner General did not recommend the abandonment of the tax in issue as it continued to hold the view that the application did not meet the criteria for abandonment in section 37[1] of the Tax Procedures Act, 2015. 29.Poignantly, the Commissioner General clarified to the PS Treasury that:“excise duty is an agency tax that manufacturers collect from consumers of their products and as such incapable abandonment under the criteria set out under section 37[1] of the TPA. Abandonment of this tax as applied to LDKL will be in breach of the law and may form precedence that is likely to have far reaching negative implications on tax compliance in so far as agency tax is concerned. It may also be construed that the National Treasury has appropriated exchequer revenue to fund private enterprise outside the established legal framework and budgetary process.” And in line with its advisory mandate on matters relating to tax administration and collection of revenue under Section 5[2] [b] of the Kenya Revenue Authority Act advised against abandonment of the LDKL taxes and recommended the decision to abandon the tax be reconsidered “as it is not supported by the law and the facts” and its implementation “will seriously undermine domestic revenue mobilization and will be inconsistent with the principles of fairness and equity in tax administration.’’The Commissioner General copied the said letter to the Appellant and several relevant Government departments including the office of the Attorney General whose advice had not been sought before the decision to abandon LDKL’s excise tax liability was made by the CS Treasury. 30.In his written opinion dated 22nd February 2022, the Principal Constitutional Legal Advisor to Government correctly advised the CS Treasury that the process of abandonment of taxes under Section 37[1] could only be initiated by an application by the Commissioner KRA to the CS; only if the Commissioner determines that the application meets the threshold under that section 37(1) and not otherwise. He counselled that a decision to determine whether abandonment of taxes and waiver of interest and penalties was desirable was within the remit of the Commissioner and the CS’s mandate was approval of the remission upon request by Commissioner. That position applied to applications for waiver of interest and penalties under section 89 of the Act. Being of that opinion the A.G guided that the abandonment of excise duty and the remission of interest and penalties by the Cabinet Secretary in favor of the Appellant be rescinded. 31.Based on that opinion and guidance consultations were held within government institutions following which the approval was rescinded and the Appellant required to the full amount of tax Ksh 517,118,680 as previously agreed before the Appellant applied to the CS for tax abandonment. That position was communicated to the Appellant in a letter dated 2nd March, 2022 addressed to the Appellant’s managing Director by the Respondent’s Chief Manager -Corporate Tax Payer Account Management Division. It is that letter that triggered the filing of the judicial review application before the High Court which was dismissed for lack of merits. The letter reads:“Dear Sir,Re: London Distillers Kenya Limited – A Bandonment of Excise Tax and Waiver Of Penalties And InterestReference is made to the above subject. We refer to the letter dated 20th January 2022, under Re. No. zz/28/012, from the Cabinet Secretary the National Treasury [CS] to the Commissioner General KRA and copied to you. In his letter, the Cabinet Secretary had approved the abandonment of 80% of the outstanding principal Excise tax and waiver of 100% penalties and interest.Please note that consultations have been held with the various government institutions and the approval has now been rescinded. Therefore, the full amount of tax is payable.You are required to immediately make arrangement to pay the Kshs. 517,118,680 within seven days from the date of this letter to avoid enforcement measures for recovery of the tax.’’ 32.It is the demand in the last paragraph that the Appellant claimed was arbitrary, irrational, illegal, unreasonable, unprocedural and untenable before the trial court but which the trial court found was lawful. The question in the appeal is whether the judge was right in arriving at that decision or whether he erred in law and in fact as contended by the Appellant. In our assessment the decision of the trial court turned on the interpretation of sections 37 and 89 of the Tax Procedures Act. The judge found that the two sections reposed the mandate of determining whether tax abandonment and waiver of interest and penalties was needed as well as the initiation of the process of abandonment and waiver on the Commissioner General KRA and not anyone else. That the role of the CS National Treasury was limited by the law to approving requests or applications made in that regard by the Respondent and not otherwise. That he had no business abandoning tax and waiving interest and penalties as the Respondent had not determined that there was any need for either abandonment of the principal tax or waiver of interest and penalties. 33.The two sections (Sections 37 and 89) are therefore central to the determination of this appeal. The Appellant did not address us on the interpretation of those sections despite strongly contending that the Respondent’s demand contained in the letter of 2/3/2022 was arbitrary and irrational and the judge erred in law by upholding it and holding that Treasury had no business determining the 80% abandonment of tax and 100% remission of interest and penalties. Counsel for the Respondent told us we should stick to the text of the law, this being a tax law we should not read anything into it. So what do the two Sections say:“Section 37 of the Act reads:Relief because of doubt or difficulty in recovery.(1)This section applies where the Commissioner determines that;a)It may be impossible to recover an unpaid tax;b)There is undue difficulty or expense in the recovery of an unpaid tax; orc)There is hardship or inequity in relation to the recovery of an unpaid tax;(2)Despite the provision of any tax law, the Commissioner may, with the prior written approval of the Cabinet Secretary, refrain from assessing or recovering an unpaid tax and the liability in relation to the tax shall be deemed to be extinguished or the tax shall be deemed to be abandoned or remitted, as the case may be-(3)In any case referred to the cabinet Secretary under subsection {1} and where appropriate, the Cabinet Secretary may direct the Commissioner in writing –a)to take such action as the Cabinet Secretary deem fit; orb)to obtain the directions of the court in relation to the case.” 34.On the other hand Section 89 which deals with General provisions relating to penalties expressly provides at subsection (6) thereof that:“A person liable to a penalty or interest may apply in writing to the Commissioner for the remission of the penalty or interest payable and such application shall include the reasons for the application.” 35.In our view, the text of both sections 37 and 89 [6] is plain enough. The judge did not say anything outside those sections in the ruling. His finding that it is for the Commissioner to determine whether to abandon tax under Section 37 of the Act and only he can initiate the process of abandonment by applying to the Cabinet Secretary represent the correct reading of the law and cannot be faulted. So is his finding that the Cabinet Secretary had no business abandoning the 80 % of the tax due and giving remission of 100% on the interest and penalties on the application of the Appellant by letter dated 15th September, 2021. The CS’s role is limited to approving applications made by the Commissioner upon determining that the three conditions outlined in section 37 are met. Under the scheme of Section 37 and 89(6) of the Tax Procedures a tax payer cannot apply directly to the CS for abandonment of tax or remission of interest and penalties. In the instant case it is clear that the tax payer applied to the Cabinet Secretary for abandonment of tax which was unprocedural and the Cabinet Secretary decided to abandon 80% of the tax due and to give 100% on interest and penalties against the advice of the Commissioner General. We agree with the trial Court that he had no such powers. That abandonment was illegal and the Respondent was not bound to act on it. We would add that there can be no discretion to abandon that which has been collected by a tax agent from third parties for onward transmission to public coffers. 36.The Respondent’s duty under Section 37(3) is to implement lawful directives of the Cabinet Secretary not otherwise. It would be dangerous to hold otherwise. It would bleed uncertainty in tax administration and collection, completely obliterate objectivity in the process of abandonment of tax and interest and penalty and undermine the inbuilt checks and balances that ensure transparency in tax administration. 37.In the end, we are not at all persuaded that the learned judge erred in law and fact when he dismissed the Appellant’s judicial review application dated 1st April, 2022 as contended in this appeal. That application was rightly dismissed. We therefore find no merits in this appeal and dismiss it with costs. DATED AND DELIVERED AT NAIROBI THIS 31ST DAY OF JULY, 2026.S. GATEMBU KAIRU,(P), FCIArb, C.Arb.....................................JUDGE OF APPEALG. V. ODUNGA....................................JUDGE OF APPEALMURUNGI B. KAIRARIA...................................JUDGE OF APPEALI certify that this is a True copy of the originalSignedDEPUTY REGISTRAR