[2024] KETAT 1135 (KLR)

L’Oreal East Africa Limited v Commissioner of Customs and Border Control (Tax Appeal 592 of 2023) [2024] KETAT 1135 (KLR) (1 August 2024) (Judgment)

Neutral citation: [2024] KETAT 1135 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 592 of 2023

RM Mutuma, Chair, M Makau, EN Njeru, B Gitari & AM Diriye, Members

August 1, 2024

Between

L’Oreal East Africa Limited

Appellant

and

Commissioner of Customs and Border Control

Respondent

Judgment

Background 1. The Appellant is a Private Limited Liability Company incorporated in Kenya. Its main form of business is the marketing and distribution of personal care products within East Africa.

2. The Respondent is established under the Kenya Revenue Authority Act, Cap 469 Laws of Kenya. The Kenya Revenue Authority (“KRA”) is an agency of the Government of Kenya for assessing, collecting, and accounting for all revenue.

3. The Respondent flagged the Appellant’s shipment declared through Entry Number 23EKIM400677831 for verification of the Harmonized System Code applied by the Appellant for the Appellant’s product, Garnier Pure Active 3-in-1- Charcoal (Garnier Pure Active) declared by the Appellant under HS Code 3401. 30. 00 of the EAC/CET version 2022.

4. The Respondent then issued a Tariff Ruling on 19th July 2023 Reference No. KRA/C&BC/BIA/THQ/504/07/2023 wherein it reclassified the Product to HS Code 3304. 99. 00.

5. The Appellant lodged an Application for Review via a letter dated 24th July 2023 objecting to the Respondent’s Ruling and engaged in talks with the Respondent in a meeting at the Respondent’s offices on 1st August 2023 for further information.

6. The Respondent consequently issued a Review Decision dated 1st August 2023 upholding its ruling and subsequent reclassification of the Appellant’s product under HS Code 3304. 99. 00 and demanded an excise duty of Kshs. 415,565. 00 paid by the Appellant under protest vide a letter dated 8th August 2023.

7. Aggrieved by the Respondent’s Decision, the Appellant filed a Notice of Appeal dated and filed on 14th September 2023.

The Appeal 8. The Appeal is premised on the following grounds outlined in the Memorandum of Appeal dated 15th September 2023 and filed on 19th September 2023: -a.The Respondent erred in fact and law by failing to appreciate the Garnier Pure Active 3-in-1 Charcoal (Garnier Pure Active) is a mixture made up of different materials and substances thereby the General Interpretation Rules (GIR) 1 and 6 should not have been applied to classify it.b.The Respondent erred in fact and law by failing to appreciate that Garnier Pure Active is prima facie classified under two headings and as such the same should have been classified in accordance with the rules provided under GIR 3. c.Garnier Pure Active is rightly classifiable under Harmonised System (HS) Code 3401. 30. 00 and by applying GIR 3 (a).d.In the alternative, and without prejudice to the foregoing, Garnier Pure Active would still be rightly classifiable under HS Code 3401. 30. 00 by applying GIR 3 (c).e.The Respondent erred in fact and law in its interpretation of GIRs 1 and 6, the Chapter Notes as well as the World Customs Organization (WCO) Explanatory Notes (EN) on the correct HS Code classification applicable to Garnier Pure Active.f.The Respondent erred in fact and law by failing to appreciate that Garnier Pure Active is an organic surface-active product or preparation that is properly classifiable under Heading 34. 01. and specifically, under HS Code 3401. 30. 00. g.The Respondent erred in fact and law by disregarding the provisions of the WCOs Explanatory Notes and classification opinions to Heading 34. 01. h.The Respondent erred in fact and law by failing to appreciate international standards on the treatment of organic surface-active products and preparations such as Garnier Pure Active and further erred in deviating from such standards without any cogent justification and reasons.i.The Respondent violated the Appellant’s rights to fair administrative action and natural justice by making its decision based on test results of a sample of Garnier Pure Active, which results are not shared with the Appellant.

The Appellant’s Case 9. The Appellant’s case was premised on its;a.Statement of Facts dated 15th September 2023 and filed on 19th September 2023 together with the documents attached thereto;b.The written submissions filed on 28th April 2024; and,c.The witness statement of Philippe Rapold dated and signed on 27th February 2024 and filed with the Tribunal on 28th February 2024 and adopted as evidence in chief on the 26th March 2024.

10. The Appellant stated that Garnier Pure Active is made up of a combination of various materials and substances which include Decyl Glucoside, Sodium Laureth Sulfate, peg-7 Glyceryl Cocoate, Salicylic Acid, Tetrasodium EDTA, Sodium Hydroxide, zinc Gluconate, Charcoal Powder, Water, Glycerine amongst other components as highlighted in the product catalogue.

11. The Appellant averred that Garnier Pure Active is used for unclogging pores and removing excess oil, while exfoliating for clear, blackhead free skin. It added that it is primarily used as a face wash, blackhead scrub and charcoal face mask.

12. It relied on Headings 33. 04 and 34. 01 of the EAC CET and contended that based on the materials listed as contained in the product, Garnier Pure Active is prima facie classifiable under the two because it can be termed as a preparation for the care of skin as well as an organic surface-active product and preparation for washing the skin, in the form of liquid or cream and put up for retail sale.

13. It averred that the Respondent gave no reason why it disregarded the provisions of Heading 3401 despite the fact that it is clear that Garnier Pure Active could also be classifiable under the heading when it classified the product under 3304. 99. 90 after applying GIR 1 and 6 and the WCO Explanatory Notes to Heading 33. 04.

14. It relied on the case of Kenya Breweries Limited vs. Commissioner of Customs and Border Control [2020] eKLR where the court approvingly cited the case of Canadian Court in Puratos Canada Inc vs. Canada (Customs Revenue) [2004] CA CITT and contended that while it appreciates the fact that the GIRs must be applied sequentially, this does not mean that they are to be applied in total disregard to the other rules and the Respondent did not follow the required procedure so as to arrive at the classification of the product. It added that GIR 1 would have required the Respondent to also look at Heading 34. 01 especially given the composition of the product as a mixture or composite product.

15. The Appellant cited GIR 1 and stated that had the Respondent applied GIR 1, it would have noted that the product is classifiable under Tariff Heading 33. 04 and 34. 01 and the Respondent should not have concluded by classifying the product under GIR 1 but rather reviewed the next GIRs to determine the correct classification.

16. It relied on the case of Davis & Shirtliff Limited vs. Commissioner of Customs & Border Control, Appeal No. 368 of 2021 and Note XIII to GIR 2 to support its contention that the Respondent erred in fact and law by failing to take into consideration the provisions of Heading 3401 and concluding classification of Garnier Pure Active by applying GIR 1 and instead of applying the provisions of GIR 3.

17. It cited GIR 2 (b) and further averred that GIR 2 (a) shall not apply since the product contains various materials and substances and thus the product shall be explainable under the provisions of GIR 3 as provided under GIR 2 (b) which uses the word “shall” which means that the provision is couched in mandatory terms.

18. The Appellant relied on GIR 3 (a) and Headings 33. 04 and 34. 01 to buttress its contention that Heading 34,01 provides a more specific description of the product than Heading 33. 04 which is a general reference to the category in which the product may belong. It added that GIR 3 (a) exempts a particular product from application when two or more headings each refer to a part only of the materials or substances contained in mixed composite goods and thus Heading 34. 01 refers to organic surface-active agents which have some of the materials and substances that make up the product but Heading 33. 04 does not refer to any material or substance contained in the product.

19. The Appellant relied on the case of Sollatek Electronics Kenya Limited vs. Commissioner of Customs and Border Control, Appeal No. 142 of 2022 and contended that GIR 3 (a) only refers to the use of the descriptions in the Headings and thus the product is rightly classifiable under Heading 34. 01and HS Code 3401. 30. 00 by virtue of the Application of GIR 3 (a) and GIR 6.

20. It cited GIR 3 (b) and averred that the materials that give the product its essential character are the organic surface-active agents (known as surfactants) which give the product its cleansing efficacy as well as Salicylic Acid and Zinc Gluconate which give the product an anti blackhead efficacy.

21. The Appellant further relied on the Latvian case of Kurcums Metal vs. Vaists ienemumu Dienests C-558/11 and averred that the removal surfactants in its product will affect its characteristic properties of being a cleanser while the removal of salicylic Acid and Zinc Gluconate would ensure that it loses characteristic property that gives the product its anti-blackhead efficacy and thus the removal of these two components would mean that the product would not function as intended as the two components give the product its essential character and thus cannot be classified through the Application of GIR 3 (b).

22. It asserted that had the Respondent considered the provisions of Heading 34. 01, the WCO Explanatory Notes and the WCO classification opinions to the same, the Respondent would have classified the product under HS Code 3401 even after applying GIR 1 and 6.

23. It averred that while considering Heading 33. 04 the Respondent disregarded the provisions of the Notes to Chapter 33 which exempts soap and other products of Heading 34. 01 from the coverage of the chapter and since the Chapter Notes to Chapter 33 do not provide otherwise, the Respondent should not have classified its product under Chapter 33 especially when Heading 34. 01 applies to organic surface-active products and preparations such as the Appellant’s product.

24. It also averred that based on the provisions of the WCO Explanatory Note III to Heading 34. 01, description fits the Appellant’s product as the same is a preparation for washing the skin that partially consists of organic surface-active agents and thus the correct classification for Garnier Pure Active by the Respondent should be under HS Code 3401. 30. 00 even by applying GIR 1 and 6.

25. It stated that had Respondent considered the WCOs HS Committee’s classification opinions of the 60th Session held in October 2017, then it would be persuaded to classify Garnier Pure Active under Heading 34. 01 as the similarities in the products therein are all cleansers that wholly or partly contain organic surface agents which the WCO opined should be classified under Heading 34. 01 because the products were organic surface-active products or preparations for washing the skin as the WCO listed the surfactant components in two disputed products.

26. It relied on the case of Commissioner of Investigations and Enforcement vs. Mombasa Maize Millers Limited Tax Appeal E103 of 2021 and the case of Sollatek Electronics Kenya Limited vs. Commissioner of Customs and Border Control, Appeal No. 142 of 2022, together with a document titled “What every Member of the Trade Community Should Know about: Beauty and Skin Care Products of Heading 3304. ” published by the United States Customs Border Patrol and asserted that the United States treats cleansers containing surfactants or Organic Surface Active Agents as excluded from the Application of Chapter 33.

27. The Appellant further relied on the Indian cases of Mul Dentpro Pvt. Ltd vs. CCE Vapi reported in 2007 (218) ELT 435 (Tri. Ahmd) Hindustan Lever Ltd vs. CCE Chennai reported in 2008 (228) ELT 374 (Tri. Chennai) and maintained that other jurisdictions classify cleansers containing organic surface-active agents under Chapter 34 and not Chapter 33 by virtue of wholly or partly containing surface active agents.

28. It was the Appellant’s averment that since it is a global conglomerate, its products are shipped to various destinations across the globe where and its product, as an organic surface-active product or preparation is classified under Heading 34. 01 a situation which has never been in question by other revenue authorities.

29. The Appellant appreciated the fact that the Tariff Rulings and publication from the United States it availed are not binding in Kenya but since it is an accepted fact that the HS is a global system critical in facilitating international trade, it provided the same as proof that the Respondent in its ruling deviated from accepted international standards without providing justifiable reasons or any reasons at all for its deviation.

30. It was the Appellant’s statement that in the Respondent’s review decision, it stated that in making its ruling, it relied on tested samples of the product but the Appellant has not had any test results availed for its review and comment.

31. The Appellant relied on the case of Republic vs. Kenya Revenue Authority Ex Parte Universal Corporation Ltd [2016] eKLR and stated that by not providing the test results relied on to make its ruling, the Respondent is in contravention of the provisions of Article 47 of the Constitution of Kenya, 2010 which entitles every person to “administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair”.

On whether the Respondent erred in fact and law in its interpretation of the general interpretation rules (GIRs) 1 & 6, the Chapter Notes, the World Customs Organization (WCO) Explanatory Notes (EN) and Classification opinions determining the correct HS Code classification opinions in determining the correct HS Code classification available to garnier pure active 32. The Appellant submitted that Garnier Pure Active is made up of a combination of various materials and substances which include Decyl Glucoside, Sodium Laureth Sulfate, peg-7 Glyceryl Cocoate, Salicylic Acid, Tetrasodium EDTA, Sodium Hydroxide, zinc Gluconate, Charcoal Powder, Water, Glycerine amongst other components as highlighted in the product catalogue.

33. The Appellant contended that the Respondent’s witness statement wherein it testified that the product was reclassified on the fact that the product was more than a wash because of its scrubbing and masking timelines was rebutted by the Appellant’s witness during the hearing when it stated that scrubbing and masking are followed by rinsing one’s face with water, which are all forms of washing hence Garnier Pure Active is considered a preparation for washing the skin.

34. It asserted that the Respondent reclassified the product under HS Code 3304. 99. 90 after applying GIR 1 and 6 as well as WCO Explanatory Notes to Heading 33. 04 without giving any reason for disregarding the provisions of Heading 34. 01 and the WCO Explanatory Notes therein and the WCO classification opinions.

35. It argued that had the Respondent considered the provisions of Heading 34. 01 and the WCO classification opinions and Explanatory Notes to the heading, it should have classified the product under HS Code 3401. 30. 00 by applying GIR 1 and 6.

36. The Appellant reiterated that the Respondent disregarded the provisions of the Notes to Chapter 33 which exempts soap or other products of Heading 34. 01 from the coverage of the chapter while considering Heading 33. 04 and thus the Respondent should not have classified the product under Chapter 33 especially since Heading 34. 01 applies to organic surface-active products and preparations for washing the skin such as the product herein.

37. The Appellant cited WCO Explanatory Note III to Heading 34. 01 and contended that some of the main materials and substances making up the product is a preparation for the washing of skin that partly consists of organic surface-active agents (surfactants) as active components and thus the Respondent should have classified the product under HS Code 3401. 30. 00 by applying GIR 1 and 6.

38. The Appellant maintained that the Respondent’s witness testimony during the hearing that one of the reasons it reclassified the product from Heading to 34. 01 was because the product had Salicylic Acid, Tetrasodium EDTA, Sodium Hydroxide, Zinc Gluconate, Charcoal Powder as active ingredients enabling the product to achieve its ultimate purpose was made only because the Appellant had labeled the substances as active ingredients in the products in the product catalogue and thus the Respondent did not consider the surfactants as key active ingredients to the product.

39. It added that the Respondent’s witness, at cross examination, did not carry out any laboratory tests to the samples it collected and thus the Respondent’s conclusion that the substances were the only active components in the product is erroneous.

40. The Appellant reiterated that while the Sodium Hydroxide and Tetrasodium EDTA have been labelled as active compounds in the Appellant’s product catalogue, their respective functions have nothing to do with skin care as alleged by the Respondent’s witness testimony during the hearing.

41. The Appellant submitted that Sodium Hydroxide plays a role of PH adjustment during the batching of the formula to ensure the PH is at the right value when the product is released. It added that the material is not unique to this product and the compound is used for the same purpose in many other products in this category and thus does not play any role in the main function or performance of the product.

42. It maintained that the Tetrasodium EDTA is a chelating agent to make sure that, among other things, any remaining metals that could be present in the formula when produced are trapped and deactivated having no interference with the product and thus it does not play any role in the main function or performance of the product.

43. It reiterated that its witness in his testimony at hearing confirmed that surfactants account for 10 times more than the concentration of salicylic Acid and Zinc Gluconate, a fact which was not refuted by the Respondent adding that its witness demonstrated using its water bottle as a visual aid the function and importance of surfactants in the Product and testified that surfactants have a unique structure with two parts: the head equated to the neck and bottle top of the water bottle and the tail equated to the bottom part of the water bottle.

44. It asserted that the head part of the surfactant molecule has a hydrophilic characteristic meaning that it has an affinity to water enabling the surfactants to interact with water molecules, facilitating their dispersion in aqueous solutions and the tail part of the surfactant molecule is hydrophobic, meaning that it repels the water and prefers to interact with nonpolar substances like dirt and oil enabling the surfactant to interact with oily and or greasy substances by surrounding them and forming micelles or emulsions and thus giving the product its cleansing efficacy.

45. The Appellant submitted that the surfactants give the product its cleansing efficacy as a wash and without the surfactants, the product would not work as intended by the manufacturer and thus the surfactants are key ingredient and active component in the make-up of the product per the Appellant’s catalog and thus the product is classifiable under Heading 34. 01.

46. It contended that had Respondent considered the WCOs HS Committee’s classification opinions of the 60th Session held in October 2017, then it would be persuaded to classify Garnier Pure Active under Heading 34. 01 as the similarities in the products therein are all cleansers that wholly or partly contain organic surface agents which the WCO opined should be classified under Heading 34. 01 because the products were organic surface-active products or preparations for washing the skin as the WCO listed the surfactant components in two disputed products.

47. It argued that for similarity’s sake, the second product in the HS Committee’s classification opinions of the 60th Session held in October 2017 named Nu Skin Liquid Lufra, 250ml is classified under Heading 34. 01 in consideration of the surfactants in the product as active compounds despite the product catalogue notes the key ingredients to be Aloe Vera and Walnut Husks and thus the Respondent erred while classifying the product herein by only considering the ingredients labelled as active compounds in its products catalogue without considering the surfactants in the products as active components and classifying it under Heading 34. 01 as the WCO did in the case of the Nu Skin Lufra Product.

48. It cited the case of Commissioner of Investigations and Enforcement vs. Mombasa Maize Millers Limited Tax Appeal E103 of 2021 and maintained that had the Respondent considered the provisions of Heading 34. 01, Explanatory Note III to Heading 34. 01 and the classification opinion provided, tit would have arrived at the conclusion that Garnier Pure Active is classifiable under HS Code 3401. 30. 00 by applying GIR 1 and 6.

On whether the Respondent erred in fact and law by failing to appreciate international standard on the treatment of organic surface-active products and preparations in determining the correct HS Code classification Applicable to Garnier Pure Active. 49. The Appellant cited the case of Commissioner of Investigations and Enforcement vs. Mombasa Maize Millers Limited Tax Appeal E103 of 2021 and the case of Sollatek Electronics Kenya Limited (supra) and submitted that during her cross examination, the Respondent’s Witness agreed with the Appellant’s counsel’s analogy of a pen imported to various countries around the world would be classified under the same heading and subheading in each of those countries if they are party to the harmonized System, Convention and thus the Harmonized System is an international standard classification system for commodities which is crucial for fair international trade and thus it would not make sense for Kenya to have a different classification for the same product to other jurisdiction yet the world is governed by the same principles of the WCO Harmonized System.

50. It further cited a document titled “What every Member of the Trade Community Should Know about: Beauty and Skin Care Products of Heading 3304. ” published by the United States Customs Border Patrol and asserted that the United States treats cleansers containing surfactants or Organic Surface-Active Agents as excluded from the Application of Chapter 33 in line with the provisions of WCO Explanatory Note III Heading 34. 01.

51. The Appellant further relied on the Indian cases of Mul Dentpro Pvt. Ltd vs. CCE Vapi reported in 2007 (218) ELT 435 (Tri. Ahmd.) Hindustan Lever Ltd vs CCE Chennai reported in 2008 (228) ELT 374 (Tri. Chennai) and maintained that other jurisdictions classify cleansers containing organic surface-active agents under Chapter 34 and not Chapter 33 by virtue of wholly or partly containing surface active agents in line with the provisions of the WCO Explanatory Note III to Heading 34. 01.

52. It was the Appellant’s submission that since it is a global conglomerate, its products are shipped to various destinations across the globe and its product, as an organic surface-active product or preparation is classified under Heading 34. 01 a situation which has never been in question by other revenue authorities where the same product is shipped to its sister companies.

53. The Appellant appreciated the fact that the Tariff Rulings and publication from the United States it availed are not binding in Kenya but since it is an accepted fact that the HS is a global system critical in facilitating international trade, it provided the same as proof that the Respondent in its ruling deviated from accepted international standards without providing justifiable reasons or any reasons at all for its deviation.

54. It argued that there is therefore no justifiable reason why the Respondent failed to be guided by how the WCO and other WCO member states classify cleansers that are partly or wholly contain surfactants as an active component thus the Respondent erred by failing to recognize and appreciate the international standards relating to the Application of the Harmonized System.

On whether the Respondent erred in fact and law by failing to appreciate that Garnier Pure Active is a mixture made up of different materials/substances and/or prima facie classifiable under two headings and as such the same should have been classified in accordance with the rules provided under GIR 3 (a) or 3(c) 55. The Appellant submitted that Garnier Pure Active is made up of a combination of various materials and substances which include Decyl Glucoside, Sodium Laureth Sulfate, Peg-7 Glyceryl Cocoate, Salicylic Acid, Tetrasodium EDTA, Sodium Hydroxide, zinc Gluconate, Charcoal Powder, Water, Glycerine amongst other components as highlighted in the product catalogue.

56. It argued that some of the material that make up the product include organic surface-active agents (popularly known as surfactants) which give it its cleansing efficacy and these are Decyl Glucoside, Sodium Laureth Sulfate, peg-7 Glyceryl Cocoate. It added that the product also contains ingredients that gives it its anti-blackhead efficacy which are Salicylic Acid and Zinc Gluconate

57. It relied on Headings 33. 04 and 34. 01 of the EAC/CET and contended that based on the materials listed as contained in the product, Garnier Pure Active is prima facie classifiable under the two because it can be termed as a preparation for the care of skin as well as an organic surface-active product and preparation for washing the skin, in the form of liquid or cream and put up for retail sale.

58. It asserted that the Respondent gave no reason why it disregarded the provisions of Heading 3401 despite the fact that it is clear that Garnier Pure Active could also be classifiable under the heading.

59. The Appellant relied on the case of Kenya Breweries Limited vs. Commissioner of Customs and Border Control [2020] eKLR where the court approvingly cited the case of Canadian Court in Puratos Canada Inc vs. Canada (Customs Revenue) [2004] CA CITT and maintained that while it appreciates the fact that the GIRs must be applied sequentially, this does not mean that they are to be applied in total disregard to the other rules and the Respondent did not follow the required procedure in arriving at the classification of the product. It added that GIR 1 which the Respondent applied would have required the Respondent to also look at Heading 34. 01 especially given the composition of the product as a mixture or composite product or the fact that the product is classifiable under two potential headings.

60. It cited GIR 1 and reiterated that had the Respondent applied GIR 1, it would have noted that the product is classifiable under Tariff Heading 33. 04 and 34. 01 and the Respondent should not have concluded by classifying the product under GIR 1 but rather reviewed the next GIRs to determine the correct classification.

61. The Appellant relied on the case of Davis & Shirtliff Limited vs. Commissioner of Customs & Border Control, Appeal No. 368 of 2021 and Note XIII to GIR 2 to support its contention that the Respondent erred in fact and law by failing to take into consideration the provisions of Heading 34. 01 and concluding the classification of Garnier Pure Active by applying GIR 1 and 6 instead of applying the provisions of GIR 3.

62. It cited GIR 2 (b) and further submitted that in addition to GIR 2 (b), GIR 2(a)shall not apply since the product is not an unfinished product and contains various materials and substances and thus the product shall be explainable under the provisions of GIR 3 as provided under GIR(b)which uses the word “shall” which means that the provision is couched in mandatory terms.

63. The Appellant relied on GIR 3 (a) and Headings 33. 04 and 34. 01 to buttress its position that Heading 34. 01 provides a more specific description of the product and Heading 33. 04 which is a general reference to the category in which the product may belong. It added that GIR 3 (a) exempts a particular product from application when two or more headings each refer to a part only of the materials or substances contained in mixed composite goods and thus Heading 34. 01 refers to organic surface-active agents which have some of the materials and substances that make up the product. It added that Heading 33. 04 does not refer to any material or substance contained in the product.

64. The Appellant relied on the case of Sollatek Electronics Kenya Limited vs. Commissioner of Customs and Border Control, Appeal No. 142 of 2022 and contended that GIR 3 (a) only refers to the use of the descriptions in the Headings without considering any Section of the Chapter Notes and thus the product is rightly classifiable under Heading 34. 01and HS Code 3401. 30. 00 by virtue of the Application of GIR 3 (a) and GIR 6.

65. It cited GIR 3 (b) and Explanatory Note VIII to GIR 3 (b) and averred that the main materials that give the product its essential character are the organic surface-active agents (known as surfactants) which give the product its cleansing efficacy as well as Salicylic Acid and Zinc Gluconate which give the product an anti blackhead efficacy.

66. The Appellant further relied on the Latvian case of Kurcums Metal vs. Vaists ienemumu Dienests C-558/11 and averred that the removal surfactants in its product will affect its characteristic properties of being a cleanser while the removal of salicylic Acid and Zinc Gluconate would ensure that it loses characteristic property that gives the product its anti-blackhead efficacy and thus the removal of these two components would mean that the product would not function as intended as the two components give the product its essential character. It cannot be therefore classified through the Application of GIR 3 (b).

67. It asserted that had the Respondent considered the provisions of Heading 34. 01, the WCO Explanatory Notes and the WCO classification opinions to the same, the Respondent would have classified the product under HS Code 3401 even after applying GIR 3 (c) and 6.

On whether the Respondent violated the Appellant’s right to fair administrative action and natural justice by making its decision based on test results of a sample of Garnier pure active which results were not shared with the Appellant 68. The Appellant submitted that in the Respondent’s Review Decision, it stated that in making its ruling, it relied on tested samples of the product but the Appellant has not had any test results availed for its review and comment.

69. The Appellant relied on the case of Republic vs. Kenya Revenue Authority Ex Parte Universal Corporation Ltd [2016] eKLR and argued that the Respondent’s witness testified in cross examination that no laboratory tests were conducted on the samples of the product it collected hence why the Respondent never availed any test results to the Appellant therefore making the Respondent’s ruling and Review Decision in contravention of Article 47 of the Constitution of Kenya which entitles every person to “administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair”.

70. It reiterated that having not conducted any laboratory test and referring to base its Review Decision on the tests, the Respondent was in violation of the provisions of the fair administrative action.

The Appellant’s prayers. 71. The Appellant consequently prayed that: -a.This Appeal be allowed;b.The Review Decision dated 1st August 2023 be annulled and set aside in its entirety;c.The Appellant’s impugned product “Garnier Pure Active 3-in-1 Charcoal” and any products containing organic surface agents are correctly classifiable under tariff HS Code 3401. 30. 00;d.The Respondent facilitates the refund of the tax paid in protest by the Appellant;e.The costs and incidentals to this appeal be awarded to the Appellant; andf.Any other orders that the Honourable Tribunal may deem fit.

The Respondent’s Case 72. The Respondent’s case is premised on its;a.Statement of Facts dated and filed on 19th October 2023 together with the documents attached thereto;b.Written submissions dated and filed on 12th April 2024; and,c.Witness statement of Stella Wangenci Mwangi dated and signed on 22nd February 2024 and filed with the Tribunal on 23rd February 2024 and adopted as evidence in chief on 26th March 2024.

73. It stated that HS Code 3304. 99. 00 covers classification of beauty or make-up preparations and preparations for the care of the skin (other than medicaments), Including sunscreen or sun tan preparations; manicure or pedicure preparations and based on the good’s description and intended uses as well as the Explanatory Notes to Heading 33. 04, Charcoal, the product is classifiable as a product for the case of the skin hence the product, Garnier Pure Active 3-in-1 Charcoal is classified in 2022 EAC/CET Code 3304. 99. 00.

74. The Respondent averred that Rule 3 (a) of the GIR states that the heading which provides the most specific description shall be applied and according to GIR 1, classification shall be determined according to the terms of the Headings and any relative Sections of Chapter Notes and the HS classifications should be read and not to distort the true classification but give it meaning.

75. It cited the HS Rules of General Interpretation and averred that from the first rule, the most specific description can only be found from the scientific analysis of the product or the physical analysis of the product adding that where classification is done on a product then the rules must be applied in a sequential manner and Rule 1 provides that the classification is determined principally by the terms of the headings and relative section or chapter notes.

76. It contended that from the understanding that only subheadings at the same level are comparable, for the purposes of GIR 6, the relative section and chapter notes also apply, unless context requires otherwise

77. The Respondent stated relied on Section 56 (1) of the Tax Procedures Act and averred that the Appellant failed to prove to the satisfaction of the Commissioner that the assessment was wrong.

78. It contended that its competence to assess, demand and collect taxes established from the investigation is derived from Section 24 (2) of the Tax Procedures Act and the Appellant has failed to support the reason for the classification of its product under HS Code 3401. 40. 00 thus failing to discharge its burden of proof to demonstrate the variance noted by the Respondent.

On whether Garnier Pure Active is rightly classifiable under two headings as provided under GIR (3) (a). 79. The Respondent relied on Rule 3 and 2 (b) of the HS General Interpretation Rules and submitted that HS Code 3304. 99. 00 covers classification of beauty or make-up preparations and preparations for the care of the skin (other than medicaments), Including sunscreen or sun tan preparations; manicure or pedicure preparations and based on the good’s description and intended uses as well as the Explanatory Notes to Heading 33. 04, Charcoal, is classifiable as a product for the care of skin as EAC/CET 2022 HS Code 3304. 99. 00 .

80. It submitted that according to GIR, classification is determined according to the terms of the Headings and any relative section or chapter notes.

81. It relied on Rule 1 of the GIR and argued that classifications should be read and not to distort the true classification but give it meaning and per Brigstock in “Problems of Interpretation and Application in Tariff Classification; Some Consequential Customs Compliance Risk and Mitigation”, GIR 1 is one of the ways the Respondents used to classify this product as GIR 1 is one of the most basic classification of a product the subject classification.

82. It relied on the case of Commissioners of Her Majesty’s Revenue & customs vs. Fir AB (2009) and the case of VTech Electronics (UK) PPLC vs. Commissioner of Customs & Excise [2003] to support its contention that GIR 1 ascribes a basic classification of the product the subject of the classification and therefore the product in question is correctly classified by the Respondent.

83. It cited the case of Siemens Nixdorf Information Systeme AG vs. Hauptzollant Augsburg [1994] and maintained that where classification is done on a product, then the rules must be applied in a sequential manner as observed in Rule 1, the classification is determined principally by the terms of the headings and relative Section or chapter notes

84. It argued that the argument advanced by the Appellant that the Respondent should have concluded by classifying Garnier Pure Active based on GIR 1 but rather should have reviewed the next GIRs to determine the correct classification is misleading and misplaced.

85. The Respondent contended that GIR (3)(a)states that the heading which provides the most specific description shall be preferred and GIR 3(b)applies to classification of mixtures or sets in respect to the material component that gives them their essential characteristic. It added that GIR 3(c)is used when the goods cannot be classified under the Heading which occurs last on the numerical order among those that equally merit consideration.

86. It submitted that from the Appellant’s catalogue, its witness during cross examination demonstrated f that the active ingredients in the product is salicylic acid, tetrasodium edta, sodium hydroxide, charcoal powder, and polyglyceryl-10, stearate and polyglyceryl-10, myristate and polyglyceryl-10, Zinc gluconate and not surfactants as testified by the Appellant’s witness.

87. It added that the product catalogue pits the active ingredients as five, as opposed to surfactants that that are three and the active ingredients are specifically used to unclog pores and remove excess oil while exfoliating for clear blackhead-free skin it is also used as a face wash, blackhead scrub and charcoal free face mask to visibly remove reduce the appearance of blackheads and help protect against their re-appearance.

88. It argued that surfactants are general cleaning ingredients found in normal soaps and the product is not a normal face wash but a product targeted for a specific purpose and used to achieve a specific result as the picture of the product shows that it is not a normal face wash since it shows that the product has three functions: to wash, to scrub, and to mask. It added that the packaging has been uniquely done to appeal to specific clientele who suffer from blackheads and acne.

On whether the Commissioner erred in making its Review Decision dated 1st August 2023 89. The Respondent cited Section 56 (1) of the Tax Procedures Act and submitted that the Respondent failed to prove to the satisfaction of the Respondent that the assessment was wrong. It added that the Appellant failed to avail detail supporting documentation and records to counter the Respondent’s assertions in various engagements at the assessment stage as well as the objection stage contrary to Section 59 of the Tax Procedures Act.

90. The Respondent further submitted that the Appellant failed to support its reason for classification of their product under HS Code 3401. 30. 00 hence the Appellant failed to discharge its burden of proof to demonstrate the variance noted by the Respondent.

The Respondent’s prayers 91. The Respondent humbly prayed for the Tribunal to find that the Appeal herein is devoid of any merit and dismiss the same with costs thereby upholding the Respondent’s Review of Tariff Classification for Garnier 3 in 1 Charcoal, 150 ML dated 3rd August 2023.

Issues For Determination 92. After perusing the pleadings and documentation produced before it, the Tribunal is of the opinion that the issue for its determination is as follows:Whether the Respondent erred in law in classifying the Appellant’s imports “Garnier Pure Active 3-in-1 Charcoal” under HS Codes 3304. 99. 00.

Analysis And Findings 93. The Tribunal wishes to analyse the issue as hereinunder:

94. In the instant Appeal, the Respondent found that the Appellant had wrongly classified its goods under HS Codes 3401. 30. 00 which provides for ‘Organic surface-active products and preparations for washing the skin, in the form of liquid or cream and put up for retail sale, whether or not containing soap’ under Heading 34. 01 instead of HS code 3304. 99. 00. for ‘other’ under the Heading 34. 01 that provides for “Beauty or make-up preparations and preparations for the care of the skin (other than medicaments), including sunscreen or sun tan preparations; manicure or pedicure preparations”, the heading under which the Respondent classified the Garnier Pure Active, belonging to the Appellant.

95. The Appellant reiterated that its witness in his testimony confirmed that surfactants account for 10 times more than the concentration of salicylic Acid and Zinc Gluconate, a fact which was not refuted by the Respondent and demonstrated the function of surfactants in the product as having unique structure with two parts; the head part of the surfactant molecule that has a hydrophilic characteristic meaning that it has an affinity to water enabling the surfactants to interact with water molecules, facilitating their dispersion in aqueos solutions; and the tail part of the surfactant molecule which is hydrophobic, meaning that it repeals the water and prefers to interact with nonpolar substances like dirt and oil enabling the surfactant to interact with oily and or greasy substances by surrounding them and forming micelles or emulsions and thus giving the product its cleansing efficacy.

96. The Appellant submitted that the surfactants give the product its cleansing efficacy as a wash and without the surfactants, the product would not work as intended by the manufacturer and thus the surfactants are the key ingredient and active component in the make-up of the product as per the Appellant’s catalog and thus the product is classifiable under Heading 34. 01.

97. The Respondent asserted that the product catalogue puts the active ingredients as five as opposed to surfactants that are three. It added that the active ingredients are specifically used to unclog pores and remove excess oil while exfoliating for clear blackhead-free skin and is also used as a face wash, blackhead scrub and charcoal free face mask to visibly remove and reduce the appearance of blackheads and help protect against their re-appearance.

98. The Respondent argued that surfactants are general cleaning ingredients found in normal soaps and the Garnier Active Pure is not a normal face wash but a product targeted and used to achieve a specific result. It added that the product is not a normal face wash since it has three functions: to wash, to scrub, and to mask uniquely appealing to specific clientele who suffer from blackheads and acne.

99. Flowing from the parties’ submissions, the Tribunal is enjoined to determine whether the product “Garnier Pure Active 3-in-1 Charcoal”, was classifiable under HS Code 3304. 99. 00 that provides for “Beauty or make-up preparations and preparations for the care of the skin (other than medicaments), including sunscreen or sun tan preparations; manicure or pedicure preparations” or HS Code 3401. 30. 00 which provides for ‘Organic surface-active products and preparations for washing the skin, in the form of liquid or cream and put up for retail sale, whether or not containing soap’.

100. In determining the correct classification of the goods imported by the Appellant, the Tribunal relies on the General Rules of Interpretation (GIR) of the EAC CET and the World Customs Organization (WCO) Explanatory Notes to the Harmonized System (HS), GIR 1 states:“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…”

101. While GIR 3 on the classification of goods that are potentially classifiable in two or more Headings provides as follows:“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)……..(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”

102. Further GIR 4 on goods that cannot be classified under Rules 1 to 3 states as follows:“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.”

103. The Trib8nal observed that, Heading 34. 01 provides for:“Soap; organic surface-active products and preparations for use as soap, in the form of bars, cakes, moulded pieces or shapes, whether or not containing soap; organic surface-active products and preparations for washing the skin, in the form of liquid or cream and put up for retail sale, whether or not containing soap; paper, wadding, felt and nonwovens, impregnated, coated or covered with soap or detergent.”

104. More specifically, Heading 3401. 30. 00 states, that;“Organic surface-active products and preparations for washing the skin, in the form of liquid or cream and put up for retail sale, whether or not containing soap”

105. As per the catalogue provided by the Appellant, the product Garnier Pure Active Intensive Charcoal 3 in 1 wash contains Decyl Glucoside, Sodium Laureth Sulfate, PEG-7 Glyceryl Cocoate which are all surfactants. It also contains Salicylic Acid as an active ingredient which contains anionic surfactants. Tetrasodium EDTA is also an active ingredient contained in the product which removes metals from water to allow for the surfactants to work.

106. The Charcoal powder and polyglyceryl-10 stearate and polyglyceryl-10 myristate and polyglycerin are also active compounds contained in the product that is a surfactant. Another active compound contained in the product is Zinc Gluconate which is also a surfactant.

107. The remaining ingredients listed that are contained in the product are not active ingredients that form the main characteristic of the product. This is to say that without the active ingredients which either contain surfactants or act as catalysts for the surfactants to work properly, the product would not be used for the purpose it is meant.

108. The Tribunal observed that the Respondent did not provide any evidence showing the reasoning behind its Review Decision other than the fact that it is considered the product as a facial and skin cleansing cream provided for under the Explanatory Notes to Heading 33. 04.

109. Pursuant to the Respondent’s own admission, the product contains surfactants, as little an amount as the Respondent argues are in the product compared to the other ingredients, the surfactants are still contained in the product thus ousting the application of Heading 33. 04.

110. In the absence of any negating evidence and with the corroboration of the Appellant’s catalogue, the Tribunal is persuaded that the Appellant has satisfactorily proven the composition of its product which is well within the threshold provided by the law supporting the Appellant’s classification of its product under Tariff 3401. 30. 00.

111. Consequently, the Tribunal finds that the Respondent erred in law in classifying the Appellant’s imports under HS Codes 3304. 99. 00. The Appellant’s Appeal thus succeeds.

Determination 112. The upshot to the foregoing is that the Appeal is meritorious and the Tribunal consequently makes the following orders; -a.The Appeal be and is hereby allowed;b.The Respondent’s Review Decision dated 1st August 2023 be and is hereby vacated;c.The Respondent to facilitate the refund of any taxes paid in protest by the Appellant regarding the ensuing dispute within ninety (90) days of the date of this judgement; and,d.Each party to bear its costs.

113. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 1ST DAY OF AUGUST 2024ROBERT M. MUTUMACHAIRPERSONMUTISO MAKAU ELISHAH N. NJERUMEMBER MEMBERBERNADETTE M. GITARI ABDULLAHI DIRIYEMEMBER MEMBER