[2024] KETAT 1647 (KLR)

L’oreal East Africa Limited v Commissioner of Customs and Border Control (Tax Appeal E963 of 2023) [2024] KETAT 1647 (KLR) (21 November 2024) (Judgment)

Neutral citation: [2024] KETAT 1647 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E963 of 2023

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

November 21, 2024

Between

L’Oreal East Africa Limited

Appellant

and

Commissionerof Customs And Border Control

Respondent

Judgment

Background 1. The Appellant is a limited liability company incorporated in Kenya and whose principal activity is the marketing and distribution of personal care products within East Africa.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws (hereinafter “the Act”). Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 and 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. The Respondent identified the Appellants shipment declared through Entry Number 23EMKIM400945882 for verification to determine the Harmonized System (HS) Code applied by the Appellant for one of the products contained in the shipment. The product in question was L'Oréal Paris Revitalift Replumping Gel Wash (Revitalift Gel Wash) which the Appellant declared under HS Code 3401. 30. 00 of the East African Customs Common External Tariff, Version 2022 (hereinafter “EACCET”). Subsequently, the Respondent issued a Tariff Ruling on 5th September 2023 through ruling in which the Respondent’s decision was to reclassify Revitalift Gel Wash to HS Code 3304. 99. 00.

4. Being dissatisfied with the Respondent’s decision in the ruling and pursuant to the provisions of Section 229 (1) and (2) of the East African Community Customs Management Act, 2004 (hereinafter “EACCMA”), the Appellant lodged its application for review through its letter dated 3rd October 2023. Consequently, the Respondent issued a review decision dated 3rd November 2023 wherein the Respondent upheld the decision to reclassify Revitalift Gel Wash under HS Code 3304. 99. 00.

5. Aggrieved by the Respondent’s review decision and pursuant to the provisions of Section 230 (1) and (2) of EACCMA, the Appellant lodged its Notice of Appeal on 20th December 2023.

The Appeal 6. The Appellant lodged the memorandum of appeal dated 20th December 2023 raising the following grounds of appeal:a.That the Respondent erred in law and in fact and exceeded its powers in issuing a review decision outside the thirty-day mandatory timeline set under Section 229 (4) of the EACCMA;b.The Respondent erred in law and fact in issuing a review decision confirming the tariff ruling when by virtue of Section 229 (5) of EACCMA, the Respondent is deemed by operation of the law to have allowed the application for review upon the expiry of thirty days;c.The Respondent erred in fact and in law in her interpretation of GIRs 1 & 6, the Chapter Notes as well as the World Customs Organization (WCO) Explanatory Notes (EN) on the correct HS Code classification applicable to L'Oréal Paris Revitalift Replumping Gel Wash (Revitalift Gel Wash);d.In the alternative and without prejudice to the foregoing, Revitalift Gel Wash is prima facie classifiable under two Headings by virtue of either being a mixture made up of different materials and substances in accordance with General Interpretative Rule (hereinafter “GIR )”2 (b) or by virtue of the phrase “any other reason” as required under GIR 3;e.In the alternative and without prejudice to the foregoing, Revitalift Gel Wash is rightly classifiable under Harmonized System (HS) Code 3401. 30. 00 and by applying GIR 3 (a) and GIR 6;f.In the alternative and without prejudice to the foregoing, Revitalift Gel Wash would still be rightly classifiable under HS Code 3401. 30. 00 by applying GIR 3 (b) and GIR 6;g.The Respondent erred in fact and in law by misunderstanding the facts relating to Revitalift Gel Wash which misunderstanding led to an erroneous classification;h.The Respondent erred in law and fact by failing to appreciate international standards on the treatment of organic surface-active products and preparations such as Revitalift Gel Wash and further erred in deviating from such interactional standards without any cogent justification and reasons; and,i.That 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 Revitalift Gel Wash, which results were not shared with the Appellant.

Appellant’s Case 7. The Appellant’s Appeal was supported by its statement of facts dated 20th December 2023 and filed on 21st December 2023 together with the Witness statement of Philippe Rapold dated 10th July 2024 and filed on 26th July 2024 which was adopted by the Tribunal as evidence in chief during the hearing on 11th September, 2024. The Appellant also filed its written submissions on 30th September, 2024 thereby complying with the direction of the Tribunal.

8. The Appellant’s case was that the Respondent identified the Appellants shipment declared through Entry Number 23EMKIM400945882 for verification to determine the Harmonized System (HS) Code applied by the Appellant for one of the products contained in the shipment. The product in question was L'Oréal Paris Revitalift Replumping Gel Wash (Revitalift Gel Wash) which the Appellant declared under HS Code 3401. 30. 00 of the EACCET. Subsequently, the Respondent issued a Tariff Ruling on 5th September 2023. In the ruling the Respondent’s decision the Respondent reclassified Revitalift Gel Wash to HS Code 3304. 99. 00. The Appellant lodged its application for review through its letter dated 3rd October 2023.

9. Before issuing its review decision, the Respondent invited the Appellant for a meeting through an electronic mail dated 26th October 2023. The meeting was scheduled to be held on 31st October 2023 at the Respondent's offices. The Appellant alleged that during the meeting, the Appellant provided further information and justification in support of its case to classify Revitalift Gel Wash under HS Code 3401. 30. 00. Thereafter, the Respondent issued a review decision dated 3rd November 2023. According to the Appellant, the review decision was sent and received by the Appellant via the Respondent's electronic mail dated 6th November 2023.

10. The import of the Respondent reclassifying Revitalift Gel Wash from HS Code 3401. 30. 00 to HS Code 3304. 99. 00 is that products under HS Code 3304. 99. 00 are subject to 15% Excise Duty in Kenya. In this regard, the Respondent demanded additional taxes in the form of Excise Duty which the Appellant decided to pay under protest so as to avoid any further delay in the clearance of its shipment and additional accumulation of demurrage. Consequently, the Appellant filed this appeal to protest the Respondent’s findings.

(a) Whether the Respondent erred in law and in fact and exceeded her powers in issuing a review decision outside the thirty-day mandatory timeline set under Section 229 (4) of EACCMA. 11. The Appellant cited section 229 (1) of EACCMA which provides as follows:“A person directly affected by the decision or omission of the Commissioner or any other officer on matters relating to Customs shall within thirty days of the date of the decision or omission lodge an application for review of that decision or omission’”.

12. The Appellant argued that vide its letter dated 3rd October 2023 lodged an application for review as contemplated by Section 229 (1) of EACCMA. The application for review was received by the Respondent on the same date. It argued that section 229 (4) of EACCMA provides as follows:“The Commissioner shall, within a period not exceeding thirty days of the receipt of the application under subsection (2) and any further information the Commissioner may require from the person lodging the application communicate his or her decision in writing to the person lodging the application stating reasons for the decision.”

13. The Appellant asserted that given that the Respondent received the application for review on 3 October 2023, the Respondent had until 2 November 2023 to issue the review decision but the same was however sent and received by the Appellant on 6th November 2023, after the expiry of the thirty-day mandatory deadline imposed by Section 229 (4) of EACCMA.

14. The Appellant submitted that the Respondent erred in law and fact in issuing a review decision confirming tariff ruling when by virtue of Section 229 (5) of EACCMA, the Respondent is deemed by operation of the law to have allowed the application for review upon the expiry of thirty days. The Appellant cited the case of Republic v The Commissioner of Customs Services, Ex-Parte Unilever Kenya (Misc. Civil Application No. 181 of. 2011) and BIC East Africa Limited vs. Commissioner Customs & Border Control (Tax Appeal No. 127 of 2020) where the court held that non-communication of the Respondent’s decision within the statutory period of 30 days meant that the Applicant's application for review had been allowed by operation of the law,

(b) Whether the Respondent erred in fact and in law in interpretation of the 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 Revitalift Gel Wash. 15. The Appellant stated that the Respondent in confirming its ruling, reclassified Revitalift Gel Wash under HS Code 3304. 99. 90 after applying GIR 1 and 6 as well as the WCO Explanatory Notes to Heading 33. 04. However, the Respondent gave no reason as to why it disregarded the provisions of Heading 34. 01, the respective WCO Explanatory Notes and WCO classification opinions. This in the assessment of the Appellant was an error in fact and in law.

16. The Appellant averred that had the Respondent considered the provisions of Heading 34. 01, the WCO Explanatory Notes and the WCO classification opinions to the same, then the Respondent should have rightly classified Revitalift Gel Wash under HS Code 3401. 30. 00 after applying GIR 1 and 6.

17. According to the Appellant, Revitalift is a gel wash that is used to replump, rehydrates, smoothen and cleanse the skin. It is made up of a combination of various materials and substances. These include Sodium Laureth Sulfate (Surfactant), Coco-Betaine (Surfactant), Sodium Chloride, PPG-5-Ceteth-20, Sodium Hyaluronate, Sodium Hydroxide, Disodium EDTA, Citric Acid, Panthenol, Polyquatemium, Tocopherol Acetate, Sodium Benzoate, Salicylic Acid, Linalool, Parfurm/Fragrance and Water.

18. The Appellant averred that the product catalogue provides the following instructions on how to use Revitalift:i.To be applied in the morning and evening. Apply a small amount on wet face and neck;ii.Massage delicately with circular motions;iii.Rinse off with water; andiv.Be sure to avoid eye area. In case of contact with eyes rinse them immediately and thoroughly.

19. According to the Appellant, some of the main materials and substances that make up Revitalift include organic surface-active agents (popularly known as surfactants) which gives it its cleansing efficacy. The surfactants contained in Revitalift are Sodium Laureth Sulfate and Coco-Betaine. In addition, it also contains Hyaluronic Acid which gives the product its replumping, hydrating and firming properties.

20. It noted that GIR 1 provides that classification should be according to the terms of the Headings and any relative Section or Chapter Notes and, provided such Headings or Notes do not otherwise require. The Appellant averred that the Respondent while considering Heading 33. 04 disregarded the provisions of the Notes to Chapter 33. The Appellant also noted that Chapter Note 1 (b) exempts from the coverage of the Chapter, soap or other products of Heading 34. 01. The Appellant avers that since the Chapter Notes to Chapter 33 do provide otherwise, the Respondent should not have classified Revitalift Gel Wash under Chapter 33 especially since Heading 34. 01 applies to organic surface-active products and preparations such as Revitalift Gel Wash.

21. The Appellant argued that if the Respondent had considered the WCO Explanatory Note Ill to Heading 34. 01, she would have noted that the same provides as follows:“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.This part includes preparations for washing the skin, in which the active component consists wholly or partly of synthetic organic surface-active agents (which may contain soap in any proportion), provided they are in the form of liquid or cream and put up for retail sale. Such preparations not put up for retail sale are classified in Heading 34. 02”

22. The Appellant noted that the description fits Revitalift Gel Wash as the same is a preparation for washing the skin that partially consists of organic surface-active agents as active components. In this regard, if the Respondent had taken the above Explanatory Note into consideration, then the Respondent would have rightly classified Revitalift Gel Wash under HS Code 3401. 30. 00 even while applying GIR 1 and 6.

23. The Appellant also averred that had the Respondent considered the WCO’s HS Committee’s classification opinions of the 60% Session held in October 2017, then the Respondent would have been persuaded to classify Revitalift Gel Wash under Heading 34. 01. The Appellant highlighted the opinions of the WCO HS Committee.

24. The Appellant noted the similarities in the product in issue with the main one being that they are all cleansers that wholly or partly contain organic surface-active agents as active components and for this reason, the WCO opined that they should be classified under Heading 34. 01. According to the Respondent, the Headings in consideration in both cases were actually Heading 34. 01 and Heading 33. 04. The Appellant averred that the above products are very similar to Revitalift Gel Wash and the cases are also similar as the consideration is between Headings 33. 04 and 34. 01. The Appellant noted that the WCO opinion to classify these products under Heading 34. 01 while applying GIR 1 and 6 was because the products were organic surface-active products or preparations that contained such surfactants as active components.

25. In this regard, the Appellant averred that had the Respondent considered the provisions of Heading 34. 01, its WCO Explanatory Notes and related WCO classification opinions as well as the exempting Chapter Notes of Chapter 33, then it would have arrived at the conclusion that Revitalift Gel Wash was classifiable under HS Code 3401. 30. 00 by application of GIR 1 and 6.

26. The Appellant urged the Tribunal to review the relevant WCO classification opinions and be persuaded to hold in Appellant’s favour. The Appellant cited the case of Commissioner of Investigations and Enforcement v Mombasa Maize Millers Limited, Tax Appeal E103 of 2021) where the High Court was persuaded by a WCO classification opinion to make its decision. The High Court in this matter stated as follows:“it was further persuaded by the Respondent’s reliance on the World Customs Organization's (WCO) opinion during the 59th HS Committee in March 2017 in the classification of silo plants where WCO classifies silo plants under Chapter 84 as opposed to Chapter 94 as the Commissioner had done.”

(c) Whether Revitalift Gel Wash is prima facie classifiable under two Headings by virtue of either being a mixture made up of different materials and substances as per GIR 2 (b) or by virtue of the phrase “any other reason” as required under GIR 3. 27. The Appellant maintained that Revitalift Gel Wash is made up of a combination of various materials and substances including Sodium Laureth Sulfate (Surfactant), Coco- Betaine (Surfactant), Sodium Chloride, PPG-5-Ceteth-20, Sodium Hyaluronate, Sodium Hydroxide, Disodium EDTA, Citric Acid, Panthenal, Polyquatermnium, Tocopherol Acetate, Sodium Benzoate, Salicylic Acid, Linalool, Parfum/Fragrance and Water. According to the Appellant, some of the materials and substances that make up Revitalift Gel Wash include organic surface-active agents (popularly abbreviated and known as surfactants) which gives it its cleansing efficacy. The surfactants contained in Revitalift are Sodium Laureth Sulfate and Coco-Betaine.

28. By virtue of being a mixture made of various materials and substances and also by virtue of its various functions, the Appellant noted that Revitalift Gel Wash is prima facie classifiable under two tariff Headings of the EACCET: Heading 33. 04 and Heading 34. 01.

29. It was the Appellant’s case that the Respondent reclassified Revitalift Gel Wash under HS Code 3304. 99. 90 after applying GIR 1 and 6 as well as the World Customs Organization (WCO) Explanatory Notes (EN) to Heading 33. 04. However, the Respondent gave no reason as to why she disregarded the provisions of Heading 34. 01 and the respective EN despite the fact that it is clear that Revitalift Gel Wash could also be classifiable under this Heading.

30. The Appellant asserted that whereas it appreciates the fact that the GIRs must be applied sequentially, it does not mean that they are to be applied in total disregard of the other Rules. It relied on the case of Kenya Breweries Limited v Commissioner of Customs & Border Control (2020) eKLR where the Tribunal agreed with the holding of the Canadian Court in Puratos Canada Inc v Canada (Customs and Revenue) (2004) CA CITT in which the court stated as follows: “The General Rules for the Interpretation of the Harmonized System referred to in section JO of the Customs Tariff originated in the International Convention on the Harmonized Commodity Description and Coding Systems. They are structured in cascading form so that if the classification of the goods cannot be determined in accordance with Rule 1, then regard must be had to Rule 2 and so on.... The above legislation requires the Tribunal to follow several steps before arriving at the proper classification of goods on an appeal: first to examine the schedule to see if the goods fit prima facie within the language of a Tariff Heading; second, to see if there is anything in the Chapter or Section notes that precludes the goods from classification in the Heading; and third, to examine the Classification Opinions and the Explanatory Notes to confirm classification of the goods in the Heading.

31. The Appellant asserted that the Respondent did not follow the required procedure so as to arrive at the classification for Revitalift Gel Wash. In the Ruling, the Respondent applied GIR 1 and 6 while only looking at the provisions of Heading 33. 04 and related WCO Explanatory Notes. GIR 1 actually would have required the Respondent to also look at Heading 34,01 especially given the composition of Revitalift Gel Wash as a mixture or the provisions of GIR 3 (specifically in reference to the phrase “or for any other reason, goods are, prima facie, classifiable under two or more headings’’).

32. According to the Appellant, had the Respondent applied GIR 1 accordingly, then it would have noted that Revitalift Gel Wash is prima facie classifiable under Tariff Headings 33. 04 and 34. 01. Therefore, the Respondent should not have concluded to classify Revitalift Gel Wash based on GIR 1 but rather should have reviewed the next GIRs to determine the correct classification. We note that in the case of Davis & Shirtliff limited v Commissioner of Customs & Border Control. Appeal No. 368 of 2021 the Tribunal observed as follows:“Based on the foregoing, the Solar Water Heaters are potentially classifiable under two Headings, namely 84. 19 and 85. 16. The goods can function as a solar heating system and also as electric water heaters. They have all the characters of a solar water heater and also the characteristics of an electric water heater. Rule 1 cannot be used to classify the goods because it results into two possible classifications”

33. The Appellant therefore added that the Respondent erred in fact and in law by failing to take into consideration the provisions of Heading 34. 01 and therefore concluding classification of Revitalift Gel Wash by applying GIR 1 and 6 instead of applying the provisions of GIR 3.

(d) Whether the Product is rightly classifiable under HS Code 3401. 30. 00 and by applying GIR 3 (a) and GIR 6 34. According to the Appellant, Revitalift Gel Wash can be deemed to be classifiable under two Headings and as such the Respondent should have relied on the provisions of GIR 3. The Appellant noted that GIR 2 (a) deals with articles that are incomplete or unfinished therefore, the same is not applicable and since one is supposed to apply the Rules sequentially.

35. The Appellant averred that GIR 2 (a) shall also not apply since Revitalift Gel Wash contains various materials and substances as explained in Part (c) of this Statement of Fact. In this regard, the classification of Revitalift Gel Wash shall be based on the provisions of GIR 3 as is provided under the emphasized section of GIR 2 (b) which uses the word *shall” which means that the provision is couched in mandatory terms. In addition, the introductory part of GIR 3 does provide that if “for any other reason, goods are, prima facie, classifiable under two or more headings” then classification should be determined through application of GIR 3.

36. According to the Appellant, since Revitalift Gel Wash qualifies as a mixture because of its composition and being classifiable under two headings, the Appellant averred that the classification of the product should be determined through the application of GIR 3. The Appellant asserted that Heading 34. 01 provides a more specific description of Revitalift Gel Wash than Heading 33. 04.

37. The Appellant cited the case of Sollatek Electronics Kenya Limited v Commissioner of Customs & Border Control, Appeal No. 142 of 2022 where it stated as follows with regards to the application of GIR 1:“The Tribunal notes that since the Heading is clear on the treatment of the solar water heaters, there is no need to consider the chapter notes or what other sections provide. This is because the Heading takes priority and reference to chapter notes or other sections should only be made when the Heading lacks clarity on the classification of the ifem in question.”

38. The Appellant therefore, averred that Revitalift Gel Wash is rightly classifiable under Heading 34. 01 and specifically under HS Code 3401. 30. 00 by virtue of the application of GIR 3 (a) and GIR 6.

(e) Whether Revitalift Gel Wash would still be rightly classifiable under HS Code 3401. 3 by applying GIR 3 (b) and GIR 6 39. The Appellant stated that should the Respondent for any reason find Headings 33. 04 and 34. 01 as being equally specific in relation to Revitalift Gel Wash, then the provisions of GIR 3 (b) would apply. On the issue of essential character, the Appellant referred to the provisions of the WCO Explanatory Note Vill to GIR 3 (b) which states as follows:“The factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods”therefore, the Appellant opined that Revitalift Gel Wash is made up of various materials. Nevertheless, the main materials that give Revitalift Gel Wash its essential character are the organic surface-active agents (popularly known as surfactants) which gives Revitalift Gel Wash its cleansing efficacy.

40. The Appellant cited the case of Kurcums Metal v Vaists ienémumu dienests Case C-558/11 where the court held as follows:“Under that general rule, in carrying out the tariff classification of goods it is necessary to identify, from among the materials of which they are composed, the one which gives them their essential character; this may be done by determining whether the goods would retain their characteristic properties if one or the other of their constituents were removed.”

41. The Appellant averred that removal of the surfactants in Revitalift Gel Wash would definitely affect its characteristic properties of being a cleanser. Therefore, removal of the surfactants would mean that the product would not function as intended, which is as a cleanser or wash. It added that the surfactants therefore give Revitalift Gel Wash its essential character. As such, Revitalift Gel Wash would be classifiable as an organic surface-active product or preparation for washing the skin, in the form of liquid or cream and put up for retail sale under Heading 34. 01 and specifically under HS Code 3401. 30. 00 by virtue of applying GIR 3 (b) and GIR 6.

(f) Misunderstanding of the facts and subsequent erroneous tariff classification by the Respondent 42. The Appellant averred that the Respondent misunderstood the facts relating to Revitalift Gel Wash as it is not a cream. The Appellant stated that Revitalift Gel Wash is a gel and not a cream and has been manufactured as an organic surface-active preparation or product serving the primary purpose of washing the skin. By misconstruing the above facts, the Commissioner made an erroneous decision by relying on the above-named Explanatory Notes to reclassify Revitalift Gel Wash from HS Code 3401. 30. 00 to 3304. 99. 00.

(g) The Respondent has failed to appreciate international standards 43. The Appellant noted that the Tariff classification system currently in use in Kenya is adopted from the Harmonized System, an internationally standardized system of names and numbers to classify traded products. In this regard, the Appellant cited the case of Commissioner of Investigations and Enforcement v Mombasa Maize Millers Limited, Tax Appeal E103 of 2021 where the court stated as follows:“The parties also agree that to ascertain what code is applicable to particular goods, one has to look at the GIRs which are rules that govern the classification of goods under the Harmonized System and the Explanatory Notes which provide commentary on the intent and scope of provisions and as approved by the Customs Co-operation Council and constitute the official interpretation of the Harmonized System at the International level and are an indispensable complement to the System.”

44. The Appellant also relied on the Tribunal in the case of Sollatek Electronics Kenya Limited (supra) noted as follows: “It is clear to the Tribunal that HS tariff classification codes are internationally used to facilitate global trade.”

45. Based on the above, the Appellant averred that it is a widely accepted fact that the Harmonized System is an international standard classification system for commodities and that Harmonization is crucial for fair international trade. As such, it would not make sense for Kenya to have a different classification for the same product when compared to other jurisdictions, yet the world is governed by the same principles of the WCO.

(h) Violation of the Appellant’s right to fair administrative action and natural justice 46. The Appellant argued that by not providing the test results that she relied on to make her ruling, the Respondent contravened the provisions of Article 47 of the Constitution of Kenya, 2010 (hereinafter “the Constitution”) which entitles every person to "administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair”.

47. The Appellant relied on the case of Republic v Kenya Revenue Authority Ex Parte Universal Corporation Ltd [2016] eKLR in which Justice Odunga, held the following regarding KRA's statutory powers to undertake reviews:“I agree with the position taken by the Respondent that the Customs Officer is supposed to verify the accuracy of the entries made by the clearing agent within the shortest time possible in order to facilitate the release of the goods and mitigate the accrual of demurrage and customs warehouse rent hence the reason for conferment of the powers under Section 235 and 236 of the EACCMA to conduct Post Clearance Audits to verify the accuracy of the entries after the goods have been released from Customs control. However, the exercise of statutory power must be so exercised in a manner that is fair and just to the people against whom the same is being exercised.”

Appellant’s Prayers 48. The Appellant prayed that the Tribunal would grant it the following reliefs:a.That this Appeal be allowed;b.That the review decision dated 3rd November 2023 and delivered via an electronic mail dated 6th November 2023 be declared void ab initio and be set aside in its entirety;c.That the review decision be annulled and set aside in its entirety;d.That the Appellant's impugned product Micellar Cleansing Water and any products containing organic surface-active agents as active ingredients are correctly classifiable under tariff HS Code 3401. 30. 00;e.That the Respondent facilitates the refund of the tax paid in protest by the Appellant;f.The costs of and incidental to this appeal be awarded to the Appellant; andg.Any other orders that the Tribunal may deem fit.

Respondent’s Case 49. The Respondent premised its case upon its statement of facts dated 19th January and filed on 22nd January 2024, the Witness Statement by Ms. Stella Wangechi Mwangi dated 24th June 2024 and filed on 7th July 2024 adopted by the Tribunal as evidence in chief on 11th September, 2024. The Respondent also complied with the directions of the Tribunal by filing its written submissions dated 30th September 2024 and filed on even date.

50. The Respondent’s case was that the Appellant imported a product known as L’Oréal Paris Revitalift Replumping Gel Wash under import number 23EMKIM400945882 and proceeded to classify it tariff code 3401. 30. 00 of the EACCET.

51. That the Harmonized System (HS) heading 3401 declared by the Appellant covers: “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.

52. The Respondent stated that HS Code declared by the Appellant, HS Code 3401. 30. 00 covers: “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”.

53. According to the Respondent, from the product description, L’Oréal Paris Revitalift Replumping Gel Wash is a skin care product that rehydrates smoothes and cleanses skin. The Respondent averred that the product in issue contains hyaluronic acid; an active ingredient known for its replumping, hydrating and firming properties. It added that the product is specified to contain: Aqua / Water, Sodium Laureth Sulfate- Surfactant, Coco-Betaine -Surfactant, Sodium Chloride, Glycerin, Ppg-5-Ceteth-20, Sodium Hyaluronate, Sodium Hydroxide, Disodium EDTA, Citric Acid, Panthenol, Polyquaternium, Tocopherol Acetate, Sodium Benzoate, Salicylic Acid, Linalool, Parfum/ Fragrance.

54. The Respondent asserted that from the product catalogue submitted by the appellant, the role of surfactants in the product was assessed and found to be crucial but not as active compounds in the product. Surfactants (Surface Active Agents) are a class of chemicals that have both hydrophilic (water-attracting) and hydrophobic (water-repelling) properties. Surfactants help in a variety of ways in skincare products: cleansing, foaming, emulsifying, reducing surface tension, solubilizing and preservation.

55. It stated that Heading 33. 04 covers: “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.”

56. The Respondent cited Explanatory Note to Heading 3304 which elaborates as follows:“Other beauty or make up preparations and preparations for the care of the skin (other than medicaments), such as: face powders (whether or not compressed), baby powders (including talcum powder, not mixed, not perfumed, put up for retail sale), other powders and grease paints; beauty creams, cold creams, make up creams, cleansing creams, skin foods (including those containing bees, royal jelly) and skin tonics or body lotions; petroleum jelly, put up in packings of a kind sold by retail for the care of the skin; barrier creams to give protection against skin irritants; injectable intracutaneous gels for wrinkle elimination and lip enhancement (including those containing hyaluronic acid); anti-acne preparations (other than soaps of heading 34. 01) which are designed primarily to cleanse the skin and which do not contain sufficiently high levels of active ingredients to be regarded as having a primary therapeutic or prophylactic effect against acne; toilet vinegars which are mixtures of vinegars or acetic acid and perfumed alcohol.”

57. Consequently, the Respondent issued a tariff ruling referenced KRA/CBC/BIA/THQ/685/09/2023 dated 5th September 2023 notifying the Appellant that the correct classification of the product is 3304. 99. 00 of the EAC/CET 2022. The Appellant appealed the tariff ruling vide a letter dated 3rd October 2023 which the Respondent received on the same day. It was the Respondent’s case that a meeting was held on 31st October 2023 and thereafter the Respondent issued an appeal response referenced KRA/CBC/BIA/THQ/APPEAL/192/11/2023 dated 3rd November 2023.

58. It stated that it issued the response pursuant to Section 229 of the East EACCMA as read together with the East Africa Community Customs Union Protocol which defines the word “days” as “working days in any calendar month”.

59. The Respondent relied on Section 2 of the EACCMA, which defines “Customs laws” as being “this Act, Acts of the Partner States and of the Community relating to Customs, relevant provisions of the Treaty, the Protocol, regulations and directives made by the Council and relevant principles of international law.”

60. It cited Section 229 (4) of EACCMA which provides as follows:“Commissioner shall, within a period not exceeding thirty days of the receipt of the application under subsection (2) and an any further ‘information the Commissioner may require from the person lodging the application, communicate his or her decision in writing to the person lodging the application stating reasons for the decision”.

61. According to the Respondent, the Appellant confirmed providing further information during the meeting held on 31st October 2023 in Paragraph 7 of its Statement of Facts which it intended the Respondent to consider. The appeal response upheld the classification of the Appellant’s product as being 3304. 99. 00 because based on the indicated product description provided by the Appellant, “L’Oréal Paris Revitalift Replumping Gel Wash,” the intended use of the product which is a cleansing gel is replumping and anti-aging of the face and skin.

62. The Respondent asserted that Classification of goods in the EACCET is done in accordance with the GIR for the classification of goods as read together with the WCO Harmonised Commodity Description and Coding System Explanatory Notes (ENs) which are the official interpretation of the Harmonised System at the international level.

63. The Respondent stated that Note 3 to Chapter 33 of the EACCET states as follows:“Headings 33. 03 to 33. 07 apply, inter alia, to products, whether or not mixed (other than aqueous distillates and aqueous solutions of essential oils), suitable for use as goods of these headings and put up in packings of a kind sold by retail for such use.’’

64. According to the Respondent, 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. Based on the composition, description, the intended use of the goods as well as the Terms of the Heading 33. 04 the product is intended for care of the skin. The Respondent maintained that it is based on the information above that the Appellant's product L’Oréal Paris Revitalift Replumping Gel Wash is classified under HS Code 3304. 99. 00 of the EACCET 2022.

65. In its written submissions, the Respondent submitted that it issued its Review Decision within the required statutory timelines under Section 229 (4) of the EACCMA. Finally, the Respondent submitted that it acted within its mandate in reclassifying the Appellant’s product L’Oreal Paris Revitalift Replumping Gel Wash to HS Code 3304. 99. 00.

Respondent’s prayers 66. The Respondent prayed for the following orders from the Tribunal:a.That the Review Decision dated 3rd November, 2023 be upheld; andb.That this Appeal be dismissed with costs to the Respondent as the same is without merit.

Issues for Determination 67. The Tribunal having considered the parties’ pleadings, documentation and written submissions, puts forth the following two issues for determination:a.Whether the Respondent’s Review Decision dated 3rd November, 2023 is statutorily time barred.b.Whether Respondent erred in re-classifying the Appellant’s imported products, Revitalift Gel Wash, from HS code 3401. 30. 00 to HS code 3304. 99. 00.

Analysis and Findings a. Whether the Respondent’s review decision dated 3rd November, 2023 is statutorily time barred. 68. According to the Appellant, the Respondent’s review decision is time barred. On the other hand, the Respondent asserted that the decision was issued within the statutory timelines. The Respondent issued tariff-ruling dated 5th September 2023 to which the Appellant appealed against vide a letter dated 3rd October 2023. The Respondent then issued an appeal review decision dated the 3rd November 2023. The Appellant also asserted that it received this decision on 6th November 2023.

69. Section 229(4) of the EACCMA provides as follows:The Commissioner shall, within a period not exceeding thirty days of the receipt of the application under subsection (2) and any further information the Commissioner may require from the person lodging the application, communicate his or her decision in writing to the person lodging the application stating reasons for the decision.’’

70. The Respondent submitted that the parties had several meetings and every time these meetings were called and parties deliberated the Appellant brought forth new information for consideration by the Respondent during the meeting of 31st October 2023. The Respondent stated that whereas the Review decision was made on 3rd November 2023, it was within timelines as the days began to run from the date the Appellant submitted the last information as provided by Section 229(4) of the EACCMA. The Respondent appeared to suggest that time started running from the time the Appellant provided last information.

71. Section 229(4) of the EACCMA has two facets. The first facet is ‘the receipt of the application under subsection (2)’ while the second limb is about ‘receipt of any further information the Commissioner may require from the person lodging the application.’ The two facets are conjoined by coordinating conjunction ‘‘AND’’ as opposed to ‘‘OR.’’ The issue in the interpretation of the provisions is whether or not the two limbs are conjunctive or disjunctive.

72. The use of the word ‘‘AND’’ in under Section 229(4) of the EACCMA makes the two limbs conjunctive in that they are related and tired together, and the section does not give the Respondent options in timelines in issuing review decisions. In other words, it means that the Respondent cannot issue the review decision on ‘the receipt of the application under subsection (2) or when the Respondent receives additional information from the Applicant.

73. If the Section 229(4) of the EACCMA was meant to be interpreted disjunctively as the Respondent appears to suggest, then, the coordinating conjunction ‘‘OR’’ would have been employed by the legislature as opposed to ‘‘AND.’’ Had the coordinating conjunction ‘‘OR’’ been used, then the Respondent would have had an option to issue review decision either on ‘the receipt of the application under subsection (2) or when the Respondent receives additional information from the Applicant.

74. The Tribunal’s view is that EACCMA is international law and Section 229(4) of the EACCMA does not give the Respondent options and freedom in timeframes within which to issue review decision. One of the reasons could be to facilitate international trade within the region by ensuring that tax disputes are resolved as quick as possible without bottlenecks. The Respondent has to issue review decision within 30 days on receipt of the application under subsection (2) even if the Respondent receives any further information the Commissioner may require from the person lodging the application.

75. The Tribunal notes that a comparison of Section 229(4) of the EACCMA with domestic law, namely section 51 (11) of the Tax Procedures Act CAP 469B of the Laws of Kenya (hereinafter “TPA”) before it was amended by Finance Act no. 22 of 2022 shows that a divergent outcome emerges. The said section 51 (11) employed coordinating conjunction ‘‘OR’’ instead of ‘AND’ before its amendment. It used to provide as follows:“(11)The Commissioner shall make the objection decision within sixty days from the date of receipt of—(a)The notice of objection; or(b)Any further information the Commissioner may require from the taxpayer.”

76. Before the amendment to the said section 51 (11) of TPA, the Respondent had an option or freedom to issue objection decision within sixty days from the date of receipt of the notice of objection; or within 60 days from the date of receipt of any further information the Commissioner may require from the taxpayer. However, upon amendment, this freedom was curtailed. The current section 51 (11) of the TPA provides as follows:“(11)The Commissioner shall make the objection decision within sixty days from the date of receipt of a valid notice of objection failure to which the objection shall be deemed to be allowed.’’

77. The confusion arising from the use of coordinating conjunction ‘‘AND’’ and ‘‘OR’’ in statutes is not novel. The Supreme Court holding in Odinga & another v Independent Electoral and Boundaries Commission & 2 others; Aukot & another (Interested Parties); Attorney General & another (Amicus Curiae) (Presidential Election Petition 1 of 2017) [2017] KESC 42 (KLR) was as follows:“No election shall be declared to be void by reason of non-compliance with any written law relating to that election if it appears that the election was conducted in accordance with the principles laid down in the Constitution and in that written law or that the non-compliance did not affect the result of the election."

78. The Supreme Court in the aforementioned case had the following to at paragraphs 192 and 193:“192. There are clearly two limbs to all the above quoted provisions: compliance with the law on elections, and irregularities that may affect the result of the election. The issue in the interpretation of the provisions is whether or not the two limbs are conjunctive or disjunctive.193. …However, under both the repealed National Assembly and Presidential Elections Act (section 28) and the current Elections Act (section 83) the term used is or instead of and appearing in the English Acts. The use of the word or clearly makes the two limbs disjunctive under our law. It is, therefore, important that, while interpreting Section 83 of our Elections Act, this distinction is borne in mind[emphasis ours]. In the circumstances, authorities from many Commonwealth countries, such as Nigeria, Ghana, Zambia, Tanzania and Uganda whose provisions are not in sync or exact parri materia with ours may not be useful.’’ (emphasis is ours).

79. In the case of Republic V Commissioner of Customs Services Ex-Parte Africa K-Link International Limited [2012] eKLR, C.W. Githua J observed as follows:“I fully associate myself with the interpretation given to Section 229 of the Act by Korir J in R v Commissioner of customs Exparte Unilever Ltd (supra) in which he held that once an application for review is made against the Commissioner’s decision under Section 229 of the Act, the commissioner must communicate his/her decision to the tax payer within 30 days and failure to do so means that the commissioner will be deemed to have allowed the application for review by operation of the law and will be barred from demanding payment of the taxes specified in the decision subject matter of the review.However, it is my view that in order for Section 229(4) and (5) to apply in favour of a taxpayer, the taxpayer must lodge a valid application for review in terms that are clear and unambiguous and which show clearly that the tax payer was making an application for review under Section 229 of the Act.’’

80. The Tribunal, notes in pursuance of the foregoing that it then follows that the Respondent had to make a decision within 30 days of the receipt of the Appellant’s valid application as contemplated under section 229(4) of EACCMA notwithstanding the last date that a taxpayer provides additional supporting documents in support of the application. The opposite of this is that on the other hand, the Appellant cannot give additional documents beyond 30 days from the date it lodges an application for review.

81. Further, from the provisions of section 229(4) of EACCMA, the date that matters is the date of communication of the review decision and not the date of the review decision. The Tribunal examined the electronic mail of 6th November 2023 from the Respondent to the Appellant forwarding the Review Decision to the Appellant and noted that the Respondent communicated the Review Decision on 6th November 2023 therefore, the relevant date for filing this appeal is on 6th November 2023 and not 3rd November 2023.

82. The Respondent argued that 30 days under section 229(4) of EACCMA only refers to working days only as provided for under the Protocol. It therefore, argued that its decision was well within 30 days. Article 1 of the protocol defines "days" as working days in any calendar month. On the other hand, EACCMA does not define days.

83. The Tribunal notes that the timeframe in days is used under two articles of the Protocol. The first instance is used under Article 20 which deals with ‘Co-operation in the Investigation of Dumping, Subsidies and Application of Safeguard Measures.’ The second instance where timeframe in days is used under the Protocol is under Article 37 of the Protocol which provides for ‘Trade Arrangements with Countries and Organisations Outside the Customs Union.’

84. There is nothing under Article 20 and Article 37 of the Protocol to indicate that the definition of days is applicable to other laws in the EAC. The Tribunal is of the view that definition of days under the Protocol is only applicable to the Article 20 and Article 37 of the Protocol. Further, the Tribunal is of the view that the interpretation that the Respondent suggests has a far-reaching consequence under the EACCMA which provides multiple timeframes under which certain actions are to be done.

85. Further, Article 34 of the Protocol provides that, ‘the administration of the Customs Union, including legal, administrative and institutional matters, shall be governed by the customs law of the Community.’ Under the circumstance, definition of days under the community is a preserve of the customs law of the Community save for Article 20 and 37 of the Protocol.

86. Having established the above, the Tribunal finds that Appellants decision dated 3rd November 2023 and received by the Appellant on 6th November 2023 was issued beyond 30 days contrary to the provisions of section 229(4) of EACCMA. The Respondent having issued the decision contrary to of section 229(4) of EACCMA, the provisions of Section 229(5) of EACCMA stood activated. Section 229(5) of EACCMA provides as follows:“(5)Where the Commissioner has not communicated his or her decision to the person lodging the application for review within the time specified in subsection (4) the Commissioner shall be deemed to have made a decision to allow the application.”

87. The Tribunal’s finding is that in the Appellant’s objection stood as allowed by operation of law pursuant to section 229(5) of EACCMA.

88. Having established the foregoing, the Tribunal finds it is moot to examine the remaining issue.

Final Decision 89. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal meritorious and consequently makes the following Orders:a.The Appeal be and is hereby allowed.b.The Respondent’s review decision issued on 6th November 2023 be and is hereby set aside.a.The Appellant be and is hereby entitled to a refund of any duties paid in protest pursuant to the provisions of section 144(3) of EACCMA.c.Each party to bear its own cost.

90. It is so ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 21ST DAY OF NOVEMBER, 2024. …………………………………CHRISTINE A. MUGA - CHAIRPERSON…………………………………BONIFACE K. TERER - MEMBER…………………………………ELISHAH N. NJERU - MEMBER…………………………………EUNICE N. NG’ANG’A - MEMBER…………………………………OLOLCHIKE S. SPENCER - MEMBER