[2025] KETAT 222 (KLR)

Matsinberg Clearing and Forwarding Limited v Kenya Revenue Authority & another (Tax Appeal E630 of 2024) [2025] KETAT 222 (KLR) (25 April 2025) (Judgment)

Neutral citation: [2025] KETAT 222 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E630 of 2024

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

April 25, 2025

Between

Matsinberg Clearing and Forwarding Limited

Appellant

and

Kenya Revenue Authority

1st Respondent

Kenya Wine Agencies Limited

2nd Respondent

Judgment

1. The Appellant is a limited liability company registered under the Companies Act Cap 486 Laws of Kenya (hereinafter “Companies Act”) involved in the business of clearing and forwarding and is licensed as a customs agent under East Africa Community Customs Management Act, 2004 ( hereinafter “EACCMA”) with responsibility of advising and collecting taxes on behalf of the 1st Respondent for all goods imported into or from Kenya. The Appellant was also appointed in the year 2006 as the 2nd Respondent’s customs agent and had its license renewed from time to time between 2006 and 2010.

2. The 1st 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 2nd Respondent is a limited liability company incorporated under the Companies Act Cap 486 Laws of Kenya and is licensed under EACCMA as a customs bonded warehouse. The 2nd Respondent is in the business of procuring, manufacturing and distributing alcoholic and non-alcoholic beverages.

4. In a letter dated 3rd July 2020, the 1st Respondent demanded evidence of exportation of goods by the 2nd Respondent following a review of all 2nd Respondent’s entries (R300) that established outstanding bonds in force for various re-exportation entries between 2006 and 2008 that were lacking in proof of having exited the country. The Principal amount demanded to be paid within 14 days by the 2nd Respondent amounted to Ksh 2,413,579. 00.

5. On 19th August 2020, the 2nd Respondent wrote to the 1st Respondent indicating that the onus of bond cancellation rested with the Appellant who had executed the respective bonds.

6. In a letter dated 11th January 2021 and pursuant to Section 60(2) of the EACCMA, the 1st Respondent made a final reminder to the 2nd Respondent relating to outstanding CB4 bonds amounting to Ksh 5,317,470. 00 in principal taxes, penalties and interest. This was followed by a meeting of the 1st and the 2nd Respondent’s representatives on 2nd February 2021 wherein it was agreed that the 1st Respondent should write directly to the Appellant and make the demands since the Appellant was the owner of the bonds.

7. On 10th June 2021, the Appellant requested the 1st Respondent to release goods withheld that were for a different client other than the 2nd Respondent a request that was allowed.

8. In a letter dated 15th June 2021 the Appellant wrote to the 1st Respondent stating that the matter for unaccounted for goods and outstanding bonds rested with the 2nd Respondent.

9. On 6th August 2021, the 1st Respondent wrote to the Appellant demanding for unaccounted goods and outstanding bonds in force against which the Appellant applied for review in a letter dated 8th December 2021.

10. In the year 2021, the 1st Respondent published a notice for vetting for all customs agents. The Appellant in a letter dated 16th February 2022, was invited for an interview that took place on 1st March 2022. Subsequently, the Appellant’s certificate was renewed on 9th September 2022.

11. On 27th July 2023, the Appellant’s request for certificate renewal was unsuccessful and the Appellant wrote to the Respondent vide a letter dated 21st August 2023 wherein the 1st Respondent granted access to its system pending hearing and determination of the application.

12. In a letter dated 9th April 2024, the Appellant was informed that its application was successful and in a follow-up email of 17th April 2024 was requested to comply with a list of requirements to be reviewed by the Licensing Officer for customs license to be processed on or before 13th May 2024.

13. Aggrieved by the Respondent’s customs license renewal decision dated 31st May 2024, the Appellant filed its Notice of Appeal dated 5th June 2024 on even date at the Tribunal.

The Appeal 14. The Appellant’s case was predicated on the following grounds as outlined in a Memorandum of Appeal dated 5th May 2024 and filed on 10th June 2024:i.The Respondent purportedly made a decision on 31st May 2024 denying the Appellant a Certificate of Bond and Debt Clearance (CBDC) for its customs Agent License under Section 145 of the EACCMA.ii.That the decision of the Respondent through the station manager licensing department of customs and border control Nairobi suspended the Appellant’s password and denied the Appellant access to the Integrated Customs Management System (iCMS) through which all transactions relating to the Appellant’s work as a Customs Agent are done.iii.That the Respondent’s decision to deny the Appellant a CBDC and suspending password and access to iCMS was made in breach of the Appellant’s right to due process of law under the EACCMA, the Constitution, Fair Administrative Action Act, CAP 7L of the Laws of Kenya (hereinafter “FAAA”) and all applicable laws of Kenya as the Respondent failed to give the Appellant an opportunity to be heard prior to making the impugned decision which was never communicated to the Appellant.iv.That the Respondent erred in fact and in law purporting to make a decision denying the Appellant a CBDC despite the fact that the Respondent knew or ought to have known that the 2nd Respondent had the duty and obligation to account for the goods and bonds issued for the re-export of the goods in their bonded warehouse.v.That the Respondent illegally and without following the due process of law failed and/or ignored their duty of collecting taxes from the 2nd Respondent who was issued with a license as a bonded warehouse and the 1st Respondent failed to account and reconcile the 2nd Respondent’s customs record as a warehouse keeper.

Appellant’s Case 15. The Appellant outlined its case in its Statement of Facts dated 3rd May 2024 and filed on 10th June 2024 together with witness statements of Mr. Stephen Ndeto and Mr. Emmanuel Mathai both of which were admitted as evidence-in-chief by the Tribunal on 29th January 2025.

16. The Appellant was appointed in the year 2006 as the 2nd Respondent’s customs agent charged with responsibility of preparing customs entry form (Form-C63) under customs procedure for re-exporting of goods (CPC-R300) for the 2nd Respondent’s clients’ goods (alcoholic beverages-wines and spirits) stored in their bonded warehouse and for transfer of the goods to their warehouse in Rwanda.

17. According to the Appellant, it was mandatory for the Appellant to issue bonds to facilitate movement of cargo from the 2nd Respondent’s bonded warehouse to the exit border and the Appellant did issue various bonds for goods re-export during the 2006 to 2008 review period. That however, in the year 2009, the Appellant learnt that some cargo for which it had issued bonds and booked for re-export could not be accounted for as no entries had been made in the 2nd Respondent’s system. The 2nd Respondent promised to avail the relevant information regarding the entries supported by relevant bonds.

18. It was the Appellant’s case that pursuant to Part IV of EACCMA, the 2nd Respondent having a license for private bonded warehouse had the responsibility of maintaining proper records for all goods stored in their warehouse. Additionally, as an exporter, the 2nd Respondent was duty bound to ensure that goods in issue were duly processed and exported out of the country as intended; but that it failed and or neglected to account for or give information regarding goods held in the bonded warehouse specifically for the 2006 and 2008 review period while also failing to pay taxes due for goods in issue.

19. The Appellant stated that as a result of the outstanding bonds held by the 2nd Respondent, its password and access to iCMS was suspended and was orally informed the reason was the pending bonds in force for the years 2006 and 2008. Additionally, the Appellant’s application for renewal of customs agent license was rejected and was only temporarily opened between 30th May 2024 and 6th June 2024 to allow the Appellant clear perishable entries for another client.

20. It was the Appellant’s case that the impugned action of suspending its password and access to iCMS without notice was arbitrary, illegal and unfair as it has prevented the Appellant from earning an income from its professional trade for two years yet the 1st Respondent was well aware that the 2nd Respondent was liable to account for goods held in its warehouse. As a result, the Appellant stands to lose contracts and the right to operate business at large if its password and access to iCMS was not restored.

Appellant’s Prayers 21. The Appellant sought the following prayers from the Tribunal:a.The Respondent’s decision dated 31st May 2024 denying the Appellant a CBDC be reviewed and/or set aside.b.That an order be directed at the 1st Respondent to issue the Appellant a customs agent license under Section 145 of EACCMA.c.That the suspended password and access to the iCMS and or any other system operated by the 1st Respondent be unconditionally restored and the Appellant be allowed to conduct its business accordingly.d.That the Respondent be compelled to receive and process the Appellant’s license renewal application without the CBDC.e.That the 2nd Respondent be compelled to account for the goods and re-export bonds issued by the Appellant for the year 2006 and 2007. f.That in the alternative the 2nd Respondent be compelled to pay the taxes due on the bonds issued by the Appellant for 2006 and 2007 re-exports.

The Respondents’ Case 22. The 1st Respondent replied to the Appeal through its Statement of Facts dated and filed on 10th June 2024 together with written submissions dated 10th February 2024 and filed on 12th February 2025. It was the 2nd Respondent’s case that the 1st Respondent having established that the Appellant failed to cancel all bonds that facilitate re-exportation of goods from the 2nd Respondent’s warehouse blocked access to iCMS and suspended its password in June 2024. The Tribunal has neither considered the 2nd Respondent Statements of facts nor its submissions with the reasons having been stipulated at paragraph 29 and 30 of this Judgement.

23. The 1st Respondent held that the Appellant failed to respond or comply with the following requirements to be issued with a customs agent license for year 2024 as communicated in the letter dated 9th April 2024;a.To execute a customs agent security bond of USD 5,000. 00 through the iCMS.b.Pay the license fee of USD 400. 00 for the year 2024 in accordance with Section 151(2) of the EACCMA Regulations 2010. c.To submit the Kenya International Freight and Warehousing Association certificate of registration for the year 2024. d.Certificate of bond clearance.e.Current CR12. i.Copy of previous license-form C21ii.Copy of duly filed license renewal form -form C20

24. That the failure by the Appellant to comply with the listed requirements led to the 1st Respondent’s denying it access to the customs system but allowed it temporarily for two (2) days following a request by the Appellant in a letter dated 3rd June 2024 to clear a perishable consignment. The Respondent cited Section 145(1) of the EACCMA which provides that;“The Commissioner may license persons to act as agents for transacting business relating to the declaration of clearance of any goods or baggage other than accompanied non-manifested personal baggage of a person travelling by air, land and sea.”

25. The 1st Respondent asserted that a certificate of bond clearance was among documents listed to facilitate renewal of the 2024 customs license and the Appellant could not be cleared as it had outstanding bonds that had not been accounted for as provided pursuant to the following provisions of Section 145(2) of EACCMA which provides“The Commissioner shall not license any person to act as agent under this Act unless the Commissioner is satisfied that, that person has the capability, office equipment, a registered office and documents to effectively transact business in accordance with the provisions of this Act and any other conditions as may be prescribed by regulations.”

26. Further the Respondent held that it may refuse to issue, suspend, revoke or refuse to renew license pursuant to Section 145(3) of EACCMA which provides;“The Commissioner may refuse to issue a license or may by order, suspend, revoke or refuse to renew, any such license on the ground that the applicant or holder has been found guilty of an offence under the Customs laws or has been convicted of an offense involving dishonesty or fraud, or for any other reason that the Commissioner may deem fit.”

27. The 1st Respondent asserted that the decision to suspend the Appellant’s license was not illegal but was consistent with powers bestowed upon the 1st Respondent under Part XI of the EACCMA as read with Section 190 of the EACCMA and Regulations 149 and 150 of the EACCMA. Therefore, the Appellant failed to comply with mandatory provisions of the law as it has not demonstrated why it filed a premature Appeal with the Tribunal before exhausting appropriate administrative review mechanism pursuant to Section 229 of the EACCMA yet the 1st Respondent did not fail to converse with the Appellant.

28. The 1st Respondent sought the following reliefs :i.That the Tribunal dismiss the Appeal with costs for lack of merit.ii.That the Tribunal upholds the 1st Respondent’s demand to charge tax amounting to Ksh 5,317,470. 00. iii.That the Tribunal finds the Respondent was right in declining the Appellant’s request for reinstatement of their iCMS password.

Issues for Determination 29. Tax disputes are in persona and accordingly a party cannot enjoin other parties in its Appeal to aid in its defense. This is a firm view of the Tribunal and it is particularly so because the Tribunal would not be able to issue orders against parties who may have been enjoined to a dispute. Enjoining parties with crucial information to an Appeal in a tax dispute is unlawful and unjustified as it amounts to inviting such a party to defend itself in a tax dispute yet there is no tax decision against it.

30. Accordingly, the Tribunal has not considered the pleadings and submissions of the 2nd Respondent. Perhaps the Appellant ought to have sought leave to enjoin the 2nd Respondent but as held in the interlocutory application in the case Cellini Holdings Limitedv Commissioner Domestic Taxes [TAT Appeal No E710 of 2024] wherein the Appellant/Applicant sought sought to enjoin parties who the Appellant/Applicant opined would provide or were in possession of pivotal information the Tribunal held as follows:“Granting the orders sought when there is a remedy capable of aiding the Appellant to get the justice it seeks under Section 20(2) of the TAT Act would thus not only be unsustainable given that the new or joined parties would have been invited to defend themselves against a tax dispute without being served with an assessment and also being allowed to go through the preliminary tax objection process laid out in Section 51 of the TAT Act.”

31. The Tribunal having expunged the record of the 2nd Respondent from this suit has however carefully considered the Appellant and 1stRespondent’s pleadings, documentation and the 1st Respondent’s submissions and found that a single issue falls for its determination:

Whether there is an appealable decision before the Tribunal. Analysis and Findings 32. The Tribunal having established a sole issue for determination will proceed to analyze the same as follows:

Whether there is an appealable decision before the Tribunal. 33. The Tribunal observes that the genesis of the dispute at hand was the 1st Respondent’s demand for evidence of exportation of goods by Kenya Wine Agencies (KWAL) for the period between 2006 and 2008 through a letter dated 3rd July 2020 resulting in principal taxes of Ksh 2,413,579. 00. On its part, the Appellant held that having executed the bonds, it was KWAL’s responsibility to ensure that goods and bond documents were properly maintained and the ensuing taxes paid.

34. The Tribunal observes the Appellant’s averments that it issued bonds to facilitate re-exportation of goods from the Kenyan market but that the responsibility of the warehouse and transit of the goods was squarely on KWAL. The 1st Respondent however held that Appellant was the “owner” of the goods as provided for under Section 2(1) of the EACCMA.

35. The Tribunal notes that the Appellant was denied customs license renewal as one of the requirements that it failed to meet was certificate of bond clearance. That this was occasioned by some cargo for which it had issued bonds and booked for re-export but could not be accounted for as no entries had been made in KWAL’s system. The Tribunal notes that the demand letter of 19th August 2020 was addressed to the KWAL and was in relation to un-executed bonds for the 2006 to 2008 review period.

36. The Tribunal notes that the Courts have upheld that tax burden is not a shared burden but is for every taxpayer to dispense with it. The law has provided reliefs and mechanisms to shield taxpayers against unfair practices that is why the provisions of Section 3 of the TPA provides an avenue for a taxpayer to appeal against a decision of the Commissioner. However, an appeal must meet certain criteria as set out in the cited Section which provides as follows:“appealable decision” means an objection decision and any other decision made under a tax law other than—(a)a tax decision; or(b)a decision made in the course of making a tax decision;…”

37. The Tribunal keenly analyzed the chronology of events leading to the instant Appeal but never sighted the impugned decision of 31st May 2024 alluded to by the Appellant. The Tribunal notes that Section 13(2) of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”) is couched in mandatory terms and provides as follows:“(2)The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal, of—a.a memorandum of appeal;b.statements of facts; andc.the appealable decision; andd.such other documents as may be necessary to enable the Tribunal to make a decision on the appeal.”

38. Accordingly, the Tribunal notes that the instant appeal was brought before it against a decision of the 1st Respondent, wherein it disallowed an application for “license renewal” subject to the provision of documents by the Appellant. The appeal by the Appellant was premature as it was an appeal against a decision that is not an ‘appealable decision’ as provided for by Section 3 of the TPA and Section 13 (2) of the TATA. Accordingly, the Tribunal finds that it lacks jurisdiction and must down its tools as guided by the principles set out in the case of Phoenix of E.A. Assurance Company Limited vs. S. M. Thiga t/a Newspaper Service [2019] eKLR, where the Court of Appeal held as follows:“...Jurisdiction is primordial in every suit. It has to be there when the suit is filed in the first place. If a suit is filed without jurisdiction, the only remedy is to withdraw it and file a compliant one in the court seized of jurisdiction. A suit filed devoid of jurisdiction is dead on arrival and cannot be remedied. Without jurisdiction, the Court cannot confer jurisdiction to itself.”

Final Decision 39. The upshot of the foregoing is that the Appeal herein is not meritorious and accordingly the Tribunal proceeds to make the following Orders:a.The Appeal be and is hereby struck out.b.Each party to bear its own costs.

40. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 25TH DAY OF APRIL, 2025. CHRISTINE A. MUGA CHAIRPERSONBONIFACE K. TERER - MEMBERELISHAH N. NJERU - MEMBEREUNICE N. NG’ANG’A - MEMBEROLOLCHIKE S. SPENCER - MEMBER