[2024] KETAT 1466 (KLR)

Mutava v Commissioner of Customs and Border Control (Miscellaneous Tax Appeal E825 of 2024) [2024] KETAT 1466 (KLR) (11 October 2024) (Ruling)

Neutral citation: [2024] KETAT 1466 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Tax Appeal E825 of 2024

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

October 11, 2024

Between

Catherine Ngina Mutava

Applicant

and

Commissioner of Customs and Border Control

Respondent

Ruling

Background 1. The Applicant moved the Tribunal vide a Notice of Motion Application dated 25th July 2024 and filed on 26th July 2024 seeking the following Orders:a.Spent.b.That the Respondent be ordered to release the Applicant’s vehicle from the port pending hearing and determination of the suit upon furnishing security for the assessable taxes.c.The Respondent be compelled to pay the cost of this application.

2. The Application was supported by an Affidavit sworn by the Applicant on the 25th day of July, 2024 was premised on the following grounds:a.That the Appellant imported a used Toyota Harrier Hybrid car (Chassis No. AXUH8S-0002299).b.That the Appellant has an income tax exemption certificate number KRAPWD0048800721 due to disability.c.That on 13th July 2024, the Applicant made an application for tax exemption for the above motor vehicle in line with Paragraph 8 of the 5th Schedule to the East African Community Customs and Management Act, 2004 (hereinafter “EACCMA”).d.That on 1st July 2024 the Respondent rejected the Applicant’s application on the erroneous basis that the nature of the Appellant's disability does not meet the legal criteria for exemption. That the Applicant filed an application for review on 5th July 2024 appealing the Respondent's decision.e.That the Respondent rejected the Applicant's application through a letter dated 22nd July 2024 on the same erroneous basis that the nature of the Applicant's disability did not meet the legal criteria for exemption.f.That the Applicant's motor vehicle was already at the port accumulating demurrage charges, which were continually increasing and causing financial strain to the Applicant.g.That the continued accumulation of demurrage charges was unjust and prejudicial to the Applicant, who has a legitimate expectation to benefit from the exemption provided under the law.h.That unless this Tribunal intervenes the Applicant would be prejudiced and continue suffering demurrage charges.i.That the urgency of the matter necessitated an immediate intervention by the Tribunal to prevent further financial loss and ensure the enforcement of the Applicants rights under the EACCMA and the Constitution of Kenya, 2010 (hereinafter "the Constitution”).j.That the Applicant has an arguable case with a likelihood of success before the Tribunal.k.That the Respondent would not suffer any prejudice if the vehicle was cleared provisionally under an undertaking to mitigate accrual of demurrage charges pending hearing and determination of the Appeal.

3. The Applicant filed its written submissions dated 7th August 2024. The Applicant submitted that she presented to the Respondent the required documents and that she complied with the requirements of Kenya Disabled Persons Car Import Tax Exemption Requirements as outlined by the Commissioner. The Applicant also submitted that the car fell within the provisions of Paragraph 39 of the First Schedule to the VAT Act, Paragraph 8 of the Fifth Schedule to EACCMA and paragraph 4, Second Schedule, Part A of the Excise Duty.

4. The Applicant’s written submissions dated 7th August, 2024 were adopted by the Tribunal on 8th August, 2024 wherein the Applicant submitted that the Respondent failed to provide details of the legal criteria employed in arriving at its decision.

5. The Applicant cited the High Court decision in Joseph Muriithi Ndirangu t/a Ndirangu Hardware v Commissioner of Domestic Taxes (2023) KEHC 19357 KRL to submit that the High Court concurred with the Tribunal that failure to provide reasons for a decision renders the decision inadequate. The Applicant also relied on the case of TheNational Assembly & Speaker of the National Assembly v Okiya Omtata & 55 Others Civil Appeal No. E003 of 2023 and Local Productions Kenya Limited v Commissioner of Domestic Taxes in TAT Appeal No. 50 of 2017 to emphasise that the decision maker has to issue reasons for a decision.

6. The Applicant also submitted that the Respondent unlawfully discriminated against the Applicant contrary to section 248B of EACCMA which enjoins the Respondent not to promote any customs procedures, measures or practices that are discriminatory to persons on grounds of gender, age or disabilities.

7. In response to the Application, the Respondent filed a replying affidavit on 5th August 2024 and sworn by its officer, Victor Chabala on 5th August 2024 opposing the grounds of the Application as follows:a.The Respondent stated that even though the Applicant imported a motor vehicle, the Respondent was guided by prevailing legal provisions such as the EACCMA, Excise Duty Act, CAP 472 of the Laws of Kenya (hereinafter “EDA”) and the Value Added Tax Act, CAP 476 of the Laws of Kenya (hereinafter “VAT Act”).b.That the provisions of Paragraph 8 of Part A of the Fifth Schedule to EACCMA are as follows:‘‘8. Disabled, Blind and Physically Handicapped Persons Materials, articles and equipment, including one motor vehicle, which:are specially designed or use by disabled or physically handicapped persons.’’c.That Paragraph 39 (1) of Section A of Part 1 of the VAT Act states as follows:‘‘Subject to paragraphs (2) and (3), materials, articles and equipment, including motor vehicles, which—(a)are specially designed for the sole use by disabled, blind and physically handicapped persons.’’d.That Paragraph 4 of Part A of the Second Schedule of the EDA states as follows:‘‘4. One motor vehicle for use by persons with disability.’’e.That section 35 (3) on Exemptions of the Persons with Disabilities Act, CAP 133 of the Laws of Kenya (hereinafter “PWDA”) states as follows:“Materials, articles and equipment, including motor vehicles, that are modified or designed for the use of persons with disabilities shall be exempt from import duty, value added tax, demurrage charges, port charges and any other government levy which would in any way increase their cost to the disadvantage of persons with disabilities.”f.That the statutory obligation on the exemption of motor vehicles is that the motor vehicle shall be specifically designed and modified for use by the persons with disabilities or and the physically handicapped persons.g.That the aforementioned provisions limit the Respondent to issue motor vehicles exemption strictly to motor vehicles that have been modified and designed specifically for use by the persons with disabilities.h.That whilst taxpayers with disabilities may have recommendations from the National Council for Persons with Disabilities (NPWD) for tax exemptions on motor vehicles, taxing statutes are interpreted strictly.i.That the Exemption Certificate that the Applicant relied on indicated as being an “Income Tax Exemption Certificate’’ and that the Certificate further indicates, “the exemption is only applicable to Income Tax and not any other tax.”j.That is the issue at hand in this application as well as the appeal is not an issue of income tax exemption.k.That the Applicant’s disability does not meet the legal criteria for exemption under EACCMA, VAT Act and EDA and that failure by the Applicant to meet its tax obligations entitles the Respondent under the law, to enforce collection of the taxes.l.That the instant Application was misconceived, as the Applicant failed to comply with the mandatory provisions of the law.m.That the Applicant did not demonstrate that it deserves favourable discretion of this Tribunal and the Application should be dismissed with costs to the Respondent.

8. The Respondent relied on its written submissions dated and filed on 7th August 2024 and adopted by the Tribunal on 8th August, 2024 wherein it cited the case of Cape Brandy Syndicate vs I.R. Commissioners (1921) 1 KB to submit that tax statutes ought to be applied strictly.

9. The Respondent also submitted the Applicant had an obligation to comply with the prevailing legal provisions such as the EACCMA 2004, EDA and the VAT Act.

Analysis And Findings 10. The Tribunal having examined the parties’ pleadings, finds that the main issue for determination is whether the Applicant’s vehicle should be released from the port pending hearing and determination of the appeal.

11. The parties did not dispute the fact that the Applicant was disabled. The fact that the Applicant obtained an exemption certificate was also undisputed. Whereas the Respondent maintained that the said certificate is not applicable to the Appellant’s imported car on grounds that it was issued in relation to Income Tax, the Applicant did not challenge this fact. The Tribunal examined the certificate in issue and concurs with the Respondent that the Certificate issued exempted the Applicant from her income tax obligation only.

12. Section 110 (1) EACCMA provides that duty is to paid on goods at the rate and in the circumstances specified in the Protocol. Duty is payable unless the law provides for exemptions. In this regard, section 114 (1) of the EACCMA provides as follows:“Duty shall not be charged on the goods listed in Part A of the Fifth Schedule to this Act, when imported, or purchased before clearance through the Customs, for use by the person named in that Part in accordance with any condition attached thereto as set out in that Part.”

13. The Tribunal notes that based on the provisions of section 114(1) of EACCMA, the Applicant ought to demonstrate that the vehicle imported is to be used by the Applicant. Further, section 114(1) envisions additional conditions that must be fulfilled pursuant to those outlined in the Fifth Schedule of EACCMA. More particularly, Paragraph 8(a) of Part A of the Fifth Schedule of EACCMA provides as follows:“Disabled, Blind and Physically Handicapped PersonsMaterials, articles and equipment, including one motor vehicle, which:a.are specially designed for use by disabled or physically handicapped persons;”

14. The Tribunal’s view, from a reading the provisions of paragraph 8(a) of the Fifth Schedule to the EACCMA is that a disabled person is entitled to import one motor vehicle duty free provided that the vehicle is specially designed for use by disabled or physically handicapped persons. The Applicant neither claimed that the motor vehicle in issue is designed for disabled persons nor did the Respondent did not assert that the motor vehicle is not designed specifically for disabled persons and it would be difficult for the Tribunal to decide on this issue due to insufficient facts and evidence.

15. The Tribunal notes that both parties made references to the provisions of the VAT Act. Paragraph 39 (1) (a) of Section A, Part 1 of the First Schedule to the VAT Act provides as follows:‘‘(1)Subject to paragraphs (2) and (3), materials, articles and equipment, including motor vehicles, which—(a)Are specially designed for the sole use by disabled, blind and physically handicapped persons.’’

16. The Tribunal, having found that the provisions of the cited Paragraph 39 (1) (a) of Section A, Part 1 of the First Schedule to the VAT Act are the same as those under Paragraph 8(a) of Part A of the Fifth Schedule of EACCMA it would be superfluous for the Tribunal to analyse the same. In addition to the provisions of VAT Act, the Parties referred to the following provisions of paragraph 4 of Part A of the Second Schedule to the EDA:‘‘4. One motor vehicle for use by persons with disability:Provided that exemption under this paragraph shall only apply once in every four years and upon payment of taxes on the previous vehicle.’’

17. The Tribunal notes that the Applicant through the instant Application sought interim orders, which courts have jurisdiction to grant pursuant to jurisprudence in the case Giella v Cassman Brown & Company Limited (1973) E.A 358. The Tribunal therefore found it necessary to exercise its discretion in favour of the Applicant on 8th August, 2024 because it is not disputed that the Applicant is disabled and that the Applicant needs the vehicle to facilitate movement.

18. The Tribunal is of the further view that the success of the Appeal would not be sufficient to cure damages incurred by the Applicant should she be denied access to the vehicle. Further, the Respondent will not be prejudiced because it will still collect taxes should her Appeal fail.

Disposition 19. The upshot of the foregoing is that the Tribunal finds that this Application has merit and accordingly proceeds to make the following Orders:a.The Application be and is hereby allowed.b.No orders as to costs.

20. It is so Ordered.

DATED AND DELIVERED AT NAIROBI THIS 11TH DAY OF OCTOBER, 2024. CHRISTINE A. MUGACHAIRPERSONBONIFACE K. TERERMEMBERELISHAH N. NJERUMEMBEREUNICE N. N’GANG’AMEMBEROLOLCHIKE S. SPENCERMEMBER