[2024] KETAT 720 (KLR)

Nairobi Enterprises Limited v Commissioner of Customs & Border Control (Tax Appeal E293 of 2023) [2024] KETAT 720 (KLR) (24 May 2024) (Judgment)

Neutral citation: [2024] KETAT 720 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E293 of 2023

E.N Wafula, Chair, Cynthia B. Mayaka, RO Oluoch, T Vikiru & AK Kiprotich, Members

May 24, 2024

Between

Nairobi Enterprises Limited

Appellant

and

Commissioner of Customs & Border Control

Respondent

Judgment

Background 1. The Appellant is a company incorporated in Kenya and duly registered in Kenya under the Companies Act, 2015.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, 1995. Under Section 5 (1) of the said Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all revenue.

3. The Appellant imported a consignment of Surgical Operating Theatre LED Lights on March 31, 2023 under customs entry number No. 23SCDIM400015656.

4. The Appellant declared the Surgical Operating Theatre LED Lights under HS Code 9018. 90. 00 which attracted Import duty at the rate of 0% and VAT at the rate of 0%.

5. The Respondent disputed the Appellant's classification of the Surgical Operating Theatre LED Lights and upon review, determined that the applicable tariff classification was HS Code 8539. 52. 00 attracting Import duty at the rate of 25% and VAT at the rate of 16%.

6. The Appellant after being informed by the Head Verification Officer (HVO) and the Verification Officer (VO) that the Respondent was seeking to amend the tariff classification, wrote a letter dated 13th April, 2023 disputing re-classification of the consignment to HS code 8539. 52. 00.

7. The Respondent maintained its position and formally issued its response vide a tariff ruling dated 28th April, 2023, whereby it affirmed its position and maintained the tariff classification as HS Code 8539. 52. 00

8. Aggrieved by the Commissioner’s decision of April 28, 2023, the Appellant filed a Notice of Appeal at the Tribunal on 26th May, 2023.

The Appeal 9. The Appeal is premised on the Memorandum of Appeal dated and filed on 9th June, 2023 stating the following grounds:-i.The Respondent erred in fact by ignoring the fact that the Lifex Single Dome 80 Ceiling Lights imported by the Appellant (hereinafter referred to as "theatre lights") were medical devices that are used in hospital theatres during surgical operations, diagnosis and treatment of patients.ii.The Respondent erred in law and fact by treating and classifying the theatre lights as ordinary lights under HS Code 8539. 52. 00 rather than HS Code 9018. 90. 00 which is the HS Code for medical devices including theatre lights.iii.The Respondent erred in law by failing to consider the customs Explanatory Notes and General Interpretation Rules which provide the framework for classifying goods based on their essential character and primary use.iv.The Respondent erred in law by failing to interpret the East African Community Common External Tariff as read together with the explanatory notes in a manner that promotes the spirit, purpose and objects of the Common External Tariff. The interpretation of a statute must remain faithful to the actual wording of the statute.

Appellant’s Case 10. The Appellant’s case is premised on the following documents:i.Its Statement of Facts dated 6th July, 2023 and filed on 7th July, 2023 together with the attachments thereof.ii.The Appellant’s witness statement of Azaan Dhanani dated and filed on 16th January, 2024; admitted as evidence under oath on 26th January, 2024. iii.The Appellant’s list and bundle of documents dated and filed on 16th January, 2024. iv.Its written submissions dated and filed on 10th April, 2024.

11. That the Respondent erred in its decision to classify theatre lights under the Heading 85. 39 which contains electric filament or discharge lamps, including scaled beam lamp units and ultra-violet or infra-red lamps; arc-lamps; light-emitting diode (LED) light sources.

12. That the heading also covers electric light lamps consisting of glass or quartz containers, of various shapes, containing the necessary elements for converting electrical energy into light rays (including infra-red or ultra-violet rays). That it includes all electric light lamps, whether or not specially designed for particular uses (including flashlight discharge lamps), filament lamps. gas or vapour discharge lamps, arc-lamps and light-emitting diode (LED) lamps.

13. The Appellant averred that the Respondent erred by failing to understand that items under consideration are medical devices designed to illuminate the patient's body during surgical operations, diagnostic or treatment in the theatre room.

14. The Appellant contended that the C17 forms describe the imported items as: "Led Light 80, Led Single Dome Ceiling; Led Light 80 Led Single dome Ceiling; for hospital and clinic use such as surgery treatment". That additionally, the EACCET Tariff Heading 90. 18 describes items that are classified under this HS code as “Instruments and appliances used in medical, surgical, dental or veterinary sciences, including scintigraphic apparatus, other electro-medical apparatus and sight-testing instruments."

15. The Appellant averred that the words used to describe HS Code 90. 18 should be read using their ordinary meaning. The Appellant submitted that the meaning of the words in the EACCET are clear and in interpreting them, the court must not read in or imply anything not clearly stated as was held in Cape Brandy Syndicate v Inland Revenue Commissioners [1921] 1 KB 64. That this was further ruled in the Court of Appeal case of Sony Holdings Ltd v Registrar of Trade Marks & Another [2015].

16. That it is the Appellant’s belief that the Respondent failed to correctly classify the items under tariff Heading 90. 18 due to failure to adopt the ordinary meaning of the words 'appliances used in medical, surgical, dental....” The Appellant averred that the theatre lights assist in diagnosis by providing proper and specific illumination, without which surgical operations would be compromised.

17. That it is clear from the theatre lights catalogue, the theatre lights are not simply LED lights but are specifically used for surgical procedures as well as help adjust illumination in surface and deep cavity surgeries. The Appellant implored that the Tribunal finds that the Respondent erred in its decision to classify them under the HS code 85. 39.

18. The Appellant stated that it fails to understand how the Respondent came to the conclusion that the items under consideration cannot be treated as having either a preventive, curative or diagnostic purpose when they were obviously designed for operational theatre use.

19. That the Respondent, in its decision, erred by stating that the theatre lights should be classified under the HS Code 8539. 52. 00. That tariff line 8539. 52. 00 covers the classification of light emitting diodes (LED) lamps. That the Respondent incorrectly averred that the items are light-emitting diode (LED) lamps which are electrical light sources, arranged in electrical circuits and containing further elements like electrical, mechanical, thermal or optical elements. That this analysis is based on Note 11 under Chapter 85 of the 2022 EACCET, which states that:“Light-emitting diode (LED) lamps which are electrical light sources containing one or more LED modules containing further elements like electrical, mechanical, thermal or optical elements. The distinction between light-emitting diode (LED) modules and light emitting diode (LED) lamps is that lamps have a cap designed to allow easy installation or replacement in a luminaire and ensure mechanical and electrical contact.”

20. That the Respondent's analysis is flawed since the lights in question are operational theatre lights. That moreover, the Appellant averred that its theatre lights do not fall under this heading.

21. That in order to arrive at the HS Code, the Appellant followed GIR 1 which states that; 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.

22. That this was affirmed in the case of Mita Copystar Am. v. United States, 21 F.3d 1079 where the court stated that “.. chapter explanatory notes offer guidance in interpreting subheadings... and there is a presumption of their correctness.”

23. That the explanatory notes to Heading 90. 18 include medical lamps classifiable in the heading 'Lamps which are specially designed for diagnostic, probing, irradiation, etc. purposes; torches, such as those in the shape of a pen are excluded (heading 85. 13) as are other lamps which are not clearly identifiable as being for medical or surgical use (heading 94. 05):

24. The Appellant contended that the theatre lights in question are not merely light-emitting diode(LED) lights, but rather lights specifically designed as medical lamps, providing adequate fissure differentiation during surgical operations.

25. That in determining the applicable HS Code, the Appellant was guided by the East Africa Community Common External Tariff (EACCET) as read together with the explanatory notes guided by the General Interpretation Rules (GIRs).

26. The Appellant referred to Heading 9018 of the EACCET which covers "Instruments and appliances used in medical, surgical, dental or veterinary sciences, including scintigraphy apparatus, other electro-medical apparatus and sight-testing instruments'.

27. That Heading 9018 covers a wide variety of instruments and apparatus which in a majority of cases, are used only in professional practice (for example by doctors, surgeons, dentists. veterinary surgeons, midwives), either to make a diagnosis, to prevent or treat an illness or to operate.

28. That Heading 9018 includes instruments and appliances for medical, surgical, dental or veterinary uses, or for related purposes (radiology, mechano-therapy, oxygen therapy, orthopaedics, prosthetics, etc).

29. The Appellant averred that the Lifex Single Dome 80 Ceiling Lights are specific to medical use and cannot be simply classified as LED lights as the Respondent avers.

30. That it should also be noted that a number of the instruments used in medicine or surgery (human or veterinary) are, in effect, tools (for example hammers, mallets, saws, chisels, gouges, forceps. pliers, spatula), or articles of cutlery (scissors, knives, shears, etc). That such articles are classified in this heading only when they are clearly identifiable as being for medical or surgical use by reason of their special shape, the ease with which they are dismantled for sterilisation, their better quality manufacture, the nature of the constituent metals or by their get-up (frequently packed in cases or boxes containing a set of instruments for a particular treatment: childbirth, autopsies, gynaecology, eye or ear surgery, veterinary cases for parturition).

31. The Appellant contended that the items in question are a light system configured to aid health professionals in detecting the "signs and symptoms" of a condition or disease, thus serving a diagnostic purpose. That the surgical lights play a crucial role in diagnosis by providing precise and targeted illumination, as operations and exploration into a patient's condition would be exceedingly challenging without adequate lighting. That the Appellant provided the manufacturer’s specifications of the Lifex Single Dome 80 Ceiling Light systems for the Tribunal’s reference.

32. The Appellant asserted that the items in question possess the specifications of surgical lights, and the Respondent seemingly concurs with this assessment, as indicated in its tariff ruling whereby it contradicted itself by stating that the lights have features and benefits needed during 'advanced and critical specialty surgical applications'. The Appellant emphasized all the surgical lights key features, some of which were omitted by the Respondent in its tariff ruling, as:i.Ability to distinguish exact colour spectrum of the tissue during advanced and critical super specialised surgical applications.ii.Pulse width modulation control ensuring less heating of LED (increasing life of LED) and no change in the light colour output throughout life.iii.High lumen to watt ratio leading to lesser energy consumptioniv.Mechanical properties of the arms to provide effective maneuverability to focus the light on the operation field.v.A sterilizable handle that can be removed and sterilised in high temperature and high pressure.vi.It offers excellent daylight illumination for in surface and deep cavity surgeries.vii.Suspension arm to fit any room configuration and experience full range maneuverability.viii.Comes with an emergency backup in case of power loss.ix.Contains a digital control panel to adjust the lux intensity.

33. The Appellant averred that based on the theatre lights essential character and primary use being medical/ or surgical use to which the Respondent has also admitted to, they cannot be classified as simple LED lights.

34. This position was affirmed in the case of Bangalore Westfort Hi-Tech Hospital Ltd. vs Commissioner of Customs on 14 July 2006 where the Tribunal held that:“Sub-heading 9018. 90 covers a very wide range of instruments and appliances, which, in the vast majority of cases, are used only in professional practice (e.g. by doctors, surgeons, dentists, veterinary surgeons, midwives), either to make a diagnosis, to prevent or treat an illness or to operate, etc. Instruments and appliances for anatomical or autoptic work, dissection, etc., are also included, as are, under certain conditions, instruments and appliances for dental laboratories.The Commissioner (Appeals) is of the view that these Operation Theatre Lights cannot be treated as having either a preventive, curative or diagnostic purpose. We do not understand how he has come to such a conclusion. Any surgery or operation will either have a curative or preventive purpose. There are many cases where advise is given for surgical operation in order to prevent certain future complications. In many cases, surgery definitely has curative view of the matter, these lights can be considered as Appliances coming under CSH 9018. 19 as Other Electro Medical Apparatus. Therefore, we allow the appeal with consequential relief by setting aside the impugned order in appeal purposes. Therefore, the Commissioner (Appeals) has adopted a view without any basis. We should also bear in mind that these lights have specifically been designed for Operation Theatre. In that view of the matter, these lights can be considered as Appliances coming under CSH 9018. 19 as Other Electro Medical Apparatus.”

35. Additionally, the Appellant referred to the case of the Trump Medical Systems, Inc. vs. United States,34 Ct. Int'l Trade 1404, 753 F. Supp. 2d 1297 (2010) where the United States Court of International Trade ruled that:“For the foregoing reasons, the court concludes that Plaintiff's entries of complete surgical light systems are correctly classified under HTSUS 9018. 90. 60 and not under Heading 9405. 10. 6020, as classified by Customs. 'Surgical lights would be classifiable under heading 9018 if they are lights for medical diagnostic, probing, irradiation, etc., lamps.”

36. That the law must not be interpreted in a form and manner that is highly prejudicial and against public policy. That the Respondent must be reasonable in its demands for tax. That in Associated Provincial Picture Houses Ltd. vs. Wednesbury Corporation [1948] 1 KB 223, the court set out the standard of unreasonableness of public-body decisions ,that if unreasonable, would make the decision liable to be quashed.

37. That the Appellant has demonstrated and provided documentation that clearly illustrates that these are surgical lights used for medical purposes only.

38. In its closing remarks the Appellant referred the Tribunal to R v Inland Revenue Commissioner, ex-parte Unilever p/c [1996] where the court held that:“the Court is there to ensure that the power to make and alter policy is not abused by unfairly frustrating legitimate individual expectations....This is contrary to the scope and powers of the revenue authority which to administer the collection of taxes and not to severely undermine the law in efforts to increase their revenues...”

Appellant’s prayers 39. The Appellant prayed that:i.The Tariff Ruling decision dated 28th April, 2023 of Kshs. 2,369,098. 00 be declared null and void and be set aside in its entirety;ii.The Lifex Single Dome 80 Ceiling Lights imported by the Appellant are medical devices falling under HS Code 9018. 90. 00iii.The Appeal be allowed with costs to the Appellant; andiv.Any other remedies as that the Honourable Tribunal deems just and reasonable.

Respondent’s Case 40. The Respondent’s case is premised on the following documents:i.Its Statement of Facts dated July 6, 2023 and filed on the same date together with the documents attached thereto.ii.The Respondent’s witness statement of Sospeter Kiprop dated and filed on 2nd February, 2024; admitted as evidence under oath on 26th January, 2024.

41. That after the letter by the Appellant dated 13th April, 2023 disputing re-classification of the consignment to HS code 8539. 52. 00, the Appellant proceeded to secure the goods under a bank guarantee on 20th April, 2023, and under protest, for an amount of Kshs. 2,369,098. 00.

42. The Respondent reiterated its position as stated in the tariff decision dated 28th April, 2023 communicated to the Appellant and refuted every allegation made in the Appellant's Memorandum of Appeal and Statement of Facts.

43. The Respondent averred that the product in dispute is a white LED lamp (unassembled), single dome and the mounting pattern is the ceiling type. That the items have the following features and benefits;i.Determine eye's ability to distinguish exact colour spectrum of the issue during advanced and critical super specialty surgical applications.ii.Pulse width modulation control ensures less heating of LED (increasing life of LED) and no change in light colour output throughout life.iii.Each LED has its own optical system with a specific reflecting angle that permits changing electronically the illuminated lighting field without any motorised movement of the lighting body, ensuring low maintenance.iv.High lumen to watt ratio leads to lesser energy consumption, additionally, mechanical properties of the arms provide effective maneuverability to focus the light on the operation field. Smooth, continuous and curved surfaces are also easy to clean.

44. The Respondent averred that Heading 85. 39 covers electric filament or discharge lamps, including sealed beam lamp units and ultra-violet or infra-red lamps; light- emitting diode (LED) light sources. That the heading covers electric light lamps consisting of glass or quartz containers, of various shapes, containing the necessary elements for converting electrical energy into light rays (including infra-red or ultra-violet rays). That it includes all electric light lamps, whether or not specially designed for particular uses (including flashlight discharge lamps), filament lamps, gas or vapour discharge lamps, arc-lamps and light-emitting diode (LED) lamps.

45. The Respondent stated that based on the above information, Lifex Single Dome 80 Cleaning Lights even though designed for use in medical theatres is considered to be a light-emitting diode (LED) light, classified in 2022 EAC/CET HS Code 8539. 52. 00 as guided by GIR 1 & 6.

46. The Respondent further stated that the declared 2022 EACCET Code 9018. 90. 00 therefore, is at variance with the tariff guidance. That particularly, Chapter 90 covers the following: optical, photographic, cinematographic, measuring, checking precision, medical or surgical instruments and apparatus; parts and accessories thereof.

47. That Heading 90. 18 covers the classification of instruments and appliances used in medical, surgical, dental or veterinary sciences, including scintigraphic apparatus. other electro-medical apparatus and sight testing instruments.

48. That the Respondent places reliance on explanatory notes of Heading 9018. 90. 00 which provide thus:“This heading covers a very wide range of instruments and appliances which, in the vast majority of cases, are used only in professional practice (e.g., by doctors, surgeons, dentists, veterinary, surgeons, midwives), either to make a diagnosis, to prevent or treat an illness or to operate, etc.”

49. The Respondent averred that in the instant case, the LED light imported by the Appellant cannot be termed as instruments or appliances pursuant to GIR 2 which requires that essential character will be considered in making a classification.

50. That in the instant case, the single dome LED ceiling lights was unassembled and in the circumstances, it had to be classified as a complete article under EACCET HS Code 8539. 52. 00.

51. The Respondent averred that this tariff classification was based on the material information presented. That the audit was not contrary to the law and was procedurally fair and reasonable in the circumstances of the case.

52. That the Appeal herein is therefore devoid of any merit and ought to be dismissed.

Respondent’s Prayers 53. The Respondent prayed that that this Tribunal considers the case and finds that:i.The Respondent's tariff ruling dated 28th April, 2023 was proper and in conformity with the provisions of the law and uphold the same.ii.This Appeal is devoid of merit and ought to be dismissed with costs to the Respondent.

Issues For Determination 54. The Tribunal having carefully reviewed the pleadings and submissions made by the parties, the supporting documentation and the oral testimony of the parties’ witnesses, is of the view that the issue that calls for its determination in this Appeal is:- Whether the Respondent erred in reclassifying the Appellant’s imports under tariff heading 8539.

Analysis And Findings 55. Having identified the issue falling for its determination, the Tribunal wishes to analyze it as hereunder.

56. The crux of this dispute is the Customs tariff classification of Surgical Operating Theatre LED Lights imported by the Appellant which the Respondent seeks to reclassify under tariff code 8539. 52. 00 while the Appellant argues that they should be classified under tariff code 9018. 90. 00.

57. The Appellant averred that the Respondent erred in law and fact by treating and classifying the theatre lights as ordinary lights under HS Code 8539. 52. 00 rather than HS Code 9018. 90. 00 which is the HS Code for medical devices including theatre lights.

58. In determining the correct classification of the Surgical Operating Theatre LED Lights imported by the Appellant, the Tribunal relied on the General Rules of Interpretation (GIRs) of the EACCET and the World Customs Organization (WCO) Explanatory Notes to the Harmonized System (HS).

59. The Tribunal noted that Heading 9018 of the EACCET covers instruments and appliances used in medical, surgical, dental or veterinary sciences, including scintigraphic apparatus, other electro-medical apparatus and sight-testing instruments.

60. The Tribunal reviewed the Explanatory Notes to Heading 9018 and notes that they state as follows:“This heading covers a very wide range of instruments and appliances which, in the vast majority of cases, are used only in professional practice (e.g., by doctors, surgeons, dentists, veterinary surgeons, midwives), either to make a diagnosis, to prevent or treat an illness or to operate, etc. Instruments and appliances for anatomical or autoptic work, dissection, etc., are also included, as are, under certain conditions, instruments and appliances for dental laboratories (see Part (II) below). The instruments of the heading may be made of any material (including precious metals).…..On the other hand, this heading includes specialised measuring instruments used exclusively in professional practice, such as cephalometers, dividers for measuring cerebral lesions, obstetrical pelvimeters, etc.It should also be noted that a number of the instruments used in medicine or surgery (human or veterinary) are, in effect, tools (e.g., hammers, mallets, saws, chisels, gouges, forceps, pliers, spatulae, etc.), or articles of cutlery (scissors, knives, shears, etc.). Such articles are classified in this heading only when they are clearly identifiable as being for medical or surgical use by reason of their special shape, the ease with which they are dismantled for sterilisation, their better quality manufacture, the nature of the constituent metals or by their get-up (frequentlypacked in cases or boxes containing a set of instruments for a particular treatment : childbirth, autopsies, gynaecology, eye or ear surgery, veterinary cases for parturition, etc.).The instruments and appliances classified here may be equipped with optical devices; they may also make use of electricity, either as motive power or for transmission, or as a preventive, curative or diagnostic agent.This heading also covers instruments and appliances operated by laser or other light or photon beam processes and ultrasonic instruments and appliances.”

61. The notes to Heading 9018 further state that this heading includes instruments and appliances for human medicine or surgery including “(R) Lamps which are specially designed for diagnostic, probing, irradiation, etc. purposes. That torches, such as those in the shape of a pen are excluded (heading 85. 13) as are other lamps which are not clearly identifiable as being for medical or surgical use (heading 94. 05).” Emphasis added.

62. Heading 8539 covers “Electric filament or discharge lamps, including sealed beam lamp units and ultraviolet or infra-red lamps; arc-lamps; light-emitting diode (LED) lamps” while tariff code 8539. 52. 00 specifically covers Light-emitting diode (LED) lamps.

63. The Tribunal further noted that the Explanatory Notes to Heading 8539 provide as follows in relation to Light-emitting diode (LED) lamps:“The light from these lamps is produced by one or more light-emitting diodes (LED). These lamps consist of a glass or plastic envelope, one or more light-emitting diodes (LED), circuitry to rectify AC power and to convert voltage to a level useable by the LEDs, and a base (e.g., screw, bayonet or bi-pin type) for fixing in the lamp-holder. Certain lamps may also contain a heat sink.These lamps are of various shapes, e.g., spherical (with or without a neck); pear or onion shaped; flame shaped; tubular (straight or curved); special fancy shapes for illuminations, decorations, Christmas trees, etc.”

64. Having reviewed the provisions of the headings in dispute as per the EACCET and the Explanatory Notes to the same, the Tribunal referred to the General Interpretative Rules which are reproduced below and state as follows:“Classification of goods in the Nomenclature shall be governed by the following principles : 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 :

2. (a)Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this Rule), presented unassembled or disassembled.(b)Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3.

3. 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)Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3 (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.(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.

4. 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.

5. In addition to the foregoing provisions, the following Rules shall apply in respect of the goods referred to therein :(a)Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This Rule does not, however, apply to containers which give the whole its essential character;(b)Subject to the provisions of Rule 5 (a) above, packing materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision is not binding when such packing materials or packing containers are clearly suitable for repetitive use.

6. For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related Subheading Notes and, mutatis mutandis, to the above Rules, on the understanding that only subheadings at the same level are comparable. For the purposes of this Rule the relative Section and Chapter Notes also apply, unless the context otherwise requires.”

65. Going through the Rules, the Tribunal established that Rules 2, 3, 4 and 5 would not apply to the instant case as they relate to the classification of incomplete, unfinished, disassembled or unassembled products; mixtures, composite goods and goods in sets, and containers, cases and packaging materials respectively. Further, GIR 4 which classifies goods on the basis of items to which they are most akin is a catch all rule that is used to address gaps in classification where Rules 1 to 3 are not usable in the classification of an item. In the instant case, Rule 1 is applicable as there exists a heading that refers to the specific goods in consideration both by description and by function. The Tribunal therefore established that the classification of the items in dispute: surgical LED lights, is determinable by applying Rules 1 and 6 of the GIRs.

66. The Tribunal went further to examine the specifications of the items imported by the Appellant and noted that the lights imported by the Appellant are specifically used in surgical procedures and as per the catalogue with manufacturer’s specifications, have the following characteristics:i.Either single or double dome ceiling mount. These domes offer an excellent daylight illumination for in surface and deep cavity surgeries. The double dome operating theatre light additionally comes with emergency backup in case of power loss.ii.Light heads that come with aero-dynamic shape that is resistant to disinfectant and easy to clean.iii.Very high light intensity – between 120,000 and 160,000 Lux.iv.Combination of yellow and white light for making natural day light.v.Sterilization handles that move the dome in all directions helping in easy adjustment of focus dia and position of light head. Additionally, after surgery, the handle may be removed and soaked in solution for disinfection under high pressure and high temperature.vi.A digital control panel to adjust lux intensity.vii.A suspension arm to fit any room configuration and to experience full range maneuverability. This feature provides precision positioning at all points of articulation without drift.

67. The Tribunal further established that importation of medical equipment must be superseded by the application for and issuance of a medical device permit by the Republic of Kenya Pharmacy and Poisons Board. The Tribunal confirms that the Appellant was issued with the said permit for the importation of the surgical lights. The permit provides the following details:i.Application status as approved.ii.Applicant’s details as Nairobi Enterprises Limited.iii.Consignee details as Nairobi Enterprises Limited.iv.Importer details as Nairobi Enterprises Limited.v.Exporter details as Indian Medical System.vi.Consignor details as Indian medical Systemvii.Item descriptions as LED Light 80, LED Single Dome Ceiling and LED Light 80, Double Dome Ceiling.viii.Intended purpose stating that examination lights are used in medical facilities for local illumination of the patient’s body during diagnostic procedures.

68. The permit by the Kenya Pharmacy and Poisons Board additionally issued conditions for the importation of the surgical lights as follows:i.That the Applicant must adhere to the conditions stipulated in the permit.ii.That each Applicant must retain records of the distribution of all the medical devices imported for a minimum period of between 5 to 10 years depending on equipment specifications.iii.That the Applicant of a medical device must keep an up to date log of information of all the devices registered.iv.That the Applicant must provide specified reports relating to any problems with the use of devices received from all manufacturers.v.That the Applicant must ensure that any medical device within their control is stored and transported in accordance with the instructions and information provided by the manufacturer.

69. It is apparent therefore that the manufacturer’s catalogue and the permit by the Kenya Poisons and Pharmacy Board both confirm that the items in question are specifically for surgical use.

70. Further, in understanding the language of the Harmonised System as embodied in the EACCET, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System, which constitute the official interpretation of the Harmonised System at the international level, should be consulted. The Explanatory Notes, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the EACCET.

71. In this regard, the Tribunal observes that the legal notes to Chapter 90 state, in part, as follows:-“1. This chapter does not cover:(h)Searchlights or spotlights of a kind used for cycles or motor vehicles (heading 8512); portable electric lamps of heading 8513; cinematographic sound recording, reproducing or re-recording apparatus (heading 8519 or 8520); sound-heads (heading 8522); still image video cameras, other video camera recorders and digital cameras (heading 8525); radar apparatus, radio navigational aid apparatus and radio remote control apparatus (heading 8526); numerical control apparatus (heading 8537); sealed beam lamp units of heading 8539; optical fiber cables of heading 8544;(ij)Searchlights or spotlights of heading 9405;”

72. Notably, the Explanatory Notes to Heading 9405 state, inter alia, that:“…This heading also excludes:…(l)Medical diagnostic, probing, irradiation, etc., lamps (heading 90. 18).”This provision demonstrates that certain lamps used during medical diagnosis, probing and irradiation are classifiable under Heading 9018.

73. The Tribunal, having considered all the factors outlined in the foregoing paragraphs, established that the subject LED surgical lights are specialized and have specific characteristics that aid in surgical procedures and by the application of GIR1, their classification shall fall under Heading 9018 which specifically provides for instruments and appliances used in medical, surgical, dental or veterinary sciences, including scintigraphic apparatus, other electro-medical apparatus and sight-testing instruments.

74. That further, Heading 8535 which covers electric filament or discharge lamps, including sealed beam lamp units and ultra-violet or infra-red lamps; arc-lamps; light-emitting diode (LED) light sources refers to the specified lamps in general without clearly providing a description for surgical instruments and appliances.

75. Additionally, in terms of functionality, and contrary to the Respondent’s averments, the lights imported by the Appellant are specifically used in operating theatres for medical surgery and are not items for general use.

76. In view of the foregoing, the Tribunal finds that the Surgical Operating Theatre LED Lights are properly classifiable under Heading 9018, specifically HS Code 9018. 90. 00 under the EACCET.

77. The Tribunal therefore concludes that the Respondent erred in re-classifying the Appellant’s imports under Heading 8539.

Final Decision 78. The upshot of the foregoing analysis is that the Appeal is merited and the Orders that recommend themselves to the Tribunal are as follows:-a.The Appeal be and is hereby upheld.b.The Respondent’s tariff ruling dated April 28, 2023 be and is hereby set aside.c.Each Party to bear its own costs.

79. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 24TH DAY OF MAY, 2024ERIC NYONGESA WAFULA - CHAIRMANCYNTHIA B. MAYAKA DR. RODNEY O. OLUOCH - MEMBER MEMBERTIMOTHY B. VIKIRU ABRAHAM K. KIPROTICH - MEMBER MEMBER