[2023] KETAT 885 (KLR)

Nairobi Plastics Limited v Commissioner of Legal Services and Board Coordination (Tax Appeal 230 of 2023) [2023] KETAT 885 (KLR) (8 December 2023) (Judgment)

Neutral citation: [2023] KETAT 885 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 230 of 2023

E.N Wafula, Chair, Cynthia B. Mayaka, RO Oluoch, AK Kiprotich, E Ng'ang'a & B Gitari, Members

December 8, 2023

Between

Nairobi Plastics Limited

Appellant

and

Commissioner of Legal Services and Board Coordination

Respondent

Judgment

Background 1. The Appellant is a private limited company incorporated as such under the laws of Kenya whose principal activity is the manufacturer of plastics within the EAC and its surrounding environs.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority Act, and Kenya Revenue Authority is charged with the responsibility of among others, assessment, collection, accounting and the general administration of tax revenue on behalf of the Government of Kenya.

3. The Respondent issued the Appellant with an Excise duty additional assessment and demand notice for the period October 2022 on 22nd November 2022.

4. The Appellant lodged an objection to Excise duty assessment for the period October 2022 on 29th November 2022.

5. The Respondent issued its objection decision vide a letter dated 1st December 2022 confirming the Excise duty assessments for the period October 2022.

6. The Appellant being dissatisfied with the objection decision, lodged a Notice of Appeal on 15th February 2023 and filed the Appeal documents on 16th March 2023.

The Appeal 7. The Appeal is premised on the following grounds as stated in the Memorandum of Appeal filed on the 16th of March, 2023:-a.That the Respondent erred in law and fact by imposing Excise duty on locally manufactured articles of plastic of tariff Heading 3923. 30. 00 and 3923. 90. 90b.That the Respondent erred in law and fact by failing to appreciate that Finance Act, 2022 as read together with the Excise Duty Act No.25 of 2015 imposes Excise duty solely on imported Articles of plastics of tariff Headings 3923. 30. 00 and 3923. 90. 90c.That the Respondent erred in law and fact by disregarding the provisions of the Hansard and Order Paper of the National Assembly dated 2" June 2022 establishing Parliament's intention that Excise duty should be solely on imported articles of plastics 3923. 30. 00 and 3923. 90. 90. d.That the Respondent erred in law and fact by disregarding the letter from the National Assembly dated 28th July 2022 averring that the intention of parliament was to introduce Excise duty solely on imported articles of plastic of tariff Heading 3923,30. 00 and 3923. 90. 90e.That the Respondent erred in law and fact by imposing Excise duty on the Appellant's locally manufactured articles of plastic in contravention of the Finance Act 2022, the Excise Duty Act, No. 23 of 2016, the directives by the Clerk of the National Assembly, and the intention of Parliament as evidenced by the Hansard and Order Paper of 2nd June 2022. f.That the Respondent erred in law and fact by failing to appreciate that the introduction of Excise duty solely on imported plastics was a measure meant to protect and preserve the dwindling local manufacturing industry as well as reduce cost of living.g.That the Respondent erred in law and fact by failing to appreciate that only Parliament is mandated and imbued with the obligation, duty and power to introduce laws in Kenya. Inspite of the same, the Respondent is blatantly refusing to abide by the will of the Legislature by imposing Excise duty on locally manufactured articles of plastics contra to Parliament's intention.

Appellant’s Case 8. The Appellant’s case is premised on the following documents:a.The Appellant’s Statement of Facts dated 16th March, 2023 and filed on the same date together with the documents attached thereto.b.The Appellant’s witness statement of Hadi Sheikh dated 13th June, 2023, filed on the same date and admitted in evidence under oath on 17th October, 2023. c.The Appellant’s written submissions dated 31st October, 2023 and filed on 1st November, 2023.

9. The Appellant submitted that it was at loggerheads with the Respondent regarding the interpretation of Section 35(b)(xiv) of the Finance Act, 2022. That the provision relates to the imposition of Excise duty on plastics with the main borne of contention being whether the provision sought for the imposition of the tax head solely on imported articles of plastics, or both imported and locally manufactured articles of plastics.

10. It averred that the amendment introduced in Section 35 of the Finance Act was indeed a culmination of years of jurisprudence being laid down to govern the introduction and eventual imposition of Excise duty on plastics. That indeed, owing to the long and convoluted nature of the changes in law leading up to the Finance Act, 2022 it shall establish a brief chronology of the events and amendments that transpired.

11. That it should be noted from the onset that both the Finance Act 2022, and the Excise Duty Act,2015 unequivocally provide that Excise duty should only be imposed on imported articles of plastic of tariff Heading 3923. 30. 00 and 3923. 30. 90.

12. That despite this being the case, the Respondent was demanding from the Appellant, as per the Excise assessments dated 22nd November 2022 issued for the month of October, and confirmed in the Objection decision dated 1st December 2022 Kshs 10,620,420.

13. The Appellant stated that it objected to the assessments and demands raised by the Respondent understanding and appreciating that it is being victimized for following the provision of the law to the letter. That it cannot be overstated that contrary to the assertions in the Respondent’s Objection decision that the Excise Duty Act, 2022 provided that Excise duty at the rate of 10% was to be levied on imported articles of plastics.

14. That to the Appellant's great consternation, sometime in 2023 the clause in the First Schedule to the Excise Duty Act providing that the Excise duty be imposed solely on imported articles of plastics of tariff Headings 3923. 30. 00 and 3923. 90. 90 was mysteriously and clandestinely deleted and/or removed.

15. It averred that it cannot be overemphasized that the deletion and removal of the clause was not done through a Gazette Notice, Legal Notice nor any known amendment channels; meaning that the removal of the clause was the handiwork of persons and individuals wishing to usurp the constitutional powers of the National Assembly and instead impose their will on the people of Kenya

16. It was the Appellant’s contention that it should be noted that Excise duty was first introduced on plastics through Section 32 of the Finance Act 2021 which amended the First Schedule to the Excise Duty Act, 2015. An Excise duty of 10% was accordingly imposed on articles of plastics of tariff Heading 3923. 30. 00.

17. That when introducing the provision, the intentions of Parliament were quite benign, seeking to curb the negative environmental impact of single-use plastics. That indeed, this was not a whimsical nor naïve assertion of the Appellant as it can in fact peer into the mind of the Legislature through the Hansard of the National Assembly dated 24th June 2021 which it cited.

18. That from the Hansard, it was clear that while crafting this provision, the main factor considered was the environmental impact arising from single-use plastics, however, noting the difficulty in segregating single-use and reusable plastics and for purposes of ease of administration and taxation, the legislature resorted to imposing the duty on articles of plastics of tariff Heading 3923. 30. 00.

19. That however, in doing so, Parliament defeated the purpose for which the law was introduced. The Appellant contended that it should be noted that by imposing the Excise duty on all articles of plastics of tariff Heading 3923. 30. 00, parliament had levied taxes on both and single use plastics which were excessively detrimental to the environment, and reusable plastics which were more environmentally friendly.

20. The Appellant submitted that despite the intention of the Legislature being to levy excise only on single-use plastics, all articles of plastics, both reusable and non-reusable were now excisable leading to a sharp increase in cost of living, and equally an increased cost of production for Kenya's local manufacturing industry.

21. That it should be noted that plastics have a wide range of applications and cuts across all industries, from the food industry to the pharmaceutical industry with packaging being one of the most common applications. It averred that in the food industry, plastics are an integral part of the packaging process and help maintain sterility of highly perishable goods such as milk. That in the pharmaceutical industry it protects the medicines from adverse effects e-g., through chemical reactions, leaching of packaging materials or absorption.

22. That accordingly, any erratic changes or adjustments to the pricing of this crucial commodity would likely impact the whole economy, and unfortunately, the introduction of this excise duty brought about the need to re-assess key variables considered in the pricing of products to factor in this prudently incurred production costs.

23. That consequently, as a result of the 2021 Finance Act amendment, the cost of basic and household commodities skyrocketed. For example, Kenyans ended up paying an additional 10% for the same packet of Brookside milk among other essential commodities.

24. The Appellant submitted that for the manufacturing sector, the effects were equally detrimental. That considering that imported articles of plastic did not suffer the same fate of having Excise duty imposed on it as goods produced in Kenya, local manufacturers became uncompetitive both regionally and globally as a result of the additional operational and production costs.

25. That indeed, the legislature and particularly the Departmental Committee on Finance and Planning at their sitting in December 2021, took cognizance of the dire situation in their Report on the Petroleum Products (Taxes and Levies) (Amendment) Bill (National Assembly Bill No. 42 of 2021) which it cited.

26. It averred that cognizant of the outcry from the public, and the effects of the additional Excise duty on plastics, Parliament sought to ameliorate the situation by introducing an amendment in the Finance Act, 2022.

27. That accordingly, both the Finance Bill 2022 and subsequently the Finance Act 2022 introduced amendments to First Schedule of the Excise Duty Act, 2015.

28. It was the Appellant’s contention that looking at the Hansard Report of 2nd June 2022, and the Final Order Paper of even date, it will be noted that the National Assembly intended to introduce a 10% Excise duty on “Imported” articles of plastic as a measure to resuscitate the dwindling local manufacturing industry and reduce the cost of living. That this assertion was reiterated in the Order Paper dated 2nd June 2022.

29. The Appellant submitted that it was thus clear from the Parliamentary record that the National Assembly intended to amend the relevant provision of the Excise Duty Act to provide that "Excise duty would be applicable only on “Imported articles of plastic of tariff heading 3923. 30. 00 and 3923. 90. 90". That indeed, as per the Hansard and the order paper, it can be noted that Parliament's intent was to exclude domestic articles of plastic from the application of Excise duty at rate specified in the Excise Duty Act.

30. That despite the aforementioned, the Respondent through its various assessments and demands intends to impose Excise duty on the plastics manufactured locally by the Appellant. That this goes not just against the spirit of the law and the mischief the Legislature intended to solve, but also the very letter of the law.

31. That it cannot be overstated that provisions of Section 35 of the Finance Act, 2022 as read with the First Schedule to Excise Duty Act No 23 of 2015 are couched in very mandatory terms, that is Excise duty is to be imposed solely on imported articles of plastics. Despite this being the case, the Respondent was demanding from the Appellant Kshs 10,620,420 being undeclared Excise duty on locally manufactured plastics.

32. The Appellant asserted that through various correspondences with the Respondent, the Appellant's representative association, the Kenya Association of Manufacturers urged the Respondent to consider that the intention of Parliament in using the word “imported” was to exclude Excise duty on domestic articles of plastics. That unfortunately, their pleas fell on deaf ears.

33. That the Respondent has indeed been arguing that the amendment sought to expand the scope of excise duty on plastics under tariff Heading 3923. 90. 90. That furthermore, it was their argument that the word “imported” mentioned in the Finance Act, was not in the current provision of the law and accordingly, the Excise duty was applicable on all articles of plastic under the two tariffs, whether manufactured locally or imported. That despite having stated this in its various correspondences, it cannot be overstated that this was not a ground nor a factor for rejecting the Appellant's objection dated 31st October 2022.

34. The Appellant insisted that the Respondent was clinging on to the fact that the Excise Duty Act contains a manifest error. That notably, despite the introduction of the new tariff description, “Imported Articles of plastic of tariff Headings 3923. 30. 00 and 3923. 90. 90", the tariff description "Articles of Plastic of tariff Heading 3923. 30. 00" as introduced by the Finance Act 2021 was still retained.

35. That to the Appellant's great consternation, the Respondent even while disputing the introduction of the tariff heading “Imported Articles of plastic of tariff Headings 3923. 30. 00 and 3923. 90. 90" was still making demands for excise duty on Articles of plastic of tariff Heading 3923. 90. 90. That this was indeed a contradiction as one hand the Respondent is saying that owing to the clerical error, the new tariff code cannot be used and yet on the other hand, they are still demanding for Excise duty under the new tariff heading.

36. That fundamentally, as established in the Hansard and order Paper, the intention of the legislative body in Kenya was to impose excise duty solely on imported articles of plastics as a response to the hue and cry from the public. That inspite of being made aware of that fact, the Respondent was still making demands on the basis of the manifest clerical error in place.

37. The Appellant submitted that it was worth remembering that a change in law is always driven by a motive, be it one to enhance revenue collection or as a trade remedy to support local manufacturers against cheaper imports, among others. That the intention of the law makers must therefore be understood, and the starting point to understand the amendment in question can be obtained first-hand from the National Assembly of Kenya's Hansard report.

38. That indeed, this was the position laid out in the Supreme Court case of Gatirau Peter Munya vs. Dickson Mwenda Kithinji & 2 Others Petition 2B of 2014 [2014] eKLR adopting the words of Lord Griffiths in the case of in Pepper vs. Hart [1992] 3 WLR. To further buttress its arguments, the Appellant cited the case the Court of Appeal case of County Government of Nyeri & Anor. Vs. Cecilia Wangechi Ndungu [2015] eKLR.

39. That for the avoidance of doubt, it cannot be overstated that as per the Hansard and Order Paper dated 2nd June 2022, Parliament had made its intent very clear, that Excise duty was to be introduced solely on imported articles of plastics. That this position would indeed later be reiterated by the Clerk of the National Assembly in a letter dated 28th July 2022.

40. That despite several correspondences and deliberations between the Appellant and the Respondent, a stalemate was reached culminating in the decision to refer the matter to the Attorney General for guidance on the correct interpretation of the Section. That accordingly, the Appellant's consultants wrote to the Attorney General's office on 13th July 2022 seeking guidance on the correct interpretation of clause 35 of the Finance act, 2022.

41. The Appellant averred that failing to receive a response by the Attorney General, the Kenya Association of Manufacturers wrote to the Clerk of the National Assembly on 8th August 2022 seeking its intervention and guidance on the correct interpretation of the provision in light of the actions by the Respondent. That a prayer was indeed made to the National Assembly that should it agree in favor of the Appellant's interpretation of the provision, it should write and direct the Attorney General to make a correction to the provision using the revisionary powers vested by the Revision of Laws Act.

42. That the request by the Kenya Association of Manufacturers was not ludicrous as it was made cognizant of the Honorable Attorney General's powers imbued by Section 13 of the Revision of Laws Act allowing for the rectification of formal, clerical and printing errors by the Attorney General.

43. That furthermore, this power had already been exercised by the good offices of the Attorney General. That it should be noted that when the Finance Bill 2022 was published had referenced HS Code 3923. 30. 90 which is not in existence, yet this error was corrected in the Finance Act 2022.

44. The Appellant submitted that on 16th August 2022, the Clerk of the National Assembly wrote to the Kenya Association of Manufacturers and indicated that it had received a similar request from the Attorney General to whom a substantive response had been issued in a letter dated 28th July 2022.

45. That in the aforementioned letter, the Clerk of the National Assembly averred as follows:“We wish to confirm the National Assembly considered and passed the particular amendment to clause 34 of the Finance Bill, 2022 as proposed by the Departmental Committee on Finance and National Planning. In this regard, the amended item should read as follows:Tariff Description RateImported Articles of plastics of tariff heading 3923. 30. 00 and 3923. 90. 90 10%”

46. That this meant that in addition to the Hansard and the Order Paper, the National Assembly had indeed confirmed as per their intention, Excise duty was only to be imposed on imported articles of plastics of tariff Heading 3923. 30. 00 and 3923. 90. 90.

47. It averred that in light of all that had been mentioned, the Respondent was indeed subverting the will of the Legislature as the duly elected representatives of the people of Kenya and was further blatantly refusing to adhere to the correct provision of Excise Duty Act No 23 of 2015 as read with the Finance Act,2022,

48. That indeed, one has to bear in mind that the grundnorm of the Country, the Constitution of Kenya 2010, unequivocally provides that it is only Parliament that is mandated and imbued with the obligation, duty and power to introduce laws; this is in fact the very foundation of the doctrine of separation of powers.

49. The Appellant asserted that in light of this Legislative mandate, the Legislature alone is responsible for the Legislation of laws within Kenya. That this mandate is manifested to a great extent in Parliament’s duty to Legislate laws that raise revenue collection as enshrined by Section 209 of the Constitution of Kenya.

50. That as such, where the National Assembly has indeed stated that Excise duty should only be levied on imported articles of plastics of tariff Headings 3923. 30. 00 and 3923. 90. 90, it was baffling why the Respondent would insist on collecting Excise duty on the Appellant's locally manufactured articles of plastics, in blatant disregard of the will of the Legislature.

Appellant’s Prayers 51. The Appellant prays that the Tribunal grants the following prayers;a.That this Appellant's Appeal be allowed.b.That the Respondent's demands and Objection decision dated 1s December 2022 be set aside in their entirety.c.That the Respondent be compelled to impose Excise duty solely on imported articles of plastics of tariff Heading 3923. 30. 00 and 3923. 90. 90 as per the intentions of Parliament.

Respondent’s Case 52. The Respondent’s case is premised on the hereunder filed documents: -i.The Respondent’s Statement of Facts dated 11th April, 2023 together with the documents attached thereto.ii.The Respondent’s written submissions dated 31st October, 2023 and filed on 1st November, 2023 together with the authorities attached thereto.

53. The Respondent was of the view that the issue for determination was; Whether the Additional Assessments were justified in law.

54. The Respondent averred that the decision to arrive at the assessments was justified and had basis in Law as required under the Tax Procedures Act, 2015.

55. The Respondent submitted that Paragraph 35 (b) (xiv) of the Finance Act 2022, amended the First Schedule to the Excise Duty Act 2015 by inserting the phrase "and 3923. 90. 90", immediately after "3923. 30. 00" appearing in the tariff description “Imported Articles of plastic of tariff Heading 3923. 30. 00".

56. That Paragraph 32 (iv) of the Finance Act 2021 introduced Excise duty at the rate of 10% on articles of plastics of tariff 3923. 30. 00.

57. The Respondent stated that following the amendments to the Finance Act 2021, the Appellant being a manufacturer of articles of plastics of tariff Heading 3923. 30. 00 had been charging excise duty and remitting the same.

58. The Respondent averred that the Appellant filed a nil return for the period October 2022. That this prompted the Respondent to issue the Appellant with an additional excise duty assessment amounting to KShs 10,620,420.

59. The Respondent contended that it is not bound by the Appellant's returns or self -assessment and it is empowered to vary the assessments using any available information in the Respondent's possession as provided for under Section 24(2) of the Tax Procedures Act.

60. That Section 31 of the Tax Procedures Act empowers the Respondent to make alterations or additions to original assessments from available information for a reporting period based on the Commissioner’s best Judgement.

61. That the Appellant argued that the Respondent erred by imposing excise duty on the Appellant's locally manufactured articles of plastic in contravention of the Finance Act 2022, the directives by the Clerk of the National Assembly and the intention of Parliament as evidenced by the Hansard and Order Paper of 2nd June 2022. That the Appellant also argued that the Respondent erred by failing to appreciate that the Finance Act, 2022 as read with the Excise Duty Act imposes Excise duty solely on imported Articles of plastics of tariff Headings 3923. 30. 00 and 3923. 90. 90.

62. The Respondent averred that Section 5(1) (a) of the Excise Duty Act provides that Excise duty shall be charged on excisable goods manufactured in Kenya by a licensed manufacturer. That further, Section 5(2) of the Excise Duty Act provides that Excise duty shall be charged at the rate specified in the First Schedule for the excisable goods or services.

63. That the First Schedule of the Excise Duty Act No. 23 of 2015 guided the Respondent at the point of issuing the additional assessment on 22nd November 2022 and when issuing the Objection decision on 1st December 2022.

64. The Respondent urged the Tribunal not to adopt a purposive approach in interpreting the Excise Duty Act and instead adopt a strict interpretation. That the Respondent relied on the case of Cape Brandy Syndicate v I.R. Commissioners [1921]IKB where it was held that in interpreting a tax statute there is no room for any intendment or implication.

65. The Respondent also relied on Mount Kenya Bottlers Limited versus the Honourable Attorney General & 3 others [2019] eKLR, where the Court held that "the accepted principle in construing a tax statute is that the court is guided by the statutory words themselves and that there is no room for intendment or adopting a purposive approach when the words of the statute are clear and unambiguous”.

66. The Respondent averred that the First Schedule to the Excise Duty Act, 2015 provides that "articles of plastic of tariff heading 3923. 30. 00 and 3923. 90. 90"are charged Excise duty at a rate of 10%.

67. The Respondent added that a strict reading of the First Schedule of the Excise Duty Act, 2015 depicts that the Appellant being a manufacturer of plastics of tariff Heading 3923. 30. 00 was liable to pay Excise duty at a rate of 10%.

68. The Respondent averred that it issued the Appellant with additional Excise duty assessments for the period October 2022, after noticing that the Appellant was declaring nil returns despite manufacturing excisable goods.

69. The Respondent stated that under Section 56 of the Tax Procedures Act and 30 of the Tax Appeals Tribunal Act, the Appellant bears the burden to demonstrate that it has discharged a tax liability.

Respondent’s Prayers 70. The Respondent prays that the Tribunal;a.Upholds the Respondent's objection decision dated 1st December 2022 as proper and in conformity with the provisions of the Law.b.That this Appeal be dismissed with costs to the Respondent as the same is devoid of any merit

Issues For Determination 71. The Tribunal has carefully studied the pleadings and documentation filed by both parties and is of the respectful view that the issues for its determination are as follows:-a.What was the applicable law at the time of assessmentb.Whether the Respondent’s assessment was justified

Analysis And Findings 72. The Tribunal having established the issues for its determination, proceeds to analyse them as hereunder.

a. What was the applicable law at the time of assessment? 73. The genesis of this dispute was the imposition of Excise duty by the Respondent on the Appellant’s plastic products in the month of October 2022.

74. The Appellant submitted that it should be noted from the onset that both the Finance Act 2022, and the Excise Duty Act, 2015 unequivocally provide that Excise duty should only be imposed on imported articles of plastic of tariff Headings 3923. 30. 00 and 3923. 30. 90.

75. That despite this being the case, the Respondent was demanding from the Appellant, as per the Excise Assessments dated 22nd November 2022 issued for the month of October, and confirmed in the Objection decision dated 1st December 2022 Kshs 10,620,420.

76. The Appellant stated that it objected to the assessments and demands raised by the Respondent understanding and appreciating that it is being victimized for following the provision of the law to the letter. That it cannot be overstated that contrary to the assertions in the Respondent’s Objection decision that the Excise Duty Act, 2022 provided that Excise duty at the rate of 10% was to be levied on imported articles of plastics.

77. The Respondent, on its part, submitted that Paragraph 35 (b) (xiv) of the Finance Act 2022, amended the First Schedule to the Excise Duty Act 2015 by inserting the phrase "and 3923. 90. 90", immediately after "3923. 30. 00" appearing in the tariff description “Imported Articles of plastic of tariff Heading 3923. 30. 00".

78. That Paragraph 32 (iv) of the Finance Act 2021 introduced Excise duty at the rate of 10% on articles of plastics of tariff Heading 3923. 30. 00.

79. The Respondent stated that following the amendments to the Finance Act 2021, the Appellant being a manufacturer of articles of plastics of tariff Heading 3923. 30. 00 had been charging excise duty and remitting the same.

80. The Respondent averred that the Appellant filed a nil return for the period October 2022. That this prompted the Respondent to issue the Appellant with an additional Excise duty assessment amounting to KShs 10,620,420.

81. The Tribunal notes that the issue as to what law was applicable at the time of the assessment required it to look at the Excise Duty Act which is the statute enacted by the Kenya Parliament to enforce Excise duty in Kenya.

82. Section 5 of the Excise Duty Act, 2015 states as follows regarding imposition of Excise duty:“Imposition of excise duty(1)Subject to this Act, a tax, to be known as excise duty, shall be charged in accordance with theprovisions of this Act on—(a)excisable goods manufactured in Kenya by a licensed manufacturer;(b)excisable services supplied in Kenya by a licensed person; or(c)excisable goods imported into Kenya.”

83. Further, Section 5(2) of the Excise Duty Act states as follows regarding chargeability of Excise duty:“(2)Excise duty shall be charged at the rate specified in the First Schedule for the excisable goods or services in force at the time the liability arises for excise duty as determined under section 6. (3)The excise duty payable—(a)under subsection (1)(a), shall be payable by the licensed manufacturer;(b)under subsection (1)(b), shall be payable by the licensed person making the supply: or(c)under subsection(1)(c), shall be payable by the importer of the excisable goods.”

84. Further, the Tribunal notes that tax laws are amended each year through the Finance Act which lays out any amendments/ changes to the taxation statutes. In this regard, the Finance Act 2021 made the following amendment to the Excise Duty Act in regard to Excise duty rates:-“The First Schedule to the Excise Duty Act, 2015 is amended—a.in paragraph 1 of Part I—i.by inserting the following item at the end of the second table— Description Rate of Excise Duty Articles of plastic of tariff heading 3923. 30. 00 10%”

85. Tariff Code 3923 of the East African Community Common External Tariff (EACCET) which lists all commodities by tariff codes which tax statutes borrow from for commodity descriptions, at the time, covered “Articles for the conveyance or packing of goods, of plastics stoppers, lids, caps and other closures, of plastics”. Specifically, tariff Heading 3923. 30. 00 covered “Carboys, bottles, flasks and similar articles”.

86. The Tribunal further notes that the above description in the Excise Duty Act covered all plastic items that fell under the description however sourced; whether locally manufactured or imported.

87. Further, the Finance Act 2022 was amended in the following manner in regard to items of plastic:“The First Schedule to the Excise Duty Act, 2015 is amended — in the second table appearing in paragraph 1 of Part I— (xiv) by inserting the expression “and 3923. 90. 90” immediately after the expression “3923. 30. 00” appearing in the tariff description “Imported Articles of plastic of tariff Heading 3923. 30. 00”;

88. The Tribunal notes that the word “imported” appeared in the 2022 amendment to the Excise Duty Act whereas it was not in the amendment that introduced Excise Duty to the items falling under tariff Code 3923. 30. 00 in the Finance Act 2021.

89. In this regard, it is discernible that the Finance Act introduced the word “imported” ahead of the description of the articles falling under the tariff Code 3923. 30. 00. The literal interpretation of this is that this change in the Finance Act 2022 was intended to levy this duty only on items that fall within the description of imported plastic items of the specified tariff Codes. This means that only imported items falling within the description of tariff Codes 3923. 30. 00 and 3923. 90. 90 were excisable with effect from the effective date of 1st July, 2022 under this particular amendment.

90. The role of the Tribunal is limited to the textual interpretation of the law. The textual interpretation of what was contained in the Excise Duty Act which was effective from the 1st of July 2022 was that only imported items that fell within the tax remit of tariff Codes 3923. 30. 00 and 3923. 90. 90 were excisable.

91. The provisions of the law surrounding the charge of Excise Duty on commodities are clear and that items listed in the First Schedule of the Excise Duty Act are chargeable based on their descriptions and the rates specified therein.

92. The Tribunal is thus enjoined to interpret the law as it is without looking at its intendment or any other justification which may have formed its enactment. Tax statutes must be interpreted literally and without equity as was explained in the classicus case of Cape Brandy Syndicate vs. Inland Revenue Commissioner [1921] 1 KB 64, where it was held that:“In a taxing Act one has to look merely at what is clearly stated. There is no room for any intendment. There is no equity about tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”

93. This view has also been recently affirmed by Majanja J in Equity Group Holdings Limited v Commissioner of Domestic Taxes [2021] eKLR where he stated as follows;“In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the .If the revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter.”

94. In view of the foregoing, and guided by the above case laws, the Tribunal finds and holds that that the law in place at the time of the assessment that is the subject matter of this Appeal provided that only imported articles of plastic that fell under tariff Codes 3923. 30. 00 and 3923. 90. 90 were excisable at 10%.

95. Locally manufactured articles of plastic were left out of this descriptions under the Finance Act 2022. It is not the place of the Tribunal to impose tax by inference, probe intentions of the Legislature or investigate and give a determination on what the law ought to be as allegedly passed by the Legislature. The statutory limit of the Tribunal is to read, apply and interpret the law as it is.

96. Accordingly, the Tribunal finds and holds that Respondent in its attempt to bring locally manufactured articles of plastic within tariff Codes 3923. 30. 00 and 3923. 90. 90 to charge was not within the applicable law on Excise duty chargeability.

b. Whether the Respondent’s assessment was justified 97. The Tribunal having established that effective 1st July 2022, only imported articles of plastic of tariff Codes 3923. 30. 00 and 3923. 90. 90 were excisable at 10%, concludes that the Respondent was not justified in levying Excise duty on the Appellant’s locally manufactured items of plastic in the months in dispute.

Final Decision 98. In the upshot of the foregoing analysis the Tribunal finds that the Appeal is merited and accordingly proceeds to make the following Orders: -a.The Appeal be and is hereby allowed.b.The Respondent’s Objection decision dated 1st December, 2022 be and is hereby set aside.c.Each Party to bear its own costs.

99. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 8TH DAY OF DECEMBER, 2023ERIC NYONGESA WAFULA - CHAIRMANCYNTHIA B. MAYAKA - MEMBERDR. RODNEY O. OLUOCH - MEMBERABRAHAM K. KIPROTICH - MEMBEREUNICE NG’ANG’A - MEMBERBERNADETTE GITARI - MEMBER