https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/314

**REPUBLIC OF KENYA IN THE TAX APPEALS TRIBUNAL AT NAIROBI TAX APPEAL NO. E048 OF 2026** **PANAFRICAN CENTRE FOR STRATEGIC DEV. LTD. ................................... APPELLANT** **VERSUS** **COMMISSIONER MICRO & SMALL TAXPAYERS ..................................... RESPONDENT** **RULING** **THE APPLICATION** 1. The Applicant, vide a Notice of Motion dated 23rd June 2026, and supported by the Supporting Affidavit of Hudson Arcoustav Aluvanza sought the following orders: * + - 1. THAT this Application be certified urgent and be heard in the first instance. 2. THAT an order do issue forthwith restraining the Respondent from maintaining the Applicant on the VAT Special Table pending the hearing and determination of this Application. 3. THAT an order do issue restraining the Respondent from maintaining the Applicant on the VAT Special Table pending the hearing, determination, and conclusion of the objection lodged by the Applicant on 16th June 2026 pursuant to Section 51 of the Tax Procedures Act, 2015. 4. THAT a permanent order do issue directing the Respondent to forthwith remove the Applicant from the VAT Special Table and restore the Applicant's full VAT compliance functionality on the iTax portal. 5. THAT costs of this Application be in the cause. 2. The Application was based upon the grounds set out in the Supporting Affidavit of HUDSON ARCOUSTAV ALUVANZE, its submissions dated 23rd July 2026 and the following grounds, that: * 1. The Respondent's placement of the Applicant on the VAT Special Table in October 2025 constitutes an administrative action that adversely affects the Applicant's rights and legitimate interests, and is subject to the requirements of lawfulness, reasonableness, and procedural fairness under Article 47 of the Constitution of Kenya, 2010. 2. The placement was effected without prior notice, hearing, or any opportunity for the Applicant to be heard, in violation of the rules of natural justice and the constitutional guarantee of fair administrative action under Article 47 of the Constitution. 3. The Respondent insinuates that the Applicant is a participant in fraud. Determination of fraud is ideally a matter for the courts and not a matter for the Commissioner to make. Accordingly, by placing the Applicant on the VAT Special Table by alleging that it has committed fraud, the Applicant has acted ultra vires and made a decision for which it lacked the prerequisite mandate and jurisdiction. 4. The continued retention of the Applicant on the VAT Special Table, notwithstanding the filing of a valid Notice of Objection under Section 51 of the Tax Procedures Act, 2015, is premature, disproportionate, and inconsistent with the statutory framework governing the resolution of tax disputes in Kenya. 5. Upon the filing of a valid Notice of Objection pursuant to Section 51 of the Tax Procedures Act, 2015, the disputed assessments cease to be final and enforceable determinations and enter a process of statutory administrative review. It is therefore impermissible for the Respondent to continue to rely on contested and undetermined assessments as the basis for the Applicant's continued placement on the Special Table. 6. The VAT Special Table has no express statutory basis in the Value Added Tax Act, 2013, the Tax Procedures Act, 2015, or any other written law, and its operation as a mechanism that prevents a taxpayer from filing returns, issuing invoices, and conducting ordinary business transactions constitutes an unlawful restriction on the Applicant's rights without legislative authority. 7. The effect of the Applicant's placement on the VAT Special Table, including the inability to file returns, issue valid VAT invoices, retain staff, or meet its obligations as a going concern, is grossly disproportionate to any legitimate revenue protection objective, particularly where the underlying assessments are under active challenge. 8. The Applicant has suffered and continues to suffer irreparable loss and damage as a result of the placement, including loss of business, loss of employees, and eviction from its business premises, and will continue to suffer such harm unless the orders sought are granted. 9. The Respondent will suffer no prejudice from the grant of the orders sought, as the statutory objection process under Section 51 of the Tax Procedures Act, 2015 fully preserves the Respondent's right to review, uphold, vary, or vacate the assessments in accordance with the law. 10. It is just and equitable that the orders sought be granted. 11. Owing to its inability to operate, its employees have all absconded from their duties. 12. Further, the Applicant has been evicted and forcibly removed from its business premises owing to its inability to pay rent as a direct consequence of the paralysis occasioned by the Special Table placement. 13. To compound the Applicant's difficulties further, on 20th May 2026, 9th June 2026, 10th June 2026, and 16th June 2026, the Respondent issued the Applicant with assessment orders for Corporation Tax and Value Added Tax for the tax periods 2022, 2023, 2024, and 2025, totaling Kenya Shillings Forty-Three Million Six Hundred and Sixty-Eight Thousand and Eighteen (KES 43,668,018). 14. On 16th June 2026, the Applicant lodged its Notice of Objection to all the said assessments pursuant to Section 51(1) of the Tax Procedures Act, 2015. 15. Despite the filing of the Notice of Objection, the Respondent has kept the Applicant on the VAT Special Table, subjecting it to enhanced compliance obligations based on the basis of assessments that remain contested and have not been determined. 16. The continued placement of the Applicant on the Special Table on the basis of such contested and undetermined assessments is premature, disproportionate, and legally untenable. 17. It supported its position on the foregoing with the case of ***Judicial Service Commission v Mbalu Mutava & another [2015] eKLR.*** **THE RESPONSE** 1. The Respondent filed the Replying Affidavit of Lilian Muigai dated 6th July 2026 in opposition to the Application, together with its submissions dated 6th July 2026, on the following grounds: - 1. THAT the Respondent, having been appointed to administer and enforce the provisions of the VAT Act, the Respondent has had to develop and come up with measures to mitigate the continued loss of revenue arising from VAT. 2. THAT the measures and mitigation strategies adopted by the Respondent include VAT registration controls, the formation of the VAT Task Force, and the Special Table actions under the "VAT Special Table". 3. THAT the targeting of Non-Filers by the Respondent is in line with the Respondent's powers to enforce the provisions of Section 44 of the VAT Act, which requires every registered person to submit a return in the prescribed form and manner in respect of each tax period not later than the twentieth day after the end of that period. 4. THAT this action is undertaken by the Respondent to ensure compliance with Section 19 of the VAT, which provides that VAT is due and payable at the time of supply and that a person may defer payment of tax due to a date not later than the twentieth day of the month succeeding that in which the tax became due. 5. THAT the Respondent also onboard Taxpayers who have been involved in VAT fraud, including missing trader schemes and fictitious input tax claims, together with high or irregular input VAT claims lacking documentation and discrepancies. 6. THAT the Respondent then proceeds to request that the Taxpayer either comply by filing its returns or making the payments, failing which the Respondent placed the Taxpayer on the VAT Special Table. 7. THAT placing the Taxpayer on the VAT Special Table is not deregistration but rather an administrative tool to ensure compliance, and the 1st Respondent’s continued satisfaction that the Taxpayer continues to comply with the law. 8. THAT the Respondent reviewed the eTiMs purchase invoices provided by the Applicant and established that the underlying transactions lacked commercial substance, and it placed the appellant on the special table to seal revenue leaks. 9. THAT I am advised by the Respondent's counsel, who advise I verily believe to be true, that the Applicant has infringed the provisions of the VAT Act and seeks to continue infringing the law through the order sought, which orders this Tribunal ought to decline. * 1. THAT the public interest is for the denial of the orders sought, as granting the same would be the Tribunal allowing and permitting the continued infringement of the VAT Act by Taxpayers. * 1. It supported its position with the following cases: 1. ***Speaker of the National Assembly vs. Njenga Karume [2008] 1 KLR 425.*** 2. ***Republic v. County Government of Mombasa ex-parte Outdoor Advertising Association of Kenya (2014) eKLR.*** **ANALYSIS AND DETREMINATION** 1. The Applicant seeks the following orders: * + - 1. THAT an order do issue forthwith restraining the Respondent from maintaining the Applicant on the VAT Special Table pending the hearing and determination of this Application. 2. THAT an order do issue restraining the Respondent from maintaining the Applicant on the VAT Special Table pending the hearing, determination, and conclusion of the objection lodged by the Applicant on 16th June 2026 pursuant to Section 51 of the Tax Procedures Act, 2015. 3. THAT a permanent order do issue directing the Respondent to forthwith remove the Applicant from the VAT Special Table and restore the Applicant's full VAT compliance functionality on the iTax portal. 2. This is a case where the Applicant had been placed on the special table while its objection was being processed by the respondent. 3. A decision that the respondent has justified on the basis of public interest, the need to protect revenue, fraud, and the leakage of income arising from the Applicant’s missing trader scheme. 1. It is not possible to determine these allegations at this preliminary stage. The Tribunal shall thus limit its determination at this stage to whether the appellant has presented a prima facie case on the issue os special table justifying the issuance of the orders sought. 2. In ***Ruling TAT Appeal No. 1191 of 2025, Labaita Lounge Limited vs Commissioner of Legal and Board Services;*** the Tribunal held as follows on the status and definition of ‘special table’ *“To the Tribunal’s view, the placement on the VAT Special Table is tantamount to the enforcement of such taxes that are deemed due, and the Tribunal under the provisions of Section 18 of the Tax Appeals Tribunal Act (TAT Act), has the power to intervene, particularly under circumstances where an Appeal has been preferred.”* 1. It is thus clear that the special table is an enforcement mechanism for tax deemed to be due. How then can it be possible for an enforcement process to ensue regarding an assessment that is the subject matter of an objection process? 2. Put another way, does the law allow the Respondent to enforce and execute against taxpayer regarding taxes that are not due, even in circumstances where public interests, fraud, and missing trader schemes have been cited and not yet proven at a trial. 3. The answer to this question is found in Section 51 of the TPA, which requires the Respondent to allow the Applicant to object to the assessment and thereafter proceed to file its appeal before tax (if any) can be collected. 4. The Respondent’s action of enforcement before the completion of the due process is therefore blatantly unlawful. This position was confirmed in the cases of ***Ruling TAT Appeal No. 1191 of 2025, Labaita Lounge Limited v. Commissioner of Legal and Board Service,*** and ***Ruling TAT. No. E-1030 OF 2025 Miles Construction Limited -vs- Commissioner for Legal and Board Service***s. 5. Section 18 of the TAT Act provides as follows: *“Where an appeal against a tax decision has been filed under this Act, the Tribunal may make an order staying or otherwise affecting the operation or implementation of the decision under review as it considers appropriate for the purposes of securing the effectiveness of the proceeding and determination of the appeal.”* 1. The Tribunal is additionally guided by the reasoning in***Republic v Kenya Revenue Authority ex parte Lab International Kenya Limited [2011] eKLR*** and***Republic v Commissioner of Domestic Taxes ex parte Sony Holdings Limited [2019] eKLR*** where the Courts affirmed that administrative tax enforcement measures were subject to judicial and quasi-judicial scrutiny when they adversely affect taxpayers’ rights or undermine statutory dispute resolution mechanisms. This reasoning clearly aligns with Article 47 of the Constitution and Section 4 of the Fair Administrative Action Act. 2. Section 18 of the TAT Act and the decision in the above-cited cases make it clear that the Tribunal is clothed with power to offer relief to a taxpayer who has been affected by a decision of the Commissioner. 3. Under the prevailing circumstances, the Tribunal is persuaded that it has the power to intervene, particularly where an objection process is underway and yet the Appellant has already been found liable for the tax assessment in dispute and placed on the special table. 1. The Respondent's action of placing the appellant on the special table regarding assessments that are undergoing dispute resolution process envisaged in law under Section 51 of the TPA is unlawful. 2. The foregoing analysis affirms that the appellant has proved that it has a prima facie case deserving of Tribunal's intervention and protection at this preliminary stage. **DISPOSITION** 1. From the foregoing, the Tribunal accordingly makes the following Orders: 1. The Application be and is hereby allowed; 2. The Respondent is hereby directed to forthwith remove the Applicant from the VAT Special Table pending the conclusion of the objection and appeal process under Section 51 of the Tax Procedures Act. 3. The Respondent be and is hereby directed to restore the Applicant’s full VAT compliance functionality on the iTax portal within 14 days from the date of this Ruling. 4. No orders as to costs. 2. It is so ordered. **DATED and DELIVERED at NAIROBI this ………7th...……. Day of ……August..…… 2026** **..........................……………………….** **DR. RODNEY ODHIAMBO OLUOCH** **CHAIRPERSON** **.…..….……………………. ..….……………………….** **CYNTHIA B. MAYAKA DR. ERICK KOMOLO** **MEMBER MEMBER** **………………………………** **ABDULLAHI DIRIYE** **MEMBER**