[2017] KECA 729 (KLR)
The Court of Appeal found that the VAT Act, 2013, including Section 7(2) and the relevant Schedules, was enacted in accordance with the Constitution and did not contravene Article 201 on public finance. The imposition of import VAT on raw and packaging materials for pharmaceutical manufacturing was not...
Source-derived case information.
- Citation
- [2017] KECA 729 (KLR)
- Parties
- Appellant: Pharmaceutical Manufacturing (K) Co Ltd; Appellant: Kumar Shah; Appellant: Utamchand G. Shah; Appellant: Christine D' Souza; Respondent: The Commissioner General of the Kenya Revenue Authority; Respondent: The Attorney General; Respondent: The Commissioner of Customs Services
- Court
- Court of Appeal
- Court Station
- Court of Appeal at Nairobi
- Jurisdiction
- Kenya
- Case Number
- Civil Appeal 283 of 2014
- Procedural Posture
- Civil Appeal / Judgment
- Outcome
- appeal dismissed with costs
- Judges
- MSA Makhandia, SP Ouko, K M'Inoti
- Legal Topics
- Import Vat, Tax Exemptions, Constitutional Rights, Public Finance Principles
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Pharmaceutical Manufacturing (K) Co Ltd
Appellant
Kumar Shah
Appellant
Utamchand G. Shah
Appellant
Christine D' Souza
Appellant
The Commissioner General of the Kenya Revenue Authority
Respondent
The Attorney General
Respondent
The Commissioner of Customs Services
Respondent
Procedural Posture
Civil Appeal / Judgment
Legal Issues
- 1 Whether the imposition of import VAT on raw and packaging materials for pharmaceutical manufacturing under the VAT Act, 2013 contravenes Article 201 of the Constitution on public finance principles.
- 2 Whether Section 7(2) of the VAT Act, 2013 is null and void for imposing VAT on the 1st appellant.
- 3 Whether the VAT Act, 2013 infringes the appellants' rights to equal protection, non-discrimination, and property under Articles 27(1) and 40 of the Constitution.
Ratio Decidendi
The Court of Appeal found that the VAT Act, 2013, including Section 7(2) and the relevant Schedules, was enacted in accordance with the Constitution and did not contravene Article 201 on public finance. The imposition of import VAT on raw and packaging materials for pharmaceutical manufacturing was not discriminatory, as the law applied uniformly and no statutory exemption existed for the appellants during the relevant period. The removal of previous exemptions did not amount to arbitrary deprivation of property, as taxation is a lawful exercise of state power. The appellants' claims of violation of the right to health were not substantiated, as the legislation did not target them...
Court Disposition
appeal dismissed with costs
Orders
- The appeal is dismissed with costs to the respondents under Rule 32(5) of the Court of Appeal Rules.
Full Case Text
Judgment text and source record
35 paragraphs
IN THE COURT OF APPEAL
NAIROBI
(CORAM: MAKHANDIA, OUKO & M’INOTI, JJ.A)
CIVIL APPEAL NO. 283 OF 2014
BETWEEN
PHARMACEUTICAL MANUFACTURING (K) CO LTD…...............…….…1STAPPELLANT
KUMAR SHAH.........................................................................................2NDAPPELLANT
UTAMCHAND G. SHAH............................................................................3RDAPPELLANT
CHRISTINE D' SOUZA..............................................................................4THAPPELLANT
AND
THE COMMISSIONER GENERAL OF
THE KENYA REVENUE AUTHORITY……………..............................…..1STRESPONDENT
THE ATTORNEY GENERAL...................................................................2NDRESPONDENT
THE COMMISSIONER OF CUSTOMS SERVICES..................................3RDRESPONDENT
(An appeal from the Decree and Judgment of the High Court of Kenya (Lenaola, J.) dated 26thAugust, 2014
in
Human Rights Division Petition No. 589 of 2013)
***********
JUDGMENT OF THE COURT
The 1st appellant is a limited liability company engaged in pharmaceutical manufacturing business. The 2nd, 3rd and 4th appellants are, respectively, its shareholder, Managing Director and Administrative Manager.
The dispute culminating in the suit giving rise to this appeal was triggered by a demand from the 3rd respondent requiring the 1st appellant to pay to it Kshs.121,660,538/- in unpaid import VAT for the period between January, 2008 and November, 2013. This amount was subsequently corrected and reduced to Kshs. 43,579,769/-. The appellants petitioned the High Court for protection claiming that the 1st and 2nd Schedules to Sections 2 and 7 (2) of the VAT Act, 2013 contravened the principles and framework of public finance under Article 201of the Constitution; that, to the extent that the aforesaidSection 7 (2)imposes on the 1st appellant import VAT on raw and packaging materials imported for the purpose of manufacturing medicine, it is null and void; that the enactment of that law infringed the appellants’ right under Article 27 (1) which guarantees them the right to equal protection and equal benefits of the law and the right to non-discrimination; that the 1st appellant’s rights not to be arbitrarily deprived of property was equally violated by the Act, whose application had the effect of taking away the import VAT exemptions which it had enjoyed over the years; that the 2nd to 4th appellants’ right to health were also comprised by the Act.
The respondents on their part disputed these accusations arguing that from by a post-clearance audit carried out on the import operations of the 1st appellant it was discovered that the latter owed the Government in tax arrears Kshs.43,579,769/-; that for the period the demand related the 1st appellant did not enjoy any tax exemption or zero-rating on its pharmaceutical imports.
We have considered the appeal, submissions as well as authorities relied on by both side. We find no merit in the appeal, and for the reasons we shall give on 10th March, 2017, dismiss it with costs under Rule 32 (5) of the Court of Appeal Rules.
Dated and delivered at Nairobi this 3rdday of March, 2017.
ASIKE – MAKHANDIA
.....................................
JUDGE OF APPEAL
W. OUKO
...................................
JUDGE OF APPEAL
K. M'INOTI
...................................
JUDGE OF APPEAL
I certify that this is a true copy of the original.
DEPUTY REGISTRAR