[2024] KETAT 755 (KLR)

Platinum Distillers Limited v Commissioner of Domestic Taxes (Tax Appeal 201 of 2023) [2024] KETAT 755 (KLR) (9 May 2024) (Judgment)

Neutral citation: [2024] KETAT 755 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 201 of 2023

Grace Mukuha, Chair, E Komolo, Jephthah Njagi, W Ongeti & G Ogaga, Members

May 9, 2024

Between

Platinum Distillers Limited

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a limited liability company incorporated in the Republic of Kenya under the Companies Act, 2015. Its main business is manufacture of ready to drink (RTD) beverages and spirits.

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

3. The Respondent issued the Appellant with an additional assessment order on 4th May 2022, for the tax period March 2022.

4. On 11th October 2022, the Appellant objected to the Respondent’s additional assessment.

5. On 9th December 2022 the Respondent issued its Objection decision.

6. Aggrieved by the Respondent’s Objection decision, the Appellant lodged a Notice of Appeal dated and filed on 3rd February 2023.

The Appeal 7. The Appeal is premised on the Memorandum of Appeal dated 6th March 2023 and filed on 7th March 2023, stating the following grounds: -a.That the Respondent erred in law and fact in asserting that it had been given inadequate documents by the Appellant herein, whereas the Appellant had supplied the Respondent with thousands of pages of documents that had been requested.b.That the Respondent erred in fact by using a higher ex-factory price hence charging higher taxes than appropriate.b.That the assessments were not done in accordance with Section 29(2) of the TPA and is therefore invalid.c.That the Respondent erred in law by going against Section 51(11) of the TPA that provides that “where the commissioner has not made an objection decision within sixty days from the date the taxpayer lodged a notice of objection, the objection shall be allowed”. That the Appellant made objection notice on 11th October, 2022, only for the Respondent to decide on 9th December, 2022 without any consultation or communication with the taxpayer. This runs against the provisions of Section 51 (11) of the TPA.d.That the Respondent confirmed the notice of assessment without due regard to all records, explanations and information provided by the Appellant thereby failing to appreciate issues presented by the Appellant before confirming the assessment.e.That the Respondent erred in not considering the documents availed to it hence came to a wrong finding.

The Appellant’s Case 8. The Appellant’s case is premised on the following documents filed before the Tribunal: -a.The Appellant’s Statement of Facts dated 6th March 2023 and filed on 7th March 2023, together with annexures thereto.b.The Appellant’s Written Submissions filed on 6th November 2023.

9. The Appellant averred that in its normal trading, it manufactured alcoholic beverages and activated stamps on EGMS as per the law, and that at the end of the month it made self-assessment returns declaring VAT pursuant to provisions of Section 17 of the VAT Act.

10. The Appellant further averred that the Respondent issued it with additional assessment of Kshs. 15,027,093. 00, to which the Appellant objected.

11. That on 9th December 2022, just a day to the lapse of 60 days provided under Section 51 of the TPA, the Respondent via email informed the Appellant of an objection decision without any communication as per any clarifications required from the Appellant.

12. That by the time of the Objection decision, the Appellant had already closed for December holidays due to lack of raw materials and were unable to discharge any duty.

13. That the Respondent did not handle the objection by the Appellant carefully and diligently because of the following reasons: -a.All documents needed for the review of the case were availed.b.The Respondent’s failure to look at the objection and ask for further documents, which the Appellant was more than willing to avail, or given an explanation on why they are not possible.c.While the Appellant endeavours to settle the issue of taxes speedily, the Respondent still stuck by its calculations even though the Appellant has provided all the necessary documentations and calculation towards the same, and it is the prayer of the Appellant that amicable solution be found to settle the matter.

Appellant’s prayers. 14. The Appellant prayed to the Tribunal for the following orders: -a.That the Tribunal sets aside the Respondent’s additional assessment on the basis that incorrect interpretation of the law and fact.b.The Respondent’s confirmed assessments be set aside, and the Respondent be directed to consider substance of the case.c.A declaration that the Appellant has adhered to relevant tax legislation.

The Respondent’s Case 15. The Respondent’s case is premised on the following documents filed before the Tribunal: -a.The Respondent’s Statement of Facts dated 6th April 2023 and filed on the same date.b.The Respondent’s Written Submissions dated 15th November 2023 and filed on the same date.

16. The Respondent averred that it conducted a compliance check on the Appellant and noted that the revenue stamps issued by the Appellant were not fully accounted for.

17. That subsequently, the Respondent issued an assessment order against the Appellant on 4th May 2022.

18. That the Appellant objected to the assessment on 11th October 2022 citing grounds that it had already objected to the assessment.

19. The Respondent further averred that the supporting documents provided by the Appellant were related to an assessment of an earlier period, being March 2019 to March 2021, yet the period in dispute was March 2022.

20. That the Appellant was requested via email on 7th November 2022, to provide grounds and supporting documentation to the instant/current assessment but failed to provide the same.

21. That therefore the Respondent issued its objection decision confirming the assessment on 9th December 2022.

Respondent’s prayers 22. The Respondent prayed to the Tribunal for the following orders: -a.That the Appeal lacks merit.b.That the Respondent’s Objection decision dated 9th December 2022 be and is hereby upheld.c.Costs.

Issue For Determination 23. The Tribunal, having carefully reviewed the pleadings and filings made by the parties and the supporting documentation is of the view that the following issue falls for its determination: -Whether the Respondent’s erred in Confirming Additional Assessments of the Appellant as per Objection Decision dated 9th December 2022.

Analysis And Findings 24. Having identified the issue that fell for its determination, the Tribunal proceeds to analyze it as hereunder.

25. As a preliminary matter, the Tribunal notes that the instant dispute revolves around two periods under contestation by Appellant and the Respondent.

26. It is the Respondent’s averment and submission that the additional assessment for which it issued the Objection decision that is subject to the instant Appeal relates to March 2022.

27. To buttress its point, the Respondent has extensively referred to documents filed before the Tribunal including the following: Assessment Order filed by both parties and dated 4th March 2023; Objection application filed by both parties and dated 11th October 2022; and Objection decision filed by both parties and dated 9th December 2022.

28. The Tribunal also takes note of the fact that the Respondent annexed a letter from the Appellant dated 31st August 2021, which specifically referred to assessment period of March 2019 to March 2021. This is in addition to the Respondent’s averment that the Appellant’s response related to this period as opposed to the assessed period of March, 2022.

29. The Respondent further submitted that it did contact the Appellant via email, a copy of which is annexed, on 7th November 2022, specifically reminding the Appellant to submit documents relating to March 2022 VAT additional assessment.

30. The Tribunal notes that these factual and specific averments and submissions relating to the period under additional VAT assessment, being March 2022, have not been rebutted by the Appellant.

31. There is nothing on the record before the Tribunal to lead to the conclusion that the Appellant provided the documents related to the period covered by the Objection decision dated 9th December 2022.

32. The Tribunal reiterates that the duty to make full and accurate disclosures in tax matters vests with the Appellant and this is now settled law in tax disputes in Kenya. In this regard, the Tribunal reiterates the authority in Commissioner of Investigations and Enforcement vs Kidero (Income Tax Appeal E028 of 2020 eKLR, where it was held that:“…the duty imposed on the taxpayer to keep records and the provisions on the burden of proof all go to support the Kenyan tax collection regime which is centered on a system of self-assessment. This system relies on the taxpayer making full and good faith disclosures in their tax declaration and affairs and hence empower the Commissioner to demand documents from time to time when investigating the affairs of a taxpayer…”

33. This is the import of Section 56(1) of the Tax Procedures Act, and Section 30 of the Tax Appeals Tribunal Act and which, in the instant case, the Tribunal is unable to arrive at the conclusion that the Appellant has discharged.

Final Decision 34. The upshot of the foregoing is that the Appeal fails and the Tribunal proceeds to make the following Orders: -a.The Appeal be and is hereby dismissed.b.The Respondent’s Objection decision dated December 9, 2022 be and is hereby upheld.c.Each party to bear its own costs.

35. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF MAY, 2024GRACE MUKUHA - CHAIRPERSONDR.ERICK KOMOLO - MEMBERJEPHTHAH NJAGI - MEMBERDR. WALTER J. ONGETI - MEMBERGLORIA A. OGAGA - MEMBER