[2025] KETAT 238 (KLR)

Portlink Logistics Limited v Commissioner of Domestic Taxes (Tax Appeal E994 of 2024) [2025] KETAT 238 (KLR) (9 May 2025) (Judgment)

Neutral citation: [2025] KETAT 238 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E994 of 2024

CA Muga, Chair, BK Terer, EN Njeru, E Ng'ang'a & SS Ololchike, Members

May 9, 2025

Between

Portlink Logistics Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a limited liability company incorporated in Kenya whose principal activity is dealing in transport, logistics and storage of cooking oil and mixed products.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws (hereinafter “the Act”). Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 and 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. The Respondent vide assessment orders dated 26th February 2019 issued VAT assessments for the periods August, September, December 2017; April, May, July, August, October, and November 2018. The Respondent also issued VAT assessment orders on 6th September 2022 for the period December 2017; December 2018, December 2019, and December 2020 the assessments amounted to Kshs. 94, 317,982. 72.

4. On 19th August 2024, the Appellant filed an objection together with an application for extension of time to lodge a notice of objection out of time. The Respondent reviewed the Application and established that the Appellant had failed to provide evidence to support its reason for the late objection. Consequently, the Respondent confirmed the VAT assessment amounting to Kshs. 94,317,982. 72 vide a letter dated 2nd September 2024.

5. The Appellant was dissatisfied with the Respondent’s Decision and preferred the present Appeal vide a notice of appeal dated 5th September 2024 and filed on 6th September 2024.

The Appeal 6. The Appeal is founded on the Memorandum of Appeal dated 5th September 2024 and filed on 6th September 2024 wherein the Appellant raised the following grounds of Appeal:a.That the Respondent erred in law by rejecting the Appellant's late objection application without taking into consideration the reasons given for the same.b.That the Respondent erred in law and in fact by issuing confirmation notices without considering the Appellant's objection.c.That the Appellant was not been afforded the opportunity to support its objection application despite showing the willingness to cooperate with the Respondent to reach an amicable solution.d.That the Respondent erred in law and in fact by rejecting its application for objection.e.That the Respondent acted contrary to the principles espoused in article 47 of the Constitution of Kenya, 2010(hereinafter the Constitution) by acting arbitrarily and issuing confirmation notices without reviewing the Appellant's Objection.f.That the decision being contrary to the law or to some usage having the force of the law, is that of ignoring or dishonouring Fair Administrative Action, as per Article 47 of the Constitution.

The Appellant’s Case 7. The Appellant lodged Statement of Facts dated 5th September 2024 on 6th September 2024. The Appellant did not file written submissions and its case to proceed on the basis of its pleadings.

8. The Appellant stated that on 26th February 2019 and 5th September 2022, the Respondent issued VAT assessment orders amounting to Kshs. 94,317,982. 72, subsequently, on 22nd November 2019, the Appellant objected to the aforementioned assessment on the Respondent's i-Tax System and stating its grounds of objection and its willingness to cooperate with the Respondent's review and requested an appointment for the Appellant to be able to provide documents in support of the objection. The Appellant asserted that it did not receive any electronic mail communication from the Respondent nor any telephone calls requesting to provide the documents in support of the objection despite its willingness to provide the same.

9. The Appellant stated that it had lost access to its electronic mail since its operations were hampered during the Covid-19 pandemic and only got to know of the assessments when they resumed operations under new management and were informed of the same by the Respondent when they applied for a Tax Compliance Certificate.

10. The Appellant stated that its claim for input VAT under Section 17 of the Value Added Tax Act, CAP 476 of the Laws of Kenya (hereinafter “VAT Act”) that relate to credits for input tax against output tax are legitimate and conform to Section 17 (3) of the VAT Act. It asserted that by merely dismissing the Appellant’s objection, the Respondent showed a total disregard for the law, more specifically, the legitimate expectation by the Appellant that the Respondent shall consider the objection on its merits and arrive at an informed and well-reasoned decision.

11. According to the Appellant, VAT being a consumption tax is borne by the final consumer, it is arrived at by factoring input and output, by disallowing input VAT claim on goods that were purchased and the VAT input legitimately claimed, the Respondent looks to collect VAT from the Appellant as well as the final consumer which goes against the principle of neutrality and double taxation.

12. The Appellant contended that by upholding the Respondent's decision, it shall suffer irreparable damage to its business operations. The Appellant added that it is ready and willing to provide all the invoices in contention and any additional documents that may be required for verification by the Respondent in order to verify the input VAT claimed. In light of the above, the Appellant's case was that the decision made by the Respondent to compel the Appellant to pay an outstanding VAT liability of Kshs 94,317,982. 72 without review is improper, unfair and unjust.

13. The Appellant therefore, prayed for the Tribunal to review the Appellant's objection on its merits, allow the input VAT claimed by the Appellant and restrain the Respondent from collecting Kshs. 94,317,982. 72.

The Respondent’s Case 14. In opposition to the Appeal, the Respondent filed its Statement of Facts dated 4th October 2024 and written submissions dated 10th April 2025.

15. The Respondent in response to the Appeal stated that Section 51(7) of the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”) allows the Appellant to seek an extension of time to file an objection out of time.

16. The Respondent averred that although the Appellant indicated lack of electronic mail access as the reason for the late objection; the Appellant failed to provide any supporting documentation or evidence to support its ground for the late objection application. The Respondent submitted that the assessments were raised and shared to the Appellant’s registered electronic mail address.

17. Whereas the Appellant had cited Covid-19 as the cause of loss of access and operations, the Respondent stated that some of the assessments were raised in February 2019, a year before the breakout of the Covid-19 pandemic. The Respondent averred that it has not been disputed that the Respondent reviewed the objection.

18. The Respondent noted that neither at the objection stage nor at the appeal stage before this Tribunal has the Respondent presented any supporting documents to its claim. Concurrently, the Respondent declined to grant the Appellant’s application to lodge an objection out of time and confirmed the assessments.

19. The Respondent asserted that it is empowered by Section 31(1) (b) and Section 29 of the TPA to amend the assessment based on the information available to it and to the best of its judgement. The Respondent maintained that the aforementioned sections empower the Respondent to make alterations or additions to an original assessment from available information for a reporting period based on the Respondent’s best judgement.

20. It contended that the Appellant failed to provide all the requested documentation in support of the objection, therefore, the Respondent was justified in raising additional assessment using the available information.

21. It asserted that the Respondent is allowed by Section 24(2) of the TPA to assess a taxpayer’s liability using any information available. To this extent, the Respondent confirmed to have operated within the confines of the law by using the data available following a return review.

22. The Respondent averred that it is allowed to make additional assessments based on the available information to the best of its judgment pursuant to Section 31 of the TPA. The Respondent maintained that it reviewed the Appellant’s VAT returns and requested the Appellant to provide filed returns and supporting documentation which were not availed.

23. According to the Respondent, the Appellant failed to provide documents specified under Section 17(3) of VAT Act which includes, an original tax invoice issued for the supply or a certified copy; a customs entry duly certified by the proper officer and a receipt for the payment of tax; a customs receipt and a certificate signed by the proper officer stating the amount of tax paid, in the case of goods purchased from a customs auction; a credit note in the case of input tax deducted under Section 16(2) of VAT Act; and a debit note in the case of input tax deducted under Section 16(5) of VAT Act.

24. It relied on section 43 of the VAT Act which requires a taxpayer to keep a full and true written record, whether in electronic form or otherwise, in English or Kiswahili of every transaction he makes and the record shall be kept in Kenya for a period of five years from the date of the last entry made therein.

25. It asserted that Section 51(3) of the TPA mandates the Appellant to provide documents in support of the notice of objection but the Appellant failed to provide the documents.

26. The Respondent averred that the Appellant’s objection was rejected pursuant to Section 51(3) of the TPA as the Appellant failed to support its objection by providing all the relevant documents relating to the objection. The Respondent also maintained that it was guided by Section 56(1) of the TPA which provides as follows:“in any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”

27. Further, the Respondent relied on its written submissions wherein it submitted that it was justified in assessment and rejection of the late objection. It submitted that the Appellant failed to avail any supporting documents to under Section 51(7) of the TPA therefore, the late objection was rejected. It cited the case of Ocean Freight (E.A) Limited Vs Commissioner of Domestic Taxes (Tribunal Tax Appeal No. TAT/101 OF 2015) to support the position that the taxpayer must adduce documents to discharge its burden of proof.

28. It submitted that the Appellant also failed to keep records contrary to Section 23 of the TPA and therefore, it could not adduce them under Section 51(3) of the TPA.

29. The Respondent cited the cases of Commissioner of Domestic Taxes v Structural International Kenya Ltd (Income Tax Appeal No. E089 of 2020) [2021] KEHC 152 (KLR); Kenya Revenue Authority v Man Diesel & Turbo Se, Kenya [2021] eKLR Nairobi High Court Income Tax Appeal No. E125 of 2020; and Commissioner of Domestic Taxes vs Golden Acre Limited (2021) eKLR to argue that burden of proof falls upon the taxpayer to discharge but the Appellant herein failed to do so.

30. Consequently, the Respondent made the following prayers:a.Uphold the Respondent’s Assessment orders dated 26th February 2019 and 6th September 2022;b.Uphold the Respondent’s late Objection Rejection dated 2nd September 2024; andc.That this Appeal be dismissed with costs to the Respondent as the same was devoid of any merit.

Issues For Determination 31. Upon considering the parties’ pleadings, documentations and Respondent’s submissions, the Tribunal puts forth the following issues for determination:a.Whether the Tribunal has jurisdiction to determine the Appeal;b.Whether the assessments were time barred; andc.Whether the Appellant discharged its burden of proving that the Respondent’s decision dated 2nd September 2024 as incorrect.

Analysis And Findings 32. It is to these issues that the Tribunal will turn within as hereunder: -a.Whether the Tribunal has jurisdiction to determine the Appeal.

33. The Tribunal has a duty to satisfy itself that it has jurisdiction to determine the merits of the appeal. without jurisdiction, the Tribunal cannot proceed. In the case of Owners of the Motor Vessel “Lillian S” v Caltex Oil (Kenya) Ltd [1989] KLR, wherein Nyarangi JA held, inter alia as follows:‘‘…Jurisdiction is everything. Without it, a court has no power to make one more step. Where a court has no jurisdiction, there would be no basis for a continuation of the proceedings pending other evidence. A court of law downs its tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.”

34. The Respondent issued a decision contained in a letter dated 2nd September 2024 wherein the Respondent declined to grant the Appellant’s application for late objection under Section 51(7) of the TPA on the basis that the Appellant did not demonstrate why it delayed to object within the timelines. Consequently, the Respondent demanded the Appellant to pay Kshs 94, 317,982. 72 being the VAT liability.

35. The Tribunal examined the pleadings and noted that the Respondent issued VAT assessment orders dated 26th February 2019 and 6th September 2022. The Tribunal also perused Appellant’s pleadings and noted that the Appellant filed a number of objections against the assessments in issue. In particular, the Appellant filed objection application acknowledgment receipts which confirmed that the Appellant indeed filed objections on 19th August 2024. The issue then was whether the Appellant delayed to object.

36. A taxpayer who disputes an assessment has a statutory duty to object to the same within the required timelines as provided for under TPA. Section 51(2) of the TPA provides as follows:‘‘(2)A taxpayer who disputes a tax decision may lodge a notice of objection to the decision, in writing, with the Commissioner within thirty days of being notified of the decision.’’

37. The assessment having been issued vide assessment orders dated 26th February 2019 and 6th September 2022 and the Appellant objecting to the same 19th August 2024 it was clear that the Appellant failed to comply with the timelines under Section 51(2) of the TPA.

38. Whereas the Appellant delayed in filing its notice of objection, the law anticipates such scenarios and provides a remedy. Section 51(6) of TPA provides as follows:‘‘A taxpayer may apply in writing to the Commissioner for an extension of time to lodge a notice of objection.’’

39. A taxpayer must satisfy the Respondent on why it delayed to file an objection to the assessments. Under Section 51(7) of the TPA, the Respondent has discretion to allow or reject the application. Section 51(7) of the TPA provides as follows:‘‘The Commissioner shall consider and may allow an application under subsection (6) if—a.the taxpayer was prevented from lodging the notice of objection within the period specified in subsection (2) because of an absence from Kenya, sickness or other reasonable cause; and(b)The taxpayer did not unreasonably delay in lodging the notice of objection.’’

40. Pursuant to Section 51(7) of the TPA, the Respondent issued the decision contained in the letter dated 2nd September 2024 wherein it declined to grant leave to the Appellant to file its objection out of time. The legal consequence was that the Appellant had no objection decision against which to file this appeal as set out under Section 51(1) of the TPA which provides as follows:‘‘A taxpayer who wishes to dispute a tax decision shall first lodge an objection against that tax decision under this section before proceeding under any other written law.’’[emphasis ours]

41. There being no objection to the assessment, Section 51(1) of the TPA barred the Appellant from invoking the powers of the Tribunal under Tax Appeals Tribunal Act CAP 469A of the Laws of Kenya (hereinafter “TATA”) which simply meant that the Tribunal did not have jurisdiction to entertain the Appeal.

42. Consequently, the Tribunal finds and holds that the Tribunal lacks jurisdiction to hear and determine this Appeal. This being the position, the Tribunal will not delve into the other issues for determination.

Final Decision 43. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal is incompetent and makes the following Orders:a.The Appeal be and is hereby struck out.b.Each party to bear its own cost.

44. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 9TH DAY OF MAY 2025. CHRISTINE A. MUGA - CHAIRPERSONBONIFACE K. TERER -MEMBERELISHAH N. NJERU - MEMBEREUNICE N. NG’ANG’A - MEMBEROLOLCHIKE S. SPENCER - MEMBER