[2025] KETAT 162 (KLR)

Qaswara Traders Limited v Commissioner of Customs and Border Control (Tax Appeal E079 of 2025) [2025] KETAT 162 (KLR) (Civ) (28 February 2025) (Ruling)

Neutral citation: [2025] KETAT 162 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Tax Appeal E079 of 2025

CA Muga, Chair, AK Kiprotich & T Vikiru, Members

February 28, 2025

Between

Qaswara Traders Limited

Applicant

and

Commissioner of Customs and Border Control

Respondent

Ruling

1. The Applicant vide a Notice of Motion dated 24th January, 2025 and filed under a Certificate of urgency on the 24th January 2025, supported by an affidavit sworn by Juma Ali Juma sought the following Orders:a.Spent.b.That the Tribunal be pleased to allow for the extension of time for the filling of an appeal against the Respondent’s notice of enforcement referenced C&BC/DMU/PCA/2018/2024 and dated 21st August 2024. c.That pending the hearing and determination of the appeal, the Tribunal stay the execution of the notice of enforcement referenced C&BC/DMU/PCA/2018/2024 and dated 21st August 2024 and direct the Respondent to cease detaining or otherwise interfering with the Applicant's consignments at the port.

2. The Application was premised on the following grounds:a.That the Applicant lodged its application for review against the notice of demand forming the subject of the notice of enforcement dated 27th of March 2023 on 26th of April 2023 pursuant to Section 229(1) of the East Africa Community Customs Management Act,2004,( hereinafter “EACCMA”).b.That the Applicant never received any communication or decision from the Respondent on the application of review of the demand notice, and thus Applicant understood that the application for review had been allowed in accordance with Section 229(5) of the EACCMA.c.That over a year later on 21st August 2024, the Respondent issued a Notice of Enforcement on the 27th March 2023 demand notice.d.That the Applicant had on numerous occasions written to the Respondent explaining that the demand notice had been allowed by operation of the law, and the Respondent has never made any formal response to the Applicant.e.That instead, the Respondent resorted to instituting enforcement measures against the Applicant including placing caveats against the processing of the Applicant's customs declarations of imported consignments under the auspices of enforcing the notice of enforcement.f.That the Respondent's conduct forced the Applicant to resort to lodging an appeal before this Tribunal, hence the late filing of the appeal.g.That the delay in lodging the appeal was not deliberate, is not inordinate, and no prejudice shall be visited upon the Respondent.h.That substantial injustice and loss will be visited upon the Applicant if the orders sought are not granted.

2. The Respondent having been with the Application filed a Replying Affidavit sworn by Hellen Njoroge, an officer of the Respondent on the 4th day of February, 2025. The Respondent raised the following grounds in opposition to the Application:a.That the Applicant did not respond to the said demand notice by the Commissioner as required by Section 229 (1) of the EACCMA, that consequently, a notice of enforcement for was issued.b.That the Applicant is now seeking to have the Tribunal extend time within which to file its appeal on grounds that the Respondent has instituted enforcement measures against the Applicant including placing caveats against the processing of the Applicant's customs declarations of imported consignments under the auspices of enforcing the notice of enforcement.c.That on the issue of time, an appeal to the Tribunal, under the EACCMA must be done within 45 days of the decision of the Commissioner.d.The Respondent submitted that the Applicant's purported appeal is fundamentally flawed and invalid, as it is based on a notice of enforcement issued on the 21st of August 2024, and not on a decision of the Commissioner as required under Section 229 (1) of the EACCMA.e.That the Respondent emphasized that the right to appeal under the EACCMA is explicitly limited to its decisions.f.That the notice of enforcement, which the Applicant sought to challenge, was not a decision but a consequential step taken after the Applicant failed to comply with the demand notice issued on the 27th of March 2023. g.That the demand notice itself, which outlined the tax assessment and required the Applicant to pay the outstanding amount or respond within the stipulated timeframe, was the decision of the Commissioner. That the Applicant's failure to act on this decision within the statutory period of 45 days effectively extinguished its right to appeal.h.That further to the foregoing, the Memorandum of Appeal attached by the Applicant does not raise triable issues. That one of the requirements for a party to be granted extension of time to file an appeal out of time, the Applicant must demonstrate that the intended Appeal is arguable. That this requirement had not been met.i.That no credible reason had been advanced by the Applicant to warrant extension of time to file appeal as provided at Section 13(4) of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”).j.That an Application of this nature requires an Applicant to prove his/her absence from Kenya, sickness or other reasonable cause.k.That the reasons provided by the Applicant for failing to file an Appeal within timelines were therefore not credible and do not meet the requirements provided for under Section 13(4) of the TATA.l.That mere statements that are not backed by evidence of any sort are not solid grounds that would warrant this Tribunal to exercise its discretion in favour of the Applicant. That the Applicant failed to lay a basis to the satisfaction of the Tribunal for extension of time to file an appeal.m.That the Applicant had not been vigilant and does not warrant the exercise of the Tribunal's discretion in its favour, the Applicant is guilty of laches.n.That the Application was an afterthought, brought in bad faith, meant to delay the Respondent from collecting taxes that are due and payable and should not be entertained by this Tribunal as doing so would offend the equitable maxim of equity aids the vigilant and not the indolent and ultimately create bad precedent.o.That the Applicant was not deserving of the orders sought in the Application as the whole period of delay has not been explained satisfactorily to the Tribunal thus the Application ought to be dismissed.p.That the Respondent was merely carrying out its statutory duty by rejecting the Applicant's objection and consequently pray that its actions be upheld by the Tribunal.q.That the indolence and negligence of the Applicant should not bar the Respondent from fulfilling its mandate of collecting taxes that are due and payable.

Parties Submissions 3. In compliance with the direction of the Tribunal to that the application was to be canvassed by way of written submissions, the Applicant filed its written submissions on 11th February, 2025 whilst the Respondent filed its submissions on 12th of February, 2025.

4. The Applicant submitted as follows:a.The Applicant relied on the case of Border Palace Hotel Limited v Kenya Revenue Authority [2025] KETAT 9 (KLR), where the Tribunal affirmed the criteria to be applied in considering and granting an application for extension of time as follows:i.Whether there is a reasonable cause for the delay;ii.Whether the appeal is merited;iii.Whether the Respondent shall suffer prejudice if the order is granted; andiv.Whether there is a reasonable cause for the delay.a.The delay in lodging this appeal was caused by the fact that the Respondent failed to issue a review decision on the Applicant’s application for review lodged on 26th of April 2023. b.As the Respondent failed to issue the decision, the Applicant reasonably understood that the application for review had been allowed pursuant to Section 229 (5) of the EACCMA.c.Contrary to the Respondent’s assertion that the Applicant did not respond to the notice of demand dated 27th March 2023, from the documents submitted herein it is manifestly clear that the Applicant did in fact lodge an application for review dated 26th April 2023 which was shared with the Respondent via electronic mail.d.Based on the foregoing, the Applicant averred that the delay was not inordinate. The Respondent erred in law and fact by issuing a notice of enforcement against the Appellant on a matter that was deemed resolved in favour of the Applicant.e.The Respondent’s notice of enforcement and actions were unfair, unreasonable, unjust, and malicious in contravention to the Appellant’s rights to fair administrative action under Article 47 of the Constitution of Kenya, 2010 (hereinafter “the Constitution”).f.Further and without prejudice to the foregoing, the Respondent erred in law and fact by reclassifying the Applicant’s Toyota Hiace Vans from HS Code 8702. 10. 22 to 8703. 33. 90. g.The Applicant submitted that the above-mentioned grounds raise legitimate issues that are triable by this Tribunal. That the case is prima facie arguable and is likely to succeed.h.Having explained the cause for the delay as well as having demonstrated that the appeal is merited, the Respondent would not suffer any prejudice if the Applicant is allowed to file the appeal.i.On the flipside, the Applicant stood to suffer great injustice if the application is allowed as the Respondent shall illegally collect taxes that are not due from it and continue frustrating the Applicant’s day to day business resulting in further monetary losses.

5. The Respondent submitted as follows:a.The jurisdiction of the Tribunal is invoked under Section 12 of the TATA which provides that a person may appeal to the Tribunal against a decision of the Commissioner arising under any tax law. That however, in the present case, there is no decision by the Commissioner that warranted an appeal.b.The Applicant sought to challenge the notice of enforcement dated 21st August 2024, which was not a decision but a consequential step taken after the Applicant failed to respond to the demand notice dated 27th March 2023. That the notice of enforcement was merely an enforcement action and does not constitute an appealable decision under the law.c.In Misc. Appl. No. 175 of 2022, Valley Drillers & General Contractor’s Ltd v The Commissioner of Domestic Taxes, the Tribunal held that without a valid objection decision, the Applicant has no basis for bringing an appeal before the Tribunal. That similarly, in TAT Appeal No. 470 of 2021, Seme NG-CDF v The Commissioner of Domestic Taxes, the Tribunal affirmed that in the absence of an objection decision under Section 51(8) of the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”) there is no appealable decision to be pursued before the Tribunal pursuant to Section 52(1) of the TPA.d.The Applicant’s failure to act within the statutory timelines provided under the law effectively extinguished its right to appeal. The Tribunal, therefore, lacks jurisdiction to entertain this application in the absence of an appealable decision.e.The Applicant argued that it was under the impression that the Respondent had allowed its application for review by failing to issue a decision within 30 days under Section 229(5) of the EACCMA. That the argument was flawed, Section 229(5) of EACCMA does not provide for automatic approval of a review application in the event of the Commissioner’s silence. That the provision merely states that the Commissioner shall be deemed to have allowed the application, but it does not absolve the Applicant from taking further steps to confirm the status of the review or to pursue its rights under the law.f.The Applicant failed to act on its belief in a timely manner, it waited for over a year after the alleged deemed approval to file this application, which demonstrates a lack of diligence and vigilance in pursuing its rights.g.In addressing whether the prayers sought by the Applicant herein should be granted, the Respondent placed reliance on the case of Nicholas Kiptoo Arap Korir Salat V Independent Electoral and Boundaries Commission & 7 Others [2014] eklr where it was held as follows:i.Extension of time is not a right of a party. It is an equitable remedy that is only available to a deserving party at the discretion of the court.ii.A party who seeks for extension of time has the burden of laying the basis to the satisfaction of the court.iii.Whether the court should exercise the discretion to extend time is a consideration to be made on a case-to-case basis.iv.Whether there is a reasonable reason for delay, the delay should be made to the satisfaction of the court.v.Whether there will be prejudice suffered by the Respondent if the extension is granted.vi.Whether the application for extension has been brought without undue delay.”h.In Misc App No. 177 of 2022; Katahira & Engineers International v Commissioner of Domestic Taxes the Tribunal held that it follows from the foregoing provision of the law that for the Tribunal to exercise discretion, the Applicant ought to explain the reason(s) for the delay which reason(s) should either be absence from Kenya, sickness or other reasonable cause. That in the absence of such explanation from the Applicant the Tribunal is constrained from exercising such discretion.i.That the inordinate delay has not been justified to the satisfaction of the Tribunal to warrant exercise of the Tribunal’s discretion in favour of the Applicant.j.The Applicant’s inaction, even after a demand was issued upon it was unreasonable and inexcusable. The Tribunal has consistently held that applicants must act diligently in pursuing their appeals. That the Applicant’s failure to do so in this case should not be rewarded with an extension of time.k.One of the key considerations in granting an extension of time is whether the intended appeal raises triable issues. The Applicant failed to demonstrate that its intended appeal is arguable or has any merit.l.The Applicant’s claim that the Respondent’s failure to respond to its application for review amounted to automatic approval under Section 229(5) of the EACCMA was erroneous. The demand notice dated 27th March 2023 remains valid and enforceable.m.The demand for additional taxes was therefore lawful, and the Applicant has not provided any evidence to challenge the correctness of the classification.n.The Applicant’s intended appeal does not raise any triable issues, and the Tribunal should not grant an extension of time for an appeal that lacks merit.o.The Respondent, as mandated by law, is responsible for collecting revenue crucial to national development. That granting the Applicant’s request for an extension will unduly delay the enforcement of tax collection, setting a negative precedent for other taxpayers.p.The Applicant failed to demonstrate that it will suffer irreparable harm if the application is not granted. That instead, it is the Respondent and the public who will suffer harm due to delayed revenue collection.q.In Vigati Limited v Commissioner of Customs & Border Control [2024] KETAT 589 (KLR), the Tribunal held that the Respondent would not suffer prejudice if the Applicant were allowed to pursue its appeal, provided that the Applicant is a going concern and there is no risk of the company failing to settle the debt should the Tribunal find in favor of the Respondent. That in this case, the Applicant has not demonstrated that it is a going concern or that it has the financial capacity to settle the debt if the appeal fails.

Analysis And Findings 6. The Applicant delayed in lodging its Appeal and the reason for the delay according to it was the Respondent’s failure to issue a review decision on the Applicant’s application for review lodged on 26th of April 2023. The Tribunal notes that the crux of the matter according to the Applicant is that its objection ought to have been deemed o be allowed pursuant to Section 229 (5) of the EACCMA, as such it did not need to file an Appeal.

7. The Tribunal also notes that the Respondent challenged the fact that the Applicant sought to challenge its notice of enforcement dated 21st August, 2024 since the view of the Respondent was that the notice of enforcement did not constitute an appealable decision. The Applicant was adamant in contending that contrary to the Respondent’s assertion that it did not respond to the notice of demand dated 27th March 2023, it infact lodged an application for review on 26th April 2023 which it shared with the Respondent via electronic mail.

8. The Tribunal further notes the Respondent’s submissions that the Applicant failed to act in a timely manner on the basis of its belief of the deemed approval of its review application. That it waited for over a year to file this application, which demonstrated a lack of diligence and vigilance in pursuing its rights.

9. The Tribunal’s jurisdiction to entrain applications of this nature is anchored on the provisions of Section 13(3) and (4) of the TATA. Section 13(3) of the TATA provides as follows:“The Tribunal may, upon application in writing or through electronic means, extend the time for filing the notice of appeal and for submitting the documents referred to in subsection (2).”

10. The reasons for and/or ground upon which a party seeking extension of time to file an appeal out of time can rely upon are contained in the provisions of Section 13 (4) of the TATA which provides as follows:“(4)An extension under subsection (3) may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the applicant from filing the notice of appeal or submitting the documents within the specified period.”

11. Rule 10 (3) of the Tax Appeals Tribunal (Procedure) Rules, 2015, which makes provisions for the grounds upon which a party can rely on in making of an application for extension of time, provides as follows:“The Tribunal may grant the extension of time if it is satisfied that the applicant was unable to submit the documents in time for the following reasons-(a) absence from Kenya;(b) sickness; or(c) any other reasonable cause.”

12. The view of the Tribunal is therefore that it follows that the Applicant is obligated to demonstrate the grounds upon which its Application is anchored pursuant to the provisions of Section 13 (4) of the TATA as read together with Rule 10 of the Tax Appeals Tribunal (Procedure) Rules.

13. The Tribunal has perused the Applicant’s grounds as outlined in the application and Affidavit in support of the application thereof and observed that the Applicant has presented evidence in support of the grounds before the Tribunal for its consideration pursuant to the provisions of Section 13 (4) of the TATA as read together with Rule 10 of the Tax Appeals Tribunal (Procedure) Rules, the Applicant presented the following documentary evidence to support its grounds for the instant Application for consideration by the Tribunal:a.The Respondent’s demand notice dated 27th March 2023;b.The Applicant’s letter of application for review dated 26th April 2023;c.Electronic mail correspondence dated 26th April 2023 forwarding the letter of application for review to the Respondent;d.The Applicant’s letter dated 26th September 2023 referring the Respondent to its application for review letter submitted on 26th April 2023; ande.Electronic mail correspondence dated 26th September 2023 forwarding the letter of 26th September 2023 to the Respondent.

14. In deeming whether the delay as inordinate or reasonable, a court does not only consider the length of the period, but in exercise of its discretion considers the reasons occasioning such delay. The Tribunal is guided by the High Court case of Leo Sila Mutiso v Rose Hellen Wangari Mwangi, Civil Application Nai 251 of 1997 in which the learned trial Judge held as follows:“It is now settled that the decision whether to extend the time for appealing is essentially discretionary. It is also well stated that in general the matters which this court takes into account in deciding whether to grant an extension of time are, first the length of the delay, secondly the reasons for the delay, thirdly (possibly) the chances of the appeal succeeding if the application is granted and fourthly the degree of prejudice to the respondent if the application is granted.”

15. The Tribunal observed that the Applicant supported its contentions by providing documents showing that it did apply for review and that upon receipt of the enforcement notice it acted timeously to institute the appeal which is the subject of the instant Application.

16. The Tribunal having perused the draft Memorandum of Appeal filed herein notes that it outlines the grounds of Appeal against the Respondent’s decision dated 21st August, 2024 and finds that the said Appeal is arguable.

17. The Tribunal therefore finds that the grounds advanced by the Applicant for delay are reasonable, the delay was not inordinate and the delay has been explained to the satisfaction of the Tribunal, which is minded to exercise its discretion in favour of the Applicant.

Disposition 18. Based on the foregoing analysis, the Tribunal finds that the Application is merited and accordingly proceeds to make the following Orders:a.The Application be and is hereby allowed.b.The Applicant is hereby granted leave to file its Notice of Appeal, Memorandum of Appeal and Statement of Facts out of time.c.The Notice of Appeal, Memorandum of Appeal, Statement of Facts together with the documents attached thereto, all dated 24th January 2025 and filed on the same date be and are hereby deemed as properly filed and served.d.The Respondent is at liberty to respond to the Appeal by filing its Statement of Facts within thirty (30) days of the date hereof.e.A temporary order is hereby issued directing the Respondent to allow the specific consignment imported through entry number 24MBAIM405609618 and any imported Commercial Vans (Matatu) to be classified under tariff code 8702. 10. 22 pending the hearing and final determination of the Appeal.f.No orders as to costs.

19. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 28TH DAY OF FEBRUARY, 2025. ...................................CHRISTINE A. MUGACHAIRPERSON...................................ABRAHAM K. KIPROTICH DR. TIMOTHY VIKIRU MEMBER MEMBER