[2025] KETAT 8 (KLR)

Ragsons Kenya Limited v Commissioner of Customs & Border Control (Tax Appeal E355 of 2024) [2025] KETAT 8 (KLR) (17 January 2025) (Judgment)

Neutral citation: [2025] KETAT 8 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E355 of 2024

RM Mutuma, Chair, D.K Ngala, Jephthah Njagi, T Vikiru & M Makau, Members

January 17, 2025

Between

Ragsons Kenya Limited

Appellant

and

Commissioner of Customs & Border Control

Respondent

Judgment

1. The Appellant is a private Limited company incorporated in Kenya. Its principal business is the importation, distribution, wholesaling and retailing, of a diverse range of products including Gypsum and Wooden Board and power tools.

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

3. The Appellant imported Light Steel Keel Stud, Light Steel Keel Track, Light Steel Keel Bandering on 7th February 2024 under Entry ref. 24EMK1M00128180 and classified the items under HS Code 7216. 91. 00.

4. The Respondent however carried out a verification of the Appellant’s products and reclassified the goods under HS Code 7308. 90. 99 vide a Tariff Ruling dated 14th February 2024.

5. The Appellant sought for a review of the Respondent’s Ruling vide its letter dated 15th February 2024 and provided additional information.

6. The Respondent reviewed the additional information and vide a letter dated 21st February, 2024 issued its Review Decision confirming the reclassification of the Appellant’s products under HS Code 7308. 90. 99.

7. Aggrieved by the Respondent’s Decision, the Appellant preferred this Appeal vide its Notice of Appeal dated and filed on 13th March 2024.

The Appeal 8. The Appeal is premised on the following grounds of Appeal as stated in the Appellant’s Memorandum of Appeal dated and filed on 27th March 2024. a.That the Respondent erred in law and fact by improperly classifying the Appellant’s imported Light Steel Keel Studs, Light Steel Keel Track and Light Steel Keel Bandering, generally referred to as Rolox Gypsum Profiles under HS Code 7308. 90. 99 as opposed to HS Code 7261. 91. 00 which covers angles, shapes and sections of iron non-alloy steel;b.That the Respondent erred in law and fact in finding that the Appellant’s products fell under HS Code 7308. 90. 99 despite the fact that the product does not fit within the headings, sections and explanatory notes of the aforementioned classification;c.That the Respondent erred in law and fact in failing to appreciate that Rolox Gypsum Profiles imported by the Appellant do not meet the threshold envisaged by Tariff Code 7308. 90. 99 of the East African Community Common External Tariff (EAC/CET). Heading 7308 caters for, structures (excluding prefabricated buildings of Heading 94. 06) and parts of structures (for example, bridges and bridge sections, lock gates, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors shutters, balustrades, pillars and columns) of iron or steel, plates, rods, angles, shapes, sections, tubes and the like, prepared for use in structure of iron or steel;d.That the Respondent erred in law and fact by failing to appreciate that the structures referred to in Heading 7308, pertain to substantial constructs made primarily of iron or steel, excluding prefabricated buildings. These include various components such as bridges, lock gates, towers, lattice masts, roofing frameworks, doors and windows with their frames, thresholds, shutters, balustrades, pillars and columns. Essentially, they encompass large-scale architectural elements and supporting frameworks designed for robustness and durability in construction and infrastructure projects;e.That on the contrary, the Respondent erred in law and fact by failing to appreciate that the Appellant’s Rolox Gypsum Profiles are light steel alloy made with galvanised zinc. Emphasis is on their lightness because they do not have the strength, durability or capacity to hold up the structures envisaged in Heading 7308;f.That the Respondent erred in law and fact by failing to appreciate that the Appellant’s Light Steel Keel Stud, Light Steel Keel Track and Light Steel Keel Bandering are mainly used with Gypsum boards and lack the structures integrity to support anything heavier than the gypsum boards.g.That the Respondent erred in law and fact by failing to appreciate that at any rate owing to the weakness and light weight nature of the Appellant’s Rolox Gypsum Profiles, they are primarily used for decorative purposes and not as support structures;h.That the Respondent erred in law and fact by failing to appreciate that by weight, the Light Steel Keel Stud weighs approximately 700 grammes, the Light Steel keel Channel/Track weighs approximately 600 grammes, wall angle weighs 298 grammes, furring channel weighs 1008 grammes, corner bed weighs 270 grammes and Bandering weighs 820 grammes. In terms of thickness, the aforementioned Rolox Gypsum Profiles have a thickness of less than 0. 6 millimetres. Crucially, owing to their relative measurements and weight the products cannot support any load bearing structures;i.That the Respondent erred in law and fact by failing to appreciate that the Explanatory Notes to Heading 7216 which provides that the heading does not cover “Articles prepared for use in structures (heading 73. 08)”; and,j.That the Respondent’s actions and handling of the Appellant’s case has been unfair, unreasonable arbitrary, illegal and a manifest breach of the Appellant’s right to fair administrative action and legitimate expectation.

The Appellant’s Case 9. The Appellant’s case is premised on the following documents;a.Statement of Facts dated and filed on 27th March 2024 together with the documents attached thereto;b.Witness Statement of Dinesh Harji filed on 22nd October 2024; and,c.Written submissions dated 2nd December 2024 and filed on 3rd December 2024.

10. The Appellant averred that the Respondent displayed a fundamental lack of understanding by classifying Rolox Gypsum Profiles under Heading 7308 while the Appellant had been declaring its products under Heading 7261 and specifically under subheading 91 which provides for cold-formed or cold-finished from flat rolled products and imposed duty at the rate of 35%.

11. It noted that the East African Community Common External Tariff (EAC/CET) prescribes a duty rate of 25% for products of HS 7308. 90. 99 which would place it lower than its HS Code declared by the Appellant. Further, the 2023 EAC Gazette stayed the application of the 25% duty rate and instead imposed a rate of 35% or 350m/T for a period of one year.

12. The Appellant stated that following the reclassification its products were detained necessitating it to execute a bank guarantee of Kshs. 1,968,124. 44. However, the Respondent issued a caveat through its letter dated 19th February 2024 stipulating that if the Tariff Ruling issued in response to the Appellant’s objection was at variance with what had been declared, the Respondent would proceed to liquidate the bank guarantee and compound the supposed offence in question.

13. It asserted that indeed upon the Respondent’s decision dated 21st February 2024, the Respondent attempted to liquidate the guarantee through its letter to the bank of 12th March 2024 instructing the bank to liquidate the bank guarantee. It averred that the bad faith exhibited by the Respondent has now extended to the fact that the Appellant in now unable to declare its imported Rolox Gypsum Profiles under Heading 7216 on the 1CMS system as it is stuck with an error.

14. The Appellant averred that this error has become challenging as its supplies is not within to ship the product under any other Tariff Code. This is because the Heading 7216 is the internationally recognized Tariff Code for the Appellant’s imported product and is the code recognized in China, Germany, Malaysia, Brazil, Canada, Slovakia, Sri Lanka among other key Kenyan trade partners.

15. The Appellant averred further that by confirming the Appellant’s 1CMS portal to not accept any declarations under Heading 7216, the Appellant is unable to declare any product under Heading 7216, regardless of whether they are in dispute or note.

16. The Appellant asserted that the items envisaged under Heading 7308 are heavy duty load bearing structures. It noted that the Respondent itself has severally referred to the Appellant’s products as light steel, product which items cannot support any of the structures listed in the terms of Heading 7308. It asserted further that its products are primarily used to hold up articles of gypsum which is a soft sulphate mineral composed of calcium sulphate. It stated that the products are used with gypsum boards, a fact which the Respondent noted in its letter dated 14th February 2024.

17. It was the Appellant’s assertion that its products measurements and structures cannot support any load bearing structures and cannot therefore be affixed by any of the processes laid out in the Explanatory Notes to Heading 7216 and instead have to be screwed in place. The Appellant noted that of importance, the Explanatory Notes to Heading 7216 dictates that the heading does not cover articles prepared for use with structures of Heading 7308. The Appellant therefore asserted that that Respondent’s actions in handling the Appellant’s case constitute a fundamental breach of the Appellant’s right to Fair Administrative Action, and presumption of regularity.

18. In its written submissions dated 2nd December, 2024 and filed on 3rd December, 2024 the Appellants submitted on four issues

i. Whether the Appellants products should be classified under HS Code 7216. 96. 00 or 7308. 90. 99. 19. The Appellant submitted that the Respondent’s reclassification of the Appellant’s products is both factually and legally flawed as Heading 7308 preferred by the Respondent provides for structures, part of structures and articles of structures hence the Appellant’s products do not fall within the scope of the heading as they are light steel alloy products made with galvanized zinc and formed through a cold finish process.

20. The Appellant submitted further that the Respondent even acknowledges the fact in its letter of 14th February 2024 where it termed the Appellant’s items as made of light steel which implies that they cannot support any of the structures envisaged under Heading 7308 as the Appellant’s products are decorative in nature and designed specifically for use with gypsum boards which are lightweight and non-load bearing.

ii. Whether the Respondent breached the Appellant’s right to Legitimate Expectation. 21. It was the Appellant’s submission that sudden and erratic change in tariff classification of the Appellant’s Rolox Gypsum Profiles is a fundamental breach of the Appellant’s legitimate expectation. It relied on the case of Council of Civil Service (1995) AC 374 where the principle of legitimate expectation was defined as follows;“For a legitimate expectation to arise, the decision must affect the other person by depriving him of some benefits or advantage which he had in the past been permitted by the decision maker to enjoy and which can legitimately expect to be permitted to continue to do until there has been committed to him some rational grounds for withdrawing it on which he has been given an opportunity to comment.”

22. The Appellant submitted that in all its previous consignments, it had declared its gypsum profiles under HS Code 7216. 91. 00 which the Respondent allowed. It therefore stated that having allowed the same in the past, the Respondent was now unjustly and unfairly attempting to demand for classification of the products under a different tariff code which is subject to higher taxes.

23. The Appellant emphasized that its goods classified under Heading 7216 are subjected to Pre-export Verification of Conformity (PVoC) through a physical inspection by SGS as the appointed agent of Kenya Bureau of Standards, such that should any discrepancy be found, it would have been reported and goods could not have entered the country. It pointed out that the entire industry has been relying on Tariff Code 7216 for similar products and that it is only recently that the Respondent seeks to rely on a strange classification which neither the Appellant nor the taxpayers or the international community are accustomed to.

24. It was the Appellant’s submission therefore, that the decision by the Respondent to tax the Appellant’s goods under Heading 7308 despite having their goods taxed under Heading 7216 in the past, goes against the principle of legitimate expectation and against the Respondent’s duty to act fairly. Further that such acts of belligerent disregard to the provisions of the law would set a dangerous precedent for other Government bodies who would choose to act arbitrarily just as the Respondent did.

iii. Whether the Respondents actions have created uncertainty and ambiguity in Law. 25. The Appellant submitted that whereas the stance and correct classification of the Appellant’s product has always been clear, the Respondent has created a landscape of great confusion marred with ambiguity by insisting they are classifiable under Heading 7308. It submitted further that the Respondent’s actions have single-handedly left the taxpayers in a state of disarray.

26. The Appellant stated that as explained by is witness on the stand, its supplier in China has categorically stated that it cannot and will not ship the products under Heading 7308 due to strict government regulations in China regarding mis-declaration of goods which carry hefty penalties. It stated further that its classification of the product is supported further by the pre-classification opinion issued by the China Council for the Promotion of International trade, and China Chamber of International commerce.

27. It was the Appellant’s submission that its supplier’s firm aversion to Heading 7308 is despite the fact that using the aforementioned heading would entitle them to a 13% rebate, presenting a clear financial incentive to adopt the reclassification. However, their strict adherence to regulatory compliance and their unwillingness to mis-declare the product demonstrates the seriousness of the penalties associated with contravening Chinese customs laws.

28. The Appellant asserted that while Kenya follows the East, African Community Common External Tariff (EACCET) and China follows its own Common External Tariff (CET), both systems are derived from and adhere to the World Customs Organization (WCO) Harmonized Commodity Description and Coding System, which system serves as a global standard for classifying goods providing a common framework that ensures consistency and uniformity in international trade. Further that Kenya and China are signatories to the WCO Harmonized System, which underscores the shared guiding principles between their tariff classification systems.

29. The Appellant submitted that given this alignment, the Respondent cannot purport not to be bound by the suppliers’ classification of the goods under Heading 7216. 91. 00 as the suppliers also rely on the WCO Harmonized Nomenclature. Further that the classification by the supplier in China is based on the same guiding principles under the WCO system, demonstrating consistence with international standards. It submitted therefore that any deviation by the Respondent from this established classification undermines the integrity of the Harmonized System and creates unnecessary barriers to international trade.

30. The Appellant asserted that the Respondent’s reclassification decision is not only impractical but also detrimental to both the Appellant’s operations and the Kenyan economy at large as the inability to import the products due to non-compliance with Chinese regulations would effectively halt the Appellant’s business, causing widespread revenue losses and disrupting economic activities dependent on these imports.

31. The Appellant relied on the following authorities in buttressing its argument;a.Commissioner of Income Tax vs. Westmount Flower (K) Limited Nairobi High Court Income Tax Appeal No 626 of 2002;b.Keroche Industries Ltd vs KRA & 5 others (2007) eKLR;c.Stanbic Bank Kenya Ltd vs Kenya Revenue Authority (2009) eKLR;d.Ecobank Kenya vs Commissioner of Domestic Taxes (2012) eKLR; and,e.Law society of Kenya vs Kenya Revenue Authority & Another (2017) eKLR.

iv. Whether the Respondent breached the Presumption of Regularity. 32. It was the Appellant’s submission that it was in reliance on the Respondent’s Customs officers’ clearance and verification that its subsequent actions were based on and that a legitimate expectation was created. Therefore, it should not now be punished for relying on a government authority’s approval as per the presumption of regularity.

33. In emphasising the principle of presumption of regularity, the Appellant relied on the case of Chief Land Registrar & 4 others vs. Nathan Tirop Koech & 4 others [2018] eKLR where it was stated;“There is presumption that all acts done by a public official have lawfully been done and that all procedures have been duly followed. The Presumption of regularity is a presumption that executive officials have properly discharged their official duties. The presumption is aptly captured in the ancient Latin maxim “omnia praesumuntur rite esse acta”, which roughly translated means “All things are presumed to have been done rightly.”

34. It was the Appellant’s explicit position that should there have been a discrepancy with regards to the tariff classification, it should have been raised in the first instance and at the point of entry upon inspection by the Respondent and/or their agents. It submitted therefore that the failure to do so was solely attributable to the Respondent and should not be held against the Appellant as it was relying on the presumption of regularity. It further relied on the case of Kibos Distillers Limited & 4 others vs. Benson Ambuti Adega & 3 others [2020] eKLR which stated;“I make a finding that the presumption of regularity be rebutted through conflicting interpretation of a statutory or regulatory provision. Liability for any action cannot be founded on conflicting interpretation of statue”

The Appellant’s Prayers 35. The Appellant therefore prayed that;a.This Appeal be allowed;b.The Appellant’s imported light steel keel studs, light keel track and light steel keel bandering be declared as classifiable under HS Code 7261. 91. 00; and,c.The Respondent’s decision dated 21st February 2024 be set aside in its entirety.

The Respondent’s Case 36. The Respondent’s case is premised on the following;a.Statement of Facts dated and filed on 26th April 2024 together with the documents attached thereto; and,b.Written submission dated 3rd November 2024 and filed on 3rd December 2024.

37. In response to the Appellant’s contention, the Respondent stated that its Review Decision dated 21st February 2024 was correct and relied on the General Interpretative Rules (GIR) which govern classification of goods in the nomenclature.

38. It stated that according to GIR1, classification shall be determined according to the terms of the Heading and any relative Section or Chapter Notes and, provided the Headings or Notes do not require otherwise according to GIR 2 through 6. It stated further that the above expression is intended to make it clear that the terms of the Heading and any relative Section or Chapter Notes are paramount and are the first consideration in determining classification.

39. The Respondent noted that the Appellant’s availed items were identifies as Rolox Brand Gypsum Profiles for use in suspension ceiling and partitioning system as well as gypsum board mounting and that Chapter 73 of the HS Code covers the classification of articles of iron or steel.

40. It stated that the Explanatory Notes to Heading 7308 states that the heading includes the classification of structures such as flat-rolled products wide flats including so-called universal plates strip, rods, angles shapes, section and tubes, which have been prepared (e.g. drilled, bent or notched) for use in structures.

41. The Respondent averred that based on the information given by the Appellant about the products in dispute, and a reading of the explanatory notes, the products are best classified under Heading 7308, specifically Heading 7308. 90. 00 of the 2022 EAC/CET as guided by GIR1 & 6.

42. The Respondent averred that the Appellant has sought to classify the products under Heading 7216. 91. 00 where Heading 72. 16 of Chapter 72 provides for the classification of angles, shapes and sections of iron or non-alloy steel and that Heading 7216. 91. 00 specifically provides for cold-formed or cold finished from flat-rolled products.

43. It was the Respondent’s contention that an interpretation of Heading 7216 and the explanatory notes to the said heading clearly shows that items to be classified therein are identified by how they have been worked into various shapes, sections and angles. It therefore stated that it was for that reason that the explanatory notes excluded Articles prepared for use in structures (Heading 7308) hence the Appellant’s items were defined by its use and its composition. It noted that there was no mention of the weight of the items to be classified under Heading 7216 in the Explanatory notes therefore the Appellant’s averments of the weight of the items in dispute are not supported by a correct interpretation of the HS Code.

44. The Respondent contended further that the Appellant’s understanding or interpretation of Heading 7308 was only in relation to the superstructures provided for under the said heading. It averred that the explanatory notes provide for all manner of structures which goes to show that the Appellant had not appreciated the provision of the explanatory notes which the Respondent has relied upon in classifying the Appellant’s products in dispute.

45. The Respondent therefore stated that light steel keel stud, light steel keel track and light steel keel Bendering are metal structures used for partitioning to support ceilings and gypsum board mountings and as presented, they are classifiable in 2022 EAC/CET under HS Code 7308. 90. 99. Consequently the Review Ruling it issued after the Appeal upheld the classification of the item in 2022 EAC/CET Code 7308. 90. 99 which was at variance with the 2022 EAC/CET HS Code 7216. 91. 00 that was declared by the Appellant.

46. In response to grounds b, c, d and i of the Appellant’s Memorandum of Appeal, the Respondent stated that the heading explanatory note to 73. 08 stated that the heading also covers parts such as flat-rolled products, “wide flats” including so-called universal plates, strip rods, angles, shapes sections and tubes which have been prepared (e.g. drilled bent or notched ) for use in structure which make Rolox Gypsum Profiles to meet the threshold given in 73. 08.

47. In response to grounds f, g, h of the Appellant’s Memorandum of Appeal, the Respondent stated that the standards of durability and strength were considered in classifying the items in 73. 08. It averred however that structural integrity and strength were not among the threshold that placed the items in Heading 73. 08. It averred further that the imported items were meant to provide support to ceiling partitions and in gypsum mounting and are used to provide support.

48. In response to ground j of the Appeal, the Respondent stated that its Review Decision and its conduct in this matter was within the law and the Appellant in its statement of facts appeared confused as to which HS Code its products should be classified under. It pointed out that at paragraph 27 of the Appellant’s statement of facts, the Appellant had stated that the said products were classified under HS Code 7261 while at paragraphs 2. 12 to 2. 17 the Appellant stated that the said products be classified under HS Code Heading 7216.

49. In reference to the Appellant’s allegation of bad faith on the part of the Respondent, it averred as follows;i.Its decision to liquidate the Bank guarantee after issuance of its Review Decision was in line with Section 229 (6) of EACCMA and contrary to the Appellant’s allegations it was not actuated by malice;ii.Its action of updating the system with the correct HS Code 7308. 90. 99 pursuant to its Tariff classification Review Decision is in line with the law and that the same is a normal procedure. Further that the law provides for taxpayers to import and make payment of taxes under protest as per the provisions of Section 229 (6) of EACCMA;iii.The Appellant’s averments at paragraphs 2. 13 and 2. 14 are not anchored in law. Kenya’s interpretations of the EAC HS Code is not anchored on how the country of the exporter implements its respective HS Code but rather on the correct interpretation of the EAC HS Code. Consequently, the Respondents application of the EAC HS Code on the Appellant’s products was anchored on correct interpretation of the HS Code and the respective explanatory notes; and,iv.In response to paragraph 2. 17 of the Appellant’s statement of facts, the Respondent averred that its Review Decision was made upon verification and understanding of the Appellant’s products that were imported and subject of the dispute.

50. It was the Respondent’s assertion that the Appellant’s averments on the tariff classification preferred by the exporting countries or the exporter do not take precedence over a correct interpretation of the EAC/CET HS Code. It therefore stated that its Review Decision dated 21st February 2024 was proper and was raised in conformity with the law and as such, should be upheld.

51. In its written submissions the Respondent raised one issue for determination.

Whether the Respondent correctly classified light steel keel stud, light steel keel track and light steel keel Bendering in 2022 EACCET HS Code 7308. 90. 99. 52. The Respondent submitted that it correctly classified Light Steel Keel Stud, Light Steel Keel Track and Light Steel Keel Bandering in 2022 EACCET HS Code 7308. 90. 99 and that it is empowered by Sections 135 and 249 (1) of East African Community Customs Management Act (EACCMA) to recover any such amount short levied or erroneously refunded with interest at a rate of two percent per month for the period the taxes remain unpaid.

53. The Respondent rehashed its argument as stated in its statement of facts and submitted further that an interpretation of Heading 7216 and the explanatory notes to the said heading clearly showed that the items to be classified were identified by how they had been worked into various shapes, sections and angles.

54. The Respondent submitted that it was guided by GIR1 and Explanatory note (b) of Heading 7216 which guided that where such articles are prepared for use in structures, they are to be classified under Heading 7308, that is, the placing of Heading 7308 in brackets after the said explanatory note (b) to heading 7216.

55. The Respondent submitted that the Appellant has explained that the products in contention were for use in suspension ceiling and partitioning system as well as gypsum board mounting and that at paragraphs 2. 22 and 2. 23 of the Appellant’s statement of facts the Appellant had further explained that the Appellant’s products are primarily used to hold up articles of gypsum which is a soft sulphate mineral composed of calcium sulphate and that according to the Appellant’s witness during the hearing of the matter, the gypsum boards are screwed on the Appellant’s products.

56. The Respondent therefore noted that it was clear that the said products are to be used in structure (in this instance buildings) and as such are excluded from Heading 7216 by virtue of explanatory note (b) of Heading 7216 and instead classified under Heading 7308 as directed by the said explanatory note (b) to Heading 7216.

57. It was the Respondent’s submission that Heading 7308 provides for two kinds of structures namely;i.Structures (excluding pre-fabricated buildings of Heading 94. 06) and parts of structure (for example, bridges and bridge sectors, lock sales, towers, lattice masts, roofs, roofing frame worker doors and windows and their frames and thresholds for doors, shutters, balustrades pillars and columns), of iron or steel; and,ii.Plates, rods, angles, shapes, sections, tubes and the like prepared for use in structures of iron or steel.

58. The Respondent submitted that in the Appellant’s Memorandum of Appeal and Statement of Facts, the explanation as to the nature of structure classified under Heading 7308 only focuses on the structure under the first part of Heading 7308, while its items fall under structure under the second part of the Heading 7308. It submitted further that there is no mention of the weight of the items to be classified under Heading 7216 in the explanatory notes, hence the Appellant’s averments of weight of the items in dispute are not supported by a correct interpretation of the HS Code.

59. The Respondent submitted in conclusion that the items in dispute cannot be classified under Heading 7216 since they are excluded from the said heading by an exclusion note, being explanatory note (b) of Heading 7216 which must be taken into consideration when seeking to classify under 7216 as guided by GIR. It therefore stated that it did not err in classifying Light Steel Keel Stud, Light Steel Keel Track and Light Steel Keel Bandering in 2022 EACCET, HS Code 7308. 90. 99.

The Respondent’s Prayers 60. The Respondent therefore prayed that the Tribunal finds that;a.Light Steel Keel Stud, Light Steel Keel Track and Light Steel Keel Bandering are classified in Heading 7308 under Tariff Line 7308. 90. 99 of the 2022 EAC/CET as guided by GIR 1 and 6;b.Upholds the Respondent’s Review Decision dated 21st February 2024; and,c.Dismisses the Appellant’s Appeal with costs to the Respondent.

Issues for Determination 61. The Tribunal has considered the parties pleadings, documentation and submissions and is of the view that this Appeal raises one issue for determination;Whether the Respondent was justified in reclassifying the Appellant’s products light steel keel stud, light steel keel track and light steel keel bandering from HS Code 7216. 91. 00 to HS Code 7308. 90. 99.

Analysis and Findings 62. Having established the sole issue for determination, the Tribunal will proceed to analyse it as herein under

63. The dispute arose following a reclassification of the Appellant’s products from HS Code 7216. 91. 00 to 7308. 90. 99. The bone of contention being what the products are used for. The Appellant had contended that Chapter 73. 08 was for structures that were heavy weight while its products were light weight and were mainly used in suspension coding and partitioning system as well as gypsum board mounting, a fact the Respondent concurred with.

64. The General Interpretative Rules (GIR) of the Harmonized System state that the classification of goods in the subheading of a heading shall be determined according to the terms of those subheadings and any related subheading notes. Heading 72. 16 covers “Angles, shapes and sections of iron or non-alloy steel” while Heading 73. 08 covers “structures (excluding prefabricated building of Heading 94. 06) and parts of structure) for example bridges and bridge-sections, lock gates, towers lattice masts, roofs and roofing frame works, doors and windows and their frames and thresholds for doors, shutters, balustrades, pillars and columns of iron or steel, plates rods angles shapes sections tubes and the like prepared for use in structure of iron or steel.”

65. It is important to note that both headings provide for angles, shapes and sections of iron or steel. GIR3 (a) therefore guides in situations where more than one heading refer to parts only of the material. It provides as follows;“The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.”

66. As stated above, both headings cover parts of the material. It is therefore paramount to distinguish the effect of the two HS Codes preferred by parties. In submissions, the Respondent had stated that it was empowered under Sections 135 and 249 (1) of EACCMA to recover any such amount short levied or erroneously refunded with interest at a rate of two percent per month for the period the taxes remain unpaid.

67. It is worth noting that according to the 2022 EAC/CET version, HS Code 7216. 91. 00 preferred by the Appellant attracts a duty rate of 35%, while HS Code 7308. 90. 99 preferred by the Respondent attracts a duty rate at 25%. The question of short-levied tax therefore does not arise since the Appellant is paying a higher tax by 10% therefore the Respondent would stand to benefit.

68. The Tribunal has perused through the Appellant’s bundle of documents and specifically the pre-classification opinion issued by Chinese international trade departments which has classified the products under HS Code 7216. 91. 00 despite the motivation to enjoy a rebate of 13% if they adopted the HS Code 7308.

69. The Appellant has stated that it has always imported the same products under HS Code 7216. 91. 00 which the Respondent accepted. The Respondent has also not convinced the Tribunal as to any change in character of the products that would justify a change of the HS Code.

70. Having established that the Respondent would not have suffered loss of revenue and the fact that the Respondent has failed to demonstrate to the Tribunal any material changes to the character of the product to warrant change of HS Code, the Tribunal finds that the Respondent was not justified in the reclassification of the Appellant’s products light steel keel stud, light steel keel track and light steel keel bandering from HS Code 7216. 91. 00 to HS Code 7308. 90. 99.

71. Consequently, the Appeal succeeds.

Final Decision 72. The upshot of the following is such that the Appeal is meritorious and therefore succeeds. The Tribunal proceed to issue the following Order;a.The Appeal be and is hereby allowed;b.The Respondent’s Review Decision dated 21st February 2024 be and is hereby set aside; and,c.Each party to bear its own costs.

73. It is so ordered

DATED AND DELIVERED AT NAIROBI THIS 17TH DAY OF JANUARY 2025ROBERT M. MUTUMA - CHAIRPERSONDELILAH K. NGALA - MEMBERJEPHTHAH NJAGI - MEMBERDR, TIMOTHY B. VIKIRU - MEMBERMUTISO MAKAU - MEMBER