[2024] KETAT 1457 (KLR)

Rajchem Polymers Limited v Commissioner of Customs and Border Control (Tax Appeal E070 of 2024) [2024] KETAT 1457 (KLR) (Commercial and Tax) (7 October 2024) (Ruling)

Neutral citation: [2024] KETAT 1457 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Tax Appeal E070 of 2024

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

October 7, 2024

Between

Rajchem Polymers Limited

Appellant

and

Commissioner Of Customs and Border Control

Respondent

Ruling

Background 1. The Appellant moved the Tribunal vide a Notice of Motion Application dated 29th July 2024 and filed under a Certificate of Urgency dated on even date seeking the following Orders:i.Spent.ii.That an order do issue to enlarge the time within which an appeal can be filed pending hearing and determination of the Appeal.iii.That the Notice of Appeal, Memorandum of Appeal and the Statement of Facts dated 29th July, 2024 and the subsequent documents be deemed to be properly on record pending the hearing and determination of the application and Appeal.iv.That an order do issue stopping the Respondent from implementing the HS Code 3402. 90. 00 which is the subject of the appeal and continue using HS Code 3900. 00. 00 pending the hearing and determination of the Appeal.v.That an order do issue to the Respondent and the Appellant’s supplier/ manufacturer/agent to jointly conduct a laboratory test on the silicon products namely; L580,L450,L591,ROG S-68 Silicon to ascertain the use and purpose and also if it is in the primary form to know the exact HS code they fall in.vi.A declaration do issue that Tax Appeal No. E 794of 2023, was erroneously fully settled as opposed to partially settled to deny the Appellant an opportunity to deal with the issue of the HS Code which was the core dispute before the Tribunal.vii.Spent.viii.Spent.ix.That the Court be pleased to waive the Inland Container Deport (hereinafter “ICD”) storage charges and demurrage costs that accrued as well as the warehouse rent accumulated from 19th July 2024 pending the hearing and determination of the dispute on which HS Code to be used on taxation.x.That the Court be pleased to make such further Orders as are necessary for the ends of justice in the matter.xi.That the costs of this Application be provided for by the Respondent.

2. The Application was supported by a Sworn Affidavit dated 29th July 2024 by Loise Njeri, the Appellant’s Administrator, on the following grounds:i.That the Appellant has been engaged in the business of importing silicon that was supplied to various companies for manufacturing.ii.That the decision the Appellant appeals against was not effectively communicated to them within the prescribed period of Section 229 of the East African Community Customs Management Act, 2004 (EACCMA).iii.That the Appellant came aware of that decision on 29th September 2023 and immediately filed a review application.iv.That the Appellant raised these issues in Miscellaneous application No. E179 of 2023 and when it was agreed mutually by the parties that a bank guarantee do issue in the interim and goods be released to the Appellant and the HS Code issue be dealt with at the Tax Appeal No. E794 of 2023 but the case was closed without dealing with that issue.v.That since the reviewed HS code is the subject of appeal it is import that it is put on hold pending hearing and determination of the appeal and all imports being brought in by the Appellant should not be subjected to the new HS Code that is disputed.vi.Granting of this Application will not occasion the Respondent any prejudice; On the other hand, if this Application is not granted, the Appellant will be extremely prejudiced as the appeal will not have been determined based on all issues pending amongst the parties.vii.This Application was not meant to obstruct justice in any way. To the contrary, the same will enable the Court to deliver justice on the merits and that was the reason the Appellant was seeking leave of the Tribunal to enlarge time to file an Appeal out time.viii.Granting this Application will enable the Court to meet its objectives of dispensing justice fairly, expeditiously and affordably as the Appellant would suffer and continue to suffer irreparable financial losses if the said consignment was not released yet the balance of convenience weighed in their favour owing to willingness to execute the bank guarantee.ix.The Appellant has raised meritable and good grounds in the application on the methodologies employed for assessment of duty payable.

3. That the Appellant has always been tax compliant and continues to carry on business within the legal parameters as ascribed in the law since all previous shipments and consignments fully complied with the Customs and Border Control procedures as they underwent inspection, verification and clearance and were released after payment of all the assessed tax and/ or duty.

Response To The Application 3. The Respondent upon being served with the Application filed an opposing Replying Affidavit sworn by Victor Chabala, an officer of the Respondent dated 9th August 2024 and filed on even date citing the following as the grounds:i.That the Appellant was erroneously seeking to be allowed to file an Appeal out of time without attaching the decision it was challenging.ii.That whereas the Appellant claimed it became aware of the Respondent’s decision through a third party, it refers to the concluded case of E794 of 2023 where both parties engaged and signed an Alternative Dispute Resolution (hereinafter “ADR”) Agreement on 24th May 2024 followed by execution and filing of a consent on 11th June 2024. The same was adopted as the judgement by the Tribunal during mention on 24th June 2024 thus the Tribunal was functus officio and the Appellant’s attempts to revive the matter through the instant application was now res judicata.iii.That the Appellant was seeking some orders that went beyond the issue of filing an appeal out of time and which infringed upon the discretion of the Respondent.iv.That the instant application was misconceived, frivolous and vexatious having failed to demonstrate it deserves favourable discretion of the Honourable Tribunal and the Application ought to be dismissed with costs to the Respondent.

4. On 8th August 2024, the Tribunal granted the Appellant orders to file a further replying affidavit to the Respondent’s response the same was dated 14th August 2024 and filed on 15th August 2024 and sworn by Loise Njeri on the following grounds:i.That the Appellant perceived averments stated under paragraph 1,2,3,4 as mere facts not in contention as introductions thereunder by the Respondent and further the Appellant attached the Ruling it intended to challenge.ii.That the Appellant was neither aware nor served with the alleged ruling and that was precisely why they were appealing having paid taxes due under the HS Code 3910. 00. 00 that was now the subject of the Appeal herein and brought in good faith.iii.That when the Appellant filed TAT E794 of 2023 and Miscellaneous Application No. E179 of 2023, the Respondent in the replying affidavit attached rulings which were not within the knowledge of the Appellant which necessitated the application by the Appellant dated 30th January 2024 to amend the appeal.iv.That the Appeal did not proceed to ADR as the Respondent’s officials indicated that their department was only authorized to deal with post audit issue concerning Ksh 47,732,064. 00 which the Appellant litigated upon in ADR and concluded and the issue of HS Code was not discussed thus there was no agreement executed by parties on the same noting that the Appeal and the Miscellaneous Application were referred to court for further hearing.v.That the impugned consent was adopted in the absence of the Appellant’s counsel and no disclosure made by the Respondent that there was a pending issue of HS Code to be dealt with and that the Appellant did not have an issue with the consent agreement since it was a true reflection of the findings of the ADR and the subsequent agreement which concluded the issue of Post Audit.vi.That the Respondent has continuously avoided the issue of HS Code which is the main issue of contention and continued to tax Appellant’s imported goods under HS Code 3402. 90. 00 as opposed to 3910. 00. 00 resulting in the current four bank guarantees.vii.That the Tribunal has never dealt with the issue of HS Code between the parties herein thus was not functus officio and the rulings challenged have never been subject of any court case before the Tribunal thus the matter at hand is not res judicata. Moreover, that the ADR process was between customs department of post audit and not the tariffs department which deals with HS Codes.viii.That the Appellant has never been paid back their bank guarantees as the matter was pending before the Tribunal and the Respondent was not mentioning the bank guarantee status before wishing off the Appellant’s court case.

Analysis And Findings 5. The Tribunal on 8th August 2024 directed the matter to be canvassed by way of written submissions. The Tribunal notes that parties’ written submissions were dated 14th August 2024 and filed on even date. The Tribunal duly considered the parties written submissions in arriving at its determination in this Ruling.

6. The Tribunal notes that the Appellant’s application was seeking the intervention of the Tribunal to expand time to file an Appeal out of time against Respondent’s implementation of tariff ruling re-classifying the Appellant’s silicon imports under HS Code 3402. 90 from HS Code 3910. 00. 00 and that pending the hearing and determination of the Appeal, the Tribunal orders a joint laboratory test on the silicon products and further grant orders for waiver of storage charges, demurrage costs accrued and rent accumulated. All of which were contested by the Respondent.

7. The Tribunal notes that while establishing whether to allow an application for extension of time to appeal out of time Section 13(4) of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”) provides as follows:“An extension under subsection (3) may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the Appellant from filing the notice of appeal or submitting the documents within the specified period.”

8. Additionally, the Tribunal associates with the criteria as laid out in the case of Thuita Mwangi v Kenya Airways Ltd [2003] eKLR where the Court of Appeal held that: -“It is now well settled that the decision whether or not to extend the time for appealing is essentially discretionary. It is also well settled 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 reason 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.”

9. In the instant Application, the Appellant stated that they became aware of the Respondent’s tariff ruling through a third party. This was rebuffed by the Respondent who insisted that the Appellant was well aware of the ruling as both parties had signed and adopted a consent which was delivered as a judgement by the Tribunal on 24th June 2024 and that was why the Appellant was referring to the concluded case of E794 of 2023 in the attempted Appeal yet the Tribunal was functus officio and the case was res judicata.

10. Further, the Appellant was adamant that the impugned consent was in regards to post audit concerning Ksh 47,732,064. 00 which the Appellant litigated upon in ADR and concluded and the issue of HS Code was not discussed thus there was no agreement executed by parties on the same noting that the Appeal and the Miscellaneous Application were referred to court for further hearing. This was countered by the Respondent who insisted that the consent was conclusive in regards to taxes owing and classification. The Tribunal sighted the consent which in part stated as follows;“By consent of the parties pursuant to the ADR agreement dated 24th May 2024, this Appeal shall be marked as settled under the following terms; 1. That the imported duty of Ksh 41,148,330. 58 and Import VAT of Ksh 6,583,732. 89 totalling Ksh 47,732,063. 47 is hereby vacated.

2. That each party is to bear its costs if any….”

11. The Tribunal notes that the Court of Appeal in Paul Kiplangat Keter vs John Koech [2021] eKLR held as follows:“A consent order entered into by counsel is binding on all parties to the proceedings and cannot be set aside or varied unless it is proved that it was obtained by fraud or by an agreement contrary to the Policy of the Court or where the consent was given without sufficient material facts or in misapprehension or ignorance of such facts in general for a reason which would enable the Court to set aside an agreement.”

12. The Tribunal observes that the consent adduced as evidence vacated taxes owing the same having been arrived at by the Respondent who had re-classified the Appellant’s product under HS Code 3402. 90. 00 against Appellant’s HS Code 3910. 00. 00. The Respondent never provided reasons why it was seeking to vary the consent which had vacated taxes which previously arose from its tariff re-classification.

13. In the instant Application, the Tribunal is guided by the following holding of the Supreme Court of Kenya in the case Geoffrey M. Asanyo & 3 Others vs The Attorney General:“Adoption of a consent by a Court is a process, in the course of which a Court discharges the duty of evaluating the clarity of the consent placed before it by parties, and giving directions on the manner of adoption. This circumvents the risk of unlawful Order, and validates the mode of adoption and compliance. Thus, a consent by parties becomes an Order of the Court only once it has been formally adopted by the Court. It is only that stage, that the Court becomes functus officio.”

14. Consequently, the Tribunal finds and holds that the matter was already settled vide the Consent and the Judgement delivered therein and the Tribunal being bound by the principle of “res judicata” is “functus officio” and cannot therefore amend or vary the parties’ settlement.

Disposition 15. The upshot of the foregoing is that the Tribunal finds that the Application is not merited and accordingly proceeds to make the following Orders:i.The Application be and is hereby dismissed.ii.No Orders as to costs.

16. It is so Ordered.

DATED AND DELIVERED AT NAIROBI THIS 7TH DAY OF OCTOBER, 2024. CHRISTINE A. MUGA - CHAIRPERSONBONIFACE K. TERER - MEMBERELISHAH N. NJERU - MEMBEREUNICE N. N’GANG’A -MEMBEROLOLCHIKE S. SPENCER - MEMBER