[2023] KEHC 19438 (KLR)

Rana Auto Selection Limited v Commissioner of Domestic Taxes (Income Tax Appeal E150 of 2021) [2023] KEHC 19438 (KLR) (Commercial and Tax) (30 June 2023) (Ruling)

Neutral citation: [2023] KEHC 19438 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Income Tax Appeal E150 of 2021

A Mabeya, J

June 30, 2023

Between

Rana Auto Selection Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

(An Appeal from the decision of the Tax Appeals Tribunal dated 12th April 2021 in ITA No. 470 of 2019)

Ruling

1. Before Court is a Memorandum of Appeal dated 10/8/2021. There are also two applications dated 25/3/2021 for review and striking out the appeal as well as a preliminary objection dated 30/8/2021.

2. I will first begin by determining the preliminary objection and application dated 25/3/2021 as they are based on the same grounds. The determination thereof will determine the fate of the 2nd application and the appeal.

3. The preliminary objection was based on grounds that the appeal was incompetent having been filed out of time without the leave of court. That the appeal thus offended Rules 3 and 5 of the Tax Appeals Tribunal Act (Appeals to the High Court) Rules, 2015.

4. As to whether the objection satisfies the ingredients of a preliminary objection, the answer is in the affirmative. A preliminary objection was defined in Mukisa Biscuits Manufacturing Co. Ltd -v- West End Distributors Ltd (1969) EA 696 to consist of a point of law which has been pleaded, or which arises by clear implication out of pleadings, and which if argued as a preliminary point may dispose of the suit.

5. The grounds were similar to those raised in the application dated 25/3/2021. The Motion was taken out under section 79G of the Civil Procedure Act, Order 51 Rule 1 of the Civil Procedure Rules, section 32 of the Tax Appeals Tribunal Act, and Rule 3 and 5 of the Tax Appeals Tribunal Act (Appeals to the High Court) Rules.

6. The application also sought orders that the Memorandum of Appeal dated 20/8/2021 together with the Record of Appeal be struck out for having been filed out of time without leave of court.

7. The grounds of the application were to be found on the face of it and in the supporting affidavit of Victor Mino sworn on 25/3/2021. It was contended that the appellant filed its notice of appeal on 12/4/2021. It then filed an application dated 13/4/2019 seeking stay of execution against the Tribunal’s judgment of 12/4/2021.

8. That vide ruling delivered on 11/5/2021, the court directed the appellant to file its appeal within 14 days of the date of the ruling if it had not already filed the memorandum. That the appellant had 30 days from 12/4/2021 within which to file the memorandum or 14 days from 11/5/2021 being the date of the ruling.

9. That the appellant failed to file the memorandum of appeal until 10/8/2021 in contravention of Rule 5 of the TATA Rules causing the respondent to raise the instant preliminary objection. That though the record of appeal was dated 20/8/2021, it was only served on 8/9/2021.

10. The appellant opposed that application vide the replying affidavit of George Mbaye sworn on 12/5/2022. He was the advocate on record for the appellant. He contended that he received instructions to come on record on 23/5/2021 way after the stringent timelines had lapsed. That he had instructions to file an application for review of the ruling of 11/5/2021 which had directed the appellant to pay 50% of the demanded taxes.

11. That by the time he came on record, the statutory period within which the respondent ought to have filed its documents had lapsed and the same was occasioned by the appellant’s previous Counsel who caused the inadvertent delay in filing the appeal and documents. That the mistake ought not to be visited upon the respondent. That the parties had been engaged in negotiations through ADR to attempt to settle the dispute.

12. That the application was brought in bad faith as no prejudice would be suffered if the same was disallowed.

13. The parties filed written submissions to canvass the application. The appellant’s submissions were dated 19/7/2022 whereas those of the respondent were dated 24/5/2022. This Court has considered those submissions alongside the rival pleadings and evidence before it.

14. The main issue for determination in both the preliminary objection and the application is whether the appeal before court is competent.

15. It is not in dispute that the Tribunal delivered its judgment on 12/4/2021. The appellant filed its notice of appeal on the same day and on the following day filed an application for stay of execution dated 13/4/2019. The Court allowed that application vide its ruling dated 11/5/2021 on condition that 50% of the demanded taxes be paid, and the memorandum of appeal be filed within 14 days of that ruling. However, the memorandum of appeal was filed on 10/8/2021.

16. The statute governing the filing of appeals from the Tribunal is the Tax Appeal Tribunal Act, 2013 (“TAT”). Section 32 thereof provides for a right of appeal to the High Court as follows: -“32(1)A party to proceedings before the Tribunal may, within thirty days after being notified of the decision or within such further period as the High Court may allow, appeal to the High Court, and the party so appealing shall serve a copy of the notice of appeal on the other party.…

17. The rules contemplated under section 32(2) of the TAT are the Tax Appeals Tribunal (Appeals to the High Court) Rules, 2015 (“the Rules”) promulgated by the Chief Justice. Rule 3 thereof provides as follows: -“3. The appellant shall, within thirty days, after the date of service of a notice of appeal under section 32(1), file a memorandum of appeal with the Registrar and serve a copy on the respondent.”

18. It then follows that both under the TAT and the Rules, a party who wishes to appeal from a decision of the Tribunal must serve on the other party a Notice of Appeal within 30 days of being notified of the decision in order to comply with section 32(1) of TATA.

19. Under Rule 3, the appellant is required to file the Memorandum of Appeal within 30 days of filing the Notice of Appeal. Under Rule 5, the Memorandum of Appeal is accompanied by other documents supporting the appeal including a copy of the decision and the notice of appeal. This is what is normally referred to as the Record of Appeal.

20. Since the appellant filed its notice of appeal on 12/4/2021, it had up to 12/5/2021 to file the memorandum of appeal. This was not done. However, vide the ruling dated 11/5/2021, this time was extended and the appellant was directed to file the appeal within 14 days of that ruling which rested on 25/5/2021. In the ruling, the court ordered that: -“…b)That the applicants are directed to file and serve the respondent with the record of appeal (if not yet filed and served) within 14 days from today.c)That in the event of the applicant failing to comply with paragraph (a) and (b) above, the stay herein shall lapsed)That the respondent is directed to file and serve their statement of facts within 14 days from the date of being served with the record of appeal ...”

21. Despite the strict timelines ordered, the appellant did not file the memorandum of appeal until 10/8/2021, almost 3 months later. To complicate the matters, the same was filed without leave of court.

22. Undoubtedly, the appeal before court is incompetent and this has the effect of taking away this Court’s jurisdiction to deal with the matter any further. In Commissioner of Domestic Taxes v Local Productions (Kenya) Limited [2020] eKLR, the court held that: -“the time, manner and process of filing an appeal is governed by statute as it is trite law that a right of appeal is a creation of statute and its exercise is governed by statutory strictures governing the exercise of that right (see Nyutu Agrovet Limited v Airtel Networks Kenya Limited; Chartered Institute of Arbitrators-Kenya Branch (Interested Party) SCK Pet. No. 12 of 2016 [2019] eKLR). Whether a party has complied with statutory provisions is a jurisdictional issue.”

23. Indeed, the appellant did not deny filing the appeal out of time but only attempted to give reasons why. Respectfully, those submissions cannot be accepted. The appellant ought to have filed an application to either extend time for filing the appeal or seek leave to file the appeal out of time. No such application was filed. It is only when considering such an application that this Court would have considered the reasons given for the delay on filing the appeal out of the statutory period.

24. In Patrick Kiruja Kithinji v Victor Mugira MareteMRU CA Civil Appeal No. 48 of 2014 [2015] eKLR, the Court of Appeal held: -“It is our view, whether or not an appeal is filed on time goes to the jurisdiction of this Court. It is trite that this Court has jurisdiction to entertain appeals filed within the requisite time and/or appeals filed out of time with leave of the Court. To hold otherwise would upset the established clear principles of institution of an appeal in this Court. Consequently, we find that an appeal filed out of time is not curable under Article 159. ”

25. The upshot is that what is before Court is an incompetent appeal and this Court lacks jurisdiction to entertain the same. It must down its tools.

26. In light of that finding, it will be a futile exercise to consider the application dated 23/5/2021.

27. Accordingly, both the preliminary objection dated 30/8/2021 and application dated 25/3/2021 are allowed and the appeal herein is hereby struck out with costs to the respondent.It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 30TH DAY OF JUNE, 2023. A. MABEYA, FCIArbJUDGE