[2024] KETAT 744 (KLR)

Ripple Mart Limited v ommissioner of Customs & Border Control (Tax Appeal E414 of 2023) [2024] KETAT 744 (KLR) (Commercial and Tax) (24 May 2024) (Judgment)

Neutral citation: [2024] KETAT 744 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Tax Appeal E414 of 2023

RM Mutuma, Chair, EN Njeru, M Makau, B Gitari & AM Diriye, Members

May 24, 2024

Between

Ripple Mart Limited

Appellant

and

Commissioner of Customs & Border Control

Respondent

Judgment

1. The Appellant is a limited liability company duly incorporated under the Companies Act of the laws of Kenya, and engaged in the business of importation and sale of printing paper.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act and the Kenya Revenue Authority is mandated with the responsibility of assessing, collecting and accounting for all tax revenue as an agent of the Government of the Republic of Kenya. The Respondent is also mandated with the responsibility of the administration and enforcement of all statutes set out under the Schedule to the said Act.

3. The dispute herein arose out of the desk review of the Appellant’s imports under Tariff Code 4802. 56. 00 conducted by the Respondent for the period 2nd August 2018 to 8th February 2022. Arising thereof, the Respondent indicated that the audit revealed a short levy of taxes as a result of the application of a duty rate of 10% instead of 25 %.

4. Consequently, the Respondent issued a demand notice requiring the Appellant to pay the short-levied taxes of Kshs 16,749,855. 00 (made up of Import duty of Kshs 14,447,700. 00 and VAT of Kshs. 2,302,154. 00) in a letter dated 5th June 2023.

5. Upon receipt of the demand from the Respondent, the Appellant applied for review by the Commissioner on 8th June 2023, and the Commissioner rendered his review decision on 7th July 2023 confirming and demanding the assessed amount of Kshs. 16,749,855. 00.

6. Dissatisfied with the Respondent’s review decision the Appellant filed the Appeal herein on 28th July 2023.

The Appeal 7. The Appellant filed its Memorandum of Appeal dated 26th July 2023 on 28th July 2023 and set out the following grounds of appeal;i.That in issuing the impugned demand notices and impugned decision the Respondent has acted unreasonably and failed to take into consideration the fact that the Tribunal in its Judgment of 5th May 2023 in the Tax Appeal No.193 of 2022 (previous appeal) found that there was no appealable decision.ii.That the Respondent erred in law by purporting to issue the impugned demand notice upon the Appellant on 5th June 2023 whereas the Appellant had already applied for review of the demand notice dated 7th February 2022 on 16th February 2022 as per Section 229 (10) (b) of EACCMA.iii.That this Tribunal found that there was no appealable decision, the impugned tax decision violates the provisions of Section 229 (1) of EACCMA as the Respondent already allowed the application for review tendered on 16th February 2022. iv.That the impugned decision violates Section 229 (4) as read with Section 229 (5) of EACCMA as the Respondent failed to issue the review decision within the legally prescribed timelines.v.That the impugned decision violates the provisions of Section 229 (4) of EACCMA as the Respondent failed to issue a decision in writing to the person lodging the application.vi.That having failed to adduce as part of its evidence in the previous Appeal in TAT 193 of 2022 evidence of a review decision by the Respondent they are estopped from enforcing the impugned decision against the Appellant.vii.That the Respondent by deliberately failing to disclose the existence of the Commissioner’s decision to the Appellant’s counsel on record and this Tribunal, ought not to demand any payment of taxes by the Appellant.viii.That the impugned tax decision and impugned demand notice violates the Appellant’s Constitutional right to transparency, accountability, legitimate expectation, fair administrative action in tax administration all contrary to articles 10, 47, and 48 of the Constitution of Kenya.ix.That even if this Tribunal was arguendo going to find merit in the impugned demand notice and impugned decision, there is no law which imposes a duty rate of 25% on paper and paperboard products in the period 2nd August 2018 to 27th January 2022 as per the facts set out in the Appellant’s statement of facts.x.That even if it were to be said arguendo that some law exists which imposed a duty rate of 25% on paper and paperboard products imported under HS code 4802. 56. 00 as aforesaid, which is denied,; and even if it were to be said arguendo that the Respondent is lawfully entitled to administer and enforce such law, which is also denied; it would still be illegal and unconstitutional for the Respondent to make and or enforce compliance with the impugned decision or to issue the impugned demand notice on the basis of the facts set out in the statement of facts as set out in the Appellant’s statement of facts.

8. By reason of the grounds aforesaid the Appellant prayed that the Tribunal sets aside the Respondent’s impugned review decision and demand, and allow its appeal herein within costs.

The Appellant’s Case 9. The Appellant’s case is premised upon its;a.Statement of Facts dated 26th July 2023 and filed on 28th July 2023 together with the documents annexed thereto; and,b.Written submissions dated and filed on 25th October 2023.

10. The Appellant stated that the instant Appeal flows from the Respondent ‘s decision to issue a demand notice on 5th June 2023 to the Appellant demanding payment of the sum of Kshs 16,7492,855.

11. The Appellant lodged its application for review on 8th June 2023. The Respondent responded to the application for review on 7th July 2023 and stated that there was a review decision issued by the Commissioner on 15th March 2022.

12. The Appellant stated that it had instituted an Appeal against the Respondent in Tax Appeal No. 193 of 2022, and the Tribunal issued its Judgment on 5th May 2023 in which it made a finding that the Appellant lodged its application for review and proceeded to file its Appeal before the Commissioner rendered a review decision. The Tribunal therefore held that there was no appealable decision upon which to base an appeal and struck out the Appellant’s Appeal for being prematurely lodged and held that there was no valid Appeal before the Tribunal.

13. The Appellant stated that the Respondent in its pleadings and submissions before the Tribunal does not indicate that the Commissioner ever issued a review decision to the Appellant with the prescribed timeline.

14. It stated that there being no review decision by the Respondent then the Appellant’s application for review is deemed to be applicable by operation of the law under Section 229(5) of EACCMA.

15. The Appellant further stated that the Respondent cannot purport that there was a review decision issued as it failed to disclose the same to the Appellant during the subsistence of the Appeal or even to its Tribunal. The effect was the Respondent withheld cogent information and this Tribunal in its judgement upheld the application for review and found that there are no amounts payable to the Commissioner.

16. The Appellant further stated that the Respondent’s concealment and misstatement of material facts cannot and ought not to be the basis for them to demand taxes from the Appellant through the demand issued on 5th June 2023 and decision issued on 7th July 2023.

17. The Appellant further posited that the Tribunal ought to consider that failure to serve the Commissioner’s review decision on the Appellant fundamentally contravenes the provisions of Section 229 (4) of EACCMA which specifically provides;“…communicate his or her decision in writing to the person lodging the application stating reasons for the decision .”

18. The Appellant stated that even if arguendo this Tribunal were to find merit in the impugned demand notice and impugned review decision, legally the same cannot stand because by a Gazette Notice No. EAC/21/2014 dated 29th June 2014 the Council reduced the tariff rate for paper and paperboard products imported under Hs code 4802. 56. 00 from 25% to 10%.

19. It was a averred by the Appellant that on 30th June 2017 vide Legal Notice No. EAC/ 85/ 2017 the EAC Secretariat reviewed and modified the EAC/CET into the 2017 version in conformity with the Harmonized Commodity Description and Coding System version 2012 of the WCO. It stated that the Legal Notice No. EAC/85/2017 did not review any tariff.

20. The Appellant further stated that in the course of harmonization of the EAC/CET into a 2017 version in conformity with the Harmonized Commodity Description and Coding System, the EAC Secretariat mistakenly published a CET, which indicated the duty rate for paper and paperboard products (under HS Code 4802. 56. 00) as 25% instead of 10 %.

21. It was a further averment of the Appellant that following the publication of the 2017 version of the EAC/CET and upon noticing the purported erroneous change in the tariff for HS code 4802. 56. 00, the Respondent deliberated on the question, and consulted the EAC Secretariat for a clarification, whereupon the Secretariat clarified to them that the EAC Council had not increased the duty for tariff 4802. 56. 00 and that the tariff rate of 25 % appearing against the HS Code 4802. 56. 00 was caused by a mistake which occurred during the transposition process when they were changing the EAC/CET to make it comply with the 2012 version of the WCO CET.

22. It stated that the clarification by the EAC Secretariat was contained in email which was circulated by Kenya Revenue Authority manager for post clearance audit from Joab Omole to Senior Customs Officers in the same organization.

23. The Appellant also stated that the EAC Secretariat upon discovering the error, then caused the EAC Council of Ministers to issue a Legal Notice purporting to reduce the duty rate for paper and paperboard products from 25% to 10% vide a Legal Notice No. EAC/69/2018. It stated that this process was wholly erroneous since the Council of Ministers was purporting to reduce the rate which was still 10% (since it has never been formally increased to 25 % since it was set at 10% vide Legal Notice No. EAC/21/2016 of 20thJune 2014).

24. The Appellant averred that the EAC Secretariat once again upon discovering the mistake inherent in Legal Notice No. EAC/69/2018 as aforesaid, reacted by causing the EAC Council of Ministers to issue Legal Notice No. EAC/112/2018, with the effect of deleting the previous rate, to keep the duty rate for paper and paperboard products imported under HS Code 4802. 56. 00 at 10 %.

25. It was further stated by the Appellant that the Respondent configured its Tradex (Simba system) to collect duty under HS Code 4802. 56. 00 fed by the Respondent into the simba system at 10% with the result that any person wishing to import any goods under the tariff code would simply enter the HS code into the system whereupon both the duty rate and as well as the total tax payable would be given by the system itself in the form of Form C17B Custom Entry.

26. The Appellant also averred that on 27th January 2022, the Respondent through a Memo prepared on his behalf by one Jon Gathatwa instructed customs officers to immediately conduct a post clearance audit on all goods that were cleared under HS Code 4802. 56. 00 between 2nd August 2018 to 27th January 2022 purported because the Respondent had discovered, first , that Legal Notice No. EAC/112/2018 had deleted Paragraph 2 of Legal Notice EAC/69/2018; Secondly, that the effect of the deletion was to impose the duty rate of 25% for HS code 4802. 56. 00; and that clearing agents/importers had been applying the rate of 10% for HS Code 4802. 56. 00 instead of 25%.

27. The Appellant submitted that although both parties agree that the duty rate for paper and paperboard products was set at 10% by the EAC Council of Ministers vide Legal Notice EAC/21/2014 , there is a sharp polarity of opinion between the parties as to whether the rate has ever been increased to 25%.

28. The Appellant submitted that no law has ever been promulgated by the Council, increasing the duty rate for paper products from 10% to 25% since 20th June 2014, when the duty for paper products was last set by the Council.

29. That the Appellant’s submissions in this regard were anchored on three main truisms: That first every law must be formally enacted; Second, that every law that has been duly enacted must be formally promulgated through publication in an official gazette which also indicate the date of its commencement; and finally, that both the enactment as well as promulgation of the law can only be done by the body that has the requisite legal mandate to enact law.

30. It submitted that the mere posting of a document on the website of a legislative institution does not elevate that document to the status of a law.

31. The Appellant further submitted that the mere fact that the Respondent has power under Sections 135, 235, and 249 of EACCMA to conduct post clearance audit and thereafter demand for short levied taxes does not mean that a purported exercise of such power cannot be challenged and invalidated for violation of the right to fair administrative action.

32. The Appellant submitted that as has been held by the Court of Appeal several times, notably in the case of Kenya Revenue Authority vs. Export Trading Company Ltd ( 2020 ) eKLR, as well as in the case of Krish Commodities Ltd vs. Kenya Revenue Authority (2018) eKLR, the mere fact that the Respondent is permitted by Section 135 of EACCMA to conduct post clearance audit within five years does not mean that it is lawful and proper for it to conduct post clearance audit after four years in the circumstances where it has become impossible for the taxpayer to recover the additional taxes now being demanded because the subject goods have been sold and even been consumed by third parties.

33. The Appellant submitted that Legal Notice No. EAC/21/2014 fixed the duty rate for paper and paperboard products at 10%. That no Legal Notice issued by EAC Council of Ministers and duly gazette in the EAC gazette has increased that rate to 25%. That since there has never been increment of the rate, any legal notice purporting to lower the rate from 25% to 10% or to delete any such previously mentioned legal notice would be of no legal effect.

34. It further submitted that the Legal Notice No. EAC/85/2017 merely authorized the- harmonization of EAC/CET with WCO/CET, and did not review or change the tariff rate for paper and paperboard products.

35. The Appellant also submitted that the Respondent acted ultra vires when it purported to enforce a non-existent law.

36. The Appellant also submitted that though the Respondent posits that by virtue of the fact that this Honorable Tribunal struck out Tax Appeal No.193 of 2022, it does not follow that the taxes in dispute are due and payable to the Respondent. The Tribunal agreed with the Respondent that the Appeal was prematurely filed because the principle of exhaustion of jurisdiction had not been exhausted by the Appellant. There was therefore nothing to anchor the appeal because the statutory timelines under which the Respondent is allowed to make a determination on the application for review.

37. The Appellant further submitted that the purport of the foregoing is on one hand that there was no decision by the Respondent on which to lodge an appeal. The Tribunal acknowledged that the Appellant had issued an application for review on 16th March 2022. It followed therefore that no decision was rendered by the Respondent and in effect Section 229 (5) of EACCMA, which states;“Where the Commissioner has not communicated his or her decision to the person lodging the application for review within the time specified in subsection (4) , the Commissioner shall be deemed to have made the decision to allow the application .”

38. It was a further submission of the Appellant that the fact that the Respondent never brought to the Tribunal ‘s attention the existence of a review decision, then it cannot be said that the taxes are due, as the law is clear that the application for review by the Appellant is deemed to be allowed by operation of the law.

39. The Appellant also submitted that the Respondent having issued Tax Compliance Certificates to the Appellant it is estopped from changing its position and now averring as against the Appellant that it has outstanding taxes.

Appellant’s Prayers 40. By reason of the foregoing the Appellant prayed that;a.The Respondents’ impugned demand of Kshs. 16,749,855. 00 dated 7th July 2023 be set aside; and,b.The Appeal herein be allowed with costs.

The Respondent’s Case 41. The Respondent’s case is premised on its;a.Statement of Facts dated 24th August 2023 and filed on 31st August 2023 together with documents annexed thereto; and,b.Written submissions dated 23rd October 2023 and filed on 25th October 2023.

42. The Respondent stated that it reiterated its position in its review decision dated 22nd March 2022, and its decisions upholding the tax demand.

43. The Respondent stated that it relies on Sections 235 and 236 of EACCMA which gives the Commissioner powers to call for documents and conduct a post clearance audit (PCA) on the import and export operations of a taxpayer within a period of five years from the date of importation or exportation.

44. It stated that where the PCA reveals that taxes were short levied, or erroneously refunded, Sections 135 and 249 of EACCMA empowers the Commissioner to recover any such amount short levied or erroneously refunded with interest at a rate of 2%per month for the period the taxes remain unpaid.

45. The Respondent stated that the Appellant’s Appeal is against the Respondent’s decision dated 7th July 2023 as well as demand dated 5th June 2023.

46. It further stated that it is not in dispute that the substance of this matter was brought before this Honorable Tribunal vide TAT 193 of 2022 which was struck out for being filed prematurely.

47. The Respondent also stated that whereas the Appellant rushed to file an appeal before determination of its application for review dated 16th February 2022, the Commissioner acted within its legal mandate to issue the review decision dated 15th March 2023.

48. It further stated that though the Appellant’s counsel alleges that the review decision was never communicated to it during the proceedings of the previous Appeal, the Respondent denies this assertion in toto and calls upon the Appellant to prove the same as the Respondent’s letter dated 15th March 2022 was sent to the same address all other documents bear in this Appeal being , Rachier & Amolo Advocates LLP, P.O BOX 55645 -00200 Nairobi.

49. The Respondent also stated that as a party to the previous Appeal it was only obliged to defend its case against the decisions on Appeal dated 27th January 2022 and 2nd February 2022.

50. It further stated that its review decision dated 15th March 2022 was properly issued within the timelines and any laxity/indolence is solely attributable to the Appellant .

51. The Respondent also stated that the assertion that the Tribunal having found that there is no appealable decision in the previous appeal as the Respondent already allowed the application for review, the same is a misapprehension of the import of the Judgment. The Tribunal struck out the Appeal as the Appellant failed to follow due process thus no review decision from which its Appeal would have been anchored on.

52. The Respondent further stated that the assessment was made within the five-year window provided for by the law and therefore no legitimate expectation on the taxpayer was breached.

53. On the issue of uplifting the duties from 10% to 25%, the Respondent stated that the EAC Notice No. EAC/112/2018 dated 2nd August 2018 deleted item number 2 in the Legal Notice No. EAC/69/2018 dated 30th June 2018 , effectively reverting the duty rate of items imported under tariff 4802. 56. 00 from 10% to 25% .

54. The Respondent on 27th January 2022 commenced an audit on products imported under tariff 4802. 56. 00.

55. The Commissioner then issued a demand notice to the Appellant dated 7th February 2022, requiring it to pay the short-levied taxes of Kshs 16,749,855. 00.

56. The Respondent also stated that the Respondent operates a self-declaration regime whereby the taxpayers make declarations and pay taxes on the items that they import themselves or through their agents. This creates a legitimate expectation that the taxpayer will pay the correct taxes.

57. It was also a submission of the Respondent that the EAC Secretariat publishes the EAC Gazette Notices on the EAC website and are available to the public. These Gazette notices usually highlight the changes effected by the Council of Ministers to the EACCMA, 2004 and the EAC/CET. The EAC Gazettes usually indicate the date the legal notices come into effect hence the taxpayer’s claim that there was no law that imposed a duty rate of 25% on paper and paperboard products is false.

58. The Respondent further submitted that taxes were due and payable to the Commissioner at the time of importation.

59. It further submitted that as in this Appeal the Appellant seeks to challenge the Respondent’s decision dated 7th July 2023, it is therefore important for the Tribunal to determine and interrogate the decision that is intended to be challenged to ensure that it is one that the Tribunal has jurisdiction to determine; There has to be an appealable decision, as no Appeal can be filed or made to invite intervention of the Tribunal on decisions that are not appealable in nature and not within its mandate.

60. The Respondent also submitted that the Appellant’s Appeal is against the Respondent decision dated 7th July 2023 as well as the demand notice dated 5th June 2023.

61. The Respondent submitted further that its Review Decision dated 15th March 2022 was properly issued within the timelines. Any laxity or indolence thereafter is solely attributable to the Appellant.

62. It further stated that following the Judgment of the previous appeal on 5th May 2023, the Respondent commenced enforcement measures vide a letter dated 5th June 2023. The Appellant lodged an application for review of the demand, however the Respondent upheld its decision vide a letter dated 7th July 2023 stating that a review decision had already been issued on the matter.

63. It was the Respondent’s submission that, where a decision is made in this context, such a decision still amounts to a tax decision which cannot be subject to an appeal at the Tribunal.

64. The Respondent cited the case of TAT Misc 29 of 2019 Antony Kariuki Mwai vs. National Transport & Safety Authority & 2 others (2020) eKLR, where the Tribunal made the following observation:-“…the Tribunal is of the Considered view that a demand or directives made by the first Respondent cannot be termed as an appealable decision.”

65. The Respondent further submitted that it was clear from the facts of this Appeal that the premise upon which this Appeal is brought was purely to challenge the enforcement measures through letter dated 5th June 2023 and not the review decision dated 15th March 2022. In the circumstances there is no appealable decision that can be subject to premise the Appeal for determination.

66. On whether the Respondent’s additional assessment and demand for taxes was justified, the Respondent submitted that the EAC Notice no. EAC/112/2018 dated 2nd August 2018 deleted item no.2 in the Legal Notice EAC /69/2018 dated 30th June 2018, effectively reverting the duty rate of items imported under tariff code 4802. 56. 00 from 10 % to 25 %.

67. The Respondent further submitted that the EAC Secretariat publishes the EAC Gazette Notices on the EAC website and are available to the public. The Gazette Notice usually indicate the date the legal notices come into effect hence the taxpayer’s claim that there was no law that imposed a rate of 25% on paper and paperboard products is false. It asserted that the taxes in question were due and payable to the Respondent at the time of importation.

68. The Respondent cited the case of Anne Wanjiku Kahwai vs. Kenya Revenue Authority & Anor (2019) eKLR, where it was stated;“In summary, I find that the Respondent were and are entitled to carry out investigations and utilize the information obtained in the fulfilment of their statutory mandates. Further, the Respondents were and are entitled to inform the petitioners of the outcome of their investigations in so far as such outcome will affect the petitioners. This would include identifying unpaid or apparently underpaid taxes requiring the petitioners, by notice to appear before the 2nd Respondent to produce records and information in respect of the tax liability or for any other purposes relating to a tax law, pursuant to section 59 and 61 of the TPA”.

69. It submitted that in the instant case, in compliance with the court ‘s directive in Export Trading case (supra), that the Respondent’s conduct of PCA must be premised on reasonable conduct, the Respondent herein only charged short levy upon discovering the variance between prescribed tariff of 25% and the value inputted in the iTax system of 10%.

70. The Respondent also submitted that, as recognized by the Supreme Court, human error and system errors are reasonable, acceptable and expected in tax administration as long as the same are rationally explained; as is demonstrated in paragraphs 26 to 27 of the its submissions. The Court of Appeal in Export Trading stated:-“Granted, it is possible to have technological and human errors.”

71. It submitted that the mere existence of an error on the applicable tax rate in the Respondent’s Simba system does not extinguish the Appellant’s obligation to pay its fair share of its tax obligation and the Respondent to collect taxes as provided for under Section 110 and read with Sections 235 and 236 of EACCMA.

72. The Respondent submitted that in the instant case, on the one part, its decision to charge short levy tax is backed by a reasonable and lawful explanation actuated expeditious administrative action. On the other part, the Appellant seeks to rely on a claim of legitimate expectation contrary to the express provisions of the law and a subversion of its constitutional mandate under Article 201 of the Constitution of Kenya.

73. The Respondent submitted that it is undoubted in the circumstances the scales of justice weigh in favour of the Respondent‘s legal standing and public interest in equitable sharing of the tax burden.

Respondent’s Prayers 74. By reason of the foregoing the Respondent prayed that the Tribunal;a.Upholds its demand notices dated 6th June 2023 as proper; and,b.To dismiss the Appellant’s Appeal with costs.

Issues for Determination 75. The Tribunal having carefully reviewed the pleadings and submissions filed by the parties is of the considered view that the Appeal herein distils into two issues for determination;i.Whether the Respondent’s Review Decision dated 15th March 2022 was validly issued.ii.Whether the Respondent’s assessment and demand for taxes against the Appellant was justified.

Analysis and Determination 76. The Tribunal shall proceed to analyze the same as herein under;

i.Whether the Respondent’s Review Decision dated 15th March 2022 was validly issued. 77. The underlaying stratum of the dispute herein subject of this Appeal is the applicable duty rate for paper and paperboard products during the period of the Appellant’s importation of the subject consignments, and the relevant law that imposed that rate. Whereas the Appellant maintains that the applicable rate is 10%, the Respondent maintains that the applicable duty rate is 25%.

78. On 5th June 2023, the Respondent herein issued a demand notice on the Appellant for the payment of Kshs. 16,749,855. 00 on the basis that its Appeal TAT No. 193 of 2022 had been struck out by the Tribunal for being filed prematurely without an appealable decision.

79. The Appellant lodged an application for review against the said demand on 8th June 2022, upon which the Respondent issued a response on 7th July 2022, and asserted that the Respondent had issued a review decision on 15th March 2022, of which a copy was attached.

80. The Respondent in its pleadings and submissions before the Tribunal in TAT 193/2022 did not state or indicate that the Respondent had ever issued the said review decision dated 15th March 2022 to the Appellant within the prescribed timeline.

81. The Appellant submitted that the Respondent cannot purport that there was a review decision issued as it failed to disclose the same to the Appellant or to the Tribunal during the subsistence of the previous Appeal. Indeed, the Tribunal before striking out the said appeal noted that the Commissioner had not rendered his review decision hence there was no appealable decision.

82. The Appellant also submitted that there being no review decision issued by the Respondent within the statutory timeline, then the Appellant’s application for review was deemed allowed by operation of the law.

83. The Appellant urged the Tribunal in considering the appeal ought to consider that the failure to serve the Commissioner’s decision to the Appellant as fundamentally contravening the provisions of Section 229 (4) of EACCMA, which specifically provides that the Commissioner shall within the prescribed period;“…communicate his or her decision in writing to the person lodging the application stating the reasons for the decision.”

84. The Appellant further submitted that the Respondent having failed to communicate the decision to the Appellant who had applied for review on 16th February 2022, then the Respondent was estopped from demanding any taxes on the basis of that review decision, as the Objection stood allowed by operation of the law.

85. The Respondent on the other hand submitted that the Commissioner acted within its legal mandate to issue the review decision dated 15th March 2022 in line with the provisions of Section 229 (4) of the EACCMA.

86. The Respondent also submitted that it sent the letter communicating the decision to the Appellant’s counsel ‘s address at Rachier & Amolo Advocates LLP, P.O BOX 55645 -00200 Nairobi, which it stated as evidence of communication of the decision.

87. However, the Tribunal has noted that despite the bulk of the communication between the Appellant and its Advocates with the Respondent having been on email, this all-important communication was not put on email, and the Respondent choose to post the same to the Advocates, and did not even post a copy to the Appellant. This therefore erased any trail of the date of sending, as would not have been the case with an email.

88. The Appellant has averred that it never received the communication as alleged by the Respondent. The burden of proof therefore shifted to the Respondent to tender evidence of service and receipt of the impugned letter.

89. This would have been adequately proven if the Respondent had tendered in evidence a copy of a signed delivery book acknowledging receipt, a copy of postage register, a copy of the letter with the Appellant/Advocate’s stamp acknowledging receipt, or even email evidence of the copy of the letter being forwarded to the Appellant/Advocates’ email address, which it all failed to do.

90. The Tribunal taking into account the foregoing is of the considered view that the expected evidence of service from the Respondent did not exist as nothing would have prevented the Respondent from submitting this all-important evidence in support of its contention. Thus, this leads the Tribunal to doubts as to whether the review decision letter indeed existed at the time it is alleged to have been issued. The benefit of this doubt swings in favour of the taxpayer, and the Tribunal comes to the inescapable conclusion that the Respondent did not communicate its review decision to the Appellant in accordance with the provisions of Section 229 (4) of EACCMA.

91. The provisions of Section 229(4) states;“(4)The Commissioner shall , within a period not exceeding thirty days of the receipt of the application under subsection (2) and any further information the Commissioner may require from the person lodging the application , communicate his or her decision in writing to the person lodging the application stating the reasons for the decision” ( Emphasis added ).

92. This provision in essence emphasizes that the transmission of the review decision to the person lodging an objection is mandatory within thirty days from the date of the lodging of the review application.

93. The Appellant lodged its application for review on 16th February 2022, and the Respondent first communicated the existence of its impugned review decision dated 15th March 2022 vide its letter dated 7th July 2023 whereon a copy thereof was attached. This effectively marked the date the Appellant could have been said to have been served with the review decision, more than one year since the lodging of the review application.

94. Section 229(5) of EACCMA provides;“Where the Commissioner has not communicated his or her decision to the person lodging the application for review within the time specified in Subsection (4), the Commissioner shall be deemed to have made a decision to allow the application.”

95. The Tribunal having found that the Respondent did not communicate the decision within the statutory timeline in line with Section 229 (4) of ECCMA concludes that the provisions of Section 229 (5) kicked in and the Commissioner was deemed to have made a decision to allow the review application.

96. Consequently, the Tribunal finds and holds that the Appellant’s review application was deemed allowed by operation of the law, and therefore there was no review decision in force which the Respondent could enforce on the Appellant vide its letter dated 7th July 2023 as it purported to do.

ii.Whether the Respondent’s assessment and demand for taxes against the Appellant was justified. 97. The Tribunal having made a finding that the Appellant’s review application was allowed by operation of the law will not delve into the determination this issue as the same has been rendered moot.

98. The upshot of the foregoing is that the Appellant’s Appeal is found to have merit and is therefore successful.

Final Decision 99. The Appeal having succeeded the Tribunal makes the following Orders:-a.The Appeal be and is hereby allowed.b.The Respondent’s Review Decision dated 15th March 2022 and its consequential demands be and hereby set aside.c.The parties to bear their own costs.

100. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 24THDAY OF MAY, 2024ROBERT M. MUTUMA - CHAIRPERSONELISHAH N. NJERU - MEMBERMUTISO MAKAU - MEMBERBERNADETTE M. GITARI - MEMBERMOHAMED A. DIRIYE - MEMBER