[2024] KETAT 351 (KLR)

Rohivra Limited & another v Commissioner Customs and Border Control (Tax Appeal 1417 of 2022) [2024] KETAT 351 (KLR) (8 March 2024) (Judgment)

Neutral citation: [2024] KETAT 351 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 1417 of 2022

E.N Wafula, Chair, RO Oluoch, AK Kiprotich, Cynthia B. Mayaka & T Vikiru, Members

March 8, 2024

Between

Rohivra Limited

1st Appellant

Kiranbhai Hirimanbhai Patel

2nd Appellant

and

Commissioner Customs and Border Control

Respondent

Judgment

Background 1. The Appellant is a private limited liability company incorporated in Kenya under the Companies Act. It is engaged in importation of tobacco.

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

3. The Respondent conducted a post clearance desk audit pursuant to the provisions of Sections 235 and 236 of EACCMA, 2004. A review of the taxpayers declarations 2016MSA59xxxxx, 2019MSA6xxxxx and 2014MSA4xxxxx was conducted and upon application of the recommended tariff of 2403. 19. 00 extra taxes comprising of Import duty, Excise duty, VAT, IHDF, RDL, Interest and penalties were assessed.

4. On 17th January 2020, the Respondent issued a demand for additional duties, tax and interest of Kshs. 180,649,148. 00.

5. The Appellant objected to the demand on 14th February, 2020.

6. On 10th March, 2020 the Respondent requested for additional information without which the demand for additional duties, taxes and interest would stand.

7. The Appellant, dissatisfied with what it indicated to be the Respondent’s decisions dated 21st and 22nd September, 2022 lodged its Notice of Appeal on 24th November 2022.

The Appeal 8. The Appellant’s Appeal is premised on the following grounds contained in its Memorandum of Appeal dated 24th November 2022 and filed on even date.i.That the impugned decision is illegal, null and void for the determination of duty and tax payable based on the suggested HS Code that was not based on any sample tested or collected and contained in the tariff classification for unmanufactured tobacco.ii.That the Respondent acted illegally and/or erred in law by;a.Failing to rely on the tariff classification ruling that was issued by the KRA laboratory after the testing of SAMP/055418, entry No. 2018MSA6941907 which was collected from the Appellant's consignment in the warehouseb.Contrary to the (EACCET), under chapter 24 of the Harmonized Commodity Coding System that guides the classification of tobacco, the Respondent unjustifiably classified the product without conducting any further test to support its re-classification.c.In breach of Section 49 of the Tax Procedures Act and Section 122 (2) EACCMA 2004, failing to give a written explanation and/or a statement of reason as to how the classification was arrived at;d.In breach of Section 30 of the TPA and not relying on the tariff classification ruling that was as a result of the tests done on the unmanufactured tobacco and in the contrary relying on unfounded evidence to uphold the demand for KES 185,434,595. 00e.Contrary to Article 10(2)(c) of the Constitution of Kenya 2010, failing to act in a transparent and accountable manner by refusing to give information to the Appellant thus breaching his right to access to information enshrined in article 35. f.Contrary to article 24, 46 (1) (b), and 47 of the Constitution of Kenya failing to give full information as to the basis of the agency notice and acting in excessive of their mandate and without any court order justifying their actions to issue the agency notice.iii.That without prejudice to the above, the impugned tax decision is unlawful and unconscionable as it gives the Appellant's goods (unmanufactured tobacco) a higher duty, tax and FOB value than what it was actually bought for.iv.That the impugned tax decision is illegal, null and void in totality for breaching the provisions of Chapter 24 of the Harmonized system which covers tobacco and unmanufactured tobacco which mirrors the provisions of the EAC CET.v.That the impugned decision violated the Appellant's rights under Articles 24, 46 (1) (b) and 47 of the Constitution of Kenya.vi.That the Respondent in so acting violated the Appellant's legitimate expectation to the proper administration of the tax law, to their detriment.

The Appellant’s Case 9. The Appellant’s case is premised on the following documents before the Tribunal: -i.Its Statement of Facts dated and filed on 24th November 2022ii.Its written submissions dated 5th September 2023 and filed on 7th September 2023.

10. The Appellant averred that over the years 2014, 2016 and 2018, it imported unmanufactured tobacco, into the Republic of Kenya, which consignments were allotted entry numbers 2014MSA4xxxxx, 2016MSA59xxxxx & 2018MSA6xxxxx upon the loading of the entry.

11. That on 12th July 2018, the Customs Post Clearance Audit unit requested for Tariff Classification for unmanufactured tobacco, SAM/055418, entry No. 2018MSA69xxxxx and a sample was sent to the Respondent’s laboratory test to ascertain the actual content of the tobacco imported whether unmanufactured or processed.

12. That on 24th July 2018, the report from the Respondent’s laboratory revealed and confirmed that the actual cargo imported was unmanufactured tobacco stemmed/stripped, classified in HS Code 2401. 20

13. That the HS Code 2401. 20. 00 which was declared by the KRA laboratory, was similar and corresponded with the cargo that the Appellant through its agent had declared thus the applicable duty and tax rate in the Simba system verified.

14. That following the said report, the Respondent went ahead and varied the tax and duty payable for the consignment and issued an uplift tax amount that did not correspond and was not applicable on HS Code 2401. 20 and which uplift was more than the value of the goods.

15. That on the 1st August 2018 the Appellant appealed under Section 219 of the EACCMA 2004 against the valuation uplift and the change in HS Code. That the Respondent did not favor the Appellant with a response until on 17th of January 2020 when the Appellant received an email from the Respondent indicating that it had used a wrong tariff classification and declared HS code 2401. 20 instead of HS Code 2403. 19.

16. That the suggested tariff 2403. 19. 00 by the Respondent indicated that there had been an undervaluation of the imported tobacco which resulted in non-payment of Excise duty and VAT as well as an undervaluation of FOB for consignments with entry number 2014MSA48xxxxx3, 2016MSA59xxxxx & 2018MSA69xxxxx therefore, uplift amount of Kshs. 185,434,595. 00 applied for all.

17. The Appellant averred that based on the information contained in the email it objected the decision for the uplift through a letter dated 14th February 2020 on grounds that the Commissioner had informed and guided the classification of the Appellant's consignment on the 24th of August 2018 and the tariff applicable as 2401. 20. 00 being the same tariff that had initially been declared by the Appellant.

18. The Appellant averred that it went further and requested the Respondent to reverse its computation which would then waive the unwarranted uplift. That the Respondent on 17th February 2020 wrote to the Appellant requesting for submission of documents as the ones in its possession were not clear.

19. The Appellant stated that upon its response, the Respondent required it to submit more supporting documents for customs entries numbers 2014MSA4xxxxx, 2016MSA59xxxxx & 2018MSA6xxxxx which goods had already been cleared and consumed.

20. The Appellant submitted that on the 8th of October 2020 after submitting the supporting documents its officials were summoned to appear before the Respondent on the same date. At the conclusion of the said meeting, the Respondent was to issue the Appellant with the minutes of the meeting as well as the conclusion and/or feedback of the said meeting, it failed to do so.

21. That it was not until 21st September 2022 that the Appellant received a copy of an agency notice from the Respondent addressed to the Managing Director of l&M Bank with instruction to act as an agent and pay the Respondent the sum of Kshs.185,434,595. 00 being duties due by the Appellant.

22. The Appellant averred that as regards the import of unmanufactured tobacco, the Respondent is mandated to apply the provisions of the East Africa Community Common External Tariff (EACCET), Customs and Excise Act and the decisions, tariff rulings, opinions, guidelines and interpretations given by Directorate, World Trade Organization and Customs Cooperation Council.

23. The Appellant averred that the impugned decision is illegal, null and void since the sample used in arriving at the suggested HS Code was neither tested, collected nor contained in the tariff classification for unmanufactured tobacco.

24. The Appellant averred that the Respondent acted illegally and/or erred in law by failing to rely on the tariff classification ruling that was issued by its laboratory after the testing of SAMP/055418, Entry No. 2018MSA69xxxxx which was collected from the Appellant's consignment in the warehouse.

25. The Appellant contended that contrary to the EAC CET, under Chapter 24 of the Harmonized Commodity Coding System that guides the classification of tobacco, the Respondent unjustifiably classified the product without conducting any further test to support its re-classification.

26. The Appellant submitted that the Respondent was in breach of Section 49 of the TPA Act and Section 122 (2) EACCMA 2004 for failing to give a written explanation and/or a statement of reason as to how the classification was arrived at.

27. The Appellant submitted further that the Respondent was also in breach of Section 30 of the TPA for not relying on the tariff classification ruling that was as a result of the tests done on the unmanufactured tobacco and in the contrary relying on unfounded evidence to uphold the demand for Kshs. 185,434,595. 00

28. The Appellant averred that contrary to Article 10(2)(c) of the Constitution of Kenya 2010, the Respondent failed to act in a transparent and accountable manner by refusing to give information to the Appellant thus breaching its right to access to information enshrined in Article 35 of the Constitution of Kenya.

29. The Appellant averred further that contrary to Articles 24, 46 (1) (b), and 47 of the Constitution of Kenya, the Respondent failed to give full information as to the basis of the agency notice and acted in excessive of its mandate and without any court order justifying its actions to issue the agency notice.

30. The Appellant averred that the impugned tax decision was unlawful and unconscionable as it gives the Appellant's goods (unmanufactured tobacco) a higher duty, tax and FOB value than what it was actually bought for.

31. The Appellant stated that the Respondent in so acting violated the Appellant's legitimate expectation to the proper administration of the tax law, to its detriment.

32. The Appellant contended that despite requesting the Respondent to consider its tariff classification report and the guidance as to the duty payable, the Respondent refused, ignored and rejected to consider the same and based the uplift on its own error which further breached the Appellant's Constitutional and statutory rights. That the Respondent’s action was in breach of Article 40 of the Constitution of Kenya safeguarding the Appellant's right to acquire property and own property in the country.

33. The Appellant submitted that the Respondent failed to expeditiously, procedurally, and efficiently attend to the Appellant by giving it requisite information in a timely and legal manner as provided for under Article 47 of the Constitution of Kenya.

34. The Appellant averred that the Respondent failed to apply the provisions of the East Africa Community Common External Tariff (EACCET) as Heading System (H.S) 2401. 20. Chapter 24 of the Harmonized Commodity Coding System, General Rules of Interpretation (GIR) and laboratory reports of the sample of the consignment.

35. The Appellant posited that the Respondent in applying the HS Code 2403. 19 failed to consider that the HS Code initially applied and declared by the Respondent was as a result of tests carried out by its Laboratory and in no way was it manipulated by the Appellant and therefore the errors of its own officials cannot be visited upon the Appellant.

36. The Appellant averred that in determining this issue, it relied on the Harmonized Commodity Coding System and General Rules of Interpretation (GIR), EAC Common External Tariff and the laboratory reports conducted on the consignment sample on the 24th of July 2018.

37. The Appellant posited that goods are described by their characteristics as defined in the tariff under the tariff nomenclature as known under the Harmonized Commodity Coding System of description and applied by the Common External Tariff of East Africa Customs Union.

38. The Appellant relied on the case of Unga Limited V Commissioner General of Customs and Excise (1978) KLR 1 that sets out the guiding principles on interpretation that deal with the description of the goods, the heading, and then the notes before the sub-paragraph of the tariff which are thereby properly classified under the Harmonized System of Commodity description and coding system which is controlled by the World Customs Organisation and Kenya is a member.

39. The Appellant further relied on the case of Republic vs Commissioner of Customs & Ex-parte Mulchand Ramii & Sons limited eKLR, as regards classification and interpretation where it was held as follows: -“To ascertain what code is applicable to particular goods, one has to look at the General interpretation rules for the classification of goods, which set out the principles of interpretation in conjunction with the various chapters, describing the goods and the duty due”

40. It was the Appellants' submission that the General Rules of Interpretation of Classification of Goods (GIR 1) are applicable and therefore there was no basis for the Respondent to move or place its reliance on other rules. Rule 1 of the GIR provides that: -“The titles of Sections, Chapters and Sub- Chapters are provided for ease of reference only; for legal purposes classification shall be determined according to the terms of the headings and any relative section or chapter notes and provided such headings or notes do not otherwise require, according to the following provision."

41. The Appellant submitted that Chapter 24 of the Harmonized Commodity Coding System which covers tobacco and manufactured tobacco substitutes has 3 Headings thus: -2401:Unmanufactured tobacco, tobacco refuse2402:Cigars, cheroots, cigarillos and cigarettes of tobacco or tobacco substitutes2403:Other manufactured tobacco and manufactured tobacco substitutes; homogenized or reconstituted tobacco; tobacco extracts and essences.2403:Other manufactured tobacco and manufactured tobacco substitutes; homogenized or reconstituted tobacco; tobacco extracts and essences

42. The Appellant averred that Explanatory Notes to Heading 2401 HS provide that this heading covers;“(1)Unmanufactured tobacco in the form of whole plants or leaves in the natural state or as cured or fermented leaves, whole or stemmed/stripped, trimmed or untrimmed, broken or cut (including pieces cut to shape, but not tobacco ready for smoking). Tobacco leaves, blended, stemmed/stripped and ''cased" (''sauced" or, liquored 'J with a liquid of appropriate composition mainly in order to prevent mould and drying and/so to preserve the flavour are also coveted in this heading.(2)Tobacco refuse, e.g., waste resulting from the manipulation of tobacco leaves, or from the manufacture of tobacco products (stalks, stems, midribs, trimmings, dust, etc.)

43. The Appellant averred that from the explanatory notes, tobacco is still considered to be unmanufactured even after undergoing processes such as stemming, stripping, curing, fermenting and blending. That a similar holding was held in TAT Appeal No. 266 of 2020 Eric Ogola Adula vs Commissioner of Customs and Border Control, where in the Tribunal held that:“Based on the Explanatory notes to heading 2401 the Tribunal observed that the un-manufactured tobacco remains within the scope of heading 2401 even after undergoing certain processes such as stemming, curing, fermenting, cutting or blending provided that it is not ready for smoking."

44. The Appellant invited the Tribunal to look at the explanatory notes to Heading 2403 which the Respondent opted to reclassify the Appellant’s consignment without any further re-testing of the sample. The notes cover:i.Smoking tobacco, whether containing tobacco substitutes in any proportion, for example, manufactured tobacco for use in pipes or for making cigarettesii.Chewing tobaccoiii.Snuffiv.Tobacco compressed or liquored for making snuffv.Manufactured tobacco substitutesvi.Homogenized or reconstituted tobaccovii.Tobacco extracts and essences

45. The Appellant asserted that the sample tested was considered to be unmanufactured tobacco, not stemmed and classified in HS Code 2401. 20. 00. That further and in support of this, on 12th July 2018, the Customs Post Clearance Audit requested Tariff Classification for unmanufactured tobacco SAM/055418, entry No. 2018MSA6941907 and a sample was sent to the Respondent’s laboratory test to ascertain the actual content of the tobacco imported whether unmanufactured or processed.

46. The Appellant contended that tobacco in its imported form could not have been consumed and was not suitable for consumption and therefore had to go through some processes for it to be considered suitable for consumption. That it was the holding in TAT Appeal No. 266 of 2020 – Eric Ogola Adula vs Commissioner of Customs and Border Control, wherein the Tribunal held that:“It is the addition of additives and grinding which would have qualified the tobacco to move from Heading 2401 to 2403”

47. It was the Appellant’s submission that the Respondent erred in classifying the tobacco under the Other manufactured tobacco and manufactured tobacco substitutes; homogenized or reconstituted tobacco; tobacco extracts and essences of Heading 2403, whereas the laboratory tests conducted on the sample collected by the Respondent and submitted to its laboratory indicated that the sample tested was identified as dried plant material containing nicotine and having physical characteristics of stemmed dried broken leaves of the tobacco plant and based on the findings the officer declared the consignment to be unmanufactured tobacco, stemmed/stripped, classifiable in HS Code 2401. 20. 00 of the Common External Tariff.

48. It was the Appellant’s submission that the Respondent did not bother or even attempt to show that, contrary to what the Simba System and the Respondent's laboratory results on the consignment sample had declared that through re-testing the code differed or changed, thereby falling under HS Code 2403.

49. The Appellant averred that under the Fifth Schedule of the Customs and Excise Act Cap 472, the tariff that the Respondent relied on for uplift on tax; 2403 has the same description as what is provided for under the Customs External Tariff on Chapter 24, heading 2403 HS Code 2403. 19. 00 with a description of homogenized or reconstituted tobacco. Therefore, going with the strict interpretation of the description given to this classification would be an abuse of power for the Respondent to rely on the same without re-testing the sample to give it a different description of 2403.

50. It was the Appellant’s case that when classifying its consignment it was guided by the provisions of Chapter 24 of the Harmonized Commodity Coding System which covers tobacco and manufactured tobacco substitutes specifically under Heading 2401 which if the explanatory notes were to be relied on described the Appellant’s consignment as;“1. Unmanufactured tobacco in the form of whole plants or leaves in the natural state or as cured or fermented leaves, whole or stemmed/stripped, trimmed or untrimmed, broken or cut (including pieces cut to shape, but not tobacco ready for smoking). Tobacco leaves, blended, stemmed/stripped and ''cased" (''sauced" or ,,liquored '') with a liquid of appropriate composition mainly in order to prevent mould and drying and/so to preserve the flavour are also coveted in this heading.

(2)Tobacco refuse, e.g., waste resulting from the manipulation of tobacco leaves, or from the manufacture of tobacco products (stalks, stems, midribs, trimmings, dust, etc.) "

51. The Appellant averred that the Respondent did not provide any factual evidence on the basis for arriving at the determination that the goods could be re-classified under Heading 2403 without any further re-testing and therefore, could only hold the Appellant responsible for the uplift amount if samples are drawn and submitted for analysis.

52. The Appellant further relied on the case of Keroche Industries Limited v The Revenue Authority HMSC APP 743/06 where Justice Nyamu cited Bennion On Statutory Interpretation -acode. 4th Ed at page 726-727 where he says;“---- in a taxing Act, one has to look at what is clearly said. There is no equity in tax. There is no presumption as to tax. Nothing is to be read, nothing is to be implied. One can only look fairly at the language used”

53. Further in the case of Ramsay Ltd V Inland Revenue Commissioner (1992) Ac 300 the same principles were expressed as follows:-“A subject is only to be taxed on clear words not upon intendment or upon the "equity" of an Act”

54. The Appellant submitted that the Respondent created a legitimate expectation to the Appellant that upon bringing in the first consignment in 2014 and again in 2016 and having the two consignments classified as HS Code 2401 and duty according to the Simba system paid for therefore gave the implication that should the same consignment be imported into the Country and assessed in the same manner in the Simba system as set up by the Respondent, the same tariff classification would also apply.

55. The Appellant cited the case of Communications Commission of Kenya & 5 Others v Royal Media Services & 5 others where the Supreme Court stated that;-“Legitimate expectation would arise when a body, by representation or by past practice, has aroused an expectation that is within its power to fulfill. Therefore, for an expectation to be legitimate, it must be founded upon a promise or practice by public authority that is expected to fulfill the expectation.”

56. The Appellant submitted that legitimate expectation ought not be frustrated because it is the root of the Constitutional principle of the rule of law which requires predictability and certainty in Government dealings with the public.

57. The Appellant averred that fair administrative action under Article 47 is a distinct right from the right to a fair hearing under Article 50 (l) (2) of the Constitution which would apply for proceedings before a court of law or independent and impartial Tribunal or body.

58. It was the Appellant’s submission that in applying the principles of legitimate expectation, fair administrative action as provided for in the Constitution as well as Section 4 of the Fair Administrative Actions Act of 2015 and the provisions of Section 131 of the East African Community Customs Management Act, 2004 that gives the Commissioner power to issue agency notice it is clear that there was procedural impropriety as was used by Lord Diplock in the House of Lords decision Council of Service Unions V. Minister for the Civil Service (1984) UKHL 9 (1985) 1 A.C 374, House of Lords (UK) to explain that a public body authority could be acting ultra Vires if it commits a serious procedural error.

Appellant’s Prayers 59. The Appellant prayed that this Tribunal finds: -i.This Appeal is allowedii.Directs the Respondent to lift the agency notice issued to the Managing Director of l&M bank as regards the Appellant's accounts and its dealings.iii.A declaration that the decision of the Commissioner to use the HS Code 2403. 19. 00 is null, void, and unconstitutional.iv.The Respondent be compelled to constrain itself to the use of the HS Code that was a result of lab tests done on the sample that was acquired from the sample SAMP/055418, entry No. 2018MSA6941907 which at the time of the test being done was the only consignment available at the warehouse;v.In the alternative, the Respondent be compelled to accept the duty paid by the Appellant as the appropriate value for the goods.vi.The Respondent be compelled to compensate the Appellant for the business losses incurred by the Appellant as a result of the agency notice issued to l&M bank against the Appellant's account.vii.General damages for unfair administrative action, and failure to provide information as requested.viii.Costs of this suit.

Respondent’s Case 60. The Respondent’s case is premised on the following documents filed with the Tribunal:-i.The Respondent’s Statement of Facts dated 23rd December 2022 and filed on the same date together with the documents attached thereto.ii.The Respondent’s written submissions dated 23rd August 2022 and filed on the same date.

61. The Respondent submitted that the dispute arose from a post clearance desk audit conducted pursuant to the provisions of Sections 235 and 236 of EACCMA, 2004. That the audit centered on customs entry no 2018MSA6xxxxx in which the importer declared goods under tariff Heading 2401. 20. 10.

62. The Respondent submitted that it reviewed the taxpayer’s declarations 2016MSA59xxxxx, 2019MSA69xxxxx and 2014MSA48xxxxx and upon application of the recommended tariff of 2403. 19. 00 extra taxes comprising of Import duty, Excise duty, VAT, IDF, RDL, interest and penalties were assessed.

63. The Respondent stated that the tariff ruling dated 24th July, 2018 submitted by the Appellant was only in reference to sample from Customs Entry no 2018MSA69xxxxx. That tariff rulings are based on the sample tested and material facts presented during laboratory analysis.

64. The Respondent submitted that the 1st Appellant objected to the demand through a letter dated 10th March, 2020. That the Respondent requested the Appellant to provide some set of documents failure to which the demanded amounts remained due and payable.

65. The Respondent averred that a reminder was sent out on email on 8th April, 2020 and the Appellant failed to respond to the request. That the Appellant failed to do so and only sought recourse before this Tribunal when the Respondent took enforcement measures through agency notices on 21st and 22nd September, 2022.

66. The Respondent asserted that it cannot be strictly bound by its rulings as Section 235 and 236 of the East African Community Customs Management Act EACCMA (2004) gives it power to verify the accuracy of the entry of the goods and subsequent examination thereof.

67. The Respondent submitted that it has power to audit and re-audit declarations and entries and any person aggrieved by the decision has a right to apply for review within the parameters set under Section 229 of the EACCMA, 2004.

68. The Respondent humbly submitted that the Memorandum of Appeal raised three issues for determination as follows: -i.Whether there is a proper Appeal before the Honourable Tribunal for determination.ii.Whether there is an appealable decision for determinationiii.Whether the Respondent's additional assessment, tax demand and enforcement is proper in law

i Whether there is a proper Appeal before the Honourable Tribunal for determination 69. The Respondent submitted that this Appeal seeks to challenge the Respondent's decision dated 17th January, 2020.

70. The Respondent contended that it differs with the Appellant on whether required documents were availed to the Respondent. That whereas the Appellant stated that on 8th October 2020 it had provided supporting documents and the Appellant's officials summoned to appear before the Respondent, the Respondent on the other hand maintains that the Appellant failed to respond to its request. That this is evidenced by the fact that the dispute relates to the demand issued on 17th January, 2023.

71. It was the Respondent's submission that this dispute was brought to life by the enforcement measures taken through agency notices dated 21st and 22nd September, 2022 which form the subject of the Appellant's Notice of Appeal dated and filed on 24th November, 2023.

72. The Respondent propounded that the law governing disputes of this nature is laid down under EACCMA. Section 229 (1) to which states:“A person directly affected by the decision or omission of the commissioner or other officers of matters relating to Customs shall within thirty days of the date of the decision or omission lodge an application for review of that decision or omission.”

73. That Section 229 (4) states:“Commissioner shall within a period not exceeding thirty days of 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 reasons for the decision.”

74. That Section 230(1) states that:“a person dissatisfied with the decision of the commissioner under section 229 may appeal to a tax appeals tribunal established in accordance with section 231. ”

75. Further that Section 230(2) provides that:-“a person intending to lodge an appeal under this section shall lodge the appeal within forty five days after being served with the decision, and shall serve a copy of the appeal on the Commissioner.”

76. The Respondent submitted that Section 13 (4) of the Tax Appeals Tribunal Act provides for the circumstances under which a late Appeal may be filed. The Section states that:-“An extension under subsection (3) may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the applicant from filing the notice of appeal or submitting the documents within the specified period.”

77. The Respondent submitted that the Applicant failed to move the Tribunal through an application that provides a reason for late filing of the appeal. That this Honourable Tribunal has a duty to protect itself from abuse of its processes.

78. The Respondent contended that the Appellant's Appeal is against the Respondent's decision dated 17th January, 2020 and agency notices issued on September, 2022 yet the delay of 2 years and 11 months had not been explained before the Tribunal for leave to be granted.

79. The Respondent relied on the case of High Court in ITA E50 of 2021 Rana Auto Selection Limited-vs- Comm Domestic Taxes in striking out an appeal stated:“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.....”

80. The Respondent submitted that this Appeal is incompetent having been filed out of time without leave of the Court.

ii. Whether there is an Appealable decision for determination 81. The Respondent posited that in any Appeal lodged, the decision that is subject or should be subject to the Appeal or application must be one that is within the jurisdiction of the Tribunal to determine i.e. appealable decision.

82. The Respondent stated that it was 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, 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.

83. The Respondent cited Section 2 of the TPA, which state as follows:“appealable decision" means an objection decision and any other decision made under a tax law other than- a tax decision; or- a decision made in the course of making a tax decision”

84. That further, a tax decision is defined under Section 2 of the Tax Procedures Act to mean:i.an assessment;ii.a determination under section 17(2) of the amount of tax payable or that will become payable by a taxpayer;iii.a determination of the amount that a tax representative, appointed person, director or controlling member is liable for under sections 15,17, and 18;iv.a decision on an application by a self-assessment taxpayer under section 31(2);v.(e) a refund decision; (fJ a decision under section 48 requiring repayment of a refund; or (g) a demand for a penalty”

85. The Respondent posited that the decision dated 17th January, 2020 is a tax demand to which the Appellant objected to and was invited to provide supporting documents for review.

86. It was the Respondent's submission that, where a decision is made in this context, such a decision amounts to a tax decision which cannot be subject to an appeal at the Tribunal, unless and until an application for review is lodged, the objection is considered and consequently a review decision is made. It is only then that the decision would crystallize as an appealable decision that is subject to the jurisdiction of the Tribunal.

87. The Respondent relied on TAT Misc 29 of 2019 Anthony Kariuki Mwai v National Transport & Safety Authority &2 others [2020] eKLR where the Tribunal made the following observation.“Therefore the Tribunal is of the considered view that a demand or directives made by the first Respondent cannot be termed as an appealable decision.”

88. The Respondent submitted that in the circumstances, there is no appealable decision that can be subject to premise the appeal for determination.

ii. Whether the Respondent's additional assessment, tax demand & enforcement is proper in law 89. The Respondent submitted that the tariff ruling dated 24th July, 2018, referred to by the Appellant was only in reference to sample from customs entry no 2018MSA6941907 and that tariff rulings are based on sample tested and material facts presented during laboratory analysis. That the said ruling at page 2 has a disclaimer that there follows further investigations and verification of the industrial manufacturing process to ascertain use of this product as raw material for the production of tobacco products.

90. That the genesis of the dispute at trial is a demand letter dated 17th January, 2020, to which the Appellant objected seeking to rely on a ruling dated 24th July, 2018.

91. The Respondent averred that through its letter dated 10th March, 2020 it requested the Appellant to provide some set of documents failure to which the demanded amounts remain due and payable. That the Appellant failed to do so and only sought recourse before this Tribunal when the Respondent took enforcement measures through agency notices on 21st and 22nd September, 2022.

92. The Respondent submitted that the burden is on the Appellant to produce evidence to substantiate that the Respondent’s demand and enforcement measures were unlawful and unfounded in law.

93. The Respondent's case is that the Appellant failed to respond to the call for supporting documents for review making the additional taxes due and payable.

94. The Respondent stated that it is not enough to generally make averments, it relied on the High court’s holding in the case of National Social Security Fund Board of Trustees -v- Commissioner of Domestic Taxes, Kenya Revenue Authority (2016) eKLR where the Court affirmed as follows at Paragraph 36:“There is a world of difference between assertion and proof. That which a party puts to be his case is an assertion. The party needs to adduce evidence to support his said assertion with a view to supporting his case"

95. Further the Respondent relied on Commissioner of Domestic Taxes v Galaxy Tools Limited [2021] eKLR where it was stated that the tax laws reverse the well-known principle of evidence of "he who alleges must proof'.“In this regard, the tax authorities would assess what it considers to be the tax due from a taxpayer and the tax laws would burden the tax payer to disprove that the assessment or tax demanded is wrong or incorrect. This is borne by the fact that the assessment and demand is ordinarily made way after the tax payer has assessed himself and made a declaration of what according to him is the tax payable and has already paid such tax. The burden is therefore shifted to the tax payer because, the tax authority has to rummage through the documents of the tax payer years after the tax payer assessed himself and paid what he considered to be his tax liability”

96. The Respondent submitted that in the absence of proof to the contrary, the tax demand remains in force.

Respondent’s Prayers 97. The Respondent prayed that this Honourable Tribunal finds: -i.That the Respondent's decision via a letter dated 10th March 2022 and subsequent tax demand be upheld.ii.That this Appeal be hereby dismissed with costs.

Issue For Determination 98. Having considered the pleadings and submissions of the parties and the documentation availed, the Tribunal is of the considered view that this Appeal raises the following single issue for determination:Whether there is a proper Appeal before the Tribunal

Analysis And Findings 99. The Tribunal having identified the issue for determination proceeds to analyze it as indicated hereunder.

100. The Appeal was against the Respondent’s tax demand notice of 17th January 2020.

101. The dispute at hand relates to re-classification of goods under the East African Community Customs Management Act EACCMA, 2004 which resulted in the impugned tax demand.

102. The law governing such a dispute is to be found in Section 229 (1) of EACCMA which states:“A person directly affected by the decision or omission of the commissioner or other officers of matters relating to Customs shall within thirty days of the date of the decision or omission lodge an application for review of that decision or omission.”

103. Section 230(1) states that:-“a person dissatisfied with the decision of the commissioner under section 229 may appeal to a tax appeals tribunal established in accordance with section 231. ”

104. The Tribunal notes that the Appellant had started the process of review where it made an objection on 14th February 2022; on 10th March 2022 it was requested to provide documents to enable the Respondent review its decision.

105. While the matter was pending a review decision, the Appellant filed its Appeal on 24th November 2022 against the tax demand. This Appeal was therefore premature since the decision contemplated in EACCMA 229 had not been made by the Commissioner so as to warrant the Appellant to Appeal to the Tribunal in accordance with Section 230 of EACCMA.

106. The Tribunal is further guided by its holding in Tax Appeal No. 247 Of 2020 W.E.C Lines Kenya Limited where while quoting the case of Krystalline Salt Limited vs. Kenya Revenue Authority [2019] eKLR the Tribunal stated that:“Accordingly, we are of the view that the Appeal is premature. Our decision is informed by the findings of the court in where it stated that:"Where there is a clear procedure for redress of any particular grievance prescribed by the Constitution or an Act of Parliament, that procedure should be strictly followed. Accordingly, the special procedure provided by any law must be strictly adhered to since there are good reasons for such special procedures."

107. The Tribunal therefore finds that the Appeal is invalid due to lack of an appealable decision. Having found that the Appeal is invalid, the Tribunal could not delve into the substantive issues in the Appeal.

Final Decision 108. The upshot of the foregoing is that the Tribunal makes the following Orders:i.The Appeal be and is hereby struck out.ii.Each party to bear its own costs.

109. It is so ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 8TH DAY OF MARCH, 2024. ERIC NYONGESA WAFULA - CHAIRMANDR. RODNEY O. OLUOCH - MEMBERABRAHAM K. KIPROTICH - MEMBERCYNTHIA B. MAYAKA - MEMBERTIMOTHY B. VIKIRU - MEMBER