[2024] KETAT 623 (KLR)

Shriji Stationers Limited v Commissioner of Customs & Border Control (Appeal E415 of 2023) [2024] KETAT 623 (KLR) (5 April 2024) (Judgment)

Neutral citation: [2024] KETAT 623 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal E415 of 2023

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

April 5, 2024

Between

Shriji Stationers Limited

Appellant

and

Commissioner Of Customs & Border Control

Respondent

Judgment

Background 1. The Appellant is a limited liability Company incorporated in Kenya and a registered taxpayer.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, 1995. Under Section 5 (1) of the Act, the Kenya Revenue Authority (the Authority) is an agency of the Government for the collection and receipt of all revenue. Further, 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 Parts 1 & 2 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 dispute in this Appeal arose when the Appellant was issued with a demand notice on 5th June 2023 demanding a sum of Kshs. 40,694,434. 00 being additional assessment on Import duty. Subsequently, on 8th June 2023, the Appellant lodged an application for review.

4. The Respondent issued a review decision on 6th July 2023 rejecting the Appellant’s application for review.

5. The Appellant being aggrieved by the review decision issued by the Respondent, lodged this Appeal, filing its Notice of Appeal dated 13th July 2023 on 28th July 2023.

The Appeal 6. The Appellant’s Memorandum of Appeal dated 26th July 2023 and filed on 28th July 2023 is premised on the following grounds, that;a.In issuing the impugned demand notice and impugned decision the Respondent has acted unreasonably and failed to take into consideration the fact that this Honorable Tribunal in its judgment dated 12th May 2023 in Tax Appeal 198 of 2022 (hereinafter called “the previous appeal”) found that there was no appealable decision.b.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 (1) of the East African Community Customs Management Act, 2004 (hereinafter called "EACCMA").c.This Tribunal having found that there is no appealable decision the impugned tax decision violates the provisions of Section 229 (5) of the EACCMA as the Respondent already allowed the application for review tendered on 16th February 2022. d.The impugned decision violates the provisions of Section 229 (4) and read with Section 229 (5) as the Respondent failed to issue the review decision within the legally prescribed timelines.e.The impugned tax decision violates the provision of Section 229 (4) of the EACCMA as the Respondent failed to issue a decision in writing to the person lodging the application.f.Having failed to issue a decision in writing to the person lodging the application for review the Respondent cannot now purport to arbitrarily enforce a review decision against the Appellant.g.Having failed to adduce as part of its evidence in the previous Appeal evidence of a review decision by the Respondent they are estopped from enforcing the impugned decision against the Appellant.h.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.i.Even if this Tribunal was arguendo going to find merit in the impugned demand notice and impugned decision, there is no law which imposed a duty rate of 25% on paper and paperboard products in the period between 2nd August 2018 and 27th January 2022 in view of the fact that:i.The East African Community Council of Ministers have never approved nor formally passed any law imposing a duty rate of 25% on paper and paperboard products imported under H.S Code 4802. 56. 00 since 20th June 2014. ii.No Gazette Notice has ever been published by the East African Community imposing a rate of 25% on paper and paperboard products imported under H.S. Code 4802. 56. 00 since 20th June 2014. iii.The mandate of the Respondent under Section 5 of the Kenya Revenue Authority Act is confined solely to administering and enforcing tax legislations set out in the First Schedule to the said Kenya Revenue Authority Act, and not any other law which is not set out therein.j.Even if it were to be said arguendo that some law exist which imposed a duty rate of 25% on paper and paperboard products imported under H.S. 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 following grounds:i.It is the Respondent (and not the Appellant nor its clearing agents) who actually applied the duty rate of 10% on all paper and paperboard products imported into the country under H.S. Code 4802. 56. 00 between 2nd August 2018 and 27th January 2022 by feeding into their Tradex System (otherwise known as Simba System) the duty rate of 10% as the mandatory duty rate that all importers of paper and paperboard products under its code 4802. 56. 00 had to pay before they could get their goods cleared, as the system was configured by the Respondent to automatically "pick" the duty rate of 10% once the H.S. Code 4802. 56. 00 is keyed in. Consequently, the Respondent cannot find a cause of action as against the Appellants from their own actions.ii.It is the Respondent (and not the Appellant nor its clearing agents) who instructed its ICT officers to approve online Form C.17B customs entries that had indicated 10% as the mandatory duty rate for paper and paper board products imported under H.S. Code 4802. 56. 00. Consequently, the Respondent cannot find a cause of action as against the Appellant’s from its own actions.iii.It is the Respondent (and not the Appellant nor its clearing agents) who instructed its customs and valuation officers tasked with the responsibility of verifying and approving the correctness of import duty charged and paid with respect to paper and paperboard product imported under H.S. Code 4802. 56. 00 to insist on payment of duty at the rate of 10% before such goods could be allowed to leave the port of entry.iv.The impugned decision as well as the impugned demand notice violates the Appellant’s right to fair administrative action, right to property, the right to access justice and the right to protection of the law.v.The Appellant had a legitimate expectation that the Respondent would not labour to put in place such expensive and tamper-proof infrastructural, technological, administrative, surveillance and monitoring systems as were necessary for purposes of inducing, encouraging and coercing the Appellant into paying customs duty at the mandatory rate of 10% for all paper and paperboard products imported under H.S. Code 4802. 56. 00 only to subsequently change their mind and punish the Appellant for having paid duty at the rate of 10% and not 25% (which the Appellant could not have done even if it wanted at the time because the Simba System would not permit them so to do).vi.It is unconstitutional, illegal, unfair, irrational, capricious, in bad faith and abuse of office for the Respondent to encourage, induce and coerce the Appellant into paying duty at the rate of 10% for goods which the Respondent knew or ought to have known were meant to be sold out to third parties, only for them to subsequently demand that the Appellant pays duty at 25% long after the goods have been sold and used up by the third party purchasers at which point in time the Appellant cannot recover the uplifted duty from the third party purchasers.vii.The Respondent is institutionally bound by and cannot resile from its previous interpretation of the effect of the purported deletion of paragraph 2 of Legal Notice No. EAC/69/2018, which interpretation informed its decision to configure the Simba System to "pick" import duty for paper and paperboard products imported under H.S. Code 4802. 56. 00 at the rate of 10%.viii.The Appellant’s liability to tax cannot be made wholly dependent on the personal idiosyncrasies of the individual occupants of the office of the Commissioner of Customs and Border Control as the Respondent seems to opine. Consequently, the fact that the Respondent hold different views with regards to the effect of the purported deletion of paragraph 2 of Legal Notice No. EAC/69/2018 from a previous holder of the same office should have no effect whatsoever on the Appellant’s tax liabilities.ix.Section 135 of the East African Customs Management Act (EACMA) was intended to deal only with situations where the tax paid is less than what the Respondent honestly, sincerely and for good reasons, believed to be due and payable at the time, and not as is the case herein where the tax paid is what the Respondent honestly, sincerely and for good reasons believed to be payable at the time, save for the fact that a different occupant of the same office subsequently holds the view that the previous occupant of the same office should have collected more tax, than he did.x.The Respondent has been guilty of inordinate delay in carrying out the post clearance audit.xi.The Respondent’s decision to initiate a post-clearance audit and to issue the impugned notice was actuated by malice, bad faith and improper motive.xii.By initiating a post-clearance audit as aforesaid and issuing the impugned demand notice, the Respondent acted unreasonably and took into account improper considerations while at the same time failed to take into account proper considerations.xiii.The Respondent having issued tax compliance certificates to the Appellant are estopped from changing its position and now averring as against the Appellant that it has outstanding taxes.

Appellant’s Case 7. The Appellant’s case is premised on its;a.Statement of Facts dated 26th July 2023 and filed on 28th July 2023 together with the documents attached thereto; andb.Written submissions dated 25th October 2023 and filed on 26th October 2023.

8. That the Appellant relied on Section 229 of EACMA and stated that the Respondent’s decision was not communicated within the stipulated period in law, which failure contravened the provisions of Section 229 (4) of the EACMA.

9. That the Appellant asserted that it was issued with a demand notice by the Respondent on 5th June 2023 in the sum of Kshs. 40,694,434. 00 and lodged its application for review on 8th June 2023.

10. The Appellant stated that the Respondent issued a decision dated 6th July 2023 affirming its demand notice.

11. The Appellant averred that it had instituted an Appeal previously in TAT Appeal No. 198 of 2022, judgement whereof was delivered on 12th May 2023 finding that there was no appealable decision made by the Respondent. Further, the Respondent in its pleadings and submissions did not indicate that the Commissioner ever issued a review decision to the Appellant’s Advocates on record within the legally prescribed timelines.

12. The Appellant contented that the Respondent’s failure to issue a review decision within the legally stipulated timelines cannot and ought not to be basis for it to demand taxes from the Appellant through the demand issued on 5th June 2023 and decision issued on 6th July 2023.

13. The Appellant stated that the Respondent, having failed to communicate the decision to the application lodged on 16th February 2022, the Respondent is estopped from demanding any taxes from the Appellant as the application for review stands allowed by operation of the law.

14. The Appellant asserted that even of arguendo the Honourable Tribunal were to find merit in the impugned demand notice and review decision cannot stand because by a Gazette Notice No; EAC/21/2014 dated 20th June 2014 the Council reduced the tariff rate for paper and paperboard products imported under HS Code 4802. 56. 00.

15. The Appellant asserted that on 30th June 2017 the Council, vide Legal Notice No: EAC/85/2017 renewed and modified the East African Community Common External Tariff (Hereinafter called "EAC CET") to model it along the lines of the 2017 version of the Harmonized Community Description and Coding System version 2012 of the world Customs Organization. The purpose of that review was merely to harmonize the commodity description and coding system of the EAC CET with that of the 2012 version of the world customs union CET no tariff rate was reviewed. The revised EAC CET was christened by the 2017 version of the EAC CET.

16. The Appellant contented the in line with the Legal Notice No: EAC/85/2017 aforesaid the EAC Secretariat developed and published the 2017 version of the Harmonized Commodity Description and Coding System which was modelled upon the 2012 version of the World Customs Organization. At page 221 of the 2017 version of the EAC CET aforesaid, the EAC Secretariat mistakenly indicated a tariff rate of 25% for paper and paperboard products imported under HS Code 4802. 56. 00 without any approval by the Council and without any publication by the Council to that effect through the EAC Gazette Notice.

17. The Appellant stated that following the publication of the 2017 version of the EAC CET and upon noticing the purported erroneous change in the tariff rate for H.S Code 4802. 56. 00, the Respondent deliberated on the question whether the tariff rate for H.S Code 4802. 56. 00 had been increased from 10% to 25% and resolved to consult the EAC Secretariat for clarification on the matter whereupon the EAC Secretariat clarified to it that the Council had not increased the duty rate for H.S Code 4802. 56. 00 and that the tariff rate of 25% appearing as against the H.S 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. The clarification by the EAC Secretariat was contained in an email which was circulated by Kenya Revenue Authority Manager for Post-Clearance Audit from Joab Omole to Senior Customs officers in the same organization at 11. 59 a.m on 23rd February 2018.

18. The Appellant stated that the EAC Secretariat subsequently - albeit erroneously attempted to correct the mistake in the 2017 version of the EAC CET in connection with its code 4802. 56. 00 by causing the Council to reduce the rate from 25% to 10%. Consequently, vide paragraph 2 of the Legal Notice No: EAC/69/2018 dated 30th June 2018, the Council purported to reduce the tariff rate for H.S Code 4802. 56. 00.

19. The Appellant avowed that when it later dawned on the EAC Secretariat, as well as the Council that paragraph 2 of the Legal No: EAC/69/2018 aforesaid was itself published in error since it was purporting to reduce the tariff rate for H.S Code 4802. 56. 00 from 25% to 10% yet the said tariff rate had never been formally increased from 10% to 25% (as erroneously indicated in the 2017 version of EAC CET) the Council responded by publishing a Legal Notice No: EAC/112/2018 deleting paragraph 2 of the Legal Notice No: EAC/69/2018. The deletion of paragraph 2 of the Legal Notice No: EAC/69/2018 vide the Legal Notice No: EAC/112/2018 did not have any impact at all on the tariff rate for H.S Code 4802. 56. 00 because the tariff rate for H.S Code 4802. 56. 00 had never been formally reviewed since 2014.

20. The Appellant averred that being conversant with the foregoing, and influenced thereby, the Respondent configured its Tradex system (otherwise known as Simba System) to collect duty under H.S Code 4802. 56. 00 fed by the Respondent into the Simba system with the result that any person wishing to import any good under H.S Code 4802. 56. 00 would simply enter the H.S Code into the system whereupon both the duty rate as well as the total tax payable would be given by the Simba System itself in the form of Form C17B Custom Entry.

21. In these circumstances, the Appellant stated that it would be dishonest, callous, malicious and in extreme bad faith for the Respondent to allege that the rate of 10% was not the correct rate for H.S Code 4802. 6.00; nor to accuse any clearing agent or importer of “applying:” wrong rate since the rate of 10% was actually “applied” by the Respondent who fed it into its Simba System rather than by clearing agents who merely keyed in other details of the goods being cleared, leaving it entirely to the Simba System to give the applicable duty rate as well as the total duty payable.

22. The Appellant stated that on 27th January 2022, the Respondent, through a Memo prepared on his behalf by one John Gathatwa instructed customs officers to immediately conduct a Post Clearance Audit on all goods that were cleared under H.S Code 4802. 56. 00 between 2nd August 2018 and 27th January 2022 purportedly because the Respondent had just "discovered" first that Legal Notice No: EAC/112/2018 had deleted paragraph 2 of the Legal Notice No: EAC/69/2018; Second, that the effect of the deletion was to import the duty rate of 25% for H.S Code 4802. 56. 00; and finally, that clearing agents/importers had been applying the rate of 10% for H.S Code 4802. 56. 00 instead of 25%.

23. The Appellant contended that the said Memo epitomized utmost dishonesty, callousness, malice and extreme bad faith to the extent that it purported to assert, on the one hand, that the Respondent was not aware that clearing agents/importers were applying a rate of 10% instead of 25%, and on the other hand, curiously instruct customs officers to update the Customs System with immediate effect for tariff number 4802. 56. 00 to pick import duty at 25% (which actually amount to an admission that up to that date, the Customs System had been configured for tariff No: 4802. 56. 00 to pick import duty at 10%).

24. The Appellant stated that the said Memo further ignored the fact that up to the date of the said Memo, the official position of the Respondent (as confirmed by the information which the Respondent fed into the Simba System) was that the tariff rate for since 20th June 2014 when it was set at 10% and consequently the deletion of paragraph 2 of Legal Notice No: EAC/69/2018 had no effect whatsoever on the duty rate for H.S Code 4802. 56. 00.

25. Following the issuance of the said Memo and in compliance therewith Kenya Revenue Authority Customs Officers rushed to calculate duty rates for all consignments of goods that were cleared by the Appellant under H.S Code 4802. 56. 00 between 2nd August 2018 and 27th January 2022 and proceeded to demand what it felt was the tax short fall together with purported penalties and interests.

26. The Appellant averred that it was thereafter served with a demand notice requiring it to pay a sum of Kshs. 40,694,434. 00 within Thirty (30) days from the date of the said demand notice. The Appellant submitted an objection to the notice of enforcement on outstanding tax.

27. The Appellant submitted that it is important to note that this Honorable Tribunal has agreed with similar Appellants’ on the foregoing issues and tendered judgment finding that there is no legal notice increasing the tax on paper and paperboard products, particularly in Appeal No. 389 of 2022 - Amstel Trading Company Limited vs. Commissioner of Customs & Border Control and therefore set aside the demand notices and review decision.

28. The Appellant submitted that the Respondent is only permitted to administer and enforce provisions of written laws under Section 5 (2) (a) of the Kenya Revenue Authority Act, the Respondent therefore acted ultra vires, illegally and unconstitutionally by purporting to administer and enforce non-existent laws.

29. The Appellant submitted that the assumption by the Respondent that the effect of the deletion of Legal Notice No; EAC/69/2018 was to increase duty for H.S Code 4802. 56. 00 is therefore erroneous for the following reasons:a.Under Section 110 (1) of EACCMA (supra), customs duty is payable at the rate and in such circumstances as specified in the EAC Customs Union Protocols.b.Under Article 9 of the Treaty for the Establishment of the EAC on the establishment of the organs and institutions of the Community as read together with Article 14 on the functions of the Council, only the EAC Council of Ministers has the power to fix the rate of custom duties payable under the EACCMA.c.Under Article 14 (5) of the Treaty for the Establishment of the EAC all regulations, directives and decisions of the EAC Council of Ministers must be published in the EAC Gazette vide a specific Legal Notice which must indicate when the decision, directive or regulation comes into force.d.Since the EAC Council of Ministers fixed the duty rate for paper and paperboard products (under H.S Code No 4802. 36. 00) at 10% on 20th June 2014 vide Legal Notice No; EAC/21/2014 no directive, regulation or decision has been taken by the EAC Council of Ministers (and duly gazette as required by law increasing the duty for paper and paperboard products from 10% to 25%).e.Any directive or regulation which purported to reduce the duty rate for paper and paperboard products from 25% to 10% (when the said rate was at all practical times fixed at 10%) was therefore wholly erroneous and consequently of no legal effect.f.Documents published by the EAC Secretariat and posted on the EAC website which purport to indicate duty rates that have not been formally set by the EAC Council of Ministers and which have not been duly gazette in the EAC Gazette are of no legal consequence and therefore lack the requisite legal force.g.The Respondent therefore acted illegally, unconstitutionally, irrationally, ultra vires and in bad faith when it purported to enforce and/or implement suggestions, proposals or other indications and communications posted on the EAC website which have no force of law.

30. The Appellant submitted that it was not legally possible for the Respondent to adopt one interpretation of revenue legislation today and purport to resile from the interpretation and to embrace yet a different interpretation of the same law tomorrow, especially in circumstances where doing so involves imposition of punishment (in the form of new taxes) upon innocent tax payers.

31. The Appellant further submitted that the above is so because the doctrine of precedent governs administrative decision making just as it governs judicial decisions making. To do so, or to accept such conduct by the Respondent would be tantamount to collective irrationality.

32. The Appellant submitted that the Respondent’s case has been that, despite the fact that it has cleared paper and paperboard products at the rate of 10% and even configured its systems to note the rate as such, it ‘realized’ the rate was 25% and now seek to adjust it at the taxpayers expense years after the goods were sold.

33. The Appellant submitted that the Respondent under the doctrine of precedent, which applies to administrative bodies, cannot depart from a norm it has established over time, such as charging the duty rate per law at 10%.

34. The Appellant submitted that the Respondent has no authority to claim to collect taxes at 25% as which it claimed it should have collected, the Appellant relied on the decision of the Court of Appeal in Fleur Investments Limited vs. Commissioner of Domestic Taxes & Another [2018] eKLR.

35. The Appellant relied on the following case law;i.Kenya Revenue Authority vs. Export Trading Company Ltd [2020] eKLR;ii.Krish Commodities Limited vs. Kenya Revenue Authority [2018];iii.Republic vs. Kenya Revenue Authority ex parte Cooper K – Branis Limited [2016];iv.Export Trading Company vs. Kenya Revenue Authority [2018] eKLR;v.Keroche Industries vs. Kenya Revenue Authority & 5 Others Nairobi [2007];vi.Republic vs. Kenya Revenue Authority Ex parte Universal Corporation Ltd [2016] eKLR;vii.Kenya Revenue Authority vs. Universal Corporation Ltd [2020] eKLR; andviii.Fleur Investments Limited vs. Commissioner of Domestic Taxes &Another (2018) eKLR.

Appellant’s Prayers 36. The Appellant made the following prayers that the Tribunal;a.Allows this Appeal;b.Annuls the impugned decision as well as the impugned demand notice; andc.Awards the cost of this Appeal to the Appellant

Respondent’s Case 37. The Respondent’s case is premised on its;a.Statement of Facts dated 23rd August 2023 and filed on 24th August 2023 together with the documents attached thereto; andb.Written submissions dated and filed on 23rd October, 2023.

38. The Respondent stated that the Tribunal on 12th May 2023 delivered a judgement dismissing the Appellant’s Appeal as it was filed prematurely in the absence of a substantive Review Decision, which ought to have been issued within 30 days as is required by Section 229 of the EACCMA 2004.

39. The Respondent averred that thereafter, issued a demand on 5th June 2023 to the Appellant seeking payment of taxes in the sum of Kshs. 40,694,434. 00.

40. The Respondent averred that the Appelant declined to honour the demand vide the letter dated 8th June 2023, subsequently the Respondent issued a review decision on 6th July 2023 confirming the taxes.

41. The Respondent stated that the EAC Legal Notice No. EAC/112/2018 dated 2nd August 2018 deleted item number 2 in the EAC 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%, this change was not effected in the Customs systems, leading to goods being released at lower duty rate.

42. The Respondent submitted that the demand was issued pursuant to Legal Notice No. EAC/112/2018 of 2nd August 2018, which gazette is still in force.

43. The Respondent stated that for a duty rate to meet changes, the same must first be changed by operation of the law and in the instant case the Appellant being an imported ought to have known the law.

44. The Respondent maintained that the failure to capture the amendment in the system does not take away the fact that taxes were due and payable by law and such duty to pay proper taxes falls on the Appellant.

45. The Respondent stated that its officers conducted due diligence before releasing the goods to establish that the importation documents correspond to the imported goods. Further, Section 236 of EACCMA provides for the Post Clearance Audit with the view of verifying the accuracy of the entry of goods and that the correct taxes have been paid.

46. The Respondent maintained that the demand notice issued on 7th February 2022 and the review decision of 6th July 2023 as issued was proper in law.

47. The Respondent in its written submissions dated and filed on 23rd October 2023 identified one issue for determination, namely;Whether the review decision of 6th July 2023 of Kshs. 40,694,434. 00 is lawful.

48. The Respondent submitted that it is also imperative for the Appellant to note that the Respondent in the year 2000 procured a Customs Automated System commonly known as the Simba System to replace the inefficient and unreliable manual system that was liable for delays in clearance of goods and loss of Government revenue. The said system is an open and interactive system built on client/server platform which enables the clearing agents to prepare and lodge customs entries online for customs officials to process and facilitate the release of imported goods.

49. The Respondent further submitted that it is the Appellant’s responsibility to input data into the Simba System Code applicable to a commodity. The Customs Officer is then supposed to verify in order to facilitate the release of goods and mitigate the accrual of its conferred powers under Sections 235 and 236 of the EACCMA to conduct Post Clearance Audits to verify the accuracy of the entries after the goods have been released from Customs control.

50. The Respondent submitted that the Appellant and its clearing agent deliberately chose to apply the wrong Customs Procedure Code for direct importation of paper and paper related products. This was for it to enjoy the 10% duty rate as opposed to 25% for items imported under Tariff Code 4802. 56. 00

51. Further, a computerized system is as good as the information it is fed with and if manipulated to give certain desired outcome, it is more often than not susceptible to such manipulation since the person feeding it the information is the person in command. Therefore, although the Appellant knew that there was a gazette notice in place authorizing that Tariff Code 4802. 56. 00 and which were the products imported by the Appellant would have its duty charged at 25%, he chose to deliberately enter the wrong Customs Procedure Code in the Simba System.

52. The Respondent submitted that the law adjusting the import duty rate from 10% to 25% was operational at the time the Appellant was importing its products. The East African Community Secretariat had published the EAC Gazette Notices on the EAC website adjusting the excise duty rate from 10% to 25% on paper and paper related products.

53. The Respondent submitted that the notices were available to the public and such notices usually highlighting changes effected by the Council of Ministers to the East African Community Customs Management Act, 2004 and the East African Community Common External Tariff (CET)

54. The Respondent submitted that contrary to the Appellant’s claim that there was no law that imposed a rate of 25% on paper and paper board products, the EAC Gazettes indicated the date the legal notices came into effect.

55. The Respondent maintained that the shortfall taxes demanded of Kshs. 40,694,434. 00 was due and payable to the Respondent at the time of importation of paper and paper related products and the issues of Simba system are administrative in nature and the same do not change the law.

56. The Respondent relied on the case law of Republic vs. Kenya Revenue Authority Ex Parte Cooper K-Brands Limited [2016] eKLR;

Respondent’s Prayers 57. The Respondent called upon the Honourable Tribunal to find that;a.The Appellant’s Appeal filed on 28th July 2023 be dismissed with costs.

Issues For Determination 58. The Tribunal upon the careful consideration of the pleadings, Statements of Facts and submissions made by the parties, was of the view that the issues that recommend themselves for its determination are;i.Whether the Respondent’s Review Decision of 6th July 2023 was validly issued;ii.Whether the Respondent’s Review Decision of 6th July 2023 was justified;

Analysis And Determination 59. The Tribunal shall proceed to analyze the issues as herein under;

i. Whether the Respondent’s Review Decision of 6th July 2023 was validly issued; 60. The Appellant submitted that being aggrieved with the Respondent’s review decision dated 6th July 2023, subsequently the Respondent lodged the instant Appeal.

61. A brief synopsis of the matter is that the Respondent conducted a Post Clearance Audit on the Appellant’s imported goods and issued the Appellant with an assessment relating to short levy taxes in the sum of Kshs. 40,694,434. 00 and demanded for the same vide the notice dated 7th February 2022.

62. That the Appellant, upon receipt of the notice, lodged an application for review on the 16th February 2022 and subsequently lodged Appeal No. 198 of 2022 before the Tribunal. That on 12th May 2023, the Tribunal pronounced itself on the matter and struck out the Appeal for want of an appealable decision.

63. The Respondent then issued the Appellant with a demand notice dated 5th June 2023 for the short levy taxes in the sum of Kshs. 40,694,434. 00, to which the Appellant filed a review application dated 8th June 2023, subsequently, the Respondent issued a review decision dated 6th July 2023.

64. It was the Appellant’s submission that the Respondent’s review decision of 6th July 2023 was not communicated within the stipulated statutory timelines and offended the provisions of Section 229 of EACCMA.

65. It was the Appellant’s position that the Respondent is mandated in law to render its review decision within 30 days of the date of receipt of the application for review.

66. The Appellant buttressed its position by stating that on account of the Respondent’s failure to issued the review decision within the legally stipulated timelines, the Appellant’s application for review was deemed to be allowed by operation of the law.

67. The Appellant propped that the Respondent having failed to adduce evidence in the previous Appeal (TAT Appeal No. 198 of 2022) of a review decision, the Respondent was estopped from enforcing the impugned decision of 6th July 2023.

68. It was the Appellant’s submission that the impugned decision and demand notice violates its Constitutional rights to transparency, accountability, legitimate expectation and fair administrative action.

69. The Respondent on the other hand, submitted that the judgement delivered on 12th May 2023 was in its favour as it was correct that it had not rendered a review decision as of then. The Respondent did not state any further with regard to this issue.

70. The Tribunal is therefore, invited to interrogate and evaluate whether the review decision of 6th July 2023 was validly issued. In so doing, the Tribunal shall review the relevant laws governing the matters before it.

71. Section 229 (1) of the EACCMA, provides as follows;“(1)A person directly affected by the decision or omission of the Commissioner or any other officer on 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”

72. Further Section 229 (4) and (5) of the ECCMA, provided as follows;“(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 reasons for the decision.(5)Where the Commissioner has not communicated his or her review 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.”

73. The Tribunal has had the opportunity to peruse the documents presented by the parties herein, particularly the demand notices of 7th February 2022 and that of 5th June 2023. The reading of the demand notice dated 7th February 2022 read as follows;“RE: Demand Notice-Kshs.40,694,434. 00Pursuant to Sections 235 and 236 of the East African Community Customs Management Act (EACCMA) 2004, a desk audit of your importations covering the period from 2nd August 2018 to date has been done. The audit revealed a short levy of Kshs 40,694,434. 0o for your consignments of paper under Tariff 4802. 56. 00 as a result of application of import duty at the rate of 10% instead of 25% as per the provisions of East African Gazette Notice no. EAC/112/2018 dated 02. 08. 2018. (Copy attached).Consequently, as per the provisions of section 135 of EACCMA,2004, you are hereby called upon to pay the tabulated taxes of Kshs.40,694,434. 00 within 30 days from the date of this letter. Please see attached worksheet detailing the duties and taxes payable exclusive of interest and penalties.”

74. That the demand notice issued by the Respondent dated 5th June 2023 read in part as follows;“Tax Appeals Tribunal No. 198 Of 2022 - Shriji Stationers Limited-vs-commissioner Of Customs & Border ControlRefer to the above matter and the ruling by the Tax Appeals Tribunal delivered on 12th May 2023 for case appeal No.198 of 2022. We take note that the ruling was in favour of the Commissioner of Customs and Border Control. Consequently, the assessed extra taxes of Kshs. 40,694,434. 00 is due and payable.You are called upon to pay the assessed taxes within seven (7) days. Please note for each month in default, interest will continue to accrue in accordance with the provisions of Section 135 (2) of the East Africa Community Customs management Act, 2004. ”

75. Flowing from the above correspondence of 5th June 2023, the Tribunal notes that the demand made reference to taxes due and that were subject to an Appeal that had been concluded in TAT Appeal No. 198 of 2022. The import of the same is that the tax demanded related to an assessment prior to the aforementioned Appeal which was lodged pursuant to the demand notice issued on 7th February 2022.

76. The Tribunal noted that, whereas the Appellant lodged a review application to the demand notice dated 5th June 2023, the same did not constitute a decision that would qualify to be Objected to by the Appellant.

77. The Tribunal observed that Appellant indeed objected on the 16th February 2022 to the Respondent’s decision and did not receive a review decision from the Respondent prompting it to file the previous Appeal being TAT No. 198 of 2022.

78. It would appear that the Respondent understood the decision of the Tribunal as having dealt with the matter substantively, however, the position in law is that the Tribunal addressed a fundamental procedural fault as opposed to the substantive merits of the Appeal.

79. It follows that the Commissioner having received the application for review ought to have issued the review decision with the statutory timelines of thirty (30) days from the 16th February 2022, however, the review decision was issued on 6th July 2023.

80. The Tribunal notes that the Respondent’s review decision was issued beyond the statutory timelines and therefore the provisions of Section 229 (5) of the EACCMA are applicable, the Respondent was deemed to have allowed the Appellant’s application for review dated 16th February 2022.

81. The Tribunal is further guided by the case of Equity Group Holdings Limited vs. Commissioner of Domestic Taxes (Civil Appeal E069 & E025 of 2020) [2021] KEHC 25 (KLR) (Commercial and Tax), where the court held;“A statutory edict is not procedural technicality. It’s a law which must be complied with. Parliament in its wisdom expressly and in mandatory terms provided the consequences of failing to render a decision within 60 days. The Objection is deemed to be allowed. That being the law, the appellant’s Objection stood allowed as a matter of law the moment the Commissioner of Domestic Taxes failed to render his decision within the 60 days. This being the correct legal position, it is my finding that the 1st appeal succeeds”.

82. The Tribunal having established that the Respondent’s review decision issued on 6th July 2023 was issued beyond the statutory times, it shall not delve into the other issue for determination as the same has been rendered moot.

83. Consequently, the Tribunal finds that the Respondent’s review decision of 6th July 2023 was not validly issued as the review application had already been allowed by operation of the law.

Final Decision 84. The Tribunal finds that the Appeal has merit and accordingly proceeds to make the following Orders:i.The Appeal be and is hereby allowed.ii.The Respondent’s review decision issued on 6th July 2023 be and is hereby set aside.iii.Each party to bear its own costs.

85. It’s so ordered.

DATED AND DELIVERED AT NAIROBI THIS 5TH DAY OF APRIL, 2024. ROBERT M. MUTUMA...................................CHAIRPERSONMUTISO MAKAU........................................MEMBERELISHAH N. NJERU...................................MEMBERMOHAMED A. DIRIYE ..........................MEMBERBERNADETTE M. GITARI.................................MEMBER