[2025] KETAT 214 (KLR)

Southern Shipping Services Ltd v Commissioner of Customs and Border Control (Tax Appeal E1400 of 2024) [2025] KETAT 214 (KLR) (2 May 2025) (Judgment)

Neutral citation: [2025] KETAT 214 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E1400 of 2024

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

May 2, 2025

Between

Southern Shipping Services Ltd

Appellant

and

Commissioner Of Customs And Border Control

Respondent

Judgment

Background 1. The Appellant is a Company registered under the companies Act and whose main business is to provide supply chain logistics and acts as a customs agent to its clients.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws (hereinafter “the Act”). Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 and 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 Appellant imported a consignment of various items vide Import Entry No. 24MBAIM400812088, that included two items namely (1) CA Curtain Kit & (2) Ethylene Filters that are subject to dispute of tariff classification in this matter. The two items were declared under HS Codes 3921. 90. 10 for the Curtain Kit & HS Code 8421. 39. 10 for the ethylene filters.

4. During Customs verification the two items were found to have been misclassified and HS Code 3926. 90. 90 was preferred for the CA Curtain Kit while HS Code 8421. 39. 90 was preferred for the Ethylene Filters.

5. The Appellant through a letter dated 26th February 2024 justified that its classification of the curtain kit and ethylene filters was correct.

6. The Respondent vide a dated 28th February 2024 ruled that CA Curtain KIT was classifiable under Code 3920. 10. 90 and Ethylene Filters were classifiable under 8421 39. 90. The Appellant respondented vide its letter dated 1st March 2024 wherein it disagreed with the Respondent’s findings.

7. The Respondent issued its ruling dated 8th March 2024 affirming that CA Curtain KIT was classifiable under Code 3626. 90 90 and asserted that this ruling would supersede any previous ruling. It thus overturned its previous decision made on made on 28th February 2024.

8. The Appellant applied for review of the tariff ruling of 8th March, 2024 vide its application for review dated 3rd April 2024. Being dissatisfied with the Respondent's review decision dated 24th April, 2024, the Appellant filed the instant Appeal late vide notice of appeal dated 26th August 2024 and was granted leave by the Tribunal to do so on 24th October, 2024. The Tribunal deemed the Notice to have been filed on 24th October, 2024.

The Appeal 9. The Appellant lodged the Memorandum of Appeal dated 22nd November 2024 on even date raising the following grounds of appeal:a.That the Respondent erred in fact and in law by declining to release goods imported by the Appellant on provision of security for duty under section 229 (6) of the East African Community Customs Management Act, 2004 (hereinafter “EACCMA”).b.That the Respondent erred in fact and in law by requiring the Appellant to apply a non-existent exchange rate contrary to section 122(7) of EACCMA.c.That the Respondent erred in fact and in law by finding that CA Curtain kits for refrigerated containers imported by the Appellant are classifiable under heading 3626. 90. 90. d.That the Respondent erred in fact and in law by finding that ethylene filters imported by the Appellant are classifiable under code 8421. 39. 90 and not 8421. 39. 10 as declared by the Appellant.

The Appellant’s Case 10. The Appellant lodged its statement of facts dated 22nd November 2024 and filed written submissions dated 3rd April 2025 which the Tribunal adopted.

11. The Appellant stated that it imported a 1X40 ft container load of reefer spares, namely curtain kits and Ethylene Filters, declared them vide import entry No 24MBAIM400812084, and paid import duties.

12. During verification prior to release, the verification officer informed the Appellant of an alert posted in the ICMS system that the tariff number for the CA Curtain Kit was 3920. 10. 90 and not 3931. 90. 00 as declared by the Appellant. The officer also informed the Appellant that the alert indicated that the classification for the Ethylene filter was 8421. 39. 90 and not 8421. 39. 10 as declared by the Appellant. The Appellant stated that the verification officer prepared a worksheet for the two items wherein he calculated duties under the suggested tariffs and forwarded the file to the head of valuation and tariff for further guidance and ruling on the applicable tariff.

13. The Appellant stated that through its letter dated 26th February 2024 and various electronic mails, the Appellant provided information to the Respondent to justify that its classification of the curtain kit and ethylene filters was correct and the suggested tariff descriptions in the ICMS alerts were incorrect. On 28th February 2024 the Respondent ruled that CA Curtain KIT was classifiable under Code 3920. 10. 90 and Ethylene Filters were classifiable under 8421. 39. 90.

14. On 1st March 2024, to mitigate the accrual of demurrage charges at the port, the Appellant requested for a provisional release of the goods pending issuance of a tariff ruling and offered to post security for additional duty. However, the Respondent declined to release the goods provisionally under bond and directed the Appellant to pay the additional duties under protest. The Appellant stated that another request was submitted on 4th March 2024, and this too was declined.

15. The Appellant stated that on 8th March 2024, the Respondent issued its review ruling affirming that CA Curtain KIT was classifiable under Code 3626. 90 90. In its letter, it asserted that this ruling would supersede any previous ruling. It thus overturned its previous decision made on made on 28th February 2024. The Appellant asserted that this letter did not address the classification of Ethylene filters. The Appellant argued that the effect of this was to bring into effect the code applied by the Appellant by dint of operationalization of Section 229(5) of EACCMA.

16. The Appellant applied for review of the tariff ruling of 3rd April 2024. It stated that a mutually agreed-upon appointment to make in-person submissions at Times Tower was fixed for 16th April 2024 through an electronic mail dated 5th April 2024. The Appellant averred that at the end of the meeting, the Respondent undertook to have internal discussions and give the Appellant its verdict in due course. However, despite Appellant’s electronic mail reminder sent to the Respondent on 13th May 2023 at 11:50 am, the Respondent maintained a ‘loud silence’ until the plaintiff wrote a reminder after which it emerged that the Respondent had forwarded a reply to an unused electronic mail address.

17. In support of ground (a) of the appeal that the Respondent erred in fact and in law by declining to release goods imported by the Appellant on provision of security for duty as provided for by Section 229 (6) of the EACCMA, the Appellant averred that the Respondent declined to release the goods provisionally under bond and directed the Appellant to pay the additional duties under protest. Another request was submitted on 4th March 2024, and this, too, was declined. It therefore asserted that it suffered demurrage charges because of the Respondent’s failure to timeously clear the goods through customs.

18. In support of ground (b) of the appeal that the Respondent erred in fact and in law by requiring the Appellant to apply a non-existent exchange rate contrary to section 122(7) of EACCMA, the Appellant stated that the Respondent cancelled entry number 24MBAIM400812084 and directed the Appellant to lodge a fresh entry, which it assigned entry number 24MBA1M400812084.

19. The Appellant contended that resulting from an appreciation of the Kenya Shilling against the Dollar, the new entry showed that a lower amount of duty was payable. The Respondent then cancelled the new entry and directed the Appellant to apply the old exchange rate which was not applicable at the time the new entry was passed. It further directed the Appellant to pay under protest pending the determination of the Tariff Ruling. The Appellant stated that it complied and paid under protest to secure the release of its goods.

20. It added that the payment of duty under protest is not a procedure expressly provided under the EACCMA and therefore, requiring the Appellant to pay under protest was an administrative overreach.

21. In support of the third ground of appeal that the Respondent erred in fact and in law by finding that CA Curtain kits for refrigerated containers imported by the Appellant are classifiable under heading 3626. 90. 90, the Appellant averred that the Respondent wrongly interpreted and applied the general interpretation rules hence the Respondent wrongly classified CA kits under Code 3920. 10. 00. As a consequence of which, the Appellant suffered financial loss due to additional taxes. Furthermore, the Appellant asserted that the decision being objected to was in itself defective in that it did not advise the Appellant of its right of appeal.

22. On classification of CA curtain Kit, the Appellant stated that the kit consists of a plastic sheet used to maintain a controlled atmosphere inside the reefer container, a securing ribbon and warning labels. A reefer container, short for "refrigerated container," is a type of containerized intermodal freight transport unit that is temperature controlled. These containers are used to transport perishable goods, such as fruits, vegetables, meat, fish, dairy products, and pharmaceuticals, which require a constant temperature to maintain their quality and freshness.

23. The Appellant stated that a controlled atmosphere (CA) curtain kit for a reefer container is specially designed to create a modified atmosphere inside the container to extend the shelf life and maintain the quality of perishable goods during transportation. The plastic curtain is fixed at the entrance to ensure that the inside of the container is airtight and there is no interchange of temperature between the inside of the container and outside.

24. The Appellant added that to ensure that it is professionally installed during stuffing of the container, it comes with instructions and warnings for pasting on the plastic curtain sheet. The instructions and warnings give guidance on how the curtain is to be handled during stuffing and when the container doors are opened to ensure integrity of the temperature of the container and contents therein. It contended that these instructions may be preprinted on the curtain and they can also be printed on removable labels which can also be passed on the container doors. It asserted that the labels are not a constituent part of the curtain.

25. The Appellant cited General Interpretative Rules (hereinafter “GIR”) 2 (b) and 3(b) to argue that the CA curtain kit, although consisting of different components, is considered to be a plastic sheet as it gives the curtain its essential character. It maintained that the foregoing places the goods to be described as plastic sheets which give the kits their essential character. It asserted that plastic sheets are potentially in headings 3920 and 3921.

26. The Appellant stated that in disqualifying heading 3921, the Appellant was advised that the addition of printing on the plastic sheet affects its classification as it changes its functionality and hence its classification. The Appellant asserted that the presence of printing does not disqualify plastic sheets from either heading 3921 or 3920. The Appellant cited Explanatory Note 10 of the General chapter notes to chapter 39 places sheets under those headings whether or not printed. It provides as follows:“In headings 39. 20 and 39. 21, the expression “plates, sheets, film, foil and strip” applies only to plates, sheets, film, foil and strip (other than those of Chapter 54) and to blocks of regular geometric shape, whether or not printed or otherwise surface-worked, uncut or cut into rectangles (including squares) but not further worked (even if when so cut they become articles ready for use).”

27. The Appellant asserted that the printed labels cannot be excluded from chapter 39 by dint of note (2) to Section VII which provides as follows:“(2)Except for the goods of heading 39. 18 or 39. 19, plastics, rubber, and articles thereof, printed with motifs, characters or pictorial representations, which are not merely incidental to the primary use of the goods, fall in Chapter 49. ”

28. The Appellant averred that chapter 49 refers to articles of the printing industry such as a plastic printed manual or label where the plastic material is merely incidental to the primary use of the manual or label. What is being classified here is the plastic sheet not the label.

29. According to the Appellant, many plastics classified under HS 3920 generally have limited gas barrier properties, which are essential for controlling the composition and concentration of gases, such as oxygen, carbon dioxide, and nitrogen, inside the reefer container. Effective gas barrier materials are crucial for extending the shelf life of perishable goods by slowing down respiration rates and inhibiting microbial growth. They also have low UV chemical resistance.

30. The Appellant stated that plastic sheets classified under HS 3920 may be rigid or less flexible, making them difficult to install, adapt, or modify to create partitions, barriers, or compartments within the reefer container. Flexibility and adaptability are important for optimizing airflow, gas distribution, and temperature uniformity throughout the container, which are critical factors in atmospheric control.

31. It stated that the materials specifically designed and engineered for atmospheric control applications, reefer containers, such as the controlled atmosphere plastic curtain kits, are classified under HS 3921. It argued that these products have been developed, tested, and validated for performance, reliability, and compliance with industry standards, making them a preferred choice for many operators and manufacturers in the perishable goods transportation industry.

32. The Appellant contended that HS 3921 is more specific to CA curtain kits as it includes plastics that are often designed and manufactured for specialized applications, such as packaging, protective coverings, industrial uses, and specific technical applications requiring enhanced properties or performance requirements for creating and maintaining controlled atmospheres in reefer containers.

33. The Appellant maintained that goods classified under HS 3921 may have specialized properties or features, such as excellent gas barrier capabilities, UV resistance, chemical resistance, fire retardancy, anti-static properties, or other enhanced performance attributes tailored for specific applications or industries.

34. In the Appellant’s view, plastics classified under HS 3921 are often required to comply with industry standards, regulations, and certifications, such as food safety, medical-grade, environmental sustainability, or other specific quality and safety standards depending on their intended use. It stated that ISO1496-2 set air tightness standards for 20 ft and 40 ft reefer containers. It added that in Controlled Atmosphere (CA) transport equipment, the importance of air tightness is far higher to maintain a low oxygen concentration. The Appellant noted that CA storage facilities ISO6949 sets extra stringent air tightness requirements, justly stating that in general the respiratory oxygen consumption should at least be equal to the rate of oxygen ingress due to air leakage. The Appellant noted that these enhancements are excluded from plastic sheets of HS 3920.

35. The Appellant averred that HS 3921 encompasses a range of specialized plastics used in niche or industry-specific applications where specific properties, performance, or regulatory compliance are essential, such as aerospace, healthcare, food processing, electronics, and other specialized industries.

36. According to the Appellant, goods classified under HS 3921 are often designed, engineered, and manufactured with specialized formulations, structures, and processes that enhance their gas barrier properties. It added that these materials are tailored for specific applications and industries requiring superior performance in controlling gas permeation, maintaining controlled atmospheres, and preserving product quality, freshness, and shelf life during storage, handling, and transportation.

37. The Appellant stated that under GIR 3(a), when by application of Rule 2 (b) or for any other reason, goods are, prima facie, classifiable under two or more headings. The Appellant asserted that heading which provides the most specific description shall be preferred to headings providing a more general description. It therefore maintained that HS 3921 is more specific to CA curtain kit for reefer containers.

38. The Appellant averred that Rule 3 (c) even if plastic sheets of 3920 could be used as CA curtains albeit inefficiently, it can only mean that the sheets are potentially classifiable under the two Headings: 3920 and 3921. It asserted that Rule 3 (c) provides guidance as to how goods classifiable in more than one heading may be classified. Rule 3(c) states as follows:“3(c) When goods cannot be classified by reference to 3 (a) or 3 (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.”

39. The Appellant opined that applying this rule means heading 39. 21 should be applied since it applies last in the numerical order. In view of the forgoing and in consideration of GIR 3(a) and (c), CA Curtain Kits are classifiable under heading 3921 and more specifically code 3921. 90. 00.

40. In support of ground (d) of the appeal the Appellant averred that the Respondent erred in fact and in law by finding that ethylene filters imported by the Appellant are classifiable under code 8421. 39. 90 and not 8421. 39. 10 as declared by the Appellant, the Appellant stated that the Respondent in rejecting the Appellant’s classification under 8421. 39. 10 contended that the said ethylene filters are not industrial; thus, by deduction, they are domestic filters. The Appellant asserted that HS 8421. 39. 10 covers industrial filtering or purifying machinery and apparatus for gases, while HS 8421. 39. 90 covers non-industrial filters like those used in domestic filtering and purifying for gases designed for residential or household use.

41. The Appellant stated that Ethylene filters do filter ethylene from fruits and vegetables in reefer containers. It asserted that they work by adsorbing and removing ethylene gas from the air inside the reefer container, reducing the ethylene concentration to levels that inhibit premature ripening and ageing of fruits, vegetables, and flowers.

42. It maintained that the Respondent erred in its claim that industrial filters are typically for use in industrial settings and processes such as manufacturing or processing. It further argued that such filters are often large and used to filter large volumes of matter. It argued that they are also designed for durability and longevity.

43. The Appellant relied on Black’s law Dictionary definition of “industry” as “a group of businesses or enterprises that produce a similar product or provide a similar service. The term may refer to all such businesses collectively or to a specific type of business within that group.” The Appellant asserted that going by this definition, shipping is an industry as defining industry to cover only manufacturing or processing is limiting and inaccurate.

44. According to the Appellant, the Respondent erred in its presumption that industrial ethylene filters are large in size and designed for durability and longevity. The Appellant argued that this presumption assumes that it is used in a large factory setting and ignores the reality that even in its limited understanding of industry, the size of enterprise may vary from micro to large. Further, the Appellant asserted that in industries handling food, health standards may require that a filter that filters noxious gases like ethylene may need to be replaced frequently to avoid contamination.

45. It stated that an ethylene filter specifically designed for a reefer (refrigerated) container is typically intended for industrial or commercial use to preserve the quality and extend the shelf life of perishable goods during transportation and storage. It noted that these filters are larger, more robust, and designed to handle the high-volume airflow and ethylene levels encountered in reefer containers used for transporting fruits, vegetables, and other perishable items over long distances.

46. It averred that Ethylene filters designed for reefer containers are typically larger and have higher capacity compared to domestic filters. They may be too large or cumbersome for use in a typical household refrigerator or storage. The Appellant added that industrial-grade ethylene filters are engineered to handle high volumes of airflow and ethylene levels encountered in commercial reefer containers. It averred that their performance and efficiency may be an overkill for typical domestic use, potentially leading to unnecessary energy consumption, reduced filter lifespan, or ineffective ethylene removal.

47. The Appellant asserted that industrial ethylene filters designed for reefer containers are more expensive and may be over budget for individual consumers or households compared to smaller, domestic ethylene filters. It asserted that industrial ethylene filters for reefer containers may require professional installation, calibration, and maintenance due to their size, complexity, and technical specifications. It added that they may also have different maintenance requirements and replacement schedules compared to domestic filters. Furthermore, industrial ethylene filters for reefer containers are designed to meet specific industry standards, regulations, and safety requirements for commercial applications.

48. The Appellant stated that an ethylene filter specifically designed for a reefer (refrigerated) container is typically intended for industrial or commercial use to preserve the quality and extend the shelf life of perishable goods during transportation and storage. The filters are larger, more robust, and designed to handle the high-volume airflow and ethylene levels encountered in reefer containers used for transporting fruits, vegetables, and other perishable items over long distances.

49. Based on the foregoing, that Appellant stated that in view of GIR 3(a) on specificity, and GIR 1, on terms of headings and subheadings, ethylene filters for reefer containers are classifiable under HS 8421. 39. 10 as industrial filtering or purifying machinery and apparatus for gases.

50. In its written submissions the Appellant relied on the case of Kenya Agricultural and Livestock Research Organization v Okoko and another (Civil Appeal 36 A of 2021) [2022] KEHC 3302 (KLR) to submit that the general rule is that courts should determine a case on the issues that flow from the pleadings and therefore a court may only pronounce judgement on the issues arising from the pleadings or such issue as the parties have framed for the court’s determination.

51. The Appellant submitted that it is entitled to a refund of demurrage charges accruing due to Customs delays. It submitted that the Respondent acted unfairly in refusing to accept the security for duty offered by the Appellant pending review of the decision amounted to a failure to exercise discretion reasonably. It cited the case of David Kiprugut Cheruiyot v Land Control Board of Belgut [2021] eKLR to support the position that that the decision maker has to act fairly.

52. The Appellant submitted that it is entitled to a refund of excess duty paid due to Respondent’s instruction to use an incorrect exchange rate. Republic v Public Procurement Administrative Review Board & 2 others Ex-Parte Pelt Security Services Limited [2018] eKLR to support the position that the decision maker should make reasonable decisions.

53. The Appellant submitted that CA kits imported by the Appellant are classifiable under heading of 3921 and more specifically under HS 3921. 90. 00. It also submitted that the Respondent erred in classifying ethylene filters Imported by the Respondent under HS 8421. 39. 90.

54. The Appellant therefore, prayed for the following reliefs:i.This Appeal be allowed with costs.ii.The Tribunal directs the Respondent to refund the amount of duty paid in excess as a result of application of a non-existent exchange rate.iii.The Tribunal finds that CA curtain kits for reefer Containers are classifiable under HS 3921. 90. 00. iv.The Tribunal finds that the ethylene filters imported by the Appellant are classifiable under HS code 8421. 39. 10. v.The Tribunal directs the Respondent to refund the extra duty collected as a result of the application of the wrong tariff code.vi.The Tribunal directs the Respondent to refund the demurrage and customs warehouse rent occasioned by the Respondent’s delayed release of the container.vii.The Tribunal be at liberty to make any such orders as it deems necessary in the circumstances.

Respondent’s Case 55. In response to the appeal, the Respondent filed its Statement of Facts dated and filed on 19th December 2024. The Respondent also filed written submissions dated 2nd April 2025 on even date.

56. The Respondent stated that Appellant imported a consignment of various items vide Import Entry No. 24MBAIM400812088, that included two items namely (1) CA Curtain Kit & (2) Ethylene Filters that are subject to dispute of tariff classification in this matter. The two items were declared under HS Codes 3921. 90. 10 for the Curtain Kit & HS Code 8421. 39. 10 for the ethylene filters.

57. During Customs verification the two items were found to have been misclassified and HS Code 3926. 90. 90 was preferred for the CA Curtain Kit while HS Code 8421. 39. 90 was preferred for the Ethylene Filters. The Respondent stated that the Appellant was guided to amend the Entry to reflect the correct guided HS Codes. The Appellant proceeded to cancel entry and lodge the declaration with the correct HS Codes for the two products. The goods were then declared under import entry number 24MBAIM401569067 dated 15th March, 2024.

58. According to the Respondent, on 4th April 2024, the classification dispute was escalated to the Tariff Classification Unit for arbitration and issuance of tariff classification rulings on the two items namely the Curtain Kit and Ethylene Filters. Upon receipt of the classification dispute together technical data sheets and the samples of the two articles, the items were identified for tariff classification purposes.

59. The Respondent stated that the Appellant misdeclared the two items by classifying the same under HS Codes 3921. 90. 10 for the Curtain Kit and HS Code 8421. 39. 10 for the ethylene filters by not following the guidelines provided under the Harmonized Systems Nomenclature.

60. The Respondent averred that the Controlled Atmosphere Curtain Kit (CA Curtain Kit) is a plastic protective cover for reefer containers that prevent leakages and maintain controlled temperatures inside the container. The kit comprises a plastic sheet that forms the curtain, securing ribbon to fix the curtain on the container walls at the door and warning labels. The CA Curtain Kit ensures leak tightness of the reefer container thereby guarantee controlled atmosphere during shipping of fruits and vegetables, particularly on the side of the container.

61. The Respondent noted that CA Curtain Kit as presented was not a single item but a kit comprising of three different items namely, the curtain, the ribbon and labels intended to be used together to achieve the desired use. The Kit comprises of three articles of plastic that are used together to achieve a specific function in providing controlled environment in a reefer container.

62. The Respondent stated that CA Curtain Kit is not covered by any of the preceding Headings of the Chapter 39 that generally covers articles of plastics yet the Appellant declared HS Code 3921. 90. 10 provides for the classification of other unprinted plates, sheets, film, foil and strip, of plastics. The Respondent noted that the item does not meet the terms of Heading 39. 21 viz. ‘‘Heading 39. 21: Other plates, sheets, film, foil and strip, of plastics.’’

63. According to the Respondent, the correct classification/HS Code of the CA Curtain Kit is HS Code 3926. 90. 90 that provides for the classification of other articles of plastics and articles of other materials of headings 39. 01 to 39. 14.

64. On Ethylene Filters, the Respondent maintained that they are designed to remove ethylene from the transport containers so as to prevent premature maturation during the transportation in the controlled atmosphere in the reefer container. It added that the ethylene filters are used in the containers during transport of fruits and other fresh farm produce to prevent premature maturation of fruits by absorbing ethylene gases that are responsible for ripening of the fruits.

65. The Respondent stated that HS Code 8421. 39. 10 declared by the Appellant covers the classification of ‘‘Industrial filtering or purifying machinery and apparatus for gases.’’ It opined that the filters in this Appeal are used in absorbing gases in a container during transport and are not of a kind used in the industry as per declaration by the Appellant.

66. Based on the technical information provided, terms of the headings and the GIR of the Harmonized System, the Respondent argued that the two items product are correctly classified under 2022 EACCET HS 3926. 90. 90 for the CA Curtain Kit while HS Code 8421. 39. 90 for the Ethylene Filters.

67. The Respondent also stated that the filters are placed at appropriate points inside the cold transport container to ensure the ethylene gas and other volatile organic compounds are absorbed continuously during transport.

68. Based on the above findings, the two items were confirmed to have been misclassified and tariff rulings Ref. KRA/C&BC/BIA/THQ/146/03/2024 & & Ref. KRA/C&BC/BIA/THQ/147/03/2024 both dated 8th March 2024 were issued to the Appellant classifying the CA Curtain and Ethylene Filters under 2022 EACCET HS Codes 3926. 90. 90 & 8421. 39,90 respectively.

69. The Respondent averred that on 3rd April 2024, the Appellant lodged an appeal on the tariff ruling decisions after payment of the taxes under protest in line with Section 229 of the EACCMA, 2004. In order to adequately respond to the appeal, the Respondent stated that the Appellant was invited for an engagement to clarify the tariff classification decisions and to understand the products better.

70. It stated that on 16th April 2024, an engagement was held at its offices at Times Towers followed by a formal response to the Appeal on 24/04/2024. The Appeal responses were referenced KRA C& BC/BIA/THQ/APPEAL/041/03/2024 and ref. KRA/C&BC/BIA/THQ/APPEAL/042/03/2024 both dated 24/04/2024.

71. The Respondent stated that it considered the Appellant’s Application for review and issued a Review Decision on 24th April 2024 classifying Controlled Atmosphere Curtain Kits imported vide Import Entry No. 24MBAIM40012084 and upheld classification of the CA Curtain Kits under 2022 EACCET HS CODE 3926. 90. 90 for reasons that:i.Note 10 to Chapter 39 states as follows:In headings. 39. 20 and 39. 21, the expression “plates, sheets, film, foil and strip” applies only to plates, sheets, film, foil and strip (other than those of Chapter 54) and to blocks of regular geometric shape, whether or not printed or otherwise surface-worked, uncut or cut into rectangles (including squares) but not further worked (even if when so cut they become articles ready for use).ii.The CA Kit is composed of a plastic sheet cut into shape to make it ready for use in controlled atmosphere as an article and complete with accessories, a name based on the intended use and clearly defined use. The Respondent stated that that this was an article and not a plastic sheet or film.iii.The tariff classification of the item was determined as follows:a.Heading 39. 26 covers the classification of other articles of plastic and articles of other materials of Heading 39. 01 to 39. 14. b.The heading includes the articles, not elsewhere specified or included of plastics (as defined in Note 1 - 39) or of other materials of heading 39. 01 to 39. 14. These include articles of plastics that are for special use but that are not specifically provided for in other headings of chapter 39. c.Based on information hereinabove, the Controlled Atmosphere Curtain Kit is a transparent plastic sheet complete with kits to fit it on the door of a CA facility, classified in 2022 EACCET HS Code 3926. 90. 90 as guided by GIR 1 and 6. d.The correct classification of Controlled Atmosphere Curtain Kit was upheld at EACCET HS Code 3926. 90. 90 which classification was based on the verification and material information presented and does not absolve the importer from any liability that may arise at the time of importation, customs verification and clearance of goods.

72. In relation to the Ethylene Filters, upon review, the Respondent observed as follows:a.The ethylene filters are designed to protect fruits from premature maturing in controlled atmosphere.b.When air passes through the filters, the filters remove ethylene gas and other volatile organic compounds, thus sanitizing the controlled atmosphere.c.As fruits mature, ethylene gas is produces as a signal to induce fruit ripening, thus decreasing fruit shelf life, storability capacity and increasing its susceptibility to pathogen attacks.d.The Ethylene filters are placed at various points on top of fruits in a controlled atmosphere.e.It then absorbs the ethylene gas as it is, without being plugged into any socket or without forming part of a machinery or system.f.The Ethylene filters can be used in any controlled atmosphere to delay the ripening of fruits, whether reefer container, or a controlled atmosphere room designed to store fresh fruits.

73. The Respondent argued that the Ethylene filters are used in various other circumstances where fresh produce is involved. The Respondent claimed that its use in a controlled atmosphere does not make it a filter for industrial use. The Respondent averred that ethylene filters imported by the Appellant were not industrial filters for the following reasons:a.Industrial filters are typically designed for use in industrial settings and processes such as manufacture or processing.b.Industrial filters are often large and used to filter large volumes of matter.c.Industrial filters are also designed for durability and longevity.

74. The Ethylene Filters imported by the Appellant were thus classified under 2022 EACCET code 8421 and this classification was upheld upon review of the goods in dispute.

75. The Respondent averred that Heading 84. 21 covers the classification of centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases. The heading includes the classification of gas filters and purifiers used to separate solid or liquid particles from gases either to recover items of value (e.g. coal dust, metallic particles etc. recovered from furnace flue gases), or to eliminate harmful materials (e.g. dust, extraction, removal of tar, etc. from gases or smoke fumes and removal of tar, from gases or smoke fumes and removal of oil from steam engine vapours).

76. The Respondent stated that Ethylene Filters were considered to be gas filters designed to absorb ethylene gases in a controlled atmosphere, classified in 2022 EACCET HS Code 8421. 39. 90.

77. The Respondent asserted that the scanned responses to the Appeal were communicated to the Appellant via electronic mail indicated on the appeal letter southernshiping@alphakenya.com as its electronic mail address as well as through the postal address yet these addresses which were contained in the Appellant’s letter head of the letter dated 26th February 2024 and that dated 7th August 2024. The Respondent stated that the Appellant could not dispute its own electronic mail in the guise that it does not use the same. The Respondent asserted that the Appellant ought to have changed it to reflect the correct one.

78. According to the Respondent, on 7th August 2024, the Appellant sent an electronic mail stating that they had not received a response to their appeal 3rd April 2024 in line with Section 229 EACCMA and therefore the considered the matter resolved under Section 229 (5). The Respondent stated that on the same day a response was provided confirming that the response had been provided on 24th April 2024 vide electronic mail provided in the appeal letter and the same on the Postal address. Consequently, the Appellant appealed the Respondent’s decision issued on 24th April 2024.

79. In Response to ground(a) of the appeal, the Respondent stated as follows:i.While the Appellant imported Controlled Atmosphere Curtain Kits & Ethylene Filters vide entry no. 24MBAIM400812084 dated 9th February 2024, the Appellant had applied the wrong Tariff Classification for the two products and this led to a tax dispute between the parties with regard to the correct classification of the Controlled Atmosphere Curtain Kits & Ethylene Filters.ii.Where a dispute arises, the Commissioner has to secure taxes before the release of the goods which was the case in this matter.iii.In this case, the Appellant imported goods vide Import Entry No. 24MBAIM400812084 dated 9th February 2024 and subsequently cancelled the entry with the final entry being 24MBAIM401569067 dated 15th March 2024 upon which the Appellant paid the amount on 15th March 2024. iv.The Respondent maintained that the Appellant admitted that it had applied the wrong HS Classification for the imported goods in question when it cancelled its initial entry and substituted the same in the new entry.v.Where the taxpayer disputes a classification, taxes are paid in protest and goods released while the Tribunal determines the correct determination. The import entry remains the same, however in this case the Appellant did not maintain its grounds.vi.The Respondent maintained that the goods in question were paid once the import duty had been paid and warehouse rent paid. The Respondent further stated that it is not the only entity that determines how fast the goods are released at the port as entities like KEBS have to give its approval for the goods to be released and therefore any delays that may occur in not to be blamed on the Respondent entirely.

80. In Response to Ground (b) of the Appeal, the Respondent stated the following:i.The applicable rate is determinant on the time of entry of the goods at the port.ii.In this Appeal the Appellant’s goods entered the country vide Import Entry 24MBAIM400812084 dated 9th February 2024 and subsequently cancelled this entry to the final entry being 24MBAIM401569067 dated 15th March 2024 by which time the rate had changed.iii.The Respondent is not in control of an applicable rate as the rate is determined by the market forces as was the case in this case.

81. In Response to the Ground (c) of Appeal, the Respondent stated the following:i.The CA Kit is composed of a plastic sheet cut into shape to make it ready for use in controlled atmosphere as an article and complete with accessories, a name based on the intended use and clearly defined use. This is an article and not a plastic sheet or film.ii.The tariff classification of the item was this determined as follows:a.Heading 39. 26 covers the classification of other articles of plastic and articles of other materials of Heading 39. 01 to 39. 14. b.The heading includes the articles, not elsewhere specified or included of plastics (as defined in Note 1 - 39) or of other materials of heading 39. 01 to 39. 14. These include articles of plastics that are for special use but that are not specifically provided for in other headings of chapter 39. c.Based on information hereinabove, the Controlled Atmosphere Curtain Kit is a transparent plastic sheet complete with kits to fit it on the door of a CA facility, classified in 2022 EACCET HS Code 3926. 90. 90 as guided by GIR 1 and 6. d.The correct classification of Controlled Atmosphere Curtain Kit was upheld at EACCET HS Code 3926. 90. 90 which classification was based on the verification and material information presented and does not absolve the importer from any liability that may arise at the time of importation, customs verification and clearance of goods.

82. In Response to the ground of appeal (d), the Respondent stated the following:a.The ethylene filters are designed to protect fruits from premature maturing in controlled atmosphere. When air passes through the filters, the filters remove ethylene gas and other volatile organic compounds, thus sanitizing the controlled atmosphere.b.As fruits mature, ethylene gas is produces as a signal to induce fruit ripening, thus decreasing fruit shelf life, storability capacity and increasing its susceptibility to pathogen attacks. The Ethylene filters are placed at various points on top of fruits in controlled atmosphere. It then absorbs the ethylene gas as it is, without being plugged into any socket or without forming part of a machinery or system.c.The Ethylene filters can be used in any controlled atmosphere to delay the ripening of fruits, whether reefer container, or a controlled atmosphere room designed to store fresh fruits. Thus, the Ethylene filters are used in various other circumstances where fresh produce is involved. Its use in a controlled atmosphere does not make it a filter for industrial use.d.The ethylene filters imported by the Appellant were not industrial filters for the following reasons:i.Industrial filters are typically designed for use in industrial settings and processes such as manufacture or processing.ii.Industrial filters are often large and used to filter large volumes of matter.iii.Industrial filters are also designed for durability and longevity.e.The Ethylene Filters imported by the Appellant were thus classified under 2022 EACCET code 8421 and this classification was upheld upon review of the goods in dispute.f.Heading 84. 21 covers the classification of centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases. The heading includes the classification of gas filters and purifiers used to separate solid or liquid particles from gases either to recover items of value (e.g. coal dust, metallic particles etc. recovered from furnace flue gases), or to eliminate harmful materials (e.g. dust, extraction, removal of tar, etc. from gases or smoke fumes and removal of tar, from gases or smoke fumes and removal of oil from steam engine vapours).g.Based on the foregoing, Ethylene Filters were considered to be gas filters designed to absorb ethylene gases in a controlled atmosphere, classified in 2022 EACCET HS Code 8421. 39. 90

83. The Respondent reiterated that the Appellant failed to discharge his burden of proof in proving that it decision is incorrect as per the provisions of Section 30 of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”).

84. It also asserted that the Appellant is not entitled to the relief sought.

85. The Respondent filed written submissions and also produced the testimony of a witness, one of its officers, Mr. Kiprop, whose statement was admitted as evidence in chief during the hearing on 20th March, 2025. On whether there was justification to pay duty in protest, the Respondent submitted that in normal cases, where a taxpayer has imported goods and there is a dispute on the correct classification of the goods, the taxpayer normally protests and pays the duty under protest while the matter proceeds for appeal pursuant to the provisions of Section 229(6) of EACCMA.

86. On the applicable rate at the point of release of the goods, the Respondent submitted that the Appellant’s declaration was subject to the prevailing dollar exchange rates. The Respondent submitted that its classification of the CA Curtains an Ethylene Filters was proper.

87. Consequently, the Respondent sought the following reliefs from the Tribunal:i.That the Review Decision issued on 24th April 2024 was properly issued and prays that the same be upheld.ii.That the correct classification for the imported CA Curtain Kits is EACCET HS Code 3926. 90. 90 and prays the Tribunal to uphold the same.iii.That the correct classification for the imported Ethylene Filters is 2022 EACCET HS Code 8421. 39. 90 and prays the Tribunal to uphold the sameiv.That this Appeal be dismissed with costs to the Respondent as the same lack merit.

Issues For Determination 88. Having considered the parties’ pleadings, submissions and documentations, the Tribunal puts forth the following issues for determination:a.Whether the Appeal is competent and properly before the Tribunal.b.Whether the Respondent was justified in classifying CA Curtain Kit under HS Code 3926. 90. 90 instead of HS 3931. 90. 00;c.Whether the Respondent was justified in classifying Ethylene Filters under HS Code 8421. 39. 90 instead of HS code 8421. 39. 10;d.Whether the Respondent erred in declining to release Appellant’s goods on provision of security for duty under section 229 (6) of the EACCMA; ande.Whether the exchange rate adopted by the Respondent was justified under section 122(7) of EACCMA.

Analysis And Findings 89. It is to these issues that the Tribunal will turn within as hereunder:

a. Whether the Appeal is competent and properly before the Tribunal. 90. The Appellant in its notice of appeal indicated that it was appealing against a Review Decision dated 24th April 2024. However, the Appellant in the first paragraph of its memorandum of appeal refers to a decision by the Respondent dated 8th March, 2024 which it is appealing against.

91. The Tribunal will first outline the chronology of events leading to the current Appeal. Upon a review of the correspondence, the Tribunal finds that the first letter that the Appellant adduced in evidence is dated 26th February, 2024. The Tribunal finds that in that letter the Appellant objected to tariff rulings which were suggested in respect of CA Curtain KIT and Ethylene filters on 9th February, 2024 when it was making payments for import duty in respect of 9 other items. The response to the said objection dated 26th February, 2024 was a letter by the Respondent dated 28th February, 2024 wherein the Respondent stated the following:“Based on the foregoing tariff classification of the CA Curtain Kit in 2022 EACCET code 3920. 10. 90 and single use Ethylene Filters in 2022 EACCET code 8421. 39. 90 is hereby upheld.”

92. Accordingly, the finding of the Tribunal is that the letter dated 28th February, 2024 was the review decision against which the Appellant ought to have appealed. The Tribunal is of the further view that the Respondent could not by its own accord purport to quash or set aside its own decision as it had stated in its letter dated 8th March, 2024. That act was ‘ultra vires’. In view of this finding the Tribunal is that any correspondence after 28th February, 2024 between the parties was extraneous in regard to the current dispute and cannot be taken into consideration by the Tribunal.

93. The Tribunal also observes that the Appellant appears to be uncertain about the decision it is appealing against, whether the one dated 8th March, 2024 or 24th April, 2024. In its notice of appeal, it refers to the Appeal being against a decision dated 24th April, 2024 whilst in its Memorandum of Appeal it refers to the Appeal being against a decision dated 8th March, 2024. The view of the Tribunal is that even if the explanation is that there is a typographical error, the Appeal ought to be against the decision by the Respondent dated 28th February, 2024 which the Tribunal has established to be the review decision.

94. Section 13(2) of the TATA requires a taxpayer to file the appealable decision. It provides as follows:‘‘(2)The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal, of—(a)a memorandum of appeal;(b)statements of facts;(c)the appealable decision’’[emphasis ours]

95. The Tribunal finds that the review decision was issued on 28th February, 2024 and that the instant appeal was not against an appealable decision since the letters dated 8th March, 2024 and 24th April, 2024 are not pertinent.

96. The Tribunal is of the view that it is against the tenets of justice for it to determine this matter on its merits since it lacks jurisdiction having found that this appeal is incompetent and improperly before it as the appeal is not against an appealable decision. The Tribunal will therefore down its tools having made this finding.

97. Having established the foregoing, analysis of the remaining issues is rendered moot.

Final Decision 98. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal fails and accordingly. and makes the following Orders:a.The appeal be and is hereby struck out.b.Each party to bear its own cost.

99. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 2ND DAY OF MAY, 2025. CHRISTINE A. MUGA - CHAIRPERSONBONIFACE K. TERER - MEMBERELISHAH N. NJERU - MEMBEREUNICE N. NG’ANG’A - MEMBEROLOLCHIKE S. SPENCER- MEMBER