[2024] KETAT 1032 (KLR)

Star Brilliant Limited v Commissioner of Customs & Border Control (Miscellaneous Application E154 of 2023) [2024] KETAT 1032 (KLR) (5 July 2024) (Ruling)

Neutral citation: [2024] KETAT 1032 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Application E154 of 2023

E.N Wafula, Chair, E Ng'ang'a, M Makau, EN Njeru & AK Kiprotich, Members

July 5, 2024

Between

Star Brilliant Limited

Applicant

and

Commissioner of Customs & Border Control

Respondent

Ruling

1. The Appellant vide an Amended Notice of Motion dated 25th October, 2023 and filed on the even date and which is supported by an Affidavit sworn by Xie Pan, a director of the Appellant, on the 25th day of October, 2023 sought for the following Orders:-a.Spentb.That there be a stay of execution of the decision, order and/or attached emanating from the enforcement notice dated 28th September, 2023 pending the hearing and determination of this application.c.That this Honourable Court be pleased to issue a declaration that the Respondent having failed to abide by the requirements of Section 229 of the East African Community Customs Management Act the notice of enforcement dated 28th September, 2023 is illegal for want of compliance with the law.d.That there be a stay of execution of the decision, order and/or attachment emanating from the enforcement notice dated 25th September, 2023 pending the hearing and determination of this Appeal.e.That this Honourable Court be at liberty to issue such or further other orders at it deems just and expedient to do so in circumstances and.f.That the costs and incidental to this application abide the result of the intendd appeal.

2. The application is premised on the following grounds:-a.That the Respondent sent out a letter dated 9th March, 2023 which it termed as its desk audit findings.b.That in response thereto, the Applicant communicated its dissatisfaction to the desk audit vide an email sent out on 24th March, 2023 seeking an explanation of how the figures had been arrived at.c.That no reply was ever received by the Applicant as such provisions of Section 229(5) of the East African Community Customs Management Act rendered the dispute moot.d.That in total breach of the East African community Customs Management Act, the Respondent has issued an enforcement notice dated 28th September, 2023 seeking to act on the desk audit dated 9th march, 2023. e.That the Applicant remains discontent with the contents of the desk audit.f.That the Applicant is apprehensive that the Respondent may deal adversely and act on the enforcement notice much to the detriment of the Applicant not to mention occasion its loss and damages.g.That it would be in the interest of justice and in compliance with the doctrines of fair hearing to allow the orders sought.h.That this application has been made expeditiously and filed without undue delay.i.That the Applicant is willing to furnish security in line with the principles set out in Mass Logistics vs. Commissioner of Domestic Taxes No. 6 of 2021 and the same to be deposited with this Honourable Tribunal.j.That the Appeal is arguable and has good prima facie prospects of success.k.That in view of the foregoing, it is in the interest of justice that this Honourable Tribunal should exercise its discretion in favour of the Applicant and admit the application and order for stay of execution pending hearing of the appeal.l.That the application is not in any way obstructing or delaying the cause of justice.

3. The Respondent in response to the application filed a Replying Affidavit sworn by Fredrick Kiptum, an officer of the Respondent, on the 18th day of October, 2023 and filed on the 19th October, 2023 in which it raised the following grounds in opposition to the application:-a.That the application has no merit, is misconceive, bad in law and ought to be struck out.b.That the application is fatal for want of compliance with the rules of natural justice on fair hearing as far as the attachment of the enforcement orders to be relied on by the appellant is.c.That the Post Clearance Audit Section undertook a compliance check on the Appellant’s exportation of hides and skins for the period January, 2018 to January, 2023 and the audit findings were issued vide a letter dated 9th March, 2023. d.That the basis of the audit findings was the under declaration of tonnage of its exports on hides and skins.e.That the Applicant was given seven (7) days to respond to the findings where the Appellant disagrees to the assessed taxes, it was to furnish the necessary documents. The Applicant did not respond to the audit findings.f.That consequently the demand letter dated 15th May, 2023 was issued.g.That the appellant failed to respond to the demand notice in accordance with section 229 of the East African Community Customs management Act, 2004. h.That the demanded amount remained outstanding and the case was forwarded to the Respondent’s Debt Management Unit for enforcement action vide a memo dated 10th August, 2023. i.That the failure to respond to the demand notice raised by the Respondent occasioned the amounts demanded and payable in the sum of Kshs.14,379,121. 00 inclusive of penalty and interest.j.That the Appellant did not object to the demand notice hence the respondent did not issue a review decision.k.That the Appellant has not offered to pay any amount as conditional stay for lifting the agency notices pending the hearing and determination of the Appeal.l.That the Appellant’s conduct has demonstrated a lack of interest in settling the taxes due and despite being accorded several opportunities to be heard.m.That there is an imminent danger of loss of revenue by the Government if the enforcement measures are stayed.n.That it would generally be wrong for this Tribunal to interfere with the obligation of the Respondent as a public body uphold the law and enforce compliance with the tax laws.o.That if at all the Tribunal is inclined to grant the injunction orders sought then it is the Respondent’s prayer that the Appellant be ordered to provide security in the form of a bank guarantee from a reputable bank equivalent to the taxes owing to secure the ultimate payment of the said taxes.p.That the Appellant is unknown to the Respondent, a non-filer and its place of business is unknown thus can evade payment of taxes if the Appeal is in favour of the Respondent.

Analysis and Findings 4. The Tribunal issued directions on the determination of the application to the effect that it was to be canvassed by way of written submissions. The Appellant complied with the directions of the Tribunal by filing its written submissions on the 16th November, 2023 and which submissions were adopted by the Tribunal on the even date.

5. The purport of the orders being sought by the Appellant is for the Tribunal to stay the Respondent’s enforcement of payment and recovery of taxes emanating from both the post clearance audit findings of 9th March, 2023 and the demand notice dated 15th May, 2023 in the sum of kshs.14,379,121. 00, inclusive of both penalty and interest.

6. The Tribunal’s powers to stay the enforcement of any decision on the part of the Commissioner in relation to a tax dispute under determination by the Tribunal are immortalized under section 18 of the Tax Appeals Tribunal Act. The Section reads as thus:-“Where an appeal against a tax decision has been filed under this Act, the Tribunal my make an order staying or otherwise affecting the operation or implementation of the decision under review as it considers appropriate for the purposes of securing the effectiveness of the proceeding and determination of the appeal.”

7. The Appellant on the face of its both Amended Notice of Appeal and Amended Memorandum of Appeal dated 25th October, 2023 and filed on the 26th October, 2023 has lodged an appeal against the decision of the Respondent made on the 28th September, 2023.

8. The Respondent on the 28th September, 2023 issued a Notice of enforcement for outstanding taxes in the sum of Kshs.14,379,121. 00. The Notice reads in part as follows:-“Reference is made to our demand notice Ref KRA/CBC/RMD/PCA/155/2023(DMD) dated 15th May, 2023 where a desk audit of your customs transactions for the period 2018 to January, 2023 was conducted and extra taxes were assessed…We note that the demanded taxes have remained unpaid despite communicating the same to you. You are required to pay the outstanding taxes including accrued penalty and interest within Seven (7) days from the date of this notice, failure to which enforcement measures will be instituted without any further reference to you.”

9. The Respondent contended that the Appellant upon being served with the post clearance audit findings of the 9th March, 2023 and the demand notice of 15th may, 2023 did not in any manner lodge any review application challenging the taxes demanded by the respondent following the post clearance audit of the Appellant’s export business of hides and skins.

10. The Appellant intimated that by its email of 28th September, 2023 it requested for further clarification and details on the post clearance audit. The Appellant indicated that it learned of the post clearance audit findings from its former employee. The email which has been sighted by the Tribunal does not make any direct reference to the post clearance audit findings of 9th March, 2023 and the demand notice of 15th may, 2023. Infact the email does not in any manner suggest any opposition or challenge to the post clearance audit findings on the part of the Appellant.

11. It is clear to the Tribunal that the Appellant did not object to the audit findings and the demand notice for the taxes assessed subsequent to the post clearance audit and that the Respondent’s contention that no review decision was a consequence issued is not at all controverted by the Appellant.

12. The notice of enforcement issued on the 28th September, 2023 was as a consequence of the default by the Appellant to lodge a review application to the demand notice of 15th May, 2023 and it was as such calculated to enforce payment of the taxes that had been deemed on the part of the Respondent to have crystallized for payment. The notice of enforcement cannot to that extent be deemed to be an appealable decision.

13. The Appellant upon being served with or at the instance of learning of the existence of the demand notice issued by the Respondent on the 15th May, 2024 ought to have lodged a review application challenging assessed taxes in pursuant to Section 229 of the East African Community Customs Management act prior to commencement the appeal process before the Tribunal. The Sections provides as thus:-“(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.(2)The application referred to under subsection (1) shall be lodged with the Commissioner in writing setting the grounds upon which it is lodged.(3)Where the Commissioner is satisfied that, owing to the absence from the partner state, sickness or other reasonable cause, the person affected by the decision or omission of the Commissioner was unable to lodge an application within the time specified in subsection (1) and there has been no unreasonable delay by the person in lodging the application, the Commissioner may accept the application lodged after the time specified in subsection (1).”

14. The Appellant did not exhaust the existing statutory dispute resolution mechanisms under Section 229 of the East African Community Customs Management upon being served with the post clearance audit findings and demand for the incidentals assessed taxes and as such the Appeal as against the enforcement measures appears on the face of it premature.

15. With the appeal filed by the Appellant premature there is no review decision under appeal whose implementation ought to be stayed for the purposes of securing the effectiveness of the proceedings and determination of an appeal otherwise considered premature.

Disposition 16. In the circumstances the Tribunal finds that the application lacks merit and the Orders that commend themselves are as follows:-a.The application be and is hereby dismissed.b.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 5TH DAY OF JULY, 2024. ERIC NYONGESA WAFULA...............CHAIRMANEUNICE N. NG’ANG’A ................ MEMBERMUTISO MAKAU.........................MEMBERELISHAH N. NJERU ....................MEMBERABRAHAM K. KIPROTICH....................MEMBER