[2024] KETAT 1261 (KLR)

Style Industries Limited v Commissioner of Legal Services and Board Co-ordination (Tax Appeal E140 of 2024) [2024] KETAT 1261 (KLR) (9 August 2024) (Ruling)

Neutral citation: [2024] KETAT 1261 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E140 of 2024

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

August 9, 2024

Between

Style Industries Limited

Appellant

and

Commissioner of Legal Services and Board Co-ordination

Respondent

Ruling

1. The Respondent vide a Notice of Motion dated the 30th day of April, 2024 filed under a Certificate of urgency on the even date and which is supported by an Affidavit sworn by Sadia Salo, an Advocate for the Respondent, on the same date sought for the following Orders:-a.Spentb.That this Honourable Tribunal be pleased to admit Respondent’s Statement of Facts filed out of time.c.That the costs of this application abide in the cause.

2. The application is premised on the following grounds:-a.That the Respondent was served with the Appeal documents on the 6th February, 2024. b.That the Respondent filed its Statement of Facts on the 6th March, 2024. c.That on the 13th March, 2024 the Appellant’s Advocate wrote to the Respondent informing the Respondent that they had filed and served two different matters and that they had only been served a response on one of the matters.d.That the Appellant had served TAT No. E134 of 2024 pertaining to corporate income tax and VAT and TAT No. E140 of 2024 pertaining transfer pricing.e.That upon follow-up with the Respondent’s registry, it was clear that the Appellant had served both the matters under one Appeal TAT No. E140 of 2024. f.That the Respondent’s registry staff was further misled by the fact that both appeals’ objection decision was dated 22nd December, 2023 though on different subject matter. The assumption was therefore the Appellant had served the matter twice and the same was not brought to the attention of the Advocate on record.g.That on 18th March, 2024, the Respondent’s registry wrote an email to the Appellant informing the Appellant that the two matters were assigned one appeal number and the same need to be addressed to the Tribunal registry.h.That the Respondent has since filed its Statement of Facts out of time and prays the same be allowed.i.That the application has been brought timeously and without undue delay.j.That it is the interest of justice and in public interest that the instant application be allowed as prayed.k.That this Honourable Tribunal has jurisdiction to grant the orders sought.

3. The Appellant upon being served with the application filed a Replying Affidavit sworn by Victoria Mokaya, the legal counsel for the Appellant, on the 7th day of May, 2024 and filed on the even date in which it raised the following grounds in opposition to the application:-a.That the Respondent has not previously initiated contact with BOK & Company Advocates who are on record as Advocates for the Appellant.b.That the Respondent rendered its objection decision on the 22nd December, 2023 and the Appellant being dissatisfied filed with the Tribunal a Notice of Appeal on 19th January, 2024. c.That in pursuant to Section 13(2) of the Tax Appeals Tribunal Act the Appellant filed its Memorandum of Appeal and Statement of Facts on 2nd February, 2024 and was assigned the case number TAT E140 of 2024. d.That on 6th February, 2024 the Appellant served its Memorandum of Appeal and the Statement of Facts on the Respondent both electronically and physically.e.That at all material times since the commencement of this Appeal, Counsel on record for the Appellant has been BOK & Company Advocates.f.That the Registry has never contacted the Appellant or its Advocates on record with regards to there being two separate matters pertaining to different tax heads filed under one case number as alleged by the Respondent. Neither has the Registry ever contacted the Appellant to inform it of any change in the case number TAT No. E140 of 2024. g.That on the 18th April, 2024 when the matter came up for Mention the Respondent’s counsel informed the Tribunal that the matter was under ADR.h.That the counsel on record for the Appellant informed the Tribunal that the same was incorrect and the Appellant through its Advocates, BOK & Company Advocates, were yet to be served by the Respondent. Further, that the Appellant had not engaged in ADR.i.That the Tribunal gave orders that the Respondent should serve its pleadings on the Appellant. The Appellant confirms that as at the date of the deponement, it was yet to be served by the Respondent as directed by this Honourable Tribunal.j.That the Respondent failed to put in its response on time as prescribed by law and it is only fair and just that this Honourable Tribunal dismisses this application because allowing the same will not only be prejudicial and detrimental to the Appellant, but will also be accommodative of the Respondent’s failure to adhere to statutory timelines.k.The Respondent’s assertions are baseless, unfounded and incorrect and are an attempt by the Respondent to mislead this Honourable Tribunal.l.That the Appellant has been diligent in prosecuting this matter and has at all time complied with the timelines as prescribed by law as opposed to the Respondent who has plainly flaunted the same.m.That the Respondent has never contacted the Counsels on record for the Appellant.n.That the Respondent has approached this Honourable Tribunal with unclean hands and therefore is not deserving of the reliefs sought in the said application.o.That it is trite law that adherence to procedural requirements in tax dispute resolution is paramount.p.That the Respondent has plainly flaunted the rules of procedure and after realizing this, has come before this Honourable Tribunal seeking to remedy his indolence.q.That this Honourable Tribunal should uphold the sanctity of lawful and proper procedure in form and substance and considering the rules of procedure.

Analysis and Findings 4. The parties duly complied with the directions of the Tribunal to have the application canvassed by way of written submissions and the written submissions separately filed by the parties have been duly and appropriately considered in arriving at the findings hereinafter.

5. The Tribunal’s powers to consider and determine applications for the enlargement of time within which the Respondent could be permitted to file statement of facts outside the statutory timelines is immortalized under Section 15(4) of the Tax Appeals Tribunal Act, which provides a follows:-“The Tribunal may, upon application in writing by the Commissioner, extend the time for submitting and serving the statement of facts and the documents referred to in this section, where it is proved to the satisfaction of the Tribunal, that the delay is not inordinate or other reasonable cause that may have prevented the Commissioner from submitting and serving the Statement of Facts and the documents within the specified period.”

6. The Tribunal is enjoined to determine the length and reason for the delay when considering an application for the extension of time to file any statement of facts on the part of the Commissioner. The power to extend time is discretionary and unfettered but the same must be exercised judiciously and it is not a right to be granted to the Commissioner upon default.

7. In determining whether to extend time, the Tribunal was guided by the decision of the court in Joseph Ondiek Tumbo v Sony Sugar Co Ltd [2014] eKLR, where the learned Judge quoted Sir Thomas Bingham M R in Costellow v Somerset County Council [1993]1 All ER 952 where he stated that:“The first principle is that the rules of court and the associated rules of practice, devised in the public interest to promote expeditious dispatch of litigation, must be observed. The prescribed time limits are not targets to be aimed at or expressions of pious hope but requirements to be met. The second principle is that a plaintiff should not in an ordinary way be denied an adjudication of his claim on its merits because of a procedural default unless the default causes prejudice to his opponent for which an award of costs cannot compensate…. Further, an extension of time is an indulgence from the court by a party in default. He is not entitled to an extension. He has no reasonable or legitimate expectation of receiving one. His only reasonable or legitimate expectation is that the discretion relevant to his application to extend time will be exercised judicially in accordance with established principles of what is fair and reasonable. In those circumstances, it is incumbent on the applicant for an extension of time to provide the court with a full, honest and acceptable explanation of the reasons for the delay. He cannot reasonably expect the discretion to be exercised in his favour, as a defaulter, unless he provides an explanation for the default.”

8. The Tribunal, guided by the principles set out in Joseph Ondiek Tumbo v Sony Sugar Co Ltd [2014] eKLR and Section 15(4) of the Tax Appeals Tribunal Act, 2013 used the following criteria to consider the application:-a.Whether there is a reasonable cause for the delay?b.Whether the application for extension has been brought without undue delay?c.Whether there will be prejudice suffered by the Appellant if the extension is granted?

a. Whether there is a reasonable cause for the delay? 9. In considering what constitutes a reasonable cause for the delay, the court in Balwant Singh v Jagdish Singh & Ors (Civil Appeal No.1166 of 2006), held that:“The test is whether or not a cause is sufficient to see whether it could have been avoided by the party by the exercise of due care and attention”.

10. The Tribunal notes that the Appellant filed the Appeal documents before the Tribunal on the 2nd February, 2024 and the Appellant intimated of having effected service upon the Respondent on the 6th February, 2024.

11. The Respondent was pursuant to Section 15(1) of the Tax Appeals Tribunal Act to file its Statement of Facts within Thirty (30) days of being served and was to that extent to file its Statement of Facts within thirty (30) days of the 6th February, 2014 which in effect means by the 8th March, 2024.

12. The Respondent filed its Statement of Facts on the 1st March, 2024, which was within its statutory time limit. The Statement of Facts is to that extent duly filed and properly on record.

13. The Respondent does not appear to have effected service of the Statement of Facts upon the Appellant. The period for service of a filed Statement of Facts is provided for under Section 15(3) of the Tax Appeals Tribunal Act.

14. The Respondent manifestly fell foul of this specific and mandatory statutory provision by failing to effect the Statement of Facts upon the Appellant. The Appellant maintained and it is not refuted by the Respondent that no service of the Statement of Facts had been effected upon the Appellant prior to and immediately subsequent to the filing of the present application.

15. The Respondent did not address neither has it sought for leave to effect service of the Statement of Facts upon the Appellant out of the statutory timeline. With the Statement of Facts having been filed on time this appears to have been the remedy calculated to be achieved by the instant application.

16. There appears to have been a lot of confusion at the Respondent’s registry as to whether there was duplicity in the filing of the two Appeals between the same parties. The email trail between the registry staff and the legal counsel seem to attest to the confusion.

17. The confusion appears to have been compounded by the correspondence between the Respondent’s counsel and Messrs Delloitte and Touche LLP who are the legal representatives of the Appellant in TAT No. E134 of 2024. The confusion created a scenario where the Respondent appears to have been unsure as to whether the two separate Appeals could be allowed to proceed as filed. The confusion on the face of the trail of the email correspondences made available by the Respondent appear real and confounding to a party intend on acting diligently under the circumstances.

18. The delay in effecting service of the Statement of Facts appears to have been reasonable explainable and indeed the confusion manifest from the email correspondences as to whether there was duplicity of Appeals before the Tribunal could plausibly occasion the delay in effecting the service.

19. The Tribunal in the circumstances finds that the delay in the service of the Statement of Facts was not inordinate and has been appropriately explained.

Disposition 20. Based on the foregoing analysis the application has merit and is hereby accordingly allowed as follows:-a.The Respondent be and is hereby granted leave to effect service of the Statement of Facts filed on the 1st March, 2024 out of time.b.The Respondent to effect service of its Statement of Facts upon the Appellant within two (2) clear days of the date of delivery of this Ruling.c.The Appeals to proceed to hearing on its merits.d.The matter to be listed for Mention on the 21st August, 2024 for pre-trial directions.e.No orders as to costs.

21. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF AUGUST, 2024ERIC NYONGESA WAFULACHAIRMANMUTISO MAKAU ABRAHAM K. KIPROTICHMEMBER MEMBERELISHAH N. NJERU EUNICE N. NG’ANG’AMEMBER MEMBER