[2023] KETAT 982 (KLR)

Superserv Limited v Commissioner of Investigation & Enforcement (Appeal E047 of 2023) [2023] KETAT 982 (KLR) (1 December 2023) (Ruling)

Neutral citation: [2023] KETAT 982 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal E047 of 2023

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

December 1, 2023

Between

Superserv Limited

Appellant

and

Commissioner of Investigation & Enforcement

Respondent

Ruling

1. The Applicant vide a Notice of Motion application dated the 14th day of June, 2023 and filed under a certificate of urgency on the 15th day of June, 2023 sought for the following Orders:-a.Spentb.Spentc.That pending the hearing and determination of the main Appeal arising out of and against the objection decision dated 30th June, 2021, this Honourable Tribunal be pleased to order for the lifting, suspension and/or stay of the enforcement and implementation of the Six (6) agency notices dated 7th June, 2023 for the sum of Kshs.22,604,317. 00 issued upon Equity Bank Kenya Limited, Diamond Trust Bank Ltd, First Community Bank limited, Kenya Commercial Bank Limited and Co-operative Bank of Kenya Limited.d.That the Honourable Tribunal be pleased to restrain the Respondent, their agents, employees, assignees from demanding or issuing further agency notices in relation to the amounts in issue, being Kshs.22,604,317. 00 as demanded in the agency notices dated 7th June, 2023 or the sums confirmed in the objection decision dated 30th June, 2021 pending the hearing and determination of the intended Appeal.e.Spentf.That the Notice of Appeal dated 25th April, 2023 filed herewith be and is hereby deemed as duly filed.g.That this Honourable Tribunal be pleased to grant the Applicant leave of 14 days to file its Memorandum of Appeal and Statement of Facts upon extending time to appeal out of time.h.That this Honorable Tribunal be pleased to give all necessary and consequential directions.i.That the costs of this application to be in the cause.

2. The application which is supported by an Affidavit sworn by Yusuf Idris Yunis, a Director of the Applicant, on the 14th day of June, 2023 is premised on the following grounds, that:-a.The Respondent issued an assessment that was duly objected to subsequent to which an objection decision dated 30th June, 2021 was issued.b.That there was a delay on the part of the Applicant in appealing against the objection decision that was occasioned by the Applicant’s Director being unwell.c.That the Director who was the only Director involved at the time in active running of the business suffered prolonged illness that affected the running of the business and in handling the tax dispute.d.That the Applicant’s delay in the filing of an appeal was in the circumstances not intentional but due to the prolonged ill health.e.That the delay is not inordinate as the application for leave has been brought within reasonable time as soon as the Director was back on his feet and to running of the affairs of the Applicant.f.That the Applicant has satisfied the grounds for delay as provided under Section 13(4) of the Tax Appeals Tribunal Act.g.That the Applicant ought to be granted an opportunity to be heard on the merits on its appeal as the delay was not intentional.h.That on the basis of the draft Memorandum of Appeal annexed to the application the intended appeal is arguable and has overwhelming chances of success.i.That the application has been brought in good faith and timeously for the Tribunal to exercise its discretion judiciously.j.That no prejudice will be suffered by the Respondent as allowing the application will only grant the parties an opportunity to fairly ventilate and argue the appeal before this Tribunal.k.That it is a matter of public notoriety and judicial notice that the Respondent’s procedures are normally slow and demonstrate reluctance in effecting refunds even for taxes paid in error.l.That should the agency notices be honoured and the sums demanded remitted to the Respondent, the Applicant stands to suffer the loss of colossal amounts of money with minimal chances of the same being refunded, should the main appeal succeed.m.That unless orders of enforcement of the agency notices are granted, the Applicant stands to suffer irreparable financial loss and damage and the intended appeal would be rendered nugatory shold leave be granted.n.That the Appeal is merited and ought to be heard and orders sought granted to obviate any injustices to the Applicant.

3. The Respondent in response to the application filed a Replying Affidavit sworn by Esther Rintari, an officer of the Respondent, on the 22nd day of June, 2023 and filed on the even date in which it raised the following grounds in opposition to the application:-a.That on or about July, 2020, the Respondent conducted investigations which established that the Applicant is in the construction industry and received payments from, inter alia, County Governments.b.That the Respondent issued the Applicant with a tax assessment vide a letter dated 26th March, 2021 for a sum of Kshs.163,799,371. 00 for VAT and Corporation tax inclusive of interest and penalties.c.That the Applicant partially objected to the tax demand vide a letter dated 18th April, 2021. d.That the Respondent issued and served the Applicant with an objection decision on the 30th June, 2021, with the taxes having been adjusted to a sum of Kshs.48,870,137. 00. e.That the Applicant if dissatisfied with the objection was expected to have lodged an appeal with the Tribunal by the 30th July, 2021. f.That the Applicant filed a Notice of Appeal on 25th April, 2023 which was one year and 10 months after the objection decision was issued.g.That upon expiry of the statutory period of preferring an appeal against the objection decision the assessed taxes became due by operation of law and the Respondent was at liberty to enforce payment, thus the issuance of the agency notices.h.That the Applicant’s failure to lodge an appeal in time is not a mere technicality that can be cured under Article 159(2)(d) of the Constitution of Kenya, 2010 but is a deliberate omission that runs on the face of clear statutory provisions.i.That the application for leave to appeal out of time has been made two years later and only after agency notices were issued by the Respondent.j.That the delay is inordinate and the stated ground of sickness has not been demonstrated and sufficiently justified.k.That the application has been brought in bad faith and is an attempt to further delay the collection of taxes due and payable by the Applicant.l.That the Applicant ignored lodging the appeal on the assumption that taxes would not be recovered and was only awakened by the issuance of the agency notices.m.That the Notice of Appeal dated 25th April, 2023 is invalid and against the spirit of Section 52(2) of the Tax Procedures Act which requires that any undisputed taxes must be paid or a payment arrangement put in place prior to lodging the Notice of Appeal.n.That the Notice of Appeal is invalid, bad in law and an abuse of the process of the Tribunal and the same ought to be expunged from the Tribunal’s record.o.That the application lacks merit and is incompetent.p.That the production of the medical documents to support the ground of sickness in occasioning the delay in filing the appeal in time is an afterthought that has not been well substantiated.q.That the deponent of the Affidavit in support of the application did not avail any written document to show that he had authority to file the application on behalf of the Applicant.r.That the application is an abuse of the process of the Tribunal.

Analysis and Findings 4. The parties in pursuant to the directions issued by the Tribunal to the effect that the application was to be determined through written submissions filed their respective written submissions, that have been appropriately considered by the Tribunal in arriving at the findings hereinafter.

5. The Tribunal is enjoined to determine the length and reason for the delay when considering an application for the extension of time to appeal out of time. 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 Applicant.

6. In determining whether to extend time, the Tribunal is guided by the decision in the case of Leo Sila Mutiso v Rose Hellen Wangari Mwangi - Civil Application No. Nai. 255 of 1997 (unreported), where the Court expressed itself as thus:-“It is now well settled that the decision whether or not to extend the time for appealing is essentially discretionary. It is also well settled that in general the matters which this court takes into account in deciding whether to grant an extension of time are: first, the length of the delay; secondly, the reason for the delay; thirdly (possibly), the chances of the appeal succeeding if the application is granted; and, fourthly, the degree of prejudice to the respondent if the application is granted.”

7. The Tribunal, is further guided by the principles set out in John Kuria v Kelen Wahito, Nairobi Civil Application Nai 19 of 1983 April 10, [1984] where the court used the following criteria to consider the application.a.Whether there is a reasonable cause for the delay?b.Whether the appeal is merited?c.Whether the application for extension has been brought without undue delay?d.Whether there will be prejudice suffered by the Respondent if the extension is granted?

a. Whether there is a reasonable cause for the delay? 8. In considering what constitutes a reasonable reason for the delay, the court in Paul Wanjohi Mathenge v Duncan Gichane Mathenge [2013] eKLR, held that:-“...it is clear that the discretion to extend time is indeed unfettered. It is incumbent upon the applicant to explain the reasons for delay in making the application for extension and whether there are any extenuating circumstances that can enable the Court to exercise its discretion in favour of the applicant.”

9. The Applicant indicated that the delay in lodging the appeal timeously as against the Objection decision issued on the 30th June, 2021 was as a consequence of the prolonged illness of the only Director involved in the active running of the business of the Applicant. The Applicant produced vide the annextures to the Affidavit in support of the application treatment chits from Alliance Medical Centre that attest to prolonged illness of Yusuf Idriss Yunis, a Director of the Applicant, from March 2021 to May, 2023. The chits suggest constant and regular medical attention during the intervening period. The authencity of the medical chits has not been called into issue by the Respondent.

10. It is therefore the Tribunal’s finding that the reason tendered by the Applicant has been satisfactorily established to be a reasonable cause for the delay in filing the appeal to the Tribunal.

b. Whether the Appeal is merited? 11. The Tribunal examined whether the actions complained of by the Applicant were merited and there was an arguable appeal before the Tribunal or the appeal was frivolous to the extent that it would only result in a waste of the Tribunal’s time.

12. An appeal being merited does not mean that it should necessarily succeed rather it is arguable. The Tribunal was guided by the findings of the court in George Boniface Mbugua v Mohammed Jawayd Iqbal (Personal representative of the Estate of the late Ghulam Rasool Jammohamed) [2021] eKLR where it was held that:-“It must be remembered that the question whether an appeal is arguable, does not call for the interrogation of the merit of the appeal, and the Court, at this stage must not make any definitive findings of either fact or law. An arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully by the Court.”

13. The Applicant annexed to the Affidavit in support of the application a draft Memorandum of Appeal that raised five (5) substantive grounds of appeal. A perusal of the draft Memorandum of Appeal reveals that the Applicant has an arguable appeal that calls for it being afforded an opportunity to vindicate the same through a full hearing on the merits.

14. It is the Tribunal’s finding that these are issues only to be interrogated in trial. That as such, the Tribunal finds that there is an arguable Appeal and the same has triable issues that can only be gleaned in an evidentiary hearing before it.

c. Whether there will be prejudice suffered by the Respondent if the extension is granted? 15. The Respondent did not demonstrate how it would suffer prejudice if the prayer for expansion of time was granted. The Respondent only pointed out the fact that allowing the Appeal after such an inordinate period will be prejudicial to it and since the Respondent’s mandate of collection of revenue is key to the economic development of the Country, the public and all the arms of the Government specifically the Tribunal are called upon to assist the Respondent in carrying out its mandate so long as the same is within the law.

16. The Tribunal however observes that the Applicant’s recourse to justice lies in an appeal to the Tribunal. Thus, the Applicant would suffer prejudice if it is not granted leave to file its appeal considering that the amount of money claimed is of significant value.

17. It is the view of the Tribunal that the Respondent would otherwise still collect the taxes together with penalties and interest should the Applicant be found to be at fault.

18. The Tribunal, therefore, finds that the Respondent will not suffer prejudice if the extension is granted.

19. The Tribunal, consequently finds the Applicant has satisfactorily proven to it that it filed the application at the earliest convenient time after it found out about the issuance of the objection decision and the same has been brought without undue delay.

Disposition 20. The Tribunal in the circumstances finds the application is meritorious and finds in favour of the Respondent.

21. The Tribunal accordingly makes the following Orders:-a.The Applicant is hereby granted leave to file an appeal out of time.b.The Applicant’s Notice of Appeal dated the 25th April, 2023 be and is hereby deemed as duly filed and served.c.The Applicant to file and serve the Appeal documents within Fifteen (15) days of the date of delivery of this Ruling.d.The Respondent to file and serve its Statement of Facts within Thirty (30) days of being served with the appeal documents.e.The agency notices dated 7th June, 2023 issued to the Applicant’s bankers be and are hereby lifted.f.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 1ST DAY OF DECEMBER, 2023. ERIC NYONGESA WAFULACHAIRMANELISHAH N. NJERU MUTISO MAKAUMEMBER MEMBEREUNICE N. NG’ANG’A ABRAHAM K. KIPTROTICHMEMBER MEMBER