[2024] KETAT 155 (KLR)

Synresins Limited v Commissioner of Domestic Taxes (Tax Appeal 1164 of 2022) [2024] KETAT 155 (KLR) (9 February 2024) (Judgment)

Neutral citation: [2024] KETAT 155 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 1164 of 2022

RM Mutuma, Chair, BK Terer, EN Njeru, M Makau & W Ongeti, Members

February 9, 2024

Between

Synresins Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a private limited liability company incorporated as such under the laws of Kenya. The Appellant is a registered taxpayer and is in the business of manufacturing resins, a component used in the manufacture of paint.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority Act, the Authority is charged with the responsibility of among others, assessment, collection, accounting, and the general administration of tax revenue on behalf of the Government of Kenya.

3. The Appellant made several applications for refund of Excise duty on illuminating kerosene (a raw material in the manufacture of resins, paint and shoe polish).

4. The Respondent rejected the refund applications on 29th August 2022, 31st August 2022, 5th August 2022, 6th September 2022, 17th September 2022, 21st September 2022 and 22nd September 2022, respectively, on the basis that the claim was based on a supply that is exempt as per the Excise Duty Act 2015, 2nd Schedule, Part A, Item 13.

5. Aggrieved with the Respondent’s rejection orders, the Appellant filed at the Tribunal a Notice of Appeal.

The Appeal 6. In its Memorandum of Appeal dated 11th October 2022 and filed on even date, the Appellant premised its Appeal on the following grounds:a.That the Respondent erred in law and fact by failing to appreciate that the Appellant’s application for refund were premised on Section 29 of the Excise Duty Act and Section 8 A of the Miscellaneous Fees and Levies Act which allowed for refunds of Excise duty and anti-adulteration levy paid on illuminating kerosene subsequently used in manufacture of non-excisable goods.b.That the Respondent erred in law and fact by rejecting the Applicant’s refund applications on the basis that illuminating kerosene is exempt as per the Second schedule of Excise Duty Act 2015. c.That the Respondent erred in law and fact by failing to appreciate that the above exempt status on illuminating kerosene was introduced by Finance Act 2021. The position in law prior to the Finance Act 2021 was refund of Excise duty and anti-adulteration levy paid on illuminating kerosene subsequently used in the manufacture of non-excisable goods.d.That the Respondent erred in law and fact by retrospectively applying the 2021 Finance Act amended to deny the Appellant refunds that it was rightfully entitled by the provisions of Section 29 of the Excise Duty Act, which were in force at the time.e.That the Respondent erred in law and fact by failing to institute and put in place necessary systems, structures, frameworks and mechanisms for the licensing and registration of manufacturers who use illuminating kerosene to manufacture non-excisable goods as prescribed by Section 29 of the Excise Duty Act, Section 8A of the Miscellaneous Fees and Levies Act, and Section 33 of the Finance Act 2021. f.That the Respondent erred in law and fact by inordinately delaying the institution of the aforementioned frameworks. When the frameworks were finally put in place in 2022, the Respondent rejected the Appellant’s claims on the basis of a retrospective application of the exemption status imbued by the Finance Act 2021. g.That the Respondent erred in law and fact by rejecting the Appellant’s refund claims on the basis that illuminating kerosene is exempt, yet it had still not provided for a mechanism and framework to allow the Appellant access the illuminating kerosene duty free and levy free as envisaged by the Finance Act 2021. h.That the Respondent erred in law and fact by failing to appreciate that the Appellant’s refund claims were for the period prior to the Finance Act 2021 and were made pursuant to Section 29 of the Excise Duty Act and Section 8 A of the Miscellaneous Fees and Levies Act.

The Appellant’s Case 7. The Appellant set down its case in; -a.The Statement of Facts dated 11th October 2022 and filed on even date; together with,b.Written Submissions dated 10th May 2023 and filed on 11th May 2023.

8. The Appellant stated that it is a manufacturer of resins, which is a binding element to hold the pigment particles together and provide adhesion to painted surfaces. Resins are actual components greatly utilised by Kenya’s paint industry.

9. The Appellant stated that it applied for refund of Excise duty on illuminating kerosene but the Respondent erroneously rejected the claims necessitating an appeal before this Honourable Tribunal as prescribed under Section 47 of the Tax Procedures Act.

10. The Appellant also stated that it should be appreciated from the onset the key role kerosene plays as a raw material in the manufacture of resins, paints and shoe polish. Accordingly, a scrutiny of the kerosene importation process is necessitated to understand at what point Excise Duty and anti-adulteration levy are levied and the role they play.

11. It is the Appellant’s case that illuminating kerosene when imported by Oil Marketing Companies (OMC) is in form of dual purpose Kerosene (DPK) which typically comprises of the illuminating kerosene and JET A1 fuel.

12. The Respondent stated that when the dual-purpose Kerosene is imported by OMS, taxes including but not limited to Excise Duty and Anti-Adulteration Levy on DPK are levied at the point of importation.

13. The Appellant averred that Excise tax on illuminating kerosene was introduced in 2016 with the main aim of curbing increased adulteration of fuel in Kenya which denied oil marketers and the Government their rightfully due revenue. The Appellant further stated that the Excise tax increased the cost of production making the products uncompetitive against imports from Common Market for Eastern and Southern Africa (COMESA) and other partner states of East African Community (EAC). The Appellant also averred that the Finance Act 2017 took cognizance of this fact and allowed refund of the Excise tax.

14. According to the Appellant, Excise Duty Act 2015 was indeed amended by Finance Act 2017 to provide for a refund of Excise duty paid in respect to illuminating kerosene subsequently used by a licensed or registered manufacturer to manufacture unexcisable goods. According to the Appellant, the aforementioned provision read:“4. Section 29 of the Excise Duty Act 2015 is amended in subsection (1) by deleting paragraph (b) and substitution therefore the following new paragraph—‘The excise duty has been paid in respect of spirits or illuminating kerosene that have subsequently been used by a licensed or registered manufacturer to manufacture unexcisable goods.’”

15. The Appellant averred that in the following year, the Finance Act 2018 introduced through Miscellaneous Fees & Levies Act, an anti-adulteration levy of Kshs. 18 per litre on illuminating kerosene, levied at the point of importation to curb adulteration of fuel by unscrupulous traders.

16. It is the Appellant’s case that the introduction of the Excise duty and Anti-adulteration levy caused a strain on the local manufacturing industry as their costs of production skyrocketed. The Appellant stated that considering the challenges that the levy created to the manufacturer, the Finance Act 2019 similarly provided for refund of this levy to all manufacturers who use illuminating kerosene as an input.

17. The Appellant averred that Section 8 A (3) of the Miscellaneous Fees and Levies Act 2016 was amended by the Finance Act 2019 to provide for a refund of the levy on written application by the importer where the Commissioner is satisfied that the levy was paid in respect of illuminating kerosene that has subsequently been used by a licensed or registered manufacturer to manufacture paint, resin, or shoe polish. The Appellant stated the said provisions stated as follows:“39. Section 8A of the Miscellaneous Fees and Levies Act 2016 is amended by inserting the following new subsection immediately after section (2)—‘(3)The Commissioner shall refund the levy on the written application of an importer where the Commissioner is satisfied that the levy was paid in respect of illuminating kerosene that has subsequently been used by a licensed or registered manufacturer to manufacture paint, resin or shoe polish.’”

18. The Appellant also stated that the law also provided for a refund of the Excise duty paid in respect of illumination kerosene subsequently utilized in the production of non-excisable goods, notably Section 29 of the Excise Duty Act read:“29. Refunds(1)If excise duty has been paid by a person on excisable goods manufactured in, or imported into Kenya, the Commissioner shall, on written application by the person, refund the excise duty paid if satisfied that—(a)before being consumed or used in Kenya—(i)the goods have been damaged or stolen during the voyage or transportation to Kenya;(ii)the goods have been damaged or destroyed while subject to excise control;(iii)the buyer has returned the goods to the seller in accordance with the contract of sale; or(b)the excise duty has been paid in respect of spirits or illuminating kerosene that have subsequently been used by a licensed or registered manufacturer to manufacture unexcisable goods.(2)A licensed person may apply to the Commissioner for a refund of excise duty if the person has accounted for and paid excise duty on excisable goods or excisable services but has not received any payment from the purchaser for the goods or services, and the Commissioner may refund the excise duty if satisfied that payment for the goods or services has not been received.”

19. According to the Appellant’s Statement of Facts, whereas the Excise Duty Act and subsequently the Miscellaneous Fees and Levies Act had introduced Excise duty and Anti-adulteration levy on illuminating kerosene, the statutes were later amended to provide for a refund where the illuminating kerosene was used in the manufacture of non-excisable goods, by registered manufacturers. It is the Appellant’s case that this was the law until the Finance Act 2021 was enacted, amending the Second Schedule to the Excise Duty Act 2015 to include illuminating kerosene as an exempt item.

20. According to the Appellant, Excise duty on illuminating kerosene has thus passed through key regimes, the refunds regime and exemptions regime and should be noted that the Appellant’s refund applications span across both regimes.

21. It is the Appellant’s case also that prior to that, it should be appreciated that given the legal effect of the aforementioned amendments, a series of meetings and correspondences were held between the paints and resins subsector in the chemical and allied sector at Kenya Association of Manufacturers (KAM) (to which the Appellant is a member) and the Respondent to formalise the process of registration of manufacturers using illuminating kerosene as an industrial input, to enable the manufacturers apply for long outstanding refund.

22. In addition, the Appellant stated that to actualise the amendments introduced in 2017, particularly on the refunds, a number of operations, forms and manuals were expected to be instituted by the Respondent, key among them being:2. 16. 1.The registration on iTax or a manual registration form.2. 16. 2.The refund application platform on iTax.2. 16. 3.Usage monitoring platform for the daily or monthly monitoring of usage of illuminating kerosene by KRA.

23. The Appellant stated that a meeting was held between KAM and KRA on 17th January 2018 at KRA offices at Times Tower whose minutes were shared by the Appellant as below:i.The review of the items in the proposed checklist for registration as a user of excisable goods to manufacture non-excisable goods. In regard to this issue, the Appellant stated that details of the proposed procedure for registration were discussed and the meeting unanimously approved the form certified it as the standard procedure for application to be rolled out by KRA.ii.The validation of draft checklist for exemption of kerosene before exemption is issued to the paint manufacturer, accordingly, it was resolved that before exemption is issued:a.KRA must satisfy itself that the manufacturers are truly engaged in the paint and manufacturing business;b.An accounting system should be put in place to allow verification of kerosene used from time to time; andc.Month to month data of kerosene usage for each company in an excel format should be submitted to KRA/be availed to KRA upon request.iii.It was agreed that KRA would explores the following possibilities:a.Effecting the exemption;b.Initiating the refund process and how it can be made easier;c.Enabling monthly filing of returns online by end of February 2018 otherwise devise a manual application form.

24. The Appellant averred that by way of a letter dated 22nd January 2018, KAM on behalf of its members wrote to the Commissioner General (CG), KRA, informing the CG on the joint agreed issues arising from the meeting held between the manufacturers of paints and resin and KRA technical team on 17th January 2018 at KRA offices and also requested the CG’s kind and urgent intervention in facilitating provisions of an interim application form to initiate the process of registration and refund of claims.

25. The Appellant also stated that in a subsequent meeting held on 9th October 2018 between KAM and KRA on the policy challenges affecting manufacturers, the following transpired in relation to Excise tax refunds for industrial kerosene:a.KRA reported that the procedures and claim forms are complete and that rules have been prepared and validated;b.KRA reported that they are finalising automation for reclaiming the Excise tax refunds through iTax; andc.A meeting will be held in November between KRA and KAM to review the procedures.

26. On 11th December 208, around table meeting was held between KRA and KAM whereby KRA confirmed that a mechanism for refund had been set up and this would be available on the iTax platform from February 2019. The Appellant stated that the captured timelines were not met, even in 2020 discussions were still ongoing.

27. Following various engagements with KAM on 6th January 2020 KRA reported the following:a.That iTax had already been enhanced but a few pending issues were being addressed;b.KRA was to commence manual registration before automation and members can start making applications by the end of January 2020;c.KRA will work jointly with members to simplify the application process. KAM paints and resin manufacturers committee to share the proposed template for simplified claims lodging; andd.KRA will seek to address all issues by end of March 2020.

28. According to the Appellant, the Respondent occasioned inordinate delay in the establishment of the framework and it was not until 2022 that it finally issued guidelines for the licensing of users of spirits or illuminating kerosene through its – ‘framework for processing exemptions and refunds for excise duty and anti-adulteration levy for registered or licensed manufacturers of paint, resin and shoe polish using illuminating kerosene’.

29. The Appellant stated that from various correspondences and inspite of the provisions of the law requiring registration of manufacturers to be accorded the refund and subsequent exemption, the Respondent occasioned inordinate delay in the establishment of a proper framework that would allow manufacturers apply for refunds or acquire the illuminating kerosene excise and levy free.

30. The Appellant also averred that through its association expended great amount of time and energy to ensure that the Respondent instituted a proper framework and mechanism for the registration and licensing of users of illuminating kerosene in the production of non-excisable goods. Unfortunately, despite the efforts, the Appellant stated the Respondent did not put in place a mechanism for the registration until 2022.

31. The Appellant further stated that it was not until 2022 that the Respondent herein ultimately settled on a manual registration for manufacturers. Upon introduction of the framework, the Appellant stated that it made the manual application for licensing and was consequently a duly licensed manufacturer on the 28th March 2022.

32. The Appellant relied on the provisions of Section 29 (1) (b) (3) and (4) of the Excise Duty Act (Supra).

33. It is the Appellant’s case that all along the Appellant and other players in the industry could not make an application for licensing nor refund on the iTax platform as the system was not designed nor calibrated to accept application for registration nor refunds. Frustrated, the Appellant was stuck and at mercy of the Respondent hence numerous meetings and correspondences on the matters.

34. The Appellant argued that the Respondent ultimately issued guidelines that provided for manual applications for the licensing and further provided that the manual application for the license should be submitted together with the supporting documents to the Commissioner who will subsequently review the application and if satisfied that all the prescribed requirements are met, issue a manual license.

35. The Appellant averred that on 15th December 2021, the Appellant submitted its manual application together with the accompanying documents to the Respondent for review. The Respondent approved the application and consequently, the Appellant was licensed user of illuminated kerosene, which in this case was the resins the Appellant manufactures.

36. The Appellant stated that the following applications were rejected while others remain under review:Acknowledgment Date Rejection Date Amount Kshs Status Reason

19/11/2020 29/08/2022 816,000. 00 rejected Rejected because the claim is based on a supply that is exempt as per the Excise Duty Act 2015 (revised 2021) 2nd schedule, part A item 13

16/02/2022 31/08/2022 1,425,000. 00 rejected Rejected-illuminating kerosene supplies to licensed or registered manufacturers of paint, resin or shoe polish in such quantities as the commissioner may approve is exempt as per the second schedule of the Excise Duty Act 2015.

25/07/2022 06/09/2022 408,000. 00 rejected Rejected-illuminating kerosene supplies to licensed or registered manufacturers of paint, resin or shoe polish in such quantities as the commissioner may approve is exempt as per the second schedule of the Excise Duty Act 2015.

28/06/2021 05/09/2022 1,377,000. 00 rejected Rejected-illuminating kerosene supplies to licensed or registered manufacturers of paint, resin or shoe polish in such quantities as the commissioner may approve is exempt as per the second schedule of the Excise Duty Act 2015.

08/06/2022 22/09/2022 1,632,000. 00 rejected Claim rejected as the product exempt as per the second schedule of the Excise Duty Act 2015

21/12/202. 0 21/09/2022 714,000 rejected Rejected because illuminating kerosene supplies to licensed or registered manufacturers of paint, resin or shoe polish in such quantities as the commissioner may approve is exempt as per the second schedule of the Excise Duty Act 2015.

07/10/2021 17/09/2022 2,142,000. 00 rejected Rejected because illuminating kerosene supplies to licensed or registered manufacturers of paint, resin or shoe polish in such quantities as the commissioner may approve is exempt as per the second schedule of the Excise Duty Act 2015.

37. The Appellant stated the Respondent erroneously rejected the Appellant’s claim for refund on the grounds that the illuminating kerosene supplied to registered manufacturers are exempt as per the Second Schedule of the Excise Duty Act 2015.

38. Further, the Appellant argued that the aforementioned Section referenced and relied on by the Respondent was introduced vide an amendment in the Finance Act 2021. The amendment reads:“33. The Schedule to the Excise Duty Act is amended—(a)In part I, by inserting the following new paragraph immediately after paragraph 12-13. Illuminating kerosene supplies to licensed or registered manufacturer of paint, resin shoe polish in such quantities as the commissioner may approve.

39. The Appellant stated that prior to the amendment, the law in force was indeed Section 29 of the Excise Duty Act which provided that the Excise duty paid in respect of illuminating kerosene subsequently used by a licensed or registered manufacturer to manufacture unexcisable goods is to be refunded.

40. The appellant averred that the Respondent is applying the 2021 amendment to the Excise Duty Act retrospectively to deny the Appellant the refunds it is entitled to and that the Respondent has indeed made it abundantly clear that the only reason the refund application have been denied is due to the fact that illuminating kerosene is exempt, however, it has failed to appreciate that the refund applications relate to Excise duty accounted for and paid prior to the amendment in the Finance Act 2021 which introduced an exemption on illuminating kerosene going forward.

41. The Appellant stated that the Common law presumption is that law is to be applied prospectively and not retrospectively. The Appellant stated that the courts have pronounces themselves severally on this matter. The Appellant relied on Wilson and others vs. secretary of the state for trade and industry (2003) UKHL 40 as quoted in Republic vs. Joe Mucheru, cabinet secretary ministry of information Communication and Technology and 2 others; Katiba institute & another (Exparte) Immaculate Kasait, Data Commissioner (interested party) (Judicial review application E1138 of 2020) [2021] KEHC 122 (KLR) (Judicial Review) (14 October 2021) (Judgment) where Lord Scott of Foscote stated at Paragraph 153 of the Judgment that:“It is, of course, open to Parliament, if it chooses to do so, to enact legislation which alters the mutual rights and obligations of citizens arising out of events which predate the enactment. But in general Parliament does not choose to do so for the reason that to legislate so as to alter the legal consequences of events that have already taken place is likely to produce unfair or unjust results. Unfairness or injustice may be produced if persons who have acquired rights in consequence of past events are deprived of those rights by subsequent legislation; or it may be produced if persons are subjected on account of those past events to liabilities that they were not previously subject to. There is, therefore, a common law presumption that a statute is not intended to have a retrospective effect. This presumption is part of a broader presumption that Parliament does not intend a statute to have an unfair or unjust effect (see Maxwell on Statutes, 12th edition p 215 and Bennion's Statutory Interpretation, 4th edition pp 265-266 and 689-690). The presumption can be rebutted if it sufficiently clearly appears that it was indeed the intention of Parliament to produce the result in question. The presumption is no more than a starting point.”

42. The Appellant maintained that it is therefore erroneous for the Respondent to reject the Appellant’s refund applications based on retrospective application of the exemption status imbued by the Finance Act 2021. The Appellant argued that this retrospective application of the law is prejudicial to the Appellant as its rightfully lodged claims are being denied on laws that were not in force when the Excise duty payments were made.

43. The Appellant emphasised that illuminating kerosene is imported by the Oil Marketing Companies (OMC) as dual-purpose Kerosene and the necessary taxes and levies on them are paid at the point of importation. The cost is subsequently transferred to the public by the OMC, however, licensed manufacturers are to be exempt pursuant to the amendment introduced in the Finance Act 2021.

44. The Appellant further argued that during the purchase of illuminating kerosene which is subsequently to be used in the manufacture of non-excisable goods, the Appellant and other licensed manufacturers present the license issued by the Respondent to the OMC which would allow then access the illuminating kerosene Excise and Levy free. The Appellant also argued that whereas this would have been the ideal situation, the Appellant stated that the Respondent did not put in place the necessary mechanism for the licensing of manufacturers to access illuminating kerosene exempt from Excise duty and Anti-adulteration levy.

45. The Appellant averred that this meant that despite the law providing for its refund and exemptions, the Appellant and other manufacturers still paid aforementioned taxes which necessitated the Appellant to apply for refund of the taxes.

46. The Appellant stated that the Respondent’s actions constitutes a breach of Appellant’s right to fair administrative action as enshrined under Article 47 of the Constitution of Kenya and a further breach of the Appellant’s right to legitimate expectation and presumption of regularity.

47. From the above, the Appellant argued that the Respondent erred in fact and in law by applying the 2021 Finance Act amendment retrospectively to deny the Appellant the refunds it was rightfully entitled to in light of the provisions of Section 29 of the Excise Duty Act which were in force at the time. The Appellant also stated that the Respondent also failed to put in place necessary framework, structures and mechanisms to enable the Appellant acquire refund of the Excise duty and Levy accounted for and paid, nor the mechanism to acquire the illuminating kerosene Excise and Levy free.

48. The Appellant also submitted that Excise duty and Anti-adulteration levy have not always been levied on the Illuminating Kerosene and are in fact very recent creatures having been introduced in 2016 and 2018, respectively. The Appellant submitted that Excise duty on illuminating kerosene was introduced in 20I6 with the aim of curbing the increased adulteration of fuel. Fuel adulteration refers to the mixing of foreign substances (i.e Kerosene into diesel, solvents into gasoline) with the fuel to trick consumers into buying substandard fuel with the aim of maximizing profits.

49. The Appellant submitted at length that in 2016, the Excise Duty Act was amended by the Finance Act 2016 by amending the First Schedule to the Excise Duty Act to provide that illuminating kerosene was subject to taxation at the rate of Kshs.7,205. 00 per 1000 litres@ 20 degrees centigrade. Unfortunately, when the Excise duty was introduced, it increased the cost of production making the products uncompetitive against imports from the Common Market for Eastern and Southern Africa (COMESA) and other Partner States of the East African Community (EAC). The Finance Act, 2017 took cognizance of this fact and allowed a refund of the Excise tax paid by licensed manufacturers to manufacture non-excisable goods by amending Section 29 of the Excise Duty Act.

50. Further, the Appellant maintained that in the year 2018, Anti-adulteration Levy (AOL) was introduced to curb the adulteration of fuel by unscrupulous traders. This Levy was done through the Miscellaneous Fees and Levies Act and subsequently, a refund for the same was introduced in the Finance Act 2019 for all registered manufacturers who use illuminating Kerosene to manufacture non-excisable goods.

51. According to the Appellant, Section 8A of the Miscellaneous Fees and Levies Act, 2016 was amended by inserting the following new subsection immediately after subsection (2)-“(3)The Commissioner shall refund the levy on the written application of an importer where the Commissioner is satisfied that the levy was paid in respect of illuminatin9 kerosene that has subsequently been used by a licensed or registered manufacturer to manufacture paint, resin or shoe polish.”

52. The Appellant submitted that the changes introduced in the various statutes highlighted above were a culmination of various conclaves, negotiations, meetings and discussions between the Appellant's representative body, the Kenya Association of Manufacturers and the Kenya Revenue Authority.

53. Noting and appreciating that the Excise Duty Act and the Miscellaneous Fees and Levies Act provided that a refund should be issued to registered manufacturers. Therefore, there were meetings between the Appellant and the Respondent. The purpose of the several meetings between the Appellant and the Respondent was to formalize the process of registration of manufacturers using illuminating kerosene as an industrial input. The Appellant submitted that this was crucial not just for the processing of refund claims but was equally crucial for the purposes of processing exemptions. The Appellant submitted that the Finance Act 2021 had amended the Second Schedule to the Excise Duty Act to provide that illuminating kerosene supplies to licensed manufacturers of paint, resin or shoe polish would be exempt.

54. The Appellant submitted that to qualify for the refund, and subsequently an exemption, the Appellant among other manufacturers utilizing illuminating kerosene would need to be registered and licensed. The Appellant maintained that from the foregoing it should be appreciated that the Appellant's claims span across two regimes, that is refunds regime and subsequently the exemptions regime.

55. It is the Appellant’s case it is the Respondent's inordinate and unsubstantiated delay in instituting the proper mechanisms, systems, and structures that prevented the Appellant from applying for the refunds. The Appellant emphasized that the registration of Manufacturers utilizing illuminating kerosene was not done until sometime in 2022. Notably, this was despite the several meetings wherein the Respondent assured the Appellant that institution of the framework was well underway. Unfortunately, despite several assurances, the same was not done until 2022. The Appellant argued it was still paying excise duty and Anti Adulteration Levy knowing that the same would be refunded.

56. To access the Excise free and Levy free as suggested by the Respondent in their Response to the Appellant’s Appeal dated 8th November 2022, the Appellant would need to present an exemptions license to the Oil Marketing Companies who import the illuminating Kerosene. Failure to provide this license ideally meant that the Appellant was still required to pay Excise Duty and Anti Adulteration Levy despite the same being exempt. The Appellant submitted that it cannot be overstated that the lack of the exemptions license was squarely the cause of the Respondent who failed to put in place mechanisms, systems and structures to register the Appellant and other manufacturers utilizing illuminating kerosene as an input.

57. The Appellant submitted in detail that sometime in 2017 and 2018, the Appellant met the Respondent to discuss the operations platforms, forms and manuals which would be created by the Respondent to allow the Appellant and other manufacturers to apply for the refunds as propounded by the Finance Act, 2017. The Appellant submitted that it was agreed meetings that the Respondent would create the registration platform on iTax or a manual registration form; the refund application platform on iTax; and usage monitoring platform for the daily or monthly monitoring of usage of illuminating kerosene by KRA. The Appellant also submitted that it was agreed that a format for the application form for registration of an entity as a manufacturer of paints and resin for use of illuminated kerosene was agreed upon; KRA was to fast track uploading of registration forms on the iTax portal immediately to ensure that the one-year expiry period did not lapse for excise claims; and in the event of delays and inaccessibility of online registration application forms before the end of February 2018, KRA would allow manufacturers and interested kerosene users to apply and submit manually their applications and later facilitate uploads on iTax.

58. The Appellant submitted that at a meeting held on 9th October 2018, the Respondent reported that procedures and claim forms had been completed and that rules had been prepared and validated; KRA reported that it was finalising automation for reclaiming the excise tax refunds through iTax; and that a meeting would be held in November between KRA and KAM to review the procedures. The Appellant submitted that despite frequent meetings, the Respondent still failed to achieve the targets. Therefore, the Appellant submitted that the Respondents occasioned inordinate delay in the establishment of the framework, and it was not until 2022 that the Respondent finally issued guidelines for the licensing of users of spirit or illuminating kerosene.

59. The Appellant submitted that owing to the delay in instituting the guidelines for licensing and registration of the manufacturers, the Appellant was still paying the Excise Duty and Illuminating kerosene knowing that the Respondent would institute a mechanism that would allow for refunds. In the period following the provision of the Finance Act 2021, that is the Exemptions regime, the Appellant was again in a fix as it could not access illuminating kerosene excise-free and levy free owing to their non-registration and lack of licensing.

60. The Respondent finally put in place their framework for processing exemptions and refunds for excise duty and anti-adulteration levy for registered or licensed manufacturers of paint, resin and shoe polish using illuminating kerosene sometime in late 202, trickling into 2022. It is the Appellant’s case that the provision for the refund process was important to the Appellant bearing in mind that the Appellant is a seasoned player in the manufacturing industry. Accordingly, the Appellant submitted that it had been importing the illuminating kerosene long before the numerous changes were introduced governing the applicability of Excise duty and Anti-adulteration levy but due to Respondent’s delays, the Appellant could not be refunded.

61. The Appellant submitted that it was until the 15th December 2021, in light of the Public Notice issued by the Respondent that introduced framework, that the Appellant submitted its manual application together with the accompanying documents for review. The Respondent approved the application. After this approval, the Appellant then applied for refund of the Excise duty and Anti-adulteration levy paid during refunds regime and exemptions regime.

62. Despite the aforementioned, when the Appellant applied for refund of Excise duty paid on Illuminating Kerosene subsequently used to manufacture non-excisable goods both under the refund and exemptions regime, but the Respondent proceeded to reject the same stating that claims were based on an exempt supply as per the Excise Duty Act, 2nd Schedule, Part A, Item 13.

63. The Appellant submitted that the Respondent failed to appreciate that while the Exemptions regime was in force, in the period post-2021. The Appellant as well as other manufacturers were still paying Excise Duty and Anti Adulteration Levy owing to the fact the Respondent had failed to put in place mechanisms for registration, licensing and processing of the exemptions.

64. According to Appellant, contrary to the Respondent's assertions, the Excise Duty Act still provides for refund of Excise duty claims and that Section 29 (l) (b) of the afore-mentioned Act still unequivocally provides that the Excise duty paid in respect of spirits or illuminating kerosene that have subsequently been used by a licensed or registered manufacturer to manufacture non-excisable goods is to be refunded. The Appellant submitted that the Respondent is trying to mislead this Tribunal in its assertion that the refund regime has been done away with entirely.

65. Consequently, according to the Appellant, the issues for consideration by this Honourable Tribunal are:-a.Whether the Respondent occasioned inordinate delay in instituting the necessary frameworks to allow the manufacturers access refunds and exemptions on illuminating kerosene.b.Whether the Respondent retrospectively applied the provisions of the Finance Act 2021 to deny the Appellant the refunds it is entitled to.

66. On Whether the Respondent occasioned inordinate delay in instituting the necessary frameworks to allow the manufacturers access refunds and exemptions on illuminating kerosene, the Appellant submitted that Respondent mutilated the Appellant's right to fair administrative action and legitimate expectation. The Appellant argued that the Respondent had the onus to ensure that there is mechanism for refund and exemption claims but the Respondent did not put in place a mechanism for the registration of the manufacturers until late 2021 trickling into 2022. Accordingly, owing to the non-registration and licensing by the Respondent, the Appellant as well as other manufacturers could not apply for the statutorily mandated refunds and exemptions.

67. In this regard, the Appellant submitted that the courts have severally emphasized the need for timely processing of refunds owed to taxpayers. The Appellant relied on the case of Kenya Data Networks Limited vs. Kenya Revenue Authority (Supra) as quoted in the case of Tata Chemicals Magadi Limited vs. Commissioner of Domestic Taxes (Large Taxpayers) [2014] eKLR it was stated that:“The respondent had a duty to act on the petitioner's VAT refunds timeously. While recognizing that it is mandated by statute to collect taxes, and while appreciating the pivotal role that collection of taxes plays in a country's economic development and provision of services for citizens, KRA must also be always cognizant of the possible ramifications of its actions or omissions in dealing with taxpayers, and the impact on investment, revenue collection and the general welfare of the country. While there is no statutory period within which KRA ought to make good tax refund claims, it cannot have any basis for failing to process tax refund claims several months, and in some cases several years after they were made. It is no answer to the petitioner's claim for tax refund for the respondent to demand in turn that the petitioner pays arrears of tax."

68. The Appellant submitted that the Respondent breached of fair administrative action rules under the Constitution of Kenya, 2010 which provides in Article 47 that "Every Person has the right to administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair". The Appellant also maintained that the Constitution of Kenya under the afore-mentioned Article indeed clothes’ one with the right to administrative action that is expeditious, efficient, lawful, reasonable, and procedurally fair. The Fair Administrative Actions Act thereafter reiterates and emphasizes the same principles before adding additional rights a citizen is entitled to.

69. The Appellant further submitted that the Fair Administrative Actions Act defines an administrative action to mean:i.the powers, functions and duties exercised by authorities or Quasi-judicial tribunals; orii.any act, omission or decision of any person, body or authority that affects the legal rights or interests of any person to whom such action relates.

70. According to the Appellant, once the laws were passed, the Respondent had a duty to create the necessary frameworks that would enable the taxpayers to benefit from the refunds and exemptions introduced in the law. However, the Respondent took nearly 5 years to implement the systems. Despite occasioning inordinate and unsubstantiated delay in setting up the necessary mechanisms which needless to say occasioned great prejudice to the Appellant, the Respondent proceeded to state that it will not process the Appellant's claims owing to the fact that illumining kerosene is now an exempt item. According to the Appellant, the Respondent was retrospectively applying the provisions of the Finance Act 2021 to deny the Appellant its refund claims under the refund regime. The Appellant submitted that the retrospective application of a law to deny a citizen a legally mandated right breaches the Iaw, reasonable and procedurally fair requirements of fair administrative action.

71. The Appellant submitted that Article 47 equally dictates that a fair administrative action needs to be efficient. It cannot be over stated that the Respondent occasioned an inordinate delay in setting up of the necessary guidelines and frameworks. So much so that the law changed to allow from a refund regime to an exemption one without any player in the industry having been refunded Excise duty on the illuminating kerosene. This was despite the Respondent's constant promises and misrepresentation that the establishment of the framework was well underway, and that the Appellant together would soon achieve the proverbial "canan" wherein they will be refunded the Excise duty paid. Similarly, the Appellant argued that the Respondent's actions cannot be deemed to be procedurally fair because the Respondents in their guidelines themselves laid down a procedure for making refund claims for Excise duty and AOL paid on illuminating kerosene used to manufacture non-excisable goods. The procedure was captured in the Respondent's very own framework for processing exemptions and refunds for excise duty and anti-adulteration levy for registered or licensed manufacturer of paint, resin and shoe polish using illuminating kerosene.

72. Despite having provided the very procedure to be used for applying for the refunds, the Appellant submitted that the Respondent is now stating that the refund claim would not be processed as the illuminating kerosene is now exempt from Excise duty. The Appellant argued that if this is really the position, it begs the question as to why a refunds’ claim procedure, guidelines and forms were even introduced in the very first place.

73. The Appellant emphasised that the Respondent impeded, and breached the Appellant's economic rights to property as per Article 40 of the Constitution of Kenya as read with Article 260. By effectively forcing the Appellant to pay the Excise duty monies without refunding the same, and subsequently' making the Appellant pay Excise duty despite the same being exempt owing to the Respondent’s failure to provide a framework meant that the Respondent was essentially hampering and effecting the Appellant’s monies, which are property of the taxpayer. According to the Appellant, by refusing to refund the same, the Respondent is in fact in breach of the Appellant' s right to use and enjoy its property.

74. The Appellant referred the Tribunal to the case of lntersplav vs. Ukraine, Application No. 803/02 before the European Court of Human Rights (Ruling delivered at Strasbourg on 9th January, 2007), as quoted in the case of Republic vs. Kenya Revenue Authority Ex-parte LA.B. International Kenya Limited (2011 eKLR wherein it was held (p.6):“The Court observes that, having met the criteria and requirements established by the domestic legislation, the applicant could reasonably expect the refund of the VAT it had paid in the course of its business activities, as well as compensation for any delay."

75. According to the Appellant, as a matter of principle, the Commissioner's exercise of his statutory power is subject to the discipline of administrative law. This means that in the making of its decision, the Respondent is bound by stating and provisions of the Fair Administrative Action.

76. The Appellant also submitted that the importance of adhering to the doctrines, and principles of fair administrative action were emphasized in the case of Judicial Service Commission vs. Mbalu Mutava & another (2015] eKLR it was stated that:“(23]…. Article 47 (1) marks an important and transformative development of administrative justice for, it not only lays a constitutional foundation for control of the powers of state organs and other administrative bodies but also entrenches the right to fair administrative action in the Bill of rights. The right to fair administrative action in the Bill is a reflection of some national values in article 10 such as the rule of law, human dignity, social justice, good governance' transparency and accountability. The administrative actions of public officers, state organs and other administrative bodies are now subjected by article 47(1) to the principle of constitutionality rather than to the doctrine of ultra vires from which administrative law under the common law was developed.”

77. The Appellant submitted that the Respondent breached legitimate expectation and relied on the Supreme Court of Kenya in the case of Kenya Revenue Authority vs. Export Trading Company Limited (Petition 20 of 2020) [2022) KESC 31 (KLR) (Civ) (17 June 2022) provided several definitions of legitimate expectation. Notably, the Learned Justices stated as follows:“In the 4th Edition, Vol I (1) At page 151; paragraph 81 of the Halsbury's Laws of England, legitimate expectation is described as follows:"A person may have a legitimate expectation of being treated in a certain way by an administrative authority even though he has no legal right in private law to receive such treatment. The expectation may arise either from a representation or promise made by authority, including an implied representation, or from consistent past practice.’’

78. Similarly, the Appellant also relied on the case of Keroche Industries Limited vs. Kenya Revenue Authority & S Others Nairobi HCMA No. 743 of 2006 [2007] KLR 240 where the court pronounced itself clearly on the issue of legitimate expectation in the following manner:“…. legitimate expectation is based not only on ensuring that legitimate expectations by the parties are not thwarted, but on a higher public interest beneficial to all including the respondents, which is, the value or the need of holding authorities to promises and practices they have made and acted on and by so doing upholding responsible public administration. This in turn enables people affected to plan their lives with a sense of certainty, trust, reasonableness, and reasonable expectation. An abrupt change as was intended in this case, targeted at a particular company or industry is certainly abuse of power…’’

79. Consequently, the Appellant submitted that the Respondents in the several meetings attended by the Appellant and its representative body, unequivocally informed the Appellant that it was setting up the necessary systems and structures that would allow the Appellant to make the refund claim in line with the provisions of the law. The Appellant referred to the meetings held in 2017, 2018 and 2020, wherein the Respondent informed the Appellant that it was setting up registration mechanism for registration of manufacturers who utilize illuminating kerosene to manufacture non-excisable good. The Appellant alleged that the Respondent averred, asserted, promised and represented in the meetings that it was setting up a refund application platform on iTax.

80. In this regard, the Appellant relied on the case of Kenya Revenue Authority vs. Export Trading Company Limited (Petition 20 of 2020) [2022) KESC 31 (KLR) (Civ) (17th June 2022) (Judgment) while quoting the learned justices in the case of Communication Authority of Kenya & 5 Others vs. Royal Media Services & 5 Others (Petition No. 14 of 2014; [2014) eKLR) that; -“This is the position taken by this court in the CCK Case where it was held that legitimate expectation would arise when a body, by representation or by past practice, has aroused an expectation that is within its power to fulfil.For an expectation to be legitimate therefore, it must be founded upon a promise or practice by a public authority that is expected to fulfil the expectation. We then went on to find the emerging principles on legitimate expectation to be that:"a. there must be an express, clear and unambiguous promise given by a public authority;b.the expectation itself must be reasonable;c.the representation must be one which it was competent and lawful for the decision-maker to make; and(d)there cannot be a legitimate expectation against clear provisions of the law or the Constitution."

81. According to the Appellant, when the framework and guidelines were finally introduced in 2022, the Respondent provided therein the procedure to apply for refund claims for Excise duty and AOL. Naturally, the Appellant and other manufacturers obliged. It cannot be overstated that by providing guidelines, rules and procedures for the application of refund, then proceeding to reject all claims, including the claims for the period before the commencement of the exemption regime, the Respondent had again breached the Appellant’s right to legitimate expectation. The Appellant also submitted that the manner in which the Respondent handled the Appellants refund claim is marred with complete illegality and places the Appellant in a position of complete uncertainty. According to the Appellant, the Respondent promised that a refunds mechanism is being set up and perpetuated this lie for several years, only to then reject the refund claims on the basis of retrospective applications of laws even after it had issued guidelines for the public to follow in claiming of the refunds.

82. The Appellant relied upon the case of Republic vs. Kenya Revenue Authority Ex Parte Universal Corporation Ltd [2016) EKLR quoting the case of Republic vs. Attorney General & Another Ex Parte Waswa & 2 Others [2005] lKLR 280 wherein it stated;“The principle of a legitimate expectation to a hearing should not be confined only to past advantage or benefit but should be extended to a future promise or benefit yet to be enjoyed. It is a principle, which should not be restricted because it has its roots in what is gradually becoming a universal but fundamental principle of law namely the rule of law with its offshoot principle of legal certainty. If the reason for the principle is for the challenged bodies or decision makers to demonstrate regularity, predictability, and certainty in their dealings, this is, in turn enables the affected parties to plan their affairs lives and businesses with some measure of regularity, predictability, certainty and confidence. The principle has been very ably defined in public law in the last century, but it is clear that it has its cousins in private law of honouring trusts and confidences. It is a principle, which has its origins in nearly every continent. Trusts and confidences must be honoured in public law and therefore the situations where the expectations shall be recognized, and protected must of necessity defy restrictions in the years ahead. The strengths and weaknesses of the expectations must remain a central role for the public law courts to wei9h and determine.’’

83. The Appellant also accused the Respondent of abuse of power. The Appellant relied on the case of Noor Maalim Hussein & 4 Others vs. Minister of State for Planning, National Development and Vision 2030 &. 2 Others [2012) eKLR wherein the court stated as follows:“It is clear therefore that the primary purpose of the law is to keep the powers of the government within the legal bounds so as to protect citizens against its abuse. The powerful engines of the government must be prevented from running amok. It is usually the judges who sit between the government and its citizens. The judges check the transgressions of the citizen and that of the government in equal measures. It is a balancing exercise. The tools available to the judges is the contractual documents in place, namely the Constitution, statutes and judge made rules, in all in the name of the Rule of Law and respect for human values and dignity."

84. On Whether the Respondent retrospectively applied the provisions of the Finance Act 2021 to deny the Appellant the refunds it is entitled to, the Appellant submitted as follows:

85. The refunds regime was in effect from 2017 to 2021 when the Finance Act brought about the exemption regime. In all that time, owing to the failure by the Respondent to put in place the framework for refund, the Appellant was still paying the Excise duty and ADL and the same has to date not been refunded.

86. When the exemptions regime came about, the Appellant still had to pay the Excise Duty and ADL as they would need to present an exemptions license to the Oil Marketing Companies who import the illuminating Kerosene. Failure to provide this license ideally meant that the Appellant was still required to pay Excise duty and Anti-adulteration Levy despite the same being exempt.

87. The Appellant relied on the case of Samuel Kamau Macharia Another vs. Kenya Commercial Bank Ltd 2 Others (2012) eKLR wherein it was held:“As for non-criminal legislation, the general rule is that all statutes other than those which are merely declaratory or which relate only to matters of procedure or evidence are prima facie prospective, and retrospective effect is not to be 9iven to them unless, by express words or necessary implication it appears that this was the intention of the legislature".

88. Similarly, the Appellant relied on the case of Mzuri Sweets Limited vs. Commissioner of Investigations & Enforcement appeal No. 574 of 2020 in which the court held that as a general rule, the law abhors the retrospective application of legal provisions. This is because the retrospective application of the law raises fundamental concerns with regard to the fair administration of statutory authority and effectively imposes a liability when it is already too late for the regulated parties to alter their behaviour or take remedial action.

89. The Appellant also relied on the case of Wilson & others vs. Secretary of State for Trade and Industry (2003) UKHUO as quoted in the case of Republic vs. Joe Mucheru, Cabinet Secretary Ministry of information Communication and Technology & 2 others; Katiba Institute & another (Ex parte); Immaculate Kasait, Data Commissioner (Interested Party) (Judicial Review Application El 138 of 2020) [2021) KEHC 122 (KLR) (Judicial Review) (14- October 2021) (Judgment) where Lord Scott of Foscotc stated at paragraph 153 of the judgment that:“It is, of course, open to parliament, if it chooses to do so, to enacting legislation which alters the mutual rights and obligations of citizens arising out of events which predate the enactment. But in general Parliament does not choose to do so for the reason that to legislate so as to alter the legal consequences of events that have already taken place is likely to produce unfair or unjust results. Unfairness or injustice may be produced if persons who have acquired rights in consequence of past events are deprived of those rights by subsequent legislation; or it may be produced if persons are subjected on account of those past events to liabilities that they were not previously subject to. There is, therefore, a common law presumption that a statute is not intended to have a retrospective effect. This presumption is part of a broader presumption that Parliament does not intend a statute to have an unfair or unjust effect (see Maxwell on Statutes, 12th edition p 215 and Bennion’s Statutory Interpretation, 4th edition pp 265-266 and 689-690). The presumption can be rebutted if it sufficiently clearly appears that it was indeed the intention of Parliament to produce the result in question. The presumption is no more than a starting point.

90. Finally, the Appellant submitted that contrary to the Respondent's assertions, the Excise Duty Act still provides for refund of Excise duty claims. The Appellant maintained that Section 29 (1) (b) of the aforementioned Act still unequivocally provides that the Excise duty paid in respect of spirits or illuminating kerosene that have subsequently been used by a licensed or registered manufacturer to manufacture unexcisable goods is to be refunded. Accordingly, the Respondent is trying to mislead this Tribunal in asserting that the refunds regime has been done away entirely.

The Appellant’s Prayers 91. The Appellant prayed for the Honourable Tribunal to find that:a.The Appeal be allowed;b.The Respondent be compelled to accept the Appellant’s Excise duty refund claims;c.The Appellant’s Excise duty and refund claims be allowed in their entirety; andd.The Respondent’s decision be set aside.

The Respondent’s Case 92. The Respondent’s case is premised ona.The Statement of Facts dated and filed on 5th September 2023 andb.The Written Submissions dated 24th May 2023 and filed on 24th May 2023.

93. The Respondent stated that the claims were rejected on the basis of the amendment on the Finance Act 2021, Section 33 which states that the Second Schedule to the Excise Duty Act is amended and further states that the following excisable goods shall be exempt from Excise duty when purchased before clearance through customs or removed from excise control:“Illuminating kerosene supplies to licensed or registered manufacturers of paint, resin or shoe polish in such quantities as the Commissioner may approve.”

94. The Respondent relied on Section 47 of the Tax Procedures Act to support the position that a taxpayer can apply for a refund. Section 47 provides as follows:“47. Refund of overpaid tax(1)When a taxpayer has overpaid a tax under a tax law the taxpayer may apply to the Commissioner, in the approved form, for a refund of the overpaid tax within five years of the date on which the tax was paid.Provided that for value added tax the period of refund shall be as provided for under the Value Added Tax Act, 2013 (No. 35 of 2013).(2)The Commissioner may, for purposes of ascertaining the validity of the refund claimed, subject the claim to an audit.(3)The Commissioner shall notify in writing an applicant under subsection (1) of the decision in relation to the application within ninety days of receiving the application for a refund.(4)Where, in relation to an application for a refund made under this section or made under any other tax law, the Commissioner is satisfied that a taxpayer has overpaid a tax, the Commissioner shall apply the overpayment in the following order—(a)In payment of any other tax owing by the taxpayer under the tax law;(b)In payment of a tax owing by the taxpayer under any other tax law; and(c)Any remainder shall be refunded to the taxpayer.”

95. The Respondent stated that Section 29 of the Excise Duty Act provides for refunds of tax and further stated the Appellant may apply for refund.

96. The Respondent admitted that the taxes paid before the Finance Act 2021, Section 33 of the Second Schedule Part A, Paragraph 13 of the Excise Duty Act 2015 was amended to exempt the illuminating kerosene from Excise duty were rightfully due for taxation.

97. The Respondent stated that the Appellant may apply for refund of the taxes paid during the period of October 2020 amounting to Kshs. 816,000. 00 under task no. KRA202020219554 and August 2020 amounting to Kshs. 1,377,000. 00 under task No. KRA202113720334 as per Section 47 of the Tax Procedure Act.

98. The Respondent averred that Section 56 (1) of the Tax Procedure Act provides that the burden of proving that the tax assessment is wrong lies with the taxpayer and the Appellant herein has failed to discharge the burden.

99. The Responded stated that the Appellant does not deserve a refund for the taxes paid under task Numbers KRA202215265924 (Kshs. 1,224,000. 00), KRA20220551930 (Kshs. 1,632,000. 00), KRA202121490263 (Kshs. 1,530,000. 00), KRA202202168153 (Kshs. 1,428,000. 00), KRA20220070995 (Kshs. 1,734,000. 00), KRA202214229727 (Kshs. 408,000. 00), and KRA202119790723 (Kshs. 2,142,000. 00) and therefore states the tax assessment was proper and should be upheld by this Tribunal. The Respondent argued that this is due to the Appellant claiming for a refund of a tax that should have not have been paid at the initial stage, reasons wherefore the Respondent stated that the listed assessments were in order.

100. The Respondent submitted that the Tribunal has already pronounced itself on this issue and the Respondent wishes to rely on the case of National Bank of Kenya Limited {Appellant) vs. Commissioner of Domestic Taxes (Respondent). Tax Appeal No. 474 of 2020 where the Tribunal dismissed the Appellant case and it was held as follows:“a)Section 42 of the ITA relates to credits arising from foreign tax payable in respect of income earned under special arrangements. The TAT a reed with the Respondent that it was incorrect for the Appellant to claim overpayments under Section 42. b.Section 47 of the TPA was the only avenue available for the Appellant to utilize its overpayments. The TAT held that the Appellant cannot use the overpayment without going through the validation process set out under Section 47 of the TPA. The TAT concluded that offsetting a tax due from an overpayment of tax is not automatic and that the taxpayer must apply under Section of the TPA for validation.c.The taxes assessed as per the Respondent's Objection Decision were due and payable.”

The Respondent’s prayers 101. The Respondent, therefore, prayed for the Tribunal to:a.Uphold the Respondent’s decision dated 29th August 2022 as proper and in conformity with the provisions of the law; andb.Dismiss the Appeal with cost.

Issues For Determination 102. The Tribunal having considered the Memorandum of Appeal, the parties’ Statements of Facts, and submissions, puts forth the following issue for determination:Whether the Appellant was justified in its refund claim for the Excise Duty Taxes paid after 1st July 2021.

Analysis and Findings 103. The Tribunal wishes to analyse the issue as herein-under.

104. Excise duty on illuminating kerosene was introduced in 2016 with the main aim of curbing increased adulteration of fuel in Kenya which denied oil marketers and the government their rightfully due revenue. A series of amendments upon the Excise Duty Act concerning taxation of illuminating kerosene and refunds for licensed or registered users illuminating kerosene for manufacture of good that are not excisable. The Finance Act 2021 then exempted illuminating kerosene from Excise duty.

105. In the instant case, the Appellant made various claims for refund for Excise duty paid on the importation of illuminating kerosene. The claims covered the period payments from August 2020 to July 2022 based on Section 8 A (3) of the Miscellaneous Fees and Levies Act 2016 was amended by the Finance Act 2019 and Section 29 of the Excise Duty Act that provide for a refund of the levy on written application by the importer where the Commissioner is satisfied that the levy was paid in respect of illuminating kerosene that has subsequently been used by a licensed or registered manufacturer to manufacture paint, resin, or shoe polish. This law was applicable until the Finance Act 2021 was enacted in July 2021, amending the Second Schedule to the Excise Duty Act 2015 to include illuminating kerosene as an exempt item.

106. According to the Appellant, Excise duty on illuminating kerosene has thus passed through key regimes, the refunds regime and exemptions regime and should be noted that the Appellant’s refund applications span across both regimes.

107. Under the second regime brought about by the enactment of the Finance Act 2021, an exemption was introduced for licensed manufacturers, however to be licensed, a manufacturer was to apply through a prescribed form.

108. The prescribed form was not put in place by the Respondent between the period July 2021 to December 2022.

109. During the intervening period, the Appellant has demonstrated how it, together with the manufacturer’s association KAM, actively engaged the Respondent in putting up a framework for application registration to become a licensed and registered manufacturer.

110. The dispute herein relates to a claim for refunds of taxes that the Appellant paid during the period when the law envisaged an exemption for licensed manufacturers.

111. The Respondent argues that the taxes ought not to have been paid in the first place since the same were exempt at that time, while the Appellant’s position is that the payments were made because the Respondent had failed put in place a framework for registration of licensed manufacturers.

112. In order to obtain licenses so as to obtain refunds, the Appellant submitted that it held a series of meetings and correspondences between the paints and resins subsector in the chemical and allied sector at Kenya Association of Manufacturers (KAM) (to which the Appellant is a member) and the Respondent to formalise the process of registration of manufacturers using illuminating kerosene. The Respondent did not deny these facts.

113. It is with this reason that the Appellant argued that inspite of the law providing illuminating kerosene to be exempt in the Finance Act 2021, the Respondent did not put in place necessary framework, structures and mechanisms to allow the Appellant and other licensed manufacturers to be licensed and to acquire the illuminating kerosene excise and levy free until 2022. Therefore, the Appellant prayed that the Tribunal be pleased to find that the Respondent occasioned inordinate delay in instituting necessary framework to allow the appellant to access refunds and exemptions on illuminating kerosene.

114. The Respondent on other hand, relied upon the provisions of Section 47 of the Tax Procedures Act read together with Section 29 (1) (b) and (2) of the Excise Duty Act to support the position that a taxpayer can apply for a refund under Section 47, which states in part that the taxpayer may apply to the Commissioner, in the prescribed form and lodged with the Commissioner in the prescribed manner.

115. The Respondent argued that from the above provisions, for a taxpayer to be refunded Excise duty, the taxpayer must have been registered or licensed and the taxpayer must make an application in prescribed form and therefore went on rejected claims relating to the period from November 2020 that is, for the period while the Appellant remained unregistered/unlicensed.

116. The Tribunal observes that at the point the Finance Act 2021 was enacted, there was expected to be in place a framework for the registration of licensed manufacturers when in deed such framework is non-existent and did not exist until the Respondent put one in place in 2022. During the intervening period, there was an ambiguity as to the process taxpayer would follow to exercise their rights on either to be exempt or to claim refunds for taxes paid.

117. The Tribunal is guided by the decision in the case of Samaritan’s Purse vs. The Commissioner of Domestic Taxes (TAT 82 of 2016) where it was held; -“just as the law imposes certain legal obligations on the tax payer it in like manner behoves the Respondent to act at all time in good faith and adhere strictly to the said principle of legitimate expectation. In the present case the Respondent was in regular receipt of the Appellant’s returns and even received and accepted payment of part taxes but did nothing in formalizing registration and exemption of the scheme for a period of 8 years. Therefore, to have proceeded to order an audit once prompted by the Appellant on its pending application for registration and exemption imposition of the assessment soon thereafter is in circumstances of this Appeal evidence of bad faith and breach of principle of legitimate expectation by the Respondent.” The law is meant to regulate humans to live a better life but not to create destitution by depriving persons of their much needed scanty resources. The case in point here is that of Commissioner of Income Tax Vs Westmont Power(k) Ltd (2006) eKRL, where it stated,” even though taxation laws that have the effect of depriving citizens of their property by imposing pecuniary burdens resulting also in penal consequences must be interpreted with great caution. In this respect it is paramount that their provisions must be express and clear so as to leave no room for ambiguity. The court then stated that; any ambiguity in such law must be resolved in favour of the tax payer and not the Public Revenue authorities which are responsible for their implementation.”

118. The Tribunal holds the Respondent was aware that it had not put in place a framework for the Appellant to be licensed to qualify for exemption and therefore, its assertion that that the Appellant should not to have paid the taxes, is unfounded.

119. Based on the foregoing the Tribunal finds the Appeal meritorious and proceeds to give the determination as hereunder.

Final Decision 120. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal is merited.a.The Appeal be and is hereby allowed.b.The Respondent’s rejection decisions is hereby set asidec.Each party to bear its own costs.

121. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF FEBRUARY, 2024ROBERT M. MUTUMA - CHAIRPERSONBONIFACE K. TERER - MEMBERELISHAH N. NJERU - MEMBERMUTISO MAKAU - MEMBERDR. WALTER ONGETI - MEMBER