https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/8641

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT NAIROBI** **MILIMANI LAW COURTS** **COMMERCIAL AND TAX DIVISION** **TAX APPEAL NO. E104 OF 2025** **BETWEEN** **THE EAST AFRICA SEED COMPANY LIMITED......................................APPELLANT** **AND** **COMMISSIONER FOR LEGAL SERVICES** **AND BOARD COORDINATION………………………….…………RESPONDENT** ***(Being an appeal against the judgment of the Tax Appeals Tribunal at Nairobi dated 4th April 2025 in Tax Appeal No.E680 of 2024)*** **JUDGMENT** **Introduction and Background** 1. This appeal arises from a judgment delivered by the Tax Appeals Tribunal(“the Tribunal”) on 4th April 2025 where the Appellant’s appeal was dismissed and the Respondent’s (“the Commissioner”) Objection Decision dated 22nd December 2022 confirming the demand of Kshs. 221,294,843/= in respect of VAT was upheld. Through its amended Memorandum of Appeal dated 8th August 2025, the Appellant seeks to set aside the Tribunal’s judgment and the Objection Decision on the following grounds: 1. *The Tribunal erred in law in finding that the sale of the Appellant’s business as a going concern is subject to the Value Added Tax (VAT) contrary to Paragraph 94 of the First Schedule (now repealed) to the Value Added Tax Act, Cap 476 of the Laws of Kenya (VATA).* 2. *The Tribunal erred in law in failing to consider the totality of the evidence adduced by the Appellant in support of the fact that the Appellant’s business was sold as a going concern prior to 25 April 2020.* 3. *The Tribunal erred in law in finding that the Appellant was not entitled to the input VAT claimed without a legal basis and in disregard of the provisions of Section 17(6)(c) of the VATA which entitles a registered person to an input tax credit where the prescribed apportionment threshold is met.* 4. *The Tribunal erred in law by subjecting the variances between the Appellant’s declared zero-rated sales in its VAT returns and the corresponding sales reflected in the Simba system to VAT, notwithstanding the absence of evidence establishing that the variances represented taxable supplies under the VATA.* 5. *The Tribunal erred in law by subjecting to VAT the variances between the Appellant’s sales as declared in its VAT returns and the sales reflected in its audited financial statements, while completely disregarding the reconciliation schedules and supporting documentation provided by the Appellant.* 6. *The Tribunal erred in law by upholding the Respondent’s demand for Withholding Tax for the period 2016–2019 without acknowledging the legal gap that existed following the repeal of Section 35(6) of the Income Tax Act, CAP 470 and prior to the enactment of Section 39A of the Tax Procedures Act, Cap 469B via the Finance Act, 2019.* 7. *The Tribunal erred in law by affirming the Respondent’s retrospective application of Section 42A of the Tax Procedures Act, which only took effect from 3 April 2017 to demand Withholding VAT for the year 2016.* 8. The Commissioner has responded to the appeal through its Statement of Facts dated 31st October 2025. The parties canvassed the appeal by way of written submissions which are on record and together with the record, I have considered and I will be making relevant references to them in my analysis and determination below. **Analysis and Determination** 1. As I determine this appeal, I am cognizant of the fact that this court’s jurisdiction is circumscribed under **section 56(2)** of the ***Tax Procedures Act (Chapter 469B of the Laws of Kenya) (****“*the ***TPA****”)* which provides that *“An appeal to the High Court or to the Court of Appeal shall be on a question of law only”*. In dealing with matters of law, the court must also pay fealty to the findings of fact by the Tribunal but only intervene if such findings are perverse (see **Bashir Haji Abdullahi v Adan Mohamed Nooru & 3 others [2014] KECA 621 (KLR)**]. 1. In its submissions, the Appellant presents the following issues for the court’s determination: 2. *Whether the Tribunal erred in law in finding that the sale of the Appellant’s business as a going concern is subject to the Value Added Tax (VAT) contrary to Paragraph 94 of the First Schedule (now repealed) to the Value Added Tax Act, Cap 476 of the Laws of Kenya (VATA)* 3. *whether the Tribunal erred in law in failing to consider the totality of the evidence adduced by the Appellant in support of the fact that the Appellant’s business was sold as a going concern prior to 25 April 2020;* 4. *whether the Tribunal erred in law in finding that the Appellant was not entitled to the input VAT claimed without a legal basis and in disregard of the provisions of Section 17(6)(c) of the VATA which entitles a registered person to an input tax credit where the prescribed apportionment threshold is met* 5. *whether the Tribunal erred in law by subjecting the variances between the Appellant’s declared zero-rated sales in its VAT returns and the corresponding sales reflected in the Simba system to VAT, notwithstanding the absence of evidence establishing that the variances represented taxable supplies under the VATA.* 6. *whether the Tribunal erred in law by subjecting to VAT the variances between the Appellant’s sales as declared in its VAT returns and the sales reflected in its audited financial statements, while completely disregarding the reconciliation schedules and supporting documentation provided by the Appellant;* 7. *whether the Tribunal erred in law by upholding the Respondent’s demand for Withholding Tax for the period 2016–2019 without acknowledging the legal gap that existed following the repeal of Section 35(6) of the Income Tax Act, CAP 470 and prior to the enactment of Section 39A of the Tax Procedures Act, Cap 469B via the Finance Act, 2019; and* 8. *whether the Tribunal erred in law by affirming the Respondent’s retrospective application of Section 42A of the Tax Procedures Act, which only took effect from 3 April 2017 to demand Withholding VAT for the year 2016.* **VAT on the transfer of a business as a going concern** 1. The Appellant submits that the Tribunal erred in law and fact by holding the 21st April 2020 sale and transfer of its business to *Agriscope Limited* vatable. That prior to 25th April 2020, **Paragraph 94** of the **First Schedule** to the ***VAT Act(Chapter 476 of the Laws of Kenya)*** *(*“the ***VATA***”) expressly exempted “*the transfer of a business as a going concern by a registered person to another registered person*.” The ***Tax Laws (Amendment) Act, 2020*** which was effective as from 25th April 2020, changed this to a vatable supply at 16% and that transactions completed before that date remained exempt. The Appellant claims it sold its business as a going concern on 21st April 2020 and provided uncontroverted documentary evidence including a Sale Agreement dated 21st April 2020 transferring assets, liabilities, employees, trademarks, goodwill, and the company name, a Formal letter and email both dated 21st April 2020 notifying the Commissioner of the transfer, the Commissioner’s email acknowledgment dated 21st April 2020 and the Appellant’s last invoice No. IN12001516 dated 21st April 2020, immediately followed by Agriscope’s first invoice No. IN12001517 on 30th May 2020 2. The Appellant submits that the Tribunal improperly focused on extraneous and irrelevant factors such as prior invoice serial numbers IN12001509–IN12001513 dated 24th April 2020, the fact that all documents bore the date 21st April 2020 despite a later value adjustment and the amendment of the April 2020 VAT return on 18th November 2020 with a credit note also dated 21st April 2020. It contends that these do not determine the date of the underlying transfer and the Appellant explained the invoice sequence stating that they are generated via SAP software based on delivery notes that may have been booked earlier and that invoice printing/generation dates are not determinative of the transaction date. 3. The Appellant submits that the amendment of the return was solely to correct the transaction value from Kshs. 763,028,352 to Kshs. 620,114,133 and was done transparently under **section 31(4)(b)** of the ***TPA*** which allows amendments within 5 years. That both the original and amended returns consistently treated the transaction as exempt and the Commissioner never challenged the original exempt declaration. 4. The Appellant submits that the Tribunal disregarded material evidence without providing cogent reasons, violating the Appellant’s right to be heard and principles of natural justice and fair administrative action under **Article 47** of the ***Constitution***. That the Appellant discharged its burden under **section 56** of the ***TPA*** by producing all relevant documents and the evidentiary burden shifted to the Commissioner who adduced no evidence that the transfer occurred after 25th April 2020 or that the Appellant continued trading thereafter. 5. The Appellant submits that the Tribunal’s reliance on the 2020 amending ***Act*** constitutes impermissible retrospective application of tax law and it anchors this argument based on the decision in **Kenya Bankers Association v Attorney General & another; National Assembly (Interested Party) [2020] KEHC 10263 (KLR)** and **Republic v Cabinet Secretary National Treasury & another Ex-Parte Car Importers Association [2016] KEHC 5539 (KLR)**. The Appellant contends that a distinction exists between a mere sale of assets and a transfer of a business as a going concern and it relies on the South African Labour Court of Appeal case in **Electro Hydro World (Pty) Ltd v Murray and Roberts Cementation (Pty) Ltd and Others (JA132/24) [2025] ZALAC 62** on factors such as transfer of assets, employees, customers, and continuation of the same business to asset that the transfer qualified for the exemption. 6. On its part, the Commissioner submitted that the sale was vatable and not exempt as a going concern as the Appellant transferred its seed business to Agriscope on or around 21st April 2020 and declared it as exempt as evidenced in its April 2020 VAT return which was original filed on 20th May 2020 and the invoice No. IN12001516 for Kshs.763,028,352/=. It later amended the value to Kshs.620,114,133/= as per the amended return dated 18th November 2020 and issued a credit note No. CN606 for Kshs.142,914,218/=. 7. The Commissioner submits that all key documents including the business sale agreement, notice to the Commissioner, sale invoice, and credit note are dated 21st April 2020, despite the significant change in value and that invoices with earlier serial numbers (IN12001509–IN12001513) were dated 24th April 2020. That it was impractical and suspicious for all transfer documents to bear the exact same date while the valuation and value changed materially and the Commissioner inferred that the actual transfer, valuation of assets/liabilities, and drafting of the Agreement occurred after 21st April 2020, with the date backdated to fall before the law change. 8. Further, that although clause 2.1 of the Agreement described the transfer “as a going concern,” analysis of the draft contract documents and the broken-down sale price showed it was in substance a sale of assets in the ordinary course of business. The Commissioner submits that the Appellant provided no plausible explanation for the serial number/date anomalies and it therefore failed to prove that the actual transfer occurred before 25th April 2020 and therefore, the Commissioner correctly subjected the invoice amount of Kshs.620,114,133/= to 16% VAT of Kshs.99,218,261/=. 9. The Commissioner submits that the burden of proving the assessment Erroneous lies on the Appellant, who failed to discharge it and the Tribunal was Correct to uphold the assessment. 1. In its judgment, the Tribunal found the transfer was subject to VAT because the Appellant failed to satisfactorily prove it occurred before 25th April 2020, when the ***Tax Laws (Amendment) Act 2020*** made such transfers vatable. The Tribunal stated that it had gone through the evidence and noted that the sale agreement, notice to Commissioner, invoice No. IN12001516 bore the date 21st April 2020 despite prior invoices being dated 24th April 2020. Further, that the April 2020 VAT return was amended on 18th November 2020 with a credit note also dated 21st April 2020. The Tribunal held that these inconsistencies raised legitimate doubts and that the Appellant had not provided a satisfactory explanation. 2. The Appellant explained these inconsistencies by stating that its SAP system generates invoices from earlier delivery notes, invoice printing/generation dates are not the same as transaction dates and the November amendment was simply a value correction and both original and amended returns treated the transaction as exempt. In my view, I find that the Appellant discharged its burden with contemporaneous documents which all bore dates before the effective date and that the Tribunal placed undue weight on minor anomalies while under-weighting the evidence before it. It should not be lost that what the Appellant was required by law to establish was a prima facie case and that the Commissioner and the Tribunal ought to have measured these evidence on a preponderance of probabilities (See **Kenya Revenue Authority v Maluki Kitili Mwendwa [2021] KEHC 4148 (KLR)]** 3. In **Republic v Kenya Revenue Authority; Proto Energy Limited (Exparte) [2022] KEHC 5 (KLR)**, Mativo J.,(as he was then) expounded on the burden of proof required of a taxpayer by stating as follows: *48. The most significant justification for placing the burden of proof on the tax payer is the practical consideration that the Commissioner cannot sustain the burden because he does not possess the needed evidence. Under the system of self-reporting tax liability, the taxpayer possesses the evidence relevant to the determination of tax liability. It is simply fair to place the burden of persuasion on the taxpayer, given that he knows the facts relating to his liability, because the commissioner must rely on circumstantial evidence, most of it coming from the taxpayer and the taxpayer's records. The taxpayer must present a minimum amount of information necessary to support his position. This safety valve seems to place the burden of production on the taxpayer without relieving the Commissioner of the overall burden of proof. The tax payers’ evidence must meet this minimum threshold.* *49. A presumption of correctness arises from the Commissioner’s determination/assessment. The presumption remains until the taxpayer produces competent and relevant evidence to support his/her position. When the taxpayer comes forward with such evidence, the presumption vanishes and the case must be decided upon the evidence presented.* 1. The Tribunal appeared to apply a very high evidentiary bar on the Appellant when the evidence, on its face, was satisfactory that the sale happened before the effective date and that the differences were explained and reconciled by the Appellant. 2. I am also in agreement with the Appellant that a holistic reading of the Agreement clearly demonstrates that the Appellant transferred all its assets, liabilities, and employees, thereby evidencing that the transaction constituted a transfer of a business as a going concern, rather than a mere sale of assets. This conclusion is further reinforced by the fact that Agriscope, as the purchaser, issued its first invoice on 20th May 2020 an assertion that remains uncontroverted by the Commissioner . Therefore, its assertion that the transaction constituted a sale of assets remains wholly unsubstantiated and is entirely inconsistent with the material facts of this Appeal. If indeed the Commissioner believed that the transaction did not constitute a transfer of business, it ought to have immediately conducted this analysis when it was notified of the transfer of business on 21st April 2020. Instead, the Commissioner remained silent and is now belatedly making this argument to change the character of the transaction in order to subject it to VAT. 3. It is therefore my finding that the transfer qualified for the now-repealed **Paragraph 94** exemption as the Appellant laid sufficient evidence to warrant the exemption and the Commissioner had no valid basis to disallow the same. The Tribunal erred in law in failing to consider the totality of the evidence adduced by the Appellant in support of the fact that its business was sold as a going concern prior to 25th April 2020 **Input VAT apportionment under Section 17(6)(c) of the VATA** 1. It was the Appellant’s submission that the Tribunal erred in concluding that the Appellant failed to adduce “audited accounts or other supporting figures” in support of its claim for input VAT on its sales. That this was not a ground taken by the Commissioner in its Objection Decision or Statement of Facts and the Tribunal impermissibly introduced a new evidentiary threshold not pleaded, misdirecting itself. The Appellant submitted that the issue concerned VAT apportionment for mixed taxable/exempt supplies under **section 17(6)(c**) of the ***VATA*** which is resolved by reconciling sales data and applying the statutory formula, not by audited financial statements. The Appellant averred that it provided a reconciliation of its sales which neither the Commissioner nor the Tribunal faulted and that the application of the formula produces a fraction greater than 0.90, entitling the Appellant to full input tax credit under **section 17(7)(a).** 2. The Appellant submits that the right to deduct input tax is integral to the VAT scheme where there is a direct and immediate link to taxable output supplies as was held in **Highlands Mineral Water Limited v Commissioner of Domestic Taxes [2021] KEHC 12894 (KLR)**. The Appellant contends that the Tribunal unjustly disentitled it from its input tax claim. 3. On its part, the Commissioner submitted that the Appellant was not entitled to full input VAT credit because it made both taxable and exempt supplies and claimed input VAT in full until February 2019, despite dealing in mixed supplies. That the Commissioner applied the apportionment rules under **section 17(6)(b) and (c)** of the ***VATA*** and during the objection, the Appellant submitted a schedule of “common inputs” claiming the formula produced a fraction greater than 0.90 thus allowing full credit under **section 17(7)(a)** 4. However, that the reconciliation schedule did not support the non-deductible input VAT figures claimed in the returns and the Appellant failed to provide audited accounts or any other credible supporting figures. As such, the Commissioner disallowed the unsupported input VAT claims and confirmed the assessments and that the Tribunal correctly found the Appellant was not entitled to the full input VAT claimed. 5. Going through the record, whereas the Tribunal called for audited accounts and other supporting figures, it failed to recognize that the Appellant had already provided a reconciliation schedule that could have informed the Tribunal on whether the same was sufficient. The statutory test is the formula itself and not a requirement for audited accounts as advanced by the Tribunal and since neither the law nor the Commissioner expressly required audited accounts for this purpose, the Tribunal and the Commissioner had no valid reason to reject or not consider the Appellant’s reconciliation schedule. I find this to be a misapprehension of the evidence by the Tribunal. **Simba system import variances and VAT on alleged taxable supplies** 1. The Appellant submitted that the Tribunal erred in finding variances between import purchases declared in the Appellant’s VAT returns and *Simba* system data for 2016–2019, and in holding that the Appellant failed to substantiate the non-existence of taxable variances.The Appellant averred that it provided substantive documentation to both the Commissioner and the Tribunal, including *C17B* forms, *i-Tax* records, and detailed reconciliations that explained each affected entry and every alleged variance. That the variances were fully reconciled and there was no evidence that the variances represented taxable as opposed to zero-rated or exempt supplies and consequently, no VAT is due on the variances. 2. The Commissioner’s position was that the variances were properly disallowed and subjected to VAT as a comparison of import purchases declared in the Appellant’s VAT returns versus the *Simba* system Customs data for 2016–2020 revealed large unreconciled variances. That the variances arose from double-claimed import entries, over-claims and imports claimed with no corresponding *Simba* entries. 3. The Commissioner stated that the Appellant failed to provide specific details of the alleged typos or correct entry numbers or any reconciliation of entries by month and it was therefore impossible for the Commissioner to verify the claims and it disallowed the unverified amounts and confirmed the additional VAT assessments. It maintains that the onus was on the Appellant to prove the variances were not taxable and it failed to do so and the Tribunal correctly upheld the assessments. 4. In **Commissioner of Domestic Taxes v Trical and Hard Limited (Tax Appeal E146 of 2020) [2022] KEHC 9927 (KLR),** the court(the late Majanja J.,) stated that the burden of proof swings between the taxpayer and taxman and that once a taxpayer provides competent evidence, the presumption of correctness vanishes. The Appellant provided *C17B* forms, *i-Tax* records, and reconciliations for import variances. The Commissioner never stated that this evidence was incompetent or irrelevant to answer its claim that there were over-claimed and duplicate import entries. The Tribunal simply noted the Appellant failed to specify the typos or errors and that it did not reconcile the entries, and concluded the Appellant failed to prove its case. However, by failing to properly analyze the competence and relevance of the evidence provided, the Tribunal missed its primary task. If the *C17B* forms and *i-Tax* records were the specific documents required for the Commissioner to verify the claim , the Tribunal should have evaluated whether they met the threshold to shift the burden. By not doing so, the Tribunal may have effectively maintained the burden on the Appellant despite the provision of evidence that warranted a shifting of the burden. 5. The Tribunal accepted the Commissioner’s bare assertions over the Appellant's documented explanations, which goes against the principle that the Commissioner must present credible evidence if the taxpayer has provided a prima facie case. Once again, I find this finding to be a misapprehension of the evidence by the Tribunal that warrants the court’s interference. **Variances between VAT-declared sales and audited financial statements** 1. The Appellant submitted that the Tribunal erred by subjecting unreconciled variances to VAT while completely disregarding the reconciliation schedules and supporting documentation provided by the Appellant. The Appellant maintains that its explanations, including exports and exempt/zero-rated supplies were supported by evidence that the Tribunal failed to consider. On its part, the Commissioner submits that the variances were properly subjected to VAT where unreconciled and that comparison of VAT-declared sales versus turnover in the audited accounts showed material variances across 2016–2020 and that the Appellant’s reconciliation schedules claimed the variances related to exports not captured in VAT returns, but these explanations could not be verified. That the Appellant’s allegation that variances related to exempt or zero-rated supplies was never substantiated with evidence and that the burden of proving the assessment excessive or unjustified lies on the Appellant, who failed to discharge it. The Commissioner thus submits that the Tribunal correctly upheld the VAT on the unreconciled variances. 2. Once again, this is an issue of proof. The Appellant provided *C17B* forms, i-Tax records, and reconciliations for import variances. The Tribunal introduced audited accounts as a requirement when it was not part of the Commissioner’s objection decision and in any case, it was not denied that the sales variances related to zero-rated and exempt goods such as agricultural pest control products and maize seeds, resulting in no revenue loss. I find no valid reason why the Commissioner and the Tribunal rejected the Appellant’s explanations when the evidence was competent and relevant. **Withholding Income Tax(WHIT) and whether there existed a legal gap between 2016 and 2019** 1. The Appellant advanced that the Tribunal erred in upholding the WHIT demand for the income years 2016–2019 and that prior to 2016, **section 35(6)** of the ***Income Tax Act (Chapter 470 of the Laws of Kenya)*** allowed the Commissioner to recover unwithheld tax from the payer. The ***Finance Act, 2016*** deleted this provision and the position remained unchanged until the ***Finance Act,2019***, effective 7th November 2019, reintroduced equivalent powers as **section 39A** of the ***TPA***.Citing **Commissioner of Domestic Taxes v Pevans East Africa Limited & 6 others [2022] KEHC 10392 (KLR),** the Appellant submits that during the period 9th June 2016 to 7th November 2019 there was no legal basis for the Commissioner to assess or recover WHIT from the person who should have withheld it and it could only pursue the payee directly. That the Tribunal’s upholding of the assessment for this period was contrary to this settled position and the demand should be vacated. 2. In response, the Commissioner submitted that the demand was lawful and justified and that an analysis of the Appellant’s purchases ledger identified local purchases for professional services that attracted WHIT and compared against actual WHIT paid, revealed shortfalls. That the Appellant provided no evidence that no professional fees attracting WHIT were paid during the period and in the absence of such evidence, the Commissioner correctly subjected the professional services payments to WHIT and demanded the outstanding amounts and the Tribunal correctly upheld the demand. 3. I am in agreement with the Appellant that this court(“the late Majanja J.,) in ***Commissioner of Domestic Taxes v Pevans East Africa Limited(supra)*** held as follows: *42. I am in agreement with the Tribunal that prior to 2016, section 35(6) of the ITA provided that the commissioner could claim taxes from a payer who fails to make a deduction as though the taxes were due from them. However, the amendment introduced by the Finance Act, 2016 deleted the said section 35(6) of the ITA meaning that the Commissioner could no longer demand taxes not withheld from the person who should have withheld the same and that this position remained until the enactment of the Finance Act, 2019 came into force on November 7, 2019 when the previously deleted provisions of section 35(6) of the ITA were now reintroduced and reproduced as a new section 39A under the TPA.* *43. Consequently, I therefore find and hold that during the subject years of 2018 and 2019, the Commissioner could not collect the WHT that ought to have been deducted by the Respondents from the punters and that all the Commissioner could do was seek the same from the punters directly.* 1. The Tribunal found WHIT due simply because the Appellant had engaged professional services. However, this misses the point as the issue was not whether services were rendered, but whether the Respondent had legal power to demand unwithheld WHIT from the Appellant. The ***Commissioner of Domestic Taxes v Pevans East Africa Limited(supra)*** case is directly on point that "…*during the subject years of 2018 and 2019, the Commissioner could not collect the WHT that ought to have been deducted…*" . I find that the Tribunal's failure to acknowledge or engage this legal gap is a clear error of law and the aforementioned case supports the Appellant’s position that the Commissioner had no legal basis to assess WHIT against the withholder during the gap period. **Retrospective application of section 42A of the TPA for Withholding VAT(WHVAT) in 2016** 1. The Appellant contended that the Tribunal erred in affirming the retrospective imposition of WHVAT for 2016 through **section 42A** of the ***TPA***. That the TPA commenced on 19th January 2016 and repealed the previous WHVAT provision under **section 25A** of the ***VATA*** and the ***Finance Bill 2016*** proposed inserting **section 42A** into the ***TPA***, with Clause 1(b) purporting retrospective effect from 19th January 2016.That the National Treasury issued ***Legal Notice No. 117 of 2016*** clarifying that no penalties would apply for the period after repeal up to 8th June 2016 and the ***Finance Act 2016***, assented to on 13th September 2016 formally reintroduced the regime via section 41 and **section 42A** of the ***TPA***. 1. The Appellant submits that WHVAT liability could only lawfully attach from the date the operative provision came into force without improper retrospectivity and that the Tribunal conflated the ***TPA’s*** commencement date with the reinstatement of the WHVAT regime and improperly applied the provision retrospectively. It contends that retrospective taxation offends legal certainty, predictability, the rule of law under **Articles 10 and 210(1)** of the ***Constitution*** and the strict construction rule for fiscal statutes citing inter alia the Supreme Court in **Barclays Bank of Kenya Limited (Now ABSA Bank Kenya PLC) v Commissioner for Domestic Taxes (Large Taxpayers Office); Kenya Bankers Association & another (Interested Parties) [2025] KESC 70 (KLR)** , and the Court of Appeal in **Mount Kenya Bottlers Ltd & 3 others Vs Attorney General & 3 others [2019] KECA 500 (KLR)**. 2. The Appellant submits that in 2016, with no operative WHVAT provision, the Appellant properly accounted for the full 16% VAT on taxable supplies and demanding WHVAT now results in impermissible double taxation, which is punitive and unconstitutional. That the issue was a pure point of law on the validity of the charge, not an evidentiary reconciliation exercise and the Tribunal’s focus on the Appellant’s alleged failure to reconcile variances was misplaced. 1. The Commissioner’s position is that the demand was correct as an analysis of the purchases ledger showed a significant variance in 2016, where no WHVAT was paid. That the Appellant failed to submit any information to reconcile the variance between WHVAT paid and expected WHVAT per the ledger and as such, the Tribunal correctly upheld the demand. 1. It is not in dispute that WHVAT was repealed when the ***TPA*** came into force on 19th January 2016 and the ***Finance Act 2016*** sought to reinstate it with an effective date backdated to 19th January 2016 and the ***Finance Act 2016*** was assented to on 13th September 2016. As stated, the Supreme Court in ***Barclays Bank of Kenya Limited (Now ABSA Bank Kenya PLC)(supra)*** emphasized that tax legislation must be strictly construed and that there is no room for intendment. Korir J., (as he was then), in ***Kenya Bankers Association(supra)*** established that retrospective application of tax laws is unconstitutional when it undermines legal certainty and predictability. In my view, the Tribunal erred by conflating the commencement date of the ***TPA*** with the effective date of WHVAT reinstatement and it failed to recognize that the ***Finance Act 2016's*** attempt at retrospective application could have been unconstitutional by potentially exposing the Appellant to double taxation, having already accounted for 16% VAT and the Respondent now demanding 6% WHVAT for the same period. It is evident that the ***Finance Act's*** attempt to reinstate WHVAT was procedurally complex and backdated, the law was ambiguous at the time hence ***Legal Notice No. 117 of 2016***, waiving penalties for WHVAT agents who ceased withholding up to 8th June 2016, implicitly acknowledging the confusion caused by the backdating. It should not be lost that if there is any ambiguity in the interpretation or application of tax statutes, then the same must be construed in favour of the tax payer (see Nyamu JA., in **Stanbic Bank Kenya Limited v Kenya Revenue Authority [2009] KECA 427 (KLR)**] **Conclusion and Disposition** 1. In the foregoing, I find merit in the Appellant’s appeal and I now set aside the judgment of the Tribunal dated 4th April 2025 and the consequently, the Commissioner’s Objection Decision dated 22nd December 2022. There shall be no order as to costs. **DATED SIGNED and DELIVERED virtually at NAIROBI this 19TH DAY of JUNE 2026** **............................................................................** **J.W.W. MONGARE** **JUDGE** **IN THE PRESENCE OF** 1. Ms. Cheptoo holding brief for Ms. Muna for the Appellant 2. N/A for the Respondent 3. Amos- Court Assistant