Tile & Carpets Centre Ltd v Commissioner of Customs & Border Control (Tax Appeal E1169 of 2025) [2026] KETAT 316 (KLR) (7 August 2026) (Judgment)

**REPUBLIC OF KENYA** **IN THE TAX APPEALS TRIBUNAL AT NAIROBI** **TAX APPEAL NO. E1169 OF 2025** **TILE & CARPETS CENTRE LIMITED............................................................... APPELLANT** **VERSUS** **COMMISSIONER OF CUSTOMS & BORDER CONTROL ……………........ RESPONDENT** **JUDGMENT** **BACKGROUND** 1. The Appellant is a private limited company incorporated in Kenya. Its principal activity is the supply and distribution of tiles, carpets, wallpaper, hot water systems, parts, lamps, and other building and interior furnishing products. 2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469 Laws of Kenya. Under Section 5(1), Kenya Revenue Authority (KRA) is an agency of the Government for the collection and receipt of all revenue. Further under Section 5(2) with respect to performance of its functions under subsection (I), KRA is mandated to administer and enforce all provisions of the written laws as set out in Part 1 & 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws. 3. The Appellant imported Stiebel Eltron DHW Heat Pump SPH-A300 plus vide Entry No. 2SEMK1M400848670. 4. The Respondent reclassified the Appellant’s product from HS Code 8418.61.20 to HS Code 8418.61.90 and demanded additional duty vide its letter dated 29th August, 2025. 5. The Appellant applied for a review of the Respondent’s decision vide its letter dated 2nd September 2025.The Respondent reviewed the Appellant’s application and vide a letter dated 5th September, 2025 upheld the Tariff Ruling and issued a Review Decision. 6. Aggrieved by the Respondent’s decision, the Appellant filed its Notice of Appeal dated 17th October 2025 on 20th October, 2025. **THE APPEAL** 1. The Appeal is premised on the Appellant’s grounds of appeal as stated in the Memorandum of Appeal dated and filed on 20th October 2025 1. The Respondent erred in law and fact by misunderstanding the operating model and technical functionality of the Appellant’s Stiebel Eltron DHW Heat Pump SPH-A300 resulting in its incorrect classification under HS Code 8418.61.90 2. The Respondent erred in law and fact by asserting that the Stiebel Eltron DHW Heat Pump SPH-A300 is classified under HS Code 8418.61.90 attracting import duty at the rate of 25% rather than under HS Code 8418.61.20 attracting import duty of 0%. 3. The Respondent erred in law and fact in failing to consider that it is trite law that any ambiguity ought to be interpreted in favour of the Appellant and thus the Appellant’s classification under HS Code 8418.61.90 as “for industrial use’ is proper 4. The Respondent erred in law and fact by misinterpreting the East African Community Common External Tariff as read together with the Explanatory Notes that emphasizes on the form of the product rather than on the intention of the product as the basis for classifying goods. **THE APPELLANT’S CASE** 1. The Appellant’s case is premised on its: - 1. Statement of Facts dated and filed on 20th October, 2025 2. Witness Statement of John Njoroge dated 24th April 2026 and filed on 4th May 2026 3. Written submissions dated 18th June and filed on even date. 2. The Appellant averred that the foremost rule of classification and for legal purposes is that classification is determined by the terms of headings, Sections, or Chapter notes where relevant, and if necessary and allowable, the other GIRs. 3. The Appellant faulted the Respondent for classifying the product under HS Code 8418.61.90 and charging duty at the rate of 25% and averred that the correct classification of the Stiebel Eltron DHW Heat Pump SPH-A300 was HS Code 8418.61.20 attracting import duty of 0%. It stated that in reading its decision, the Respondent failed to consider the products’ description, technical specifications, and functionality. 4. It averred that it imported the product, which was described as a compact integrated unit that utilizes energy-efficient heat pump technology to heat water for industrial or commercial use. It asserted that, unlike conventional electric heaters, the unit transfers heat from the surrounding air to the water tank thereby reducing electricity consumption by approximately 40% to 80%. 5. It was the Appellant’s assertion that the Stiebel Eltron DHW Heat Pump SPH-A300 was designed for durability and could be installed in a variety of industrial settings to provide a reliable and cost-effective source of hot water for use in production, cleaning and other industrial operations. 6. The Appellant averred that the Stiebel Eltron technological adaptability and scalability enable it to function effectively in environments with high and continuous demand for hot water production and asserted that the equipment has demonstrated reliable adaptability for industrial application, as supported by its client base and project experience. The Appellant therefore maintained that it correctly classified the imported item as for industrial use under HS Code 8418.61.20. 7. The Appellant relied on the case **of Puratos Canada Inc. V Canada (Customs and Revenue) 2004 CAVLI 57069(CACITT)** and asserted that, according to GIR1, the titles of Sections, chapters, and sub-chapters are provided for ease of reference only; however, for legal purposes, classification of goods shall be determined according to the terms of the headings and any relative Section or Chapter Notes, provided such heading, or Notes do not otherwise require, according to GIR2 through 6. 8. The Appellant asserted that the Explanatory Notes to heading 84.10 provide classification and that the said Notes do not provide a precise definition of what constitutes a heat pump “For industrial use” and what constitutes ‘Other’. It stated, however, that the pump it imported was intended for large-scale use and could be configured to meet the needs of various clients with large volume requirements. therefore, averred that this supported the classification under HS Code 8418.61.20 for industrial use. 9. It was the Appellant’s averment that the Respondent failed to clearly guide the Appellant on why it assumed the proposed classification as ‘other’ despite the Appellant providing justification for its classification of the Stiebel Elton as for industrial use during importation. It therefore asserted that due to the noted ambiguity, it prayed that the same would be held in its favour. 10. The Appellant asserted that the law does not expressly define what constitutes and industrial heat pump and thus any ambiguity must be resolved in favour of the taxpayer. Further, that is trite law that any ambiguity in the interpretation of what a tax statute is should be interpreted in favour of a taxpayer, as was held in the case of Mount Kenya Bottlers Ltd and 3 others, Civil Appeal No. 164 of 2013(2019) eKLR where the Court of Appeal stated: - *“This common law position is what pertains and has been adopted by our courts as good law. In our view, there cannot be equitable construction of income tax legislation…if however, there is any ambiguity in a taxing statute Act, such ambiguity must be resolved in favour of the taxpayer or as it is sometimes stated; contra fiscum...”* 1. The Appellant further relied on the Tribunal’s case of **Stanbic Bank Kenya Limited v Commissioner for Domestic Taxes (Tax Appeals E084 OF 2024) (2024) KETAT 1572 (KLR)** where it was noted: *“However, the Tribunal notes that the decision of the Court of Appeal in Commissioner of Domestic Taxes (Large Tax Payer officer) vs Barclays Bank of Kenya Ltd (2020) eKLR, went against the decision of the Tribunal by stating the court reiterated that where there is ambiguity in legislation, the same must be construed in favour of the taxpayer. Conversely, where the meaning of legislation is clear, courts will give effect to the law”* 1. It asserted that the Respondent ought not to be allowed to lump up items as “others” for purposes of classification without due consideration and appreciation of the Rules of Interpretation and their legal effect thereof. 2. The Appellant averred that the law must not be interpreted in a form and manner that is highly prejudiced and against public policy. It cited the case of **Associated Provincial Picture Houses Ltd v Wednesbury Cooperation (19481 1KB22)** where the court set out the standard of unreasonableness of public body decisions, that if unreasonable, would make the decision liable to be quashed. 3. It stated that the court in issuing its decision, found that, for the court to adopt any remedies against decisions of public bodies such as Wednesbury Corporation, it would have to find that the decision matter: * + 1. Had given undue relevance to facts that, in reality, lacked relevance for being considered in the decision-making process. 2. Had not given relevance to facts that were relevant and worthy of being considered in the decision-making process. 3. Had made a decision that was completely absurd, a decision so unreasonable that no reasonable authority could have possibly made. 4. The Appellant asserted that the Respondent considered facts that were not relevant to the decision-making process and, in particular, that the Respondent failed to consider the industrial use applicable to the item Stiebel Eltron DHW Heat Pump SPH-A300 to justify the assessment of taxes, which, in the Appellant’s view, were not due. 5. It asserted further that the Respondent failed to consider material facts and documentation that were relevant to the decision-making process, including the supporting documents provided by the Appellant. It therefore stated that the Respondent’s review ought to be quashed for failing to interpret the East African Community Common External Tariff (EACCET) as read together with the Explanatory Notes, in a manner that promotes the spirit, purpose, and objects of the EACCET. 6. In its written submissions, the Appellant raised three issues for determination: 1. **Whether the Respondent erred in law and fact by importing into East African Community External Tariff (EACCET) a definition of “Industrial use”** **that is not contained in the tariff provisions or the relevant Explanatory Notes, thereby unlawfully restricting the scope of HS** **Code 8418.61.20.** 7. The Appellant submitted that it classified the Stiebel Eltron DHW heat pump SHP -A300 under HS Code 8418.61.20 as an industrial use heat pump, whereas the Respondent sought to reclassify it under HS Code 8418.61.90 “other” claiming that the heat pump was intended for domestic use and placed reliance on the installation and operation manual. It stated that the Respondent attached the manual for the Stiebel Eltron WPLS heat pump as KRA-8 in its supplementary list of documents filed on 28th April, 2026.It stated, however, that the heat pump in dispute is the Stiebel Eltron DHW Heat Pump SHP-A300. 8. It asserted that it annexed the installation and operation manual for the Stiebel Eltron DHW heat pump SHP-A300 in its witness statement dated 24th April, 2026 and faulted the Respondent’s assertion that the Appellant failed to attach the installation and operative manual in its Statement of Facts. The Respondent’s conclusion that the heat pump was for domestic use was therefore flawed and misguided, as this conclusion was not supported by the correct installation and operation manual for the Stiebel Eltron DHW heat pump SHP-A300 as attached to the Appellant’s witness statement dated 24th April 2026. 9. The Appellant stated that the Respondent relied on the Stiebel Eltron’s website to define DHW, yet the referenced material does not provide a definition of the term. Rather, it merely describes DHW (Domestic Hot Water) heat pumps as systems designed to heat water using ambient heat sources such as indoor or basement air, without indicating that the product was limited to or exclusively intended for, domestic use. 10. The Appellant submitted that Domestic Hot Water (DHW) was an industry term referring to sanitary hot water supplied within a building for routine use, such as washing, cleaning, and hygiene; therefore, it the type of water service and not the scale or nature of the premises. It faulted the Respondent’s reliance on the stated purpose as domestic space heating and hot water production, stating that this description was merely indicative of one application of the product and did not conclusively establish that the heat pump was exclusively intended for domestic use. 11. It was the Appellant’s submission that, in the absence of approved Kenyan Building Regulations on sanitation, hot water safety, and efficiency, it relied on the United Kingdom Building Regulations 2010 on Sanitation, Hot Water Safety, and Water Efficiency, which define Domestic Hot Water as follows: *“Water that has been heated for cooking food preparation, personal washing or cleaning purposes. The term is used irrespective of the type of building in which the hot water system is installed”* 1. The Appellant additionally relied on the definition of DHW in the A-Z Glossary index of common heating terminology, which defined it as follows: - *“a common acronym in the hot water industry, DHW refers to domestic hot water. Domestic hot water is the supply of wholesome water from an outlet for domestic applications. The term is used irrespective of the type of building in which the hot water system is installed, including for commercial premises”* 1. The Appellant therefore asserted that the classification of a DHW system as domestic or commercial was dependent on the demand characteristics and system design, and not the label “DHW” itself. The Appellant asserted that Paragraph 2.1 of the Stiebel Eltron DHW Heat Pump SHP-A300 installation and operation manual provided as follows; *“The appliance is intended for domestic use. It can be used safely by untrained persons. The appliance can also be used in non-domestic environments e.g. small businesses, as long as it is used in the same way”* 1. The Appellant asserted that, despite the installation and operation manual expressly providing that the heat pump can be used in non-domestic environments, the Respondent had contended that the heat pump was exclusively for domestic use. It submitted that the manufacturer had contemplated application of the heat pump in non-domestic environments, and not exclusively for domestic use, as alleged by the Respondent. 2. It was the Appellant’s submission that its business model involved the installation of heat pumps in commercial premises, as opposed to domestic premises, including Terraces and AMREF as illustrated in the selected installation projects. It stated that, applying *Ejusdem generis* (of the same kind) to the manual, the example of a small business defined the class as service-oriented, non-domestic environments relying on domestic-type water heating. 3. The Appellant submitted that the non-domestic environment extends to hotels, student residences, clinics, and similar facilities, evidenced by the selected installation projects where the heat pump was used to heat water for cleaning and personal washing purposes. The argued that the heat pump is designed for scalable non-domestic use contrary to the Respondent’s narrow interpretation that the pump was exclusively for domestic use. The Appellant asserted, therefore, that the purpose of the imported heat pump was central to the adoption of the correct classification of the product. 4. The Appellant relied on the case of **Kenchic Limited vs Commissioner of Customs & Boards Control (2023) eKLR** where the Tribunal held that the interpretation rules provide that, in seeking to classify goods, one must look at the most concise heading that most accurately describes the goods. In the said case, the High Court held that: - *“Regard must also be given to the purpose for which the consignment is imported. In this case, the goods were imported for purposes of poultry keeping which is in line with the terms of the Heading 84.36 which covers poultry keeping or bee keeping machinery”* 1. The Appellant further relied on the case of **Proctor & Allan (EA) Ltd vs Commissioner of Income Tax (2014) eKLR** where, in holding the same stance, stated that: - “*The court had little choice but to look at the intended purpose of the vitamin premix with a view to establishing whether it had been classified under the correct heading. The Court finds the purpose of the vitamin premix was to fortify or improve the vitamin characteristics of the unimix, there was no justification or basis which would have required the Respondent to have reclassified the vitamin* premix as had been contended by the Appellant. It was irrespective of whether or not the Respondent could analyse and identify the vitamins” 1. The Appellant submitted that it imported the Stiebel Eltron DHW Heat Pump SHP-A300 for use in commercial processes and that based on the technical specifications, operational capacity, and intended commercial application, its heat pump demonstrated industrial use heat pump, as opposed to domestic use. It therefore argued that the Respondent’s attempt to classify the Appellant’s heat pump under the residual category of “other” was misplaced since the residual category could only apply where a product was not specifically or expressly covered elsewhere with the heading. 2. It was the Appellant’s contention that if domestic heat pumps fall under the residual ‘other’ classification, then by necessary implication, its heat pump being demonstrably industrial in both design and operation, could not be classified as domestic or residual “other” rather, it was expressly covered as an industrial-use heat pump under the Heading 8418.61.20. 3. The Appellant therefore submitted that the Respondent erred in law and fact by misunderstanding the operating model of the Appellant’s Stiebel Eltron DHW Heat pump 5HP-A300 thus failing to factor its non-domestic applications, resulting in its incorrect classification in the residual category of “other “under HS Code 8418 61.90. 4. The Appellant relied on the case of **Republic vs Kenya Revenue Authority (Exparte) Jaffer Mujtab Mohammed (2015) eKLR** where it was held - *“a taxing authority is not entitled to pluck a figure from the air and impose it on the taxpayer without some rational basis for arriving at the figure and not another. Such action would be arbitrary, capricious and in bad faith. It would be an unreasonable exercise of power and discretion and that would justify the court intervening.”* 1. The Appellant faulted the Respondent for relying on the installation manual for Stiebel Eltron WPLS heat pump in reclassifying the Stiebel Eltron DHW Heat Pump SHP-A300, which reliance was arbitrary and in violation of the Appellants right to fair administrative action. It argued that it was not in dispute that the correct heading for classification of the heat pump was 8418 which covers: *“Refrigerators, freezer equipment, electric or other heat pumps other than air conditioning machines of heading 84.15.”* 1. The Appellant submitted that given that the only applicable subheading for the classification of the heat pump was those relating to industrial use or other use, the most appropriate classification was under the subheading for industrial use in light of the cascading configuration of the heat pumps and their large -scale application in commercial settings. 2. The Appellant further relied on the case **Napply Ever After Limited vs Commissioner of Customs and Boarder Control (2026) KETAT 73 (KLR)** where the Tribunal emphasized that residual categories should apply as a last resort, while placing reliance on the **Premier Solar Solutions Limited vs Commissioner of Customs and Border Control (2025) KEHC 12782 (KLR)** where it was stated: *“83. The Tribunal is further persuaded that the classification proposed by the Respondent under subheading 9619.00.90 (other) should only be resorted to where no more specific classification is available. This principle was affirmed in Premier Solar Solutions Limited vs Commissioner of Customs and Border Control (2025) KEHC 12782(KLR) where the Tribunal held that residual categories must only be applied as a last resort”* 1. The Appellant submitted that in applying *ejusdem generic* rule to the manual, the inclusion of “small business” illustrated that the intended class consisted of service-oriented, non-domestic establishments that relied on domestic-styled water heating applications. It reiterated further that non-domestic environments extended to hotels, student residences, clinics, and similar facilities. 2. It therefore submitted that the heat pump was therefore designed for scalable non-domestic use, contrary to the Respondent’s narrow interpretations. It argued therefore that the Respondent’s reliance on the installation and operation manual for Stiebel Eltron WPLS heat pump, which was not the heat pump in issue, and its failure to properly interrogate the actual purpose and functionality of the subject heat pump demonstrated that the reclassification was fundamentally flawed. 3. The Appellant submitted that the EAC CET and the Explanatory Notes to Heading 84.18 only distinguished heat pumps based on domestic or industrial application and that, in the present case, based on the technical specifications, operational capacity, and intended commercial application of the Appellant’s heat pump, it was demonstrated that it was an industrial use heat pump as opposed to a domestic use heat pump. 4. The Appellant further submitted that the distinction contemplated by the EACCET and the Explanatory Notes was functional in nature and the Appellant’s heat pump was expressly identifiable as an industrial-use heat pump based on its functionality and operational characteristics, which are designed for industrial and commercial heating application as opposed to ordinary household or domestic use. 5. It therefore asserted that classification ought to be determined by the actual purpose, capacity and operational use of the heat pump and not by reliance on an incorrect manual relating to a different model intended for domestic application. It stated that its heat pump performs specialized industrial heating functions, operates at capacities beyond ordinary residential use, and is integrated into a commercial system, all of which firmly places it within the industrial use category. **b) Whether the Respondent erred in law and fact by adopting a restrictive interpretation of the term “industrial use” despite the absence of a clear definition under the EACCET and the relevant Explanatory Notes, contrary to the principle that ambiguities in taxing provisions are to be construed in favour of the taxpayer”** 1. It was the Appellants’ contention that, due to a lack of express definition of industrial use in the EACCET and the Explanatory Notes to Heading 84.18, the court should classify the imported heat pump in favour of the taxpayer in this case, the Appellant. It submitted that it was trite law that any ambiguity in the interpretation of a tax statute ought to be interpreted in favour of a taxpayer. It therefore relied on the case of **Mount Kenya Bottlers Ltd and 3 others vs The Attorney General and 3 others, Civil Appeal No.164 of 2013 (2019) eKLR** where the Court of Appeal stated: *“This common law position is what pertains and has been adopted by our courts as good law. In our view there cannot be equitable construction of income tax legislation…if however, there is any ambiguity in a taxing statute Act, such ambiguity must be resolved in favour of the taxpayer or as it is sometimes stated, contra fiscum...”* 1. It reiterated that in the absence of a definition of “Industrial use” under the EACCET and the Explanatory Notes to Heading 84.18, the Appellant relied on the proposed United States Heat Pump Energy Assistance and Training (HEAT) *Act Bill which defines an industrial heat pump as follows:* *“(1) INDUSTRIAL HEAT PUMP -The term industrial heat pump means a vaper compression device that transforms law grade production waste heat by increasing the temperature of air or process fluid, such as water to meet the heating needs of agricultural industrial, or commercial process”* 1. The Appellant additionally relied on the international guidance of the European Heat Pump Association, which classifies heat pumps as industrial heat pumps based on temperature ranges, stating as follows: *“Industrial heat pumps can provide energy at temperatures levels of up to 160°C.Prototypes are operating at around 180°C.”* It further stated that the same Association characterises industrial heat pumps as systems with significantly higher operational capacities and temperature outputs. 1. The Appellant submitted that its heat pump exhibits the hallmarks of an industrial heat pump as contemplated under the proposed United States Heat Pump Energy Assistance and Training (HEAT) Act Bill and the European Heat Pump Association guidelines and,in particular, that the European Heat Pump Association identifies industrial heat pumps as systems capable of providing temperatures ranging between 120°C and 160°C with advanced systems exceeding 180°C and having significantly higher operational capacities suited for commercial and institutional applications. **c) Whether the Respondent erred in law and fact by misinterpreting the East African Community Common Tariff as read together with the Explanatory Notes that emphasizes the purpose of the product rather than the form of the product, as the basis for classifying goods.** 1. The Appellant submitted that it classified the Stiebel Eltron DHW Heat Pump SHP-A300 as an industrial-use heat pump under HS Code 8418.61.20 in accordance with the General Interpretative Rules (GIR) and applicable Explanatory Notes the Chapter 84 and 85. It relied on the following case to buttress its argument**. Netsavy Wireless Limited vs Commissioner of Custom & Border Control (Tax Appeal 106 of 2022) (2023) KETAT 511 (KLR)** where the Tribunal held that: *“The rules of interpretation are found in Annex 1 to the Protocol for the Establishment of the East African Customs Union and therefore form part of the customs law of this country. The EACCET Nomenclature groups in Section, Chapters and sub-chapters which have been given titles indicating as concisely as possible the categories or types of goods they cover”* 1. The Appellant submitted that according to GIR Rule (1), classification of goods should first be determined by the headings (titles of sections, chapters and sub-chapters) in the Harmonized system. It emphasized that the titled of the sections, chapters and sub-chapters are used for general guidance, but are not necessarily determinative of classification. It stated that the correct classification ought to be based on the actual content of the headings and any applicable notes. 2. The Appellant submitted that there was no dispute between the parties that the imported goods properly fall under Heading 84.18. However, it contended that the goods were properly classifiable under sub-heading 8418.61.20 while the Respondent insisted on reclassification under sub-heading 8418.61.90. 3. It submitted that the issue in this appeal is the interpretation of the term industrial use as it appears in Heading 8418 which distinguishes between goods for industrial use and those for “other” uses. It stated that the Explanatory Notes to Heading 84.18 do not provide the definition of “industrial use” nor do they set out clear criteria for distinguishing industrial from non-industrial applications, thus creating ambiguity. 4. The Appellant submitted that the imported pumps are usually deployed in environments such as hotels and similar establishments, which operate on a continuous, large-scale and income-generating basis where these uses are not domestic in nature but rather form part of the structured, high-demand operational system. It therefore contended that the installation of heat pumps in non-domestic environments falls within the functional scope of industrial use, as they involve sustained and systemized utilization of equipment in a business setting. 5. It contended further that a narrow interpretation of industrial use as being exclusively to manufacturing or production processes is neither supported by the wording of the heading nor practical in its application. It submitted that the Respondent failed to adhere to the General Interpretative Rules as the purported reclassification was not aligned with the terms of the relevant heading or the applicable section and chapter notes. 6. It was the Appellant’s submission that classification disputes turn on the essential character and intended use of the imported article and that under the Harmonized system, classification is determined by function and purpose in accordance with the General Interpretation Rules, not by superficial appearance or structural housing. It submitted that by focussing on the enclosure rather than the machinery’s operative function, the Respondent elevated form over substance, contrary to established classification principle. 7. To buttress its argument, the Appellant relied on the following cases; 8. **Republic v Commissioner of Customs service’s ex-parte Mulchand Ramji & Sons Ltd, (2010) eKLR** 9. **Purators Canada Inc. v Canada Customs & Revenue (2004) Can LIT 57069 (CA CITT)** **Appellant’s Prayers** 1. The Appellant prayed that: - 1. The Respondents Review Decision dated 5th September 2025 classifying the Stiebel Eltron DHW Heat Pump SPH-A300 under HS Code 8418.61.90 attracting import duty at the rate of 25% rather than under HS Code 8418.61.20 attracting import duty at 0% and any interest thereof be set aside in its entirety. 2. The Appeal be allowed with costs to the Appellant; and 3. The Honourable Tribunal be pleased to issue any other remedies that the Honourable Tribunal deems just and reasonable. **THE RESPONDENT’S CASE** 1. The Respondent’s case is premised on its: 1. Statement of Facts dated 21st November 2025 and filed on 3rd December 2025. 2. Witness Statement of Thaddeus Ogoti dated and filed on 25th May 2026 3. Written submissions dated and filed on 19th June 2025. 2. The Respondent stated that the Appellant imported Stiebel Eltron Air Source Heat Pump WPL 23 Vide Entry No.25EMKIM400249937 where its Tariff Classification Unit issued a ruling reclassifying the product under HS Code 8418.61.90. It stated that one month later the Appellant imported a variant of the same product, by name Stiebel Eltron DHW Heat Pump SPH-A300 where the Respondent demanded duty at 25%. 3. The Respondent stated that the dispute related to the classification of Stiebel Eltron DHW Heat Pump SPH-A300 and that, from the Manufacturer's website, and search from the internet, the product had been described as follows: *DHW (Domestic Hot Water) heat pumps. A series designed for energy efficiently heating water using ambient heat. The systems, such as the SHP-A or SHP-1 models, draw heat from sources like indoor air or basement air to heat domestic hot water, and they can be integrated with* “*other heating systems and PV systems”* 1. It averred that the above description was reiterated in the product data sheet and the Manufacturer website. It contended that contrary to the Appellant’s allegation that the Respondent misunderstood the operating model and functionality of the Appellant’s Stiebel Eltron DHW Heat Pump SPH-A300, the Respondent averred that it understood the product and its functionality 2. It asserted that the article was specified to be a disassembled air source heat pump, described as Stiebel Eltron Air Source Heat Pump, a high-efficiency air to water heat pump described for domestic space heating and hot water production. Further that the air source heat pump operated based on the vapor compression refrigeration cycle through the coordinated functioning of its key components. 3. It averred that the Heading 84.18 includes the classification of air source heat pumps. Further that the Explanatory Notes to Heading 84.18 describe a heat pump as a device which draws from a suitable heat source and converts it with the assistance of a supplementary energy source, into a source of more intense heat. 4. The Respondent contended that compression heat pumps consist essentially of an evaporator, a compressor and a condenser. As such the article Stiebel Eltron Air Source Heat Pump was considered to be a disassembled heat pump for domestic space and water heating solutions classified in the 2022 EAC/CET HS Code 8418.61.90 as guided by GIRs 1,3(b) & 6. 5. It averred that classification was based on the information submitted during verification and tariff classification, and that, contrary to the Appellant’s allegation that there was ambiguity, the Respondent maintained that there is no ambiguity on classification. 6. The Respondent asserted that Heading 8418.61.20 where the Appellant had classified its product, is clear that it deals with pumps for industrial use whereas all the information from the user manual to the manufacturer’s product data sheet has clearly stated that the product was for domestic use. 7. It contended that even the manual had gone further to elaborate that if the product is to be used in any other place other than the home or a restricted area, it should still be used in the same manner as it would have been used at home. 8. The Respondent asserted that, having established that HS Code 8418.61.20 was strictly for heat pumps for industrial use, it goes without saying as per rules of classification, that any other type of pump not specifically provided for will go to the general pumps under “other” with HS Code 8418.61.90 where the Respondent had classified it. 9. The Respondent averred that “other” under HS Code 8418.61.90 caters for all the remaining types of heat pumps not specifically provided for in a specific subheading. It averred further that the Appellant’s manual clearly stated that the product was for domestic use hence the Appellant cannot force it to be classified under industrial use just to avoid paying duty that accrues from it. 10. It was the Respondent’s averments that the Appellant had stated at paragraph 4 of its Statement of Facts that the product was described as a compact integrated unit that utilizes energy-efficient heat pump technology to heat water from industrial or commercial use but has not bothered to attach the said manual. It therefore asserted that the manual would have aided the Appellant’s case but its failure to attach it leads to only one conclusion: that the manual says the product is for domestic use. 11. In its Written submissions, the Respondent submitted on one issue: **Whether the Respondent erred in reclassifying the Appellant’s product from HS Code 8418.61.20 to HS Code 8418.61.90** 1. The Respondent submitted that both parties agreed that the product was correctly classified under Heading 8418 which covers the classification of Refrigerators, freezers and other refrigerating or freezing equipment, electric or other; heat pumps other than air conditioning machines of heading 84.15. It stated that the point of departure was that the Appellant preferred HS Code 8418.61.20 which specifically provides for head pumps for industrial use. 2. It submitted that it preferred HS Code 8418.61.90 under “others “which covers all other items not specifically provided for under any subheading. It argued that Heat pumps for domestic use have not been given a specific subheading; hence, they will fall under the description ‘others.’ 3. The Respondent submitted that at the point of importation, the Appellant presented its product for verification and confirmed, which exercise, the Respondent undertook and which led to the product being presented to Tariff Classification Team for proper classification who in turn, issued a ruling dated 8th May, 2025 classifying the product under HS Code 8418.61.90.It averred that it relied on the information provided by the Appellant and the manufacturers’ user manual to do the classification. 4. The Respondent submitted that the Manufacturers website described the product, and that it also relied on the product data sheet to classify the product. It stated that, contrary to the Appellant’s allegation that the Respondent misunderstood the operating model and functionality of the product, it submitted that it indeed understood the product and its functionality. 5. It submitted further that the article was specified to be a disassembled air source heat pump, described as Stiebel Eltron Air Source Heat Pump, a high-efficiency -air to water heat pump designed for domestic space heating and hot water production. 6. The Respondent submitted that under GIR1, classification must be determined according to the terms of the headings and relevant Section or Chapter Notes. However, where a product would fall under two headings, GIR 3(a) provides that the heading which provides the most specific description should be applied. It asserted that Heading 8418.61.90 provides a more precise description than heading 8418.61.20 which expressly excludes domestic heat pumps, as it is a very specific subheading. 8418.61.20 is for heat pumps for industrial use. 7. The Respondent reiterated that contrary to the Appellant’s allegations, there was no ambiguity on classification. Further that heading 8418.61.20 where the Appellant had classified its product, was clear that it deals with pumps for industrial use, whereas all the information from the user manual to the manufacturer’s product data sheet had clearly stated that the product was for domestic use. 8. The Respondent submitted that the manual had gone further to elaborate this if the product is to be used in any other place other than home or residential area, it should be still be used in the same manner as it would have been used at home. 9. The Respondent submitted that having established that HS Code 8418.61.20 was strictly for heat pumps for industrial use, this meant that as per the rules of classification, that any other type of pump not specifically provided for will be classified under general pumps under ‘other’ with HS Code 8418.61.90 which is the HS Code 8418.61.90 which is the HS Code adopted by the Respondent. 10. The Respondent stated that it was guided in its interpretation of the statute with the maxim that “*Expression* *unius Est Exclusiio Alterius* which means that where legislation specifically mentions one item in exclusion of another the one left out was not meant to be there. It stated that in the issue at hand subheading 8418.61.20 listed pumps for industrial use the deliberate omission of pumps for domestic use indicative of legislative intent not to include them. 11. The Respondent submitted that courts have consistently held that: which is expressly stated excludes what is not, and that tax law does not permit extension by analogy. It submitted further that tax statutes are statutes of strict interpretation and that nothing is to be inferred. 12. To buttress its case, the Respondent relied on the case of **Republic v Commissioner of Domestic Taxes, Large Tax Payers Office, Ex-Parte Barclays Bank of Kenya Ltd (2012) eKLR** The Respondent submitted that, in tax cases, the Court is not supposed to attempt a discovery at the intention of the Legislature, but must restrict itself to the clear words of the statute. Further, where the law has not defined a particular item, the ordinary meaning of the said item is assigned to it. It relied on the case of ***National Bank of Kenya Ltd vs Commissioner of Domestic Taxes (Income Tax Appeal E155 & 533 of 2020(Consolidated) (202) KEHC 10549(KLR) (Commercial and Tax) (26 May 2022)*.** 1. The Respondent submitted that, as was held in the National Bank case (Supra) industrial and domestic use should and ought to be given their ordinary and plain meaning, and no fabricated definitions by the Appellant’s witness. 2. It was the Respondent’s submission that the ordinary meaning of industrial is anything connected with the large-scale production, manufacturing, and commercial processing of goods. It describes machinery, materials and processes specifically designed for heavy-duty professional use rather than everyday domestic life. On the other hand, domestic primarily refers to things relating to the home, family, or one’s own home country. 3. The Respondent submitted that the Appellant should not be permitted to come up with its own definition and alteration of the domestic water heaters with the sole purpose and intention of avoiding to pay taxes due, where the heater has been expressly stated to be for domestic use. 4. It averred that if at all, the heater was meant for industrial use, nothing would have stopped the manufacturer from stating as much. It therefore argued that the Appellant cannot purport to be more knowledgeable on the pumps than the manufacturer of the said pumps. It averred that, if anything, the purported expert who testified on behalf of the Appellant could not quote the source of the information he wanted the Tribunal to rely on, which is contrary to the express instructions of the manufacturer’s manual. 5. The Respondent submitted that if the domestic water heater did not attract any duty and the industrial one was the one subjected to the duty, the Appellant would have been very happy to use the manufacturer’s manual for the same purpose, avoidance of payment of duty. 6. The Respondent submitted that the Appellant’s manual clearly stated that the product was for domestic use; hence the Appellant cannot force it to be classified under industrial use just to avoid paying duty that accrues from it. **The Respondent’s Prayers** 1. The Respondent prayed that the Tribunal: - 1. Dismisses the appeal in its entirety 2. Upholds the tax assessment as confirmed by the Review decision; and 3. Orders the Appellant to pay the costs of the appeal. **ISSUES FOR DETERMINATION** 1. The Tribunal has considered the parties pleadings, documentation and submissions and is of the view that this appeal raises one issue for determination. **Whether the Respondent was justified in reclassifying the Appellant’s Stiebel Eltron DHW Heat Pump SHP-A300 from HS Code 8418.61.20 to HS Code 8418.61.90** **ANALYSIS AND FINDINGS** 1. Having identified the single issue for determination, the Tribunal proceeds to analyse it as hereinunder. **Whether the Respondent was justified in reclassifying the Appellant’s Stiebel Eltron DHW Heat Pump SPH-A300 from HS Code 8418.61.20 to 8418.6.90** 1. The dispute arose after the Respondent reclassified the Appellant’s Stiebel Eltron DHW Heat Pump SPH-A300 from HS Code 8418.61.20 to HS Code 8418.61.90. According to the East African Community External Tariff (EACCET), HS Code 8418.6.20 preferred by the Appellant attracts 0% import duty, while HS Code 8418.61.90 preferred by the Respondent attracts import duty at 25%. 2. The Tribunal notes that there is no dispute between the parties that the imported product falls under Heading 84.18, which covers: *"Refrigerators, freezers and other refrigerating or freezing equipment, electric or other; heat pumps other than air conditioning machines of heading 84.15.* 1. The dispute is confined to the appropriate tariff subheading. The Appellant maintains that the product is classifiable under HS Code 8418.61.20 as a heat pump “for industrial use", while the Respondent contends that it properly falls under HS Code 8418.61.90 ("Other") and further stating that the information from the manufacturer’s website indicated that the product was used in domestic space heating and hot water production; therefore, for residential applications. 2. The Tribunal observes that tariff classification is governed by the General Rules for the Interpretation (GIRs) of the Harmonized System. GIR 1 provides that classification shall be determined according to the terms of the headings and any relevant Section or Chapter Notes. It is only where those provisions do not resolve the classification that recourse may be had to the subsequent Rules. 3. The Tribunal primary question for the Tribunal to unravel is whether the imported heat pump falls within the specific description of ‘for industrial use’ under HS Code 8418.61.20. If it does not, it necessarily falls within the residual category under HS Code 8418.61.90. 4. The Appellant argued that the heat pump is suitable for commercial establishments such as hotels, student residences, clinics, and similar facilities, and therefore qualifies as being ‘for industrial use.’ The Appellant further submitted that because the EAC CET does not define the term ‘industrial use,” any ambiguity ought to be resolved in favour of the taxpayer. 5. The Tribunal notes that the manufacturer's literature forms an important basis in determining the nature and intended application of imported goods. Throughout the classification process, the Respondent relied on the manufacturer's product information, technical data sheets and user documentation describing the SHP series as Domestic Hot Water (DHW) heat pumps designed for domestic hot water production through the use of ambient heat. 6. The Tribunal notes the Respondent’s argument that the relevant distinction under Heading 84.18 is not simply whether the product is installed in a business environment, but whether it is a heat pump for industrial use. 7. The Appellant did not place before the Tribunal sufficient technical evidence demonstrating that the SHP-A300 was specifically engineered or manufactured for industrial processes, industrial production, or industrial heating applications. 8. Under the circumstances, it is clear that the appliance is intended to provide domestic hot water, albeit capable of serving that purpose in small commercial establishments. The Tribunal finds that the Appellant's reliance on the locations where the units may ultimately be installed cannot override the manufacturer's description of the product itself. 9. The Tribunal is also not persuaded by the Appellant's submission that because the term ‘industrial use’ is undefined in the EAC CET, the ambiguity principle must automatically be invoked. There is no ambiguity in this case. The product was described and intended by the manufacturer to be used domestically. The fact that it can be used even in an industrial environment does not negate the fact that it was manufactured and intended for domestic use. 10. In view of the foregoing, the Tribunal finds that the Respondent was justified in reclassifying the Appellant's Stiebel Eltron DHW Heat Pump SHP-A300 from HS Code 8418.61.20 to HS Code 8418.61.90. **FINAL DECISION** 1. The upshot of the foregoing is that the Appeal lacks merit and the Tribunal proceeds to issue the following orders: 1. The Appeal be and is hereby dismissed. 2. The Respondent’s Review Decision dated 5th September, 2025 be and is hereby upheld. 3. Each party to bear its own costs. 2. Orders accordingly. **DATED and DELIVERED at NAIROBI this ………7th...……. Day of ……August..…… 2026** **................................................................** **DR, RODNEY ODHIAMBO OLUOCH** **CHAIRMAN** **……………………………. ……..............……………..** **ABDULLAHI M. DIRIYE DR. ERICK K’OMOLO** **MEMBER MEMBER**