Bidcoro Africa Limited v Commissioner of Customs & Border Control [2023] KETAT 109 (KLR)

Bidcoro Africa Limited v Commissioner of Customs & Border Control (Tribunal Appeal 689 of 2021) [2023] KETAT 109 (KLR) (17 March 2023) (Judgment)

Neutral citation: [2023] KETAT 109 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tribunal Appeal 689 of 2021

E.N Wafula, RM Mutuma, RO Oluoch & EK Cheluget, Members

March 17, 2023

Between

Bidcoro Africa Limited

Appellant

and

Commissioner of Customs & Border Control

Respondent

Judgment

Background 1. The Appellant is a limited liability company incorporated under the Companies Act of the Laws of Kenya, and is in the business of manufacturing drinkable juice drinks from non-drinkable compounds obtained from fresh fruits.

2. The Respondent is the principal officer appoint ted under the Kenya Revenue Authority Act, Cap 469 of the Laws of Kenya. The Respondent is an agency of the Government for the collection and receipting of all tax revenue. The Respondent is further mandated to administer and enforce all provisions of the written laws as set out in the 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 issue in dispute herein arose when the Appellant received a decision dated 4th October 2021 from the Respondent wherein the Respondent stated that having reviewed the Appellant’s objection and request for review of its initial ruling dated 14th September 2021 it maintained its demand of Kshs 104,562,636 being the desk audit findings for compounds for making Sunquick and Suntop products imported by the Appellant under HS Code 2106:90:20 as opposed to HS Code 2009.

4. The ruling dated 14th September 2021 was made pursuant to Section 235 and 236 of EACCMA, 2004, on the alleged position that the Appellant had used the wrong tariff classifications on its- 24 compounds forming Suntop products and Sunquick products which the Appellant had classified under the Heading 2106 instead of Heading 2009 and imported since the year 2017.

5. The said ruling clustered all the Suntop products and Sunquick products imported by the Appellant from 20th July 2017 to 25th August 2021, as well as three other products subject of appeals TAT NO. 595 0f 2021 and TAT 596 of 2021.

6. The Sunquick products and Suntop products affected by the said ruling are as follows:-NO. SUNTOP PRODUCTS SUNQUICK PRODUCTS

1. Tropical Compound Tropical Compound

Tropical Nas Compound

2. Orange Compound Orange Nas Compound

Orange Compound

Orange RTD Compound

3 Mango Compound Mango Compound

Mango RTD Compound

4 Apple Compound Apple Compound

5 Blackcurrant Compound Blackcurrant Compound

6 Suntop Compounds Sunquick Compound

7

Exotic Compound

8 Berries Compound

9

NSC Compound

10 Red Berries Compound

11

Mandarin Compound

12 Pineapple Compound

13

Zero Redcurrant Compound

7. The Appellant stated that it explained to the Respondent through several letters and factory visits that Sunquick products and Suntop product specifications were different and could not be classified under HS Code 2009.

8. The Appellant contended that the Respondent did not avail any laboratory analysis to the Appellant in respect of the twenty-four compounds forming the Sunquick products and Suntop products to contradict the Appellant’s compositions and explanations.

9. The Appellant had explained to the Respondent through several letters and demonstrated through the factory visit to the Respondent that the imported “Sunquick mandarin compound”, “Sunquick blackcurrant compound”, and “Suntop Orange Compound”’ which the Respondent tested had percentages as follows;- Sunquick Mandarin Compound - an industrial product manufactured from concentrated mandarin juice (53. 875%), colour (2. 550%), mandarin flavourings (4. 713%), water (38. 787%), and preservatives (0. 013%).

“Sunquick Blackcurrant Compound’’ – concentrated blackcurrant juice (52. 88%), concentrated black carrot juice (22. 50%), black currant flavour (13. 50%), water (11. 06%) and preservatives (0. 06%).

Suntop Orange Compound- an industrial product manufactured from concentrated orange juice (67. 357%), water (32. 018%), orange flavour (0. 512%), stabilizer (0. 100%) and colour (0. 013%).

10. The Appellant stated that the said compounds contain high levels of juice concentrates, flavours, oils, colours, and other ingredients ideally making it unfit for direct sale to consumers or direct consumption by consumers. Therefore, they cannot be considered a juice concentrate that can be diluted with water for consumption.

11. The Respondent through a letter dated 4th October 2021 rendered its review decision and upheld its findings in the ruling dated 14th September 2021.

12. The Appellant being dissatisfied with the Respondent’s decision dated 4th October 2021 filed its Notice of Appeal dated 12th October 2021 on the 27th October, 2021.

The Appeal 13. The Appellant filed its Memorandum of Appeal dated 12th October 2021 and filed on 27th October, 2021 which is premised on the following grounds:i.That the Respondent erred in law and fact by wrongly classifying the Sunquick products and Suntop products as concentrated fruit juices which fall under EAC/CET HS Code 2009 incurring a tariff rate of 25% instead of EAC/CET HS Code 2106:90:20 which incurs a tariff of rate of 10% disregarding the fact that the compounds do not have their original character.ii.That the Respondent erred in law and fact by deciding that the Sunquick products and Suntop products fall under the category of concentrate fruit juices without appreciating the manufacturer’s explanation on the composition of the compounds and conducting a full chemical analysis on the sample it collected in order to establish the parameters of the fruit acidity contained.iii.That the Respondent misapprehended the provisions of Heading 2009 by erroneously finding that the Heading covers intermixtures of juices or fruits or vegetables of the same or different types, yet the compounds making the Sunquick products and Suntop products had lost their original character.iv.That the Respondent erred in law and fact by failing to appreciate the provisions of the General Interpretation Rules, the Section Notes and Explanatory Notes to the Harmonized System which emphasizes that the fruit or vegetable juices or concentrates provided under Heading 2009 should retain their original character and failure to retain that original character, a product’s tariff classification moves from Heading 2009 to the next applicable Chapter under the HS nomenclature.v.That the Respondent erred in law by failing to consider the Heading Note 4 to the Heading 2009 which provides that the Heading excludes fruit juices in which one of the constituents (citric acid, essential oil extracted from the fruit, etc.) has been added in such quantity that the balance of the different constituents as found in the natural juice is clearly upset in such a case, the product has lost its original character.vi.That the Respondent erred in law and fact by failing to consider the evidence rendered to them by the Appellant in its letters seeking review of the Respondent’s decision to show that the Sunquick products and Suntop products do not fall within Heading 2009. vii.That the Respondent erred in fact and law by rendering a decision without considering the report of the supplier of the goods that detailed the composition and classification of the Sunquick products and Suntop products.

The Appellant’s Case 13. The Appellant has grounded its case on the Statement of Facts dated 12th October 2021 and filed on 27th October, 2021 together with the annexures thereto, and the Written Submissions dated 18th October 2022 and filed on 19th October, 2022.

14. The Appellant stated that it has been manufacturing fruit based soft drinks from various compounds under two main product banners “Sunquick’’ and “Suntop”. The compounds for the two product lines are imported from various suppliers with the main producer being the Danish CORO.

15. The Appellant stated that it received a tariff ruling dated 11th May 2021 from the Respondent wherein the Respondent stated that having reviewed the Appellant’s import entry No. 2021ICD276898 instances of use of wrong tariff classifications on Sunquick Blackcurrant compound which the Appellant had classified under Heading 2106:90:20 instead of Heading 2009:89:00.

16. The Appellant stated that it responded to the ruling of 11th May 2021 through an explanatory letter from the manufacturer dated 15th June 2021 and invited the Respondent for a factory visit through an invitation letter dated 3rd August 2021.

17. The Appellant stated that the Respondent visited its factory on 11th August 2021, and it demonstrated that the imported Sunquick Mandarin products and Suntop products are industrial products manufactured from; Sunquick Mandarin Compound - concentrated mandarin juice (53. 875 %), colour (2. 550%), mandarin flavourings (4. 713%), water (38. 787%) and preservatives (0. 075 %).Suntop orange compound- concentrated orange juice (67. 357%), water (32. 018%), orange flavour (0. 512%), stabilizer (0. 100%) and colour (0. 013%).

18. The Appellant stated that the said compounds contain high levels of juice concentrates, flavours, oils, colours, and other ingredients ideally making them unfit for direct sale to consumers or direct consumption by consumers. They are thus not a juice concentrate that can be diluted with water for consumption.

19. The Appellant stated that after the Respondent had done a visit to its factory on 11th August 2021, and the Appellant gave the explanation summarized in its explanatory letter dated 15th June 2021, the Respondent gave its tariff decision dated 24th August 2021, maintaining its position as communicated in tariff ruling dated 11th May 2021.

20. The Appellant averred that the process of classification of products is a well-defined one and is guided by EACCMA, 2004 and EACCET, 2017. As a rule of the thumb the EACCET which provides the respective tariff rates ought to be interpreted in accordance with the World Customs Organization General Interpretation Rules for the classification of goods, and the explanatory notes to the CET.

21. The Appellant submitted that when classifying a commodity, the formulae is that one should first refer to the terms of the Heading of that subject, then the terms of the Section, then the relevant Chapter and sub-Chapter notes. If doubt persists as to the classification of the product, the explanatory notes will be relied upon.

22. The Appellant further submitted that the cascading formula of looking at the Heading, Section notes, Chapter notes, sub-Chapter notes and the explanatory notes is mainly to provide guidance in the process of classification. The Appellant cited the case of Commissioner of Customs and Border Control – vs – Adula (Tax Appeal No.E003 of 2021 [2022] KEHC 248[KLR], Where the High court stated, ‘’…The parties agree that to ascertain what Code is applicable to particular goods, one has look at the General Rules for the Interpretation of the Harmonized System Rules [GIR] which are rules that govern the classification of goods under the Harmonized System..”. The Appellant also cited the case of Kenya Breweries Ltd - vs- Commissioner of Customs and Border Control (2020) eKLR. Where the court stated that GIR 1 is the foremost rule of classification.

23. In the Puratos Canada Inc. -vs- Canada ( Customs and Revenue ) [2004] CA CITT, it was stated;-“…The above legislation requires the Tribunal to follow several steps before arriving at the proper classification of goods on an appeal; first to examine the schedule to see if the goods fit prima facie within the language of a tariff Heading; to see if there is anything in the Chapter or Section notes that precludes the goods from classification in the Heading; and third, to examine the classification opinions and the explanatory notes to confirm classification of the goods in the Heading..”.

24. The Appellant further submitted that in addition to the rules of classification afore stated, consideration ought to be given to the purpose, the intended use, the chemical composition of the product to correctly determine the class under which the product correctly falls. Presently the main point of departure between the Appellant and the Respondent is whether the compounds imported by the Appellant to make the various Suntop and Sunquick products fall under HS Code 2106;90:20 or under HS Codes 2009;89:00, 2009:19:00,2009:49:00 and 2009:90:00.

25. The Appellant state that the Respondent makes reliance on Chapter 20 and particularly Heading 20;09, which has the title;“...Fruit juices [including grape must] and vegetable juices and fermented and containing added spirit whether or not containing added sugar or other sweetening matter…”

26. The Appellant averred that they agree with the Respondent to the extent that the Heading 2009 as per the GIRs and the explanatory Notes captures all fruit juices whether concentrated or in the form of crystals or powder.

27. The Appellant however submitted that there is a caveat under this Heading, that is, the fruit or vegetable juices provided under this Heading should retain their original character, failing which, a product classification moves from Heading 2009 to the next applicable Chapter under the HS nomenclature.

28. The Appellant further averred that as per Note 6 of Heading 2009, the fruit and vegetable juices of this Heading are generally obtained by mechanically opening or pressing fresh, healthy and ripe fruit or vegetable juices. This may be done by means of mechanical “extractors” operating on the same principle as the household lemon squeezer” or by pressing which may or may not be preceded either by crushing or grinding or by treatment with cold or warm water or with steam.

29. It was therefore the submission of the Appellant that the compounds are not made in any form contemplated in Note 6 of Heading 2009. Instead, its constituents are in such quantity that the balance of the different constituents distorted the natural juice, and the end product lost its original character thus the classification under Heading 2106:90 is preferred as opposed to Heading 2009:89.

30. The Appellant averred that the compounds imported are classifiable under Chapter 21 that covers “miscellaneous edible preparations” and in particular HS Code 2106:90:20 which covers “preparations of a kind used in manufacturing beverages”. However, the notes to Heading 2106:90 caveats, “provided they are not covered by any other Heading of the nomenclature”.

31. The Appellant further asserted that all previous consignments of the same product were cleared by the Respondent using the Heading 2106:90 and paying all the applicable duty at the rate of 10%.

32. The Appellant submitted that because of the wrong classification by the Respondent, their product has been exposed to excessive tax liability at the ad valorem rate of 25%, instead of the already paid 10%.

33. It was contended by the Appellant that the Respondent failed to examine and take into account the full chemical analysis and the results of the samples taken during the inspection of the Sunquick and Suntop products, and arrived at a wrong classification of the said product as under Heading 2009 instead of Heading 2106.

34. The Appellant also submitted that the Respondent did not exercise judicial discretion when arriving at the tariff rulings dated 24th August 2021 and the desk findings dated 14th September 2021 respectively.

35. It was further the Appellant’s contention that they have continuously paid the respective duty at the rate of 10% on all importation of the Sunquick and Suntop compounds. The Appellant further asserted that they have always maintained a positive relationship with the Respondent and have always paid the taxes they are obligated to pay.

36. The Appellant further submitted that the additional taxes and penalties imposed by the Respondent to the tune of Kshs 104,562,636 are unwarranted, improper and erroneous as the reclassification by the Respondent is a nullity as evidenced by the Appellant. In reinforcing its submission in this regard, the Appellant relied on the case of Keroche Industries Ltd -vs- Kenya Revenue Authority & 5 others[2007]eKLR where the court stated, “…the taxman is not permitted to go on a frolic of his own to impose tax not specifically permitted.’’.

37. The Appellant therefore submitted that it is not obligated to pay to the Respondent any sums other than those prescribed in law. Stating that, having failed to prove the legitimacy of the reclassification of the Sunquick and Suntop products, the Respondent has failed to demonstrate any liability on the part of the Appellant.

38. The Appellant therefore prayed that the Respondent’s assessment and classification of Sunquick and Suntop products under Heading 2009 instead of Heading 2106 be set aside, and the appeal be allowed.

The Respondent’s Case 39. The Respondent has grounded its case on the Statement of Facts dated and filed on the 27th October 2021, the witness statement of Bernard Odhiambo Oyucho dated and filed on 22nd February, 2023 and admitted in evidence on oath on 28th September, 2022 and the Written Submissions dated 17th October, 2022 and filed on 18th October 2022.

40. According to the Respondent, the “Sunquick” and “Suntop” products imported by the Appellant and to which the Appellant had requested for a tariff ruling are correctly classified under EAC/CET HS 2009:89:00.

41. The Respondent stated that in applying the EAC/CET, the Respondent is guided by the General Interpretation Rules [GIR] as cited within the EAC/CET. The GIR is to be applied sequentially from the first rule.

42. According to GIR 1, classification shall be determined according to the terms of the Heading, and any relative Section, or Chapter Notes and provided the Headings and notes do not require otherwise.

43. That the Rule 1 of GIR provides that;“The titles, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the Heading or Chapter notes and any relative Section, provided such Headings or notes do not otherwise require, according to the following provisions;

44. The Respondent cited the case of Keroche Breweries Ltd -vs – Commissioner of Customs and Boarder Control, where the Tribunal quoted the Canadian case of Puratos Canada Inc -vs- Canada [Customs and Revenue] 2004 Canlii 57069 [ Ca CItt] where it was stated that the steps to be followed before arriving at the proper classification of goods on appeal are as follows;“First to examine the schedule to see if the goods fit prima facie within the language of a tariff Heading, second, to see if there is anything in the Chapter or Section notes the precludes the goods from the classification in the Heading; and third, to examine the classification opinions and explanatory notes to confirm classification of the goods in the Heading,”

45. The Respondent submitted with reference to the above that the Appellant’s goods were easily classifiable under GIR Rule 1 and there was then no need to explore any of the other rules.

46. The Respondent stated that Chapter 20 of the HS Code provides for the classification of, “preparations- of vegetables, fruits, nuts, and other parts of plants”. In line with the first step the Respondent submits that upon examination of the schedule, the juice concentrates in question fit within the language of tariff Heading 20;09.

47. The Respondent further stated that the Explanatory Notes to this Chapter at Explanatory Note 2[d] provides that, “This Chapter does not cover [d] fruit or vegetable juices of an alcoholic strength by volume exceeding 0. 5 % vol. (Chapter 22)”. The Respondent therefore asserted that fruit juices or vegetable juices of an alcoholic strength exceeding 0. 5 % per volume is excluded from Chapter 20 as provided for under Chapter 22.

48. The Respondent also stated that Chapter 21 of the HS Code provides for classification of products of “miscellaneous edible preparations “and the subHeading which the Appellant seeks its product to be classified under HS Code 2106:90:20 which provides for, “preparations of a kind used in manufacture of beverages”. And Heading 2106 provides for, “food preparations not elsewhere specified or included”

49. The Respondent therefore submitted that the products imported by the Appellant are fruit base compounds of Sunquick and Suntop. Looking through the EAC/CET, these products would fall under Chapter 20 which provides for; preparations of vegetables, fruits, nuts, or other parts of plants. It is noteworthy that at this juncture, the products are not excluded by note 1 under Chapter 20.

50. The Respondent relied on the case of Godrej Foods Ltd -vs- Commissioner of Central Excise 2000[121] ELT 231 where it was held that;- “It is made clear in these explanatory notes that the reconstituted juices remain classified in Heading No. 20:09. The reconstituted juices are the products obtained by the addition to the concentrated juice of a quantity of water not exceeding that contained in similar non-concentrated juices of normal composition. It is made clear that the addition of water to a normal fruit or vegetable juice or the addition to a concentrated juice of a greater quantity of water than is necessary to re-constitute the original natural juice results in diluted products which have the character of beverages and that such beverages are classifiable under Heading 22:02. ”

51. The Respondent also relied on the case of Coca Cola Ltd -vs – Commissioner of Customs and Border Control to buttress its position and submitted that the constituents of a product did alter the product and the products retain their original character, and based on these the Appellant’s products ought to be classified under tariff 2009 rather tariff 2106.

52. The Respondent submitted that Explanatory Note 7 to Heading 2106, means that the preparations to be classified under Chapter 2106 must firstly not be covered by any other Heading. The Respondent further notes that the said Note 7provides that some of the said products are specially prepared for domestic use; they are also widely used in industry in order to avoid the unnecessary transport of large quantities of water, alcohol etc. The Respondent therefore submitted that the interpretation of this explanatory note means that Chapter 21 is for miscellaneous edible preparations not classified elsewhere.

53. The Respondent stated that the Appellant’s imported products were entered for clearance under HS Code 2106:90:00 and the Respondent’s National Targeting Centre targeted the entry for misclassification, and reported for re-classification to HS Code 2009:90:00. Samples were also drawn and taken to the Respondent’s National Inspection and Testing Centre for analysis.

54. The Respondent stated that additional information provided the Appellant confirmed the percentage composition of the compounds as follows:-“juices - - average percentage 60% Water - 10 - 20 %Additives (flavours & preservatives) - 10- 20%”The Respondent averred that the said composition was in agreement with the initial tariff ruling. The Appellant’s product was therefore found to be classifiable under the EAC/CET HS Code 2009;89:00.

55. The Respondent further submitted that the Appellant’s declared EAC/CET HS Code 2106:90:20 falls under Heading 21:06 that classifies food preparations not elsewhere specified or included. The Respondent further asserted that it should be noted that classification in Heading 21:06 is only permitted for food preparations that are not classified elsewhere in the nomenclature.

56. The Respondent stated that its tariff classification of the disputed product Heading 20:09 classifies fruit juices (including grape must) and vegetable juices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter.

57. The Respondent further stated that juices of this Heading may contain substances of a kind listed;- sugar, sweetening agents, preservatives and standardizing agents and products added to restore constituents destroyed during the manufacturing process ( e.g. Vitamins, colouring matter ) or to fix the flavour.

58. The Respondent submitted that as per the explanatory note to Heading 20:09, the juices of this Heading may be concentrated (whether or not frozen) or in the form of crystals or powder, provided that in the latter case, they entirely or almost entirely soluble in water. Such products being obtained by processes involving either heat (whether or not in a vacuum) or cold (lyophilization).

59. The Respondent submitted that classification is guided by the General Rules of Interpretation (GIRs) that are applied sequentially.-GIR 1 provides;“Classification shall be determined according to the terms of the Heading and any relative Section or Chapter notes.”- GIR 3 (b) states, “Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3 (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable.”

60. The Respondent therefore submitted that considering the percentage of composition of the juices in the compounds is of the greater percentage than any other constituent, the juice gives the compounds the essential character and thus the GIR 3(b) applies. In view of this, the Respondent asserted that the appellant’s products are classifiable under EAC/CET HS Code 2009:89:00.

61. The Respondent therefore submitted that it has correctly classified the Sunquick products and Suntop products under tariff HS Code 2009:89:00.

62. By reasons aforesaid the Respondent prays that the Tribunal dismisses the Appellant’s appeal with costs.

Issues For Determination 63. The Tribunal having carefully considered the pleadings filed and the evidence tendered is of the view that the Appeal herein crystalizes into two issues for determination, as follows;-i.Whether the Respondent erred in classifying the Appellant’s imported products “Sunquick” and “Suntop” products under tariff EAC/CET HS Code 2009:89:00 instead of EAC/CET HS Code 2106:90:20. ii.Whether the Respondent was justified in assessing and demanding short levied duty against the Appellant.

Analysis And Findings i. Whether the Respondent erred in classifying the Appellant’s imported products “Sunquick” and “Suntop” products under tariff EAC/CET HS Code 2009:89:00 instead of EAC/CET HS Code 2106:90:20. 64. The dispute herein regards the classification of the Appellant ‘s imported products “Sunquick” and “Suntop” products, which the Appellant contends is classifiable under the tariff EAC/CET HS Code 2106:90:20, while the Respondent contends that the product is classifiable under the tariff EAC/CET HS Code 2009:89:00.

65. The Appellant averred that it demonstrated to the Respondent that its products are industrial products manufactured from concentrated mandarin and orange juices and are not ready to drink concentrated fruit juices as contemplated by the Respondent.

66. The Appellant further averred that the said compounds contain high levels of juice concentrates, flavours, oils, colours, and other ingredients ideally making it unfit for direct selling to consumers or direct consumption by consumers. It averred that this compound was not juice concentrate that can be diluted with water for consumption, without undergoing further industrial processing in a factory.

67. The Appellant further averred that as per Note 6 of Heading 2009, the fruit and vegetable juices of this Heading are generally obtained by mechanically opening or pressing fresh, healthy and ripe fruit or vegetables, which is done by means of mechanical extractors, “operating on the same principle as the household lemon squeezer’’, or by pressing which may be preceded either by crushing or grinding or by treatment with cold or warm water or with steam.

68. The Appellant therefore submitted that its products are not made in any form as contemplated in Note 6 of Heading 2009, but instead, its constituents are in such quantity that the balance of the different constituents distorted the natural juice, and the end product lost its original character thus the classification under Heading 2106:90 is preferred as opposed to Heading 2009:89.

69. The Appellant contended that the Respondent failed to examine and take into account the full chemical analysis and the results of the samples taken during the inspection and thus arrived at the wrong classification of the said products under Heading 2009 instead of Heading 2106. It further asserted that all previous consignments of the same products were declared and cleared by the Respondent using the Heading 2106:90 and paying the applicable duty at 10%. It further contended that because of the erroneous classification its products have been potentially exposed to excessive taxation at the ad valorem rate of 25% instead of 10%.

70. The Appellant therefore submitted that the correct classification for its product, “Sunquick” and “Suntop” is HS Code 2106: 90: 20, as opposed to the Respondent’s preferred tariff HS Code 2009:89:00.

71. On the other hand, the Respondent submitted that in order to clarify the position on the tariff applicable to the Appellant’s product, a factory verification exercise was conducted at the Appellant’s factory and confirmed the percentage composition of the products as thus;“juice – average 60% Water - 10% - 20%Additives (flavours & preservatives) - 10% - 20%)”The Respondent asserted that the finding on the composition was found to be in agreement with the Respondent’s initial tariff ruling.

72. The Respondent submitted that as per the explanatory note to Heading 20:09, the juices of this Heading may be concentrated (whether or not frozen) or in the form of crystals or powder, provided that in the latter case, they are entirely or almost entirely soluble in water, such products being obtained by processes involving either heat (whether or not in vacuum) or cold (lyophilization).

73. The Respondent submitted that classification is guided by the General Interpretation Rules [ GIRs ] that are applied sequentially. GIR 1 provides classification shall be determined according to the terms of the Heading and any relative Section or Chapter notes.

GIR 3(b) states;

“Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified in reference to 3(a) shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable.”

74. The Respondent therefore submitted that considering the percentage of composition of the juices in the compound is of greater percentage than any other constituent, the juice gives the compound the essential character and thus GIR 3(b) applies, the Respondent asserted.

75. A quick glance of the EAC Common Extern al Tariff, (2017), would confirm that Chapter 20 covers;-“preparation of vegetables, fruit, nuts or other parts plants”, while Chapter 21 covers, “miscellaneous edible preparations”.

76. In this Chapter under Heading 20:09, the items covered are; fruit juices (including grape must) and vegetable juices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter.

77. The Tribunal notes under Heading 21:06 of Chapter 21, the coverage extends to food preparations not elsewhere specified or included and subheading 2106;90;20 extends food preparations of a kind used in the manufacturing of beverages.

78. The Respondent submitted that Explanatory Note 7 to Heading 21;06, means that the preparations to be classified under Chapter 21 Heading 21;06 must firstly not be covered by any other Heading. The said note also provides that some of the said products are prepared for domestic use; they are also widely used in industry to in order to avoid unnecessary transport of large quantities of water, alcohol, etc.

79. The Respondent further averred that the goods imported by the Appellant fit the language of tariff Heading 20:09, while the Appellant contended that the same fitted the language of tariff Heading 21:06.

80. The Respondent further averred nature of the imported products therefore is fruit juice with preservatives that would not affect the constituent of the product and the products retained their original character, and would therefore fall under Heading 2009 as a juice, which averment the Appellant opposed.

81. The Tribunal having carefully reviewed the two contentious Chapters, Heading, and explanatory notes, is satisfied with the explanation the Chapter 21 is for miscellaneous edible preparations not classified elsewhere.Heading 21:06 reads;“Food preparations not elsewhere specified or included ‘’.While subHeading 2106:90:20 reads;“…preparations of a kind used in the manufacture of beverages.’’

82. The Tribunal’s interpretation of this subHeading guided by the explanatory notes and the Chapter notes, is that this Heading classification is intended for preparations intended to be used in the manufacture of beverages and foods after certain processing or manufacturing is undertaken, and preparations of this kind are also intended for secondary adding to other food preparations.

83. This Heading clearly includes concentrates used in the manufacturing of fruit juices which are more appropriately described in Heading 21:06.

84. The Appellant argued that Heading 2106 is most suitable for the imported juice concentrates as it provides for: “food preparations not elsewhere specified or included” and relies on GIR 3, that, the products are classifiable under two Headings when considering GIR 1. However according to the explanatory notes under 20:09, it is contemplated that the imported products are simply fruit products with additives contemplated as per the explanatory notes. These do not change the very nature of the imported products as fruit juices. In this regard it would be inappropriate to apply Heading 20:09 as they do not fit such description as contemplated by that Heading.

85. In light of the foregoing analysis the Tribunal is satisfied that the Appellant’s products “Sunquick” and “Suntop” enumerated compounds are more appropriately classifiable under the tariff Headings EAC/CET HS Codes 2106:90:20, rather than the tariff Heading EAC/CET HS Code 2009:89:00.

86. The Tribunal in the circumstances finds and determines that the correct tariff classification for the Appellant’s subject products in dispute “Sunquick” and “Suntop” is under EAC/CET HS Codes 2106:90:20.

ii. Whether the Respondent was justified in assessing and demanding short levied duties against the Appellant? 87. The Tribunal having determined that the correct classification for the Appellant’s subject imported products is HS Code 2106;90:20, as declared by the Appellant and the applicable duties paid, it logically follows that no short levying of duties would arise.

88. Consequently the Tribunal also finds that the Respondent’s tax assessment against the Appellant is not justifiable as it is dependent upon the correct classification of the products imported by the Appellant.

Final Decision 89. The upshot of the foregoing is that the Appellant’s Appeal is merited and the Tribunal accordingly proceeds to make the following Orders ;i.The Appeal be and is hereby allowed.ii.The Appellant’s imported products “Sunquick” and “Suntop” compounds are correctly classified under tariff HS Code 2106:90:20. iii.The Respondent ‘s Review Decision dated 4th October 2021 classifying the Appellant’s products “Sunquick” and “Suntop” compounds under tariff EAC/CET HS Code 2009:89:00 be and is hereby set aside.iv.Each party to bear its own costs.

90. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 17TH DAY OF MARCH, 2023. ERIC N.WAFULACHAIRMAN.ROBERT M.MUTUMAMEMBERRODNEY O. OLUOCHMEMBEREDWIN K. CHELUGETMEMBER.