British American Tobacco PLC v Commissioner of Legal Services and Board Co-ordination [2024] KETAT 262 (KLR) | Excise Duty Adjustment | Esheria

British American Tobacco PLC v Commissioner of Legal Services and Board Co-ordination [2024] KETAT 262 (KLR)

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British American Tobacco PLC v Commissioner of Legal Services and Board Co-ordination (Appeal 607 of 2022) [2024] KETAT 262 (KLR) (8 March 2024) (Judgment)

Neutral citation: [2024] KETAT 262 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal 607 of 2022

E.N Wafula, Chair, D.K Ngala, CA Muga, GA Kashindi, AM Diriye & SS Ololchike, Members

March 8, 2024

Between

British American Tobacco PLC

Appellant

and

The Commissioner of Legal Services and Board Co-ordination

Respondent

Judgment

Background 1. The Appellant is a limited liability company incorporated in Kenya. Its principal activity is the manufacture and marketing of tobacco and other related products.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469 of the laws of Kenya. Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Parts 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. On 25th of September, 2020, the Appellant was issued with rates of Excise duty on various commodities factoring an adjustment for inflation pursuant to Section 10 of the Excise Duty Act, 2020 [hereinafter ‘EDA’]. The adjustment was brought to effect vide, Kenya Gazette Supplement No. 173 of 1st October, 2020 under Legal Notice No. 194.

4. On 25th October, 2021 the Respondent issued a new adjustment vide Kenya Gazette Supplement No. 199 dated 2nd November, 2021 under Legal Notice No. 217 with the intent to revoke Legal Notice No. 194.

5. The effect of Legal Notice No. 217 was to increase the rate of Excise duty on the Appellant's products. However, the Appellant continued for the period between December, 2021 and February 2022 to comply with the rate of Excise duty prescribed by Legal Notice Number, 194.

6. On 21st March, 2022, the Respondent issued the Appellant with a demand for Excise duty amounting to Kshs. 124,031,240. 00 in respect of the period between December, 2021 and February, 2022. The Appellant objected to this demand on 21st March 2022 and was issued with an objection decision on 28th April, 2022.

7. Aggrieved by the Respondent's objection decision, the Appellant lodged its Notice of Appeal on 27th May, 2022.

The Appeal 8. The Appeal as contained in the Memorandum of Appeal dated and filed on 10th June, 2022 is premised on the following grounds:a.The Respondent erred in law and in fact by proceeding to levy against the Appellant, the inflationary adjustment of Excise duty in respect of the Appellant’s products pursuant to Legal Notice Number 217 of 2021 despite the application of the said Notice having being stayed by the Court in Nairobi Constitutional Petition No. 024 of 2021 Pubs Entertainment & Restaurants Association of Kenya V the National Assembly and 3 Others as consolidated with Nairobi Constitutional Petition No. E491 & E403 of 2021 [hereinafter ‘the Petitions’].b.The Respondent erred in law by failing to abide by the orders issued by the Court in the Petitions which explicitly barred any attempt by the Respondent to apply the Legal Notice before the effective date of 20th December 2021. c.The Respondent erred in law by levying Excise duty at the rate prescribed by Legal Notice Number 217 of 2021 in clear contravention of Article 4(2), 10(I), 47 and 210 of the Constitution, 2010 and therefore amounts to an illegal tax on the Appellant.d.In any event, the Respondent's application of Legal Notice Number 217 of 2021 is in contravention of Articles 201 (a) and 210 of the Constitution of Kenya, 2010 by imposing a tax without the requisite public participation.e.The Respondent's decision to levy the new rate for Excise duty amounts to disobedience and a total disregard of the authority of the Courts in general and the orders issued in the Petitions, in particular.f.The Respondent's actions are an affront to the Constitution, rule of law, democracy and administration of justice.

The Appellant’s Case 9. The Appellant set out its case in the Statement of Facts dated and filed on 10th June, 2022 and the witness statement of Zipporah Kuria dated 9th March, 2023 and filed on the even date that was admitted in evidence in chief on the 6th September, 2023.

10. The Appellant stated that on 25th of September, 2020, the Appellant was issued rates of Excise duty on various commodities factoring in an adjustment for inflation pursuant to Section 10 of the Excise Duty Act, 2020 [hereinafter ‘EDA’]. The adjustment was brought to effect vide, Kenya Gazette Supplement No. 173 of 1st October, 2020 under Legal Notice No. 194.

11. The Appellant averred that on 25th October, 2021 the Respondent issued a new adjustment vide Kenya Gazette Supplement No. 199 dated 2nd November, 2021 under Legal Notice No. 217 with the intent to revoke Legal Notice No. 194.

12. That the effect of Legal Notice No. 217 was to increase the rate of Excise duty on the Appellant's products. However, for the period between December, 2021 and February 2022 the Appellant continued to comply with the rate of Excise duty prescribed by Legal Notice Number 194.

13. The Appellant stated that the Legal Notice No. 217 of 2021 was not only meant to affect tobacco and its related products but also had an effect on the rate of Excise duty for spirits of undenatured ethyl alcohol amongst other products. There was a drastic increase in the rate of Excise duty charged on the affected products, so much so that their prices increased two-fold, without proper participation of relevant stakeholders and further since this happened at a time when businesses were trying to recover from the Covid 19 pandemic.

14. That this resulted in the said Legal notice being challenged in the Petitions. On 19th of November 2021, an order was issued under the Petitions to the effect that in view of the fact that that Legal Notice No. 217 was to be effective on 20th December 2021, the status quo as at 19th November 2021 would be maintained.

15. That the Court further clarified the Order through a further Order dated 15th December, 2021 which stated that any attempt by the Respondent to apply Legal Notice No. 217 before the effective date of 20th December, 2021 would be improper.

16. The Appellant contended that the Respondent breached the status quo order on 19th November 2021, proceeded to change the rate on iTax to reflect the new rates set out in Legal Notice No. 217 of 2021 and then demanded payment of Excise duty under the new rate despite there being an order effectively staying the implementation of the Legal Notice.

17. That the Respondent's continued non-compliance with the Orders resulted in the Petitioners aforementioned petitions instituting contempt proceedings against the Respondent which were pending for ruling before the Constitutional Court. It was expected that the ruling would be delivered on 22nd September 2022 and accordingly the status quo orders were extended to 22nd September, 2022.

18. With regard to the period between December 2021 and February 2022, the Appellant, in compliance with the status quo orders and the prevailing rate as per Legal Notice No. 194, proceeded to pay Excise duty for its products at the rate prescribed by the said Legal Notice.

19. That on 21st March, 2022, the Respondent issued the Appellant with a demand for Excise duty amounting to Kshs. 124,031,240. 00 in respect of the period between December, 2021 and February, 2022. The Appellant objected to this demand on 21st March 2022 and was issued with an objection decision on 28th April, 2022.

20. The Appellant stated that on the said decision, the Respondent reiterated that the sums in the demand were still due. In particular, with relation to the orders for status quo, the Respondent stated that the said orders issued in the Petition were "ambiguous". The Respondent's reason for ignoring the orders is completely unlawful as the Court Orders continue to remain in force and having not been set aside. The orders issued in the Petitions have never been set aside and are therefore still in force and valid.

21. That the rate of Excise duty payable by any entity is prescribed by the EDA in line with the provisions of Section 5. In particular, Section 5(2) of the EDA states that:“Excise duty shall be charged at the rate specified in the First Schedule for the excisable goods or services in force at the time the liability arises for excise duty as determined under Section 6. ”

22. That in compliance with the Excise Duty Act and the Orders of the Court, it proceeded to remit Excise duty in relation to its excisable goods amounting to Kshs. 2,334,549,257. 00 in respect of the period between December 2021 to February 2022. The Appellant relied on the rate, prescribed in Legal Notice No. 194 which was in force on account of the status quo orders.

23. That on account of the Orders issued in the Petitions, the Appellant had every right to calculate the due amounts of Excise duty with regard to its products at the rate in force as at 19th November 2021. Accordingly, the decision, by the Respondent to impose additional taxes on it amounts to a contempt of the express orders issued by the Court and the objection decision is therefore tainted with illegality and is null and void.

24. The Appellant averred that Article 4(2) of the Constitution, 2010 declares Kenya a democratic state founded on national values and principles of governance which include the rule of law and democracy. The wilful and overt disobedience and disregard of the authority of the courts violates national values and the Constitution.

25. That the actions of the Respondent in ignoring the Court order and proceeding to impose the additional taxes on the Appellant and its subsequent refusal to reconsider its position after the Appellant’s objection are unreasonable, unlawful and amount to a violation or the Appellant's rights as enshrined in Article 47(I) of the Constitution of Kenya, 2010.

26. The Appellant stated that the absence of a valid Legal Notice in compliance with Section 10 of the EDA means that no further Excise duty is payable by the Appellant for the period under review. Furthermore, the Legal Notice the Respondent relies on, is unconstitutional and therefore invalid for want of public participation as required by Article 201(a) of the Constitution.

Appellant’s Prayers 27. Based on the foregoing the Appellant was of the view that the Respondent's demand for additional amounts of Excise duty has no basis in fact and in law and prayed for the following orders from this Tribunal:a.That the Objection decision dated 28th April, 2022 be set aside and vacated in its entirety;b.That this Appeal be allowed with costs to the Appellant; andc.Any other remedies that are deemed just and reasonable.

Respondent’s Case 28. The Respondent’s case was as set out in its Statement of Facts dated and filed on 11th July, 2022.

29. The Respondent stated that it conducted a desk review of the Appellant’s Excise tax returns covering the period December, 2021 to February, 2022. During the review, it noted that there were non-compliance issues, more specifically, the Appellant was under declaring deliveries made by making use of old Excise duty rates provided for in the revoked Legal Notice Number 194 of 2020 as opposed to the new rates set out in Legal Notice number 217 of 2021.

30. That upon sharing its findings with the Appellant, on 21st March, 2022, the Appellant objected to the additional assessments amounting to Kshs. 124,031,240. 00 on the same day. On 28th April, 2022, it issued an Objection decision in which it computed variances between the amount payable based on the new rates provided by Legal Notice Number 217 of 2021 and the revoked rates provided under Legal Notice Number 194 of 2020.

31. That the Appellant contended that the orders issued in the Petitions amounted to stay orders thus staying the operations of Legal Notice No. 217 of 2021. On 24th November, 2021 the National Assembly issued an approval and acceded the Legal Notice No. 217 of 2021 which relates to the adjustment of Excise duty rates for inflation order,2021 pursuant to the Statutory Instruments Act No. 23 of 2013 [hereinafter ‘SIA’].

32. That the Legal Notice Number 217 of 2021 provided as follows:-“In exercise of the powers provided by section 10 of the Excise Duty Act, 2015 the Commissioner General adjusts for inflation the specific rates of duty set out in the schedule hereto in accordance with the formula specified in Part 1 of the First Schedule to the Act and considers the average inflation rate for the 2020/2021 financial year of four decimal nine seven per centum (4. 97%) Legal Notice No. 194 of 2020 is revoked.”

33. That Section 23 (3) of the interpretation and general provisions act provides as herein under:-“Where a written law repeals in whole or in part another written law then unless a contrary intention appears, the repeal shall not:a.Revive anything not in force or existing at the time at which the repeal takes effect; orb.Affect the previous operation of a written law so repealed or anything duly done or suffered under a written law so repealed; orc.Affect a right privilege obligation or liability acquired, accrued or incurred under a written law so repealed; ord.Affect a penalty forfeiture or punishment incurred in respect of an offence committed against a written law so repealed; ore.Affect an investigation, legal proceeding or remedy in respect of a right privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid and any such investigation, legal proceeding or remedy may be instituted continue or enforced and any such penalty forfeiture or punishment may be imposed as if the repealing written law had not been made.”

34. The Respondent averred that the repeal of Legal Notice 194 of 2020 by Legal Notice 217 of 2021 was acceded to in conformity with the law. The Appellant has placed reliance on the Petitions wherein the learned judge thus ordered:-“That in view of the fact that the effective date shall be 20th December, 2021, this court directs that status quo be maintained as of today, 19th November, 2021. ”

35. The Respondent’s observations were as follows: -a.The orders issued in the Petitions did not amount to stay orders.b.The court order is ambiguous as it refers to the effective date of Legal Notice No. 217 of 2021 being 20th December, 2021, which is inaccurate as the Legal Notice was already in effect as at 2nd November, 2021 when the order of status quo was given.c.The court order contradicts the resolution of the National Assembly that acceded to the Legal Notice 24th November 2021. d.The Appellant continues to use the previous Excise duty rate without adhering to the provision of Legal Notice No. 217 of 2021. e.Taxes amounting to Kshs. 124,031,240. 00 are due and payable.

Respondent’s Prayers 36. That the Appellant’s reliance on the Petitions is misguided on the grounds that the objection by the Appellant is grounded on the fact that there is an active Consolidated Constitutional Petition that is to be decided and also that the Constitutional Petition challenging the Constitutionality of the Legal Notice and by extension the new Excise rates were sub-judice. Reasons wherefore the Respondent prayed for orders that:a.The assessment issued pursuant to Legal Notice No. 217 of 2021 be confirmed and enforced; andb.The Appeal be dismissed with costs to the Respondent.

Submissions By The Parties 37. The Tribunal notes that as at 20th September, 2023, the date the parties were to file their respective Written submissions, only the Appellant had filed its Written submissions which the Tribunal will proceed to consider together with the witness statement of Zipporah Kuria dated 9th March, 2023. In its Written submissions, the Appellant has analysed two issues for determination as follows:

i. Whether the orders issued by the High Court in Nairobi in the Petitions stayed the implementation of Legal Notice No. 217 of 2021. 38. With regard to this issue the Appellant submitted that the High Court had suspended the implementation of Legal Notice No. 217 of 2021 as found by the Tribunal in Excel Chemicals Limited Vs. Commissioner of Domestic Taxes (TAT 533 of 2022).

39. That as at 19th November 2021, the Court had already stayed the implementation of Legal Notice No. 217 of 2021. That the Appellant's witness, emphasised this fact in her witness statement. It submitted that the Respondent opted not to cross-examine the Appellant's witness and that therefore her witness statement was adopted in evidence and is uncontroverted.

40. That the Honourable Court then, for the avoidance of doubt, re-confirmed its Order on 15th December 2021. This Honourable Tribunal in Excel Chemicals Limited v Commissioner of Domestic Taxes (TAT 533 of 2022) critically and carefully examined the impact of the Court Order granted on 19th November 2021 and stated as follows at Paragraphs 42 to 53:-“As of 2nd November, 2021, and 19th November, 2021 the applicable Legal Notice seemed to have been LN 194 of 2020. The reason for so saying is because of provisions of Sections 10 and 35 of the EDA which are reproduced below;Section 10 of the EDA:“(1)Despite Section 8, the Commissioner may with the approval of the Cabinet Secretary. by notice in the Gazelle, adjust the specific rate of excise duty once every year to take into account inflation in accordance with the formula specified in Part I of the First Schedule.(2)The notice under subsection (7) shall be laid before the National Assembly within seven days from the date of publication(3)The National Assembly shall, within twenty-eight sitting days of the receipt of the notice under subsection (2), consider the notice and make a resolution either to approve or reject the notice.(4)The notice shall cease to have effect, if a resolution disapproving the notice is passed by the National Assembly. "

41. That Section 35 of the EDA reads:“A licensed manufacturer or a supplier of excisable services shall submit an excise duty return, in the approved form and in the prescribed manner; for each calendar month not later than the twentieth day of the succeeding month, whether or not any excise duty is payable for that month.”"From the above LN 217 was gazetted on 2nd November, 2021 and was to be presented to the National Assembly in the next 7 days. The National Assembly was to give its resolution rejecting or accepting the same within 28 sitting days. It therefore follows that the date of the gazettement is not the effective date. It is clear to us that LN 217 of 2021 could not have been operational as at 2nd November, 2021. The assertions by the Respondent that the Order of 19th November, 2021 was issued when LN 217 of 2021 was already in force as by 2nd November, 2021 is not true.

42. That the Respondent filed an application dated 10th January 2022 before the High Court where it sought to set aside the orders in contention. The Supporting Affidavit, as signed by one Lilian Nyaringita stated that LN 217 of 2021 was forwarded to the National Assembly on 8th November, 2021. She also deponed that the said LN became operational on 2nd November, 2021. It is thus not possible that LN 217 of 2021 could have become operational before it could be approved by the National Assembly.

43. That at Paragraph 11 of the Affidavit in support of the application Ms. Nyangirita, stated that:“The Honourable court failed to consider that the order of status quo issued on 19th November, 2021 was made subsequent to the enactment of Legal Notice 217 of 2021 which was on 2nd November, 2021. "

44. That at paragraph 12 of the Affidavit she deponed that:-“that as such in extending the status quo orders on 17th December, 2021 the court failed to take judicial notice that the National Assembly had acceded to the Legal Notice vide a letter dated 24th November 2021. "

45. That further at Paragraph 3 of the Affidavit she deponed that:-“That the Applicant is unable to comply with the orders herein and seeks for this court to consider the facts and the law before it and issue an appropriate order.”

46. That finally, at Paragraph 8 she deponed that: -“that the court was misdirected that the 20th of December, 2021 to be the effective date of the Legal Notice when the Legal Notice came into effect on 2nd November, 2021. "

47. The Appellant submitted that from the above it is clear that the Respondent was aware of the effect and consequence of the order issued by the High Court. It was also aware that it had breached the court orders by insisting on the implementation of the impugned LN. 217 of 2021. That moreover, the documents availed to the Tribunal also show that it was not possible for LN 217 of 2021 to come into effect on 2nd November, 2021 when it was forwarded to the National Assembly on the 8th of November 2021 and it was acceded/approved by the same National Assembly on the 24th November, 2021.

48. That the said LN. No 217 of 2021 does not also indicate that it was to be applied retrospectively to the 2nd of November, 2021 after it was approved on the 24th of November, 2021.

49. The Appellant submitted that this Honourable Tribunal therefore found as a fact in TAT No.533 of 2022 Excel Chemicals Limited Vs. Commissioner of Domestic Taxes that the Legal Notice No. 217 of 2021 was stayed by the High Court on 19th November 2021. The Tribunal's finding was bolstered by the fact that the Respondent has itself applied to set aside the Stay Order by the High Court (which application is still pending before the Court). The Kenya Revenue Authority would not have applied to set aside the stay order if the Order had not been issued in the first place. The Tribunal then concluded at paragraph 54 that:-“Based on the above, the Tribunal hereby arrives at the inescapable conclusion that the High Court had indeed suspended the implementation of LN No 217 of 2021, that introduced the Excise Duty that is the subject matter of the objection decision.”

50. That the Honourable Court in determining the Petitions that were filed to challenge the implementation of the Finance Act 2022 confirmed at Paragraphs 97 and 98 that the Petitions pursuant to which the Court granted an order staying LN No. 217 of 2021 were brought under Section 10 of the EDA and the Court further confirmed that there was a contempt application pending in the Petitions. The Respondent itself also confirmed at paragraph 39(v) and (vi) that there is a stay application pending before the Constitutional Court in the Petitions which sought to challenge the Finance Act 2022.

51. Furthermore, that in the Petitions the Court stated at Paragraphs 40 and 41 that the Respondent, had sworn an Affidavit confirming that the issues in the Petitions emanated from Section 10 of the EDA which were different from the provisions of the Finance Act 2022 and further confirmed that the matters raised therein concerning Legal Notice No. 217 of 2021 were still pending before the Court.

52. The Appellant argued that the Respondent could not possibly claim that no Stay Order was granted by the Court in the Petitions and it was therefore clear that the Petitions stayed the implementation of Legal Notice No. 217 of 2021.

ii. Whether the Respondent’s Claim for additional excise duty dated 28th April, 2022 was lawful. 53. With regard to this issue the Appellant submitted that since Legal Notice 217 of 2021 has been expressly stayed by the Court, the Respondent is under a duty to obey the Court Order. The Court of Appeal in Kenya National Union of Teachers & 2 others v Teachers Service Commission (2018) eKLR emphasised the obligation for Court Orders to be obeyed. The Court held as follows:-“The obligation of an addressee(s) of a court order was explicitly stated by Romer L.J in Hadkinson versus Hadkinson [1952} ALLER 567 as follows:-"lt is the plain and unqualified obligation of every person against, or in respect of whom an order is made by a Court of competent jurisdiction lo obey it unless and until that order is discharged the uncompromising nature of this obligation is shown by the fact that it extends even to cases where the person affected by an order believes it to be irregular or even void.Lord Cottenharm, L.C., said in Chuck versus Cremer (]) (1 Coop.temp.colt. 342):"A party, who knows of an order, whether null or valid, regular or irregular, cannot be permitted to disobey it ... It would be most dangerous to hold that suitors, or their solicitors, could themselves judge whether an order was null or valid - whether it was regular or irregular. That they should come to the Court and not take upon themselves to determine such a question. That the course of a party knowing of an order, which was null or irregular, and who might be affected by it, was plain. He should apply to the Court that it might be discharged. As long as it existed it must not be disobeyed".

54. That it is imperative on the Respondent to obey the Orders issued by the Court staying Legal Notice No. 217 of 2021 until its application to set aside the orders is heard and determined. The claim for additional duty in its Objection decision dated 28th April 2022 on the basis of a Legal Notice that has been stayed by a Court Order is blatant disobedience of the Court order and therefore unlawful.

55. That in Excel Chemicals Limited v Commissioner of Domestic Taxes (TAT 533 of 2022) this Honourable Tribunal did not hesitate in setting aside the additional assessment that the Respondent had raised on the basis of Legal Notice No. 217 of 2021. The Court held at paragraph 54 that the Respondent's attempt to implement Excise duty that had been stayed by a Court Order was thus an illegality. The applicable rate pending the determination of the suit before the High Court is the one contained under Legal Notice 194 of 2020.

56. The Appellant submitted that Article 4(2) of the Constitution of Kenya, 2010 declares Kenya is a democratic state founded on national values and principles of governance which include the rule of law and democracy. The wilful and overt disobedience and disregard of the authority of the courts violates national values enshrined in the Constitution and threatens the Rule of Law.

57. That the actions of the Respondent in ignoring the Court order and proceeding to impose the additional taxes upon the Appellant and its subsequent refusal to reconsider its position after the Appellant's objection are unreasonable, unlawful and amount to a violation of the Appellant's rights as enshrined in Article 47(1) of the Constitution of Kenya, 2010.

58. That the Appellant paid, and continues to pay, Excise duty on the basis of Legal Notice No. 194 of 2020 as Legal Notice No. 217 of 2021 was stayed by the Court.

59. The Appellant submitted that based on the foregoing, the Respondent's demand for additional amounts of Excise duty as set out in the Objection decision dated 28th April 2022 had no basis in law and prayed that this Honourable Tribunal vacates the Objection decision in its entirety.

Issues For Determination 60. The Tribunal having carefully considered the parties’ pleadings, documentation, evidence adduced and Submissions finds that there is a single issue that calls for its determination as follows:Whether the additional tax assessment in respect of Excise duty was lawful and justified.

Analysis And Findings 61. The dispute herein is in respect of the effective date of Legal Notice Number 217 of 2021 and more particularly the date at which the Respondent ought to have applied the new rates of Excise duty. Whereas the Appellant, from its pleadings is of the view that the Orders of the High Court in respect of the Petitions, dated 19th November, 2021 maintains the status quo pending determination of the Petitions, thereby making Legal Notice Number 217 of 2021 inapplicable; the Respondent avowed that the commencement date of the Legal Notice is 2nd November, 2021.

62. The Tribunal notes that Section 10 of the EDA provides as follows regarding the process that the Respondent ought to apply in adjusting Excise duty rates for purposes of inflation:“10. Adjustment for inflation(1)Despite section 8, the Commissioner may, with the approval of the Cabinet Secretary, by notice in the Gazette, adjust the specific rate of excise duty once every year to take into account inflation in accordance with the formula specified in Part 1 of the First Schedule.(2)The notice under subsection (1) shall be laid before the National Assembly within seven days from the date of publication.(3)The National Assembly shall, within twenty-eight sitting days of the receipt of the notice under subsection (2), consider the notice and make a resolution either to approve or reject the notice. ……..”

63. The Tribunal further notes that unlike Legal Notice Number 194 of 2020 which had a commencement date, Legal Notice Number 217 of 2021 did not in order to determine a commencement date for a Statutory Instrument that is published in the Gazette, the parties must take cognizance of Section 23(1) of the Statutory Instruments Act No. 23 of 2013 [hereinafter ‘SIA’]. SIA is an Act of Parliament which provides for making, scrutiny, publication and operation of statutory instruments and other matters connected therewith. Section 23(1) of SIA provides as follows:-“a Statutory instrument comes into operation on the date specified in that behalf in the statutory instrument or, if no date is so specified, then subject to subsection (2) it shall come into operation on the date of its publication in the Gazette subject to annulment where applicable.”

64. The Tribunal notes that SIA applies to every statutory instrument made directly or indirectly under any Act of Parliament or other written legislation. The Respondent averred that 2nd November, 2021, was the date of publication of Legal Notice Number 217 of 2021. On the face of it the Respondent’s averment was correct. However, Justice J A Makau in his wisdom ordered that the commencement date was 20th December, 2021. The Appellant has adopted the view that the commencement date of the Legal Notice was 20th December, 2021 as outlined in paragraph 8 of its written submissions.

65. The Tribunal agrees with this view since SIA in the said Section 23(1) provides that the commencement date can be annulled. Accordingly, since the High Court can annul the commencement date, it follows that it has also got power to change the commencement date instead of annulling it. In the High Court Order dated 19th November, 2021 and clarified on 15th December, 2021, Justice Makau, in his Ruling ordered that the commencement date /effective date of Legal Notice Number 217 of 2021 be 20th December, 2021.

66. The Tribunal has reviewed the Orders issued by the High Court on 19th November, 2021 part of which stated as follows:“(c)That the Respondents do file submissions in response within 5 days from the date of service.(d)That in view of the fact that the effective date shall be on 20/12/2021 this court directs that status quo be maintained as of today. [emphasis]………………………….”

67. The Tribunal also reviewed the Orders as clarified by the High Court on 15th December, 2021 and the same were as follows:‘(6)That the Petitioners in these petitions are seeking clarification on the order issued on 19/1 l /202 l on status quo.(7)That under order 2, of the order of I9/l l/202l the court clearly stated that in view of the fact that lhe effective date shall be 20/12/2021 status quo be maintained as of 19/1 I /2021. (8)That this meant as stated by the Respondents that the effective date of the Legal Notice No. 217 of 2021 is 20/12/202l and not and not any othe earlier than 20/12/2021. (9)That this is what the court meant when. it stated status quo be maintained as of 19/l I /2021. (10)That any attempt to apply the legal notice before effective date of 20/12/2021 is therefore improper. [Emphasis added]’.

68. The Tribunal observes and notes that at the time the orders were given, the effective date of 20th December, 2021 had not reached and therefore the implication is that Legal Notice Number 194 of 2020 was operational until 20th December, 2021.

69. All parties to this Appeal as well as this Tribunal are bound by the High Court Order. If the Respondent or Appellant is dissatisfied with the High Court orders, they are expected to raise an objection or appeal the Ruling or decision. The decision of the Judge in the High Court order remains unchallenged and therefore stands.

70. The aptitude of the High Court was espoused in Republic v Attorney General and 9 Others ex parte Evanson Jidraph Kamau and Another [2014] eKLR where it was held as follows:-“There can be no doubt that the obedience of court orders is a cardinal principle of the rule of law and administration of justice, an order standing good for purposes of enforcement until it is perfected on appeal or review. No matter how judicious an order of the court is, if it is not complied with or implemented, the same remains a worthless paper directive with no practical effect in resolution of the dispute adjudicated by the court.”

71. In Koinange vs. Commission of Inquiry into The Goldenberg Affair Nairobi HCMCA No. 372 of 2006 [2006] 2 KLR 529, the High Court held as follows:-“The doctrine of stare decisis is predicated upon the principle of precedent under which it is necessary for a court to follow earlier judicial decisions when the same facts arise again in litigation. The phrase stare decisis literally means, “stand by things decided”. This doctrine is simply that when a point or principles of law has been once officially decided or settled by the Ruling of a competent court in a case in which it is directly and necessarily invoked, it will no longer be considered as open to examination or to a new ruling by the same tribunal or by those which are bound to follow its adjudications, unless it be for urgent reasons and exceptional cases.”

72. The Tribunal takes cognizance that in its decision in Excel Chemicals Limited Vs Commissioner of Domestic Taxes (TAT No. 533 of 2022) it allowed the Appeal under similar circumstances. This was however predicated on the view that Legal Notice 217 of 2021 was suspended. However, this Tribunal finds that as espoused above there is adequate basis for departing from this previous decision.

73. The Tribunal having reviewed Petition Number E388 of 2022 [as consolidated with Petition no. E342 of 2022; Petition No. 372 of 2022; Petition No. 373 of 2022 and Petition No. 373 of 2022 & Petition No. E407 of 2022] found that the entire Petition was dismissed by Justices H I Ongudi and Justice M Thande. More particularly, the Tribunal noted that in paragraph 98 of the judgement the Judges stated as follows:“It is discernable from reading the above context that the instant petition and the cited petitions, have no correlation in the issues. This is because the cited petitions are challenging the mandate of the 3rd respondent [KRA] with reference to Section 10 of the Excise Duty Act in relation to Legal Notice No.217. The instant petition on the other hand challenges the lst respondent's [National Assembly] legislative mandate as enshrined in Article 209 of the Constitution.”

74. It is instructive to note that the Tribunal found that one of the Judges in the stated petition, Justice H I Ongudi, confirmed the orders given by Justice Makau during the last court session on the matter on 28th January, 2022 when the matter was last considered by the High Court.

75. The Tribunal is of the opinion that the High Court has supervisory jurisdiction over subordinate courts and over any person, body or authority exercising Judicial or quasi-judicial function, but not over a Superior Court. The Tribunal is bound by the Orders of the High Court dated 19th November, 2021 and clarified on 15th December, 2021. According to the said Orders, the effective date of the Legal Notice No. 217 of 2021 is 20th December, 2021.

76. In view of the foregoing, the Tribunal’s opinion is that the Respondent ought to have applied the new rates with effect from 20th December, 2021. The Tribunal however, notes and observes that the Respondent issued an assessment on the Appellant in respect of the entire month of December, 2021 without specifying the dates in December, 2021 to which the Legal Notice applied. It is pertinent for the Respondent to take into consideration the High Court Order in respect of the effective date of Legal Notice Number 217 of 2021 and apply the correct rates of Excise duty on a pro-rata basis in the month of December, 2021 so that the correct and different rates of Excise duty are applied accordingly. This would have the effect of ensuring that the correct tax is due and payable.

77. The Tribunal therefore finds that, save for the period prior to 20th December, 2021 the additional tax assessment in respect of Excise duty was lawful and justified.

Final Decision 78. The upshot of the foregoing is that the Appeal partially succeeds and the Tribunal accordingly proceeds to make the following Orders:-a.The Appeal be and is hereby partially allowed.b.The Respondent’s objection decision dated 28th April, 2022 be and is hereby upheld subject to a variation of the same arising from the application of the rates outlined in both Legal Notice Number 194 of 2020 and Legal Notice 217 of 2021 on a prorata basis only in respect of the month of December, 2021, which was included in the tax assessment.c.The Respondent to undertake a variation of the tax assessment to exclude the Excise duty for the days prior to 20th December, 2021 and to accordingly issue an appropriate decision within Thirty (30) days of the date of delivery of this Judgment.d.Each party to bear its own costs.

79. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 8TH DAY OF MARCH, 2024. ERIC NYONGESA WAFULACHAIRMANDELILAH K. NGALA CHRISTINE A. MUGAMEMBER MEMBERGEORGE KASHINDI MOHAMED A. DIRIYEMEMBER MEMBERSPENCER S. OLOLCHIKEMEMBER