Cale Infrastructure Construction Company Limited v Commissioner, Customs and Border Control & another [2024] KETAT 1041 (KLR)

Cale Infrastructure Construction Company Limited v Commissioner, Customs and Border Control & another (Tax Appeal E416 of 2023) [2024] KETAT 1041 (KLR) (19 July 2024) (Judgment)

Neutral citation: [2024] KETAT 1041 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E416 of 2023

E.N Wafula, Chair, Cynthia B. Mayaka, RO Oluoch, T Vikiru & AK Kiprotich, Members

July 19, 2024

Between

Cale Infrastructure Construction Company Limited

Appellant

and

Commissioner, Customs and Border Control

1st Respondent

Commissioner, Investigation & Enforcement

2nd Respondent

Judgment

1. The Appellant is a limited liability company incorporated in Kenya under the Companies Act. Its principal business is in the construction industry.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act. The Kenya Revenue Authority is an agency of the Government of Kenya mandated with the duty of collection and receipting of all tax revenue, and the administration and enforcement of all tax laws set out in Parts 1& 2 of the First Schedule to the Act, for purposes of assessing, collecting, and accounting for all tax revenues in accordance with those laws.

3. The issue in dispute in this Appeal arose when the Respondent carried out an audit of the Appellant’s affairs and issued it with an assessment dated 18th April 2023 for Custom taxes amounting to Kshs 6,951,343,241. 00.

4. The Appellant objected to this assessment vide its letter dated 16th May 2023 and the Respondent issued its review decision on 14th June 2023 which varied the assessment to Kshs 6,024,759,976. 00.

5. Dissatisfied with the Respondent’s review decision the Appellant lodged a Notice of Appeal on 13th July 2023.

The Appeal 6. The Appellant in its Memorandum of Appeal dated 27th July 2023 and filed on 28th July 2023 has set out the following grounds of Appeal:a.Machinery, Equipment & Motor Vehiclesa.That the Respondent erred in fact in finding that construction of the Nairobi Express-way had been completed and thus Customs duty and related taxes amounting to Kshs 359,047,353. 00 were payable by the Appellant.b.That the Respondent erred in fact and law by failing to find that the request of cancellation of customs bonds vide letters confirming the consumption of materials (letter reference Nos Motihud&PW/1/A/19. 35/Vol.19 (161) and Motihud&PW/1/A/19. 35/Vol.19 (81) dated 20th June 2022 and 4th August 2022 respectively, was for ‘Materials’, and did not include any machinery, equipment & motor vehicles.b.Hardware tools & Sparesa.That the Respondent erred in fact and law by failing to find that the hardware tools & spares procured by the Appellant for the direct and exclusive use in the construction of the Nairobi Expressway were exempted from tax.c.Materials consumed in the Projecta.That the Respondent erred in law and fact by demanding taxes from the Appellant despite acknowledging that the National Treasury through a letter referenced DFN/415/232/011 and dated 7th December 2020 undertook to pay the various taxes comprising of Import duty, VAT and Excise duty on all materials (excluding fuel and lubricants) imported or purchased locally by the Appellant for the direct and exclusive use in the construction of the Nairobi Expressway.b.That the Respondent erred in both law and fact by failing to find that the Appellant has a right to fair administrative action that is “expeditious”, “efficient”, “lawful”, “reasonable” and “procedurally fair”.c.That the Respondent erred in law and fact in failing to find that the National Treasury letter referenced DFN/415/232/011 and dated 7th December 2020 created a legitimate expectation on the Appellant that the taxes will be paid by the National Treasury.d.That the Respondent erred in fact by failing to find that the commissions and omissions of Government agencies (National Treasury and the Respondent) should not prejudice the Appellant.

Appellant’s Case 7. The Appellant’s case is premised on its Statement of Facts dated 27th July 2023 and filed 28th July 2023 and the written submissions dated 11th March 2024 and filed on 28th March 2024.

8. The Appellant averred that the Contract between KeNHA and Moja Expressway Company contained two clauses which provided as follows:i.Clause 17. 2 (d) If the inspection report concludes that the works have been completed in accordance with the detailed design and that three are no incomplete works, then the Contracting Authority shall issue, within seven (7) days following receipt of the Inspection Report, either:a.The Completion certificate (with the Punch List Items attached); orb.If there are no Punch List Items, the Completion Certificate and the Performance Certificate.ii.Clause 17. 3.3 Upon the completion of all the Punch List Items:a.In the case of Punch List Items completed by the Project Company, as verified under an additional inspection conducted in a manner consistent with the inspection procedures described in Clause 17. 2; orb.In the case of Punch List Items completed by the Contracting Authority or its third-party contractors, under Clause 17. 3.2,The Contracting Authority shall issue the performance certificate within three (3) days after the inspection report issued pursuant to Clause 17. 3.2 (a) or the completion pursuant to 17. 3.2 (b) as the case may be.

9. That the above contract clauses were clear that there are two certificates upon completion of the project, namely, the Completion Certificate and the Performance Certificate.

10. That the Performance Certificate signified the contract administrator’s satisfaction with the work, or the amount which is finally due to the contractor, or both of these things and therefore, the cancellation of the customs bonds did not mark the completion of the project.

11. That after the consumption of services, KeNHA was required to review, process and issue the Certificate of Consumption to facilitate the issuance of a bond cancellation application letter to the Ministry of Transport and KRA.

12. The Appellant stated that the letters referenced Motihud & PW/1/A/19. 35/Vol.19/ (161) and Motihud&PW/1/A/19. 35/VOL.19/ (81) dated 20th June 2022 and 4th August 2022, which requested for cancellation of customs bonds was for ‘materials, which did not include any Machinery, Equipment & Motor Vehicles.

13. The Appellant held the view that the contract period had not lapsed and the Performance Certificate had also not been received, and therefore the taxes assessed by the Respondent were not due and payable.

14. That the National Treasury letter dated 26th April 2021 exempted its consumables and spares for use in the construction of the Nairobi Express-way from taxes.

15. That additionally, the National Treasury and Planning vide a letter Ref: CONF.1/06 and dated 5th June 2020, addressed to the Ministry of Transport, Infrastructure, Housing stated that:a.Import duty, VAT and Excise duty on all the materials (excluding fuel and lubricating oils), imported or locally purchased, that will be for direct and exclusive use in the construction of the Nairobi Expressway will be the responsibility of the Government. In addition, VAT on services to the project will be the responsibility of the Government.b.Having considered the importance of this project to the Country, the Cabinet Secretary, National Treasury and Planning has exempted the Railway Development Levy (RDL) and the Import Fee (IDF) on the Contractor's equipment and the construction materials to be used in the implementation of the project.

16. That given the foregoing, the Appellant contended that all the consumables and materials, including spare parts, tyres, batteries, hardware & tools, small machines, electric cabinet and mobile lighting are exempted from taxes.

17. The Appellant stated that most of its hardware and tools had already been consumed and the Ministry of Transport sent two request cancelling customs bond letters confirming the consumption of the materials to the Commissioner for Customs and Border Control to facilitate the cancellation of customs bonds.

III. Materials Consumed in the Project 18. The Appellant stated that it had a legitimate expectation that the National Treasury would pay the various taxes on all materials (excluding fuel and lubricants) consumed by the Appellant in the construction of the Nairobi Express-way project, as was stated in their letter referenced DFN/415/232/011 and dated 7th December 2020.

19. That it is now trite law that a legitimate expectation will arise when an administrative body makes an express promise to act in a certain way. This commitment may be in writing, orally or by conduct. Schieman J in the case of R (Bibi) versus Newham Borough Council, which outlined the tests for determining whether or not a legitimate expectation has been realised stated as follows:-i.What has the public authority, whether by conduct, or practice of promise committed itself?ii.Whether the authority has acted or proposes to act unlawfully about its commitment?iii.What should the court do?

20. That same position was affirmed in cases of Republic -vs- Kenya Revenue Authority; Ex-Parte; M-Kopa Kenya Limited (2018) eKLR, Commissioner of Domestic Taxes -vs- Lewa Wildlife Conservancy Limited (2019) eKLR and Keroche Industries Limited v Kenya Revenue Authority & 5 Others (2007) eKLR.

21. It was thus its view that the taxes demanded by the Respondent on the materials consumed in the project were unwarranted and violated the Appellant’s right to expeditions and fair administrative action.

22. The Appellant identified the following issues for determination in this Appeal:a.Whether the Respondent erred in demanding Kshs. 359,047,353. 00 taxes on Machinery, Equipment & Motor Vehicles?b.Whether the Respondent erred in demanding Kshs. 863,234,745. 00 taxes on Hardware tools & Spares?c.Whether the Respondent erred in demanding Kshs. 5,698,971,927. 00 taxes on materials consumed in the project that the Government had committed to pay?

a. Whether the Respondent erred in demanding Kshs. 359,047,353 taxes on Machinery, Equipment & Motor Vehicles? 23. The Appellant submitted that Clause 17. 2 (d) as read with Clause 17. 3.3 of the Contract between KeNHA and Moja Express-way Company stated that the Contracting Authority shall issue the Performance Certificate within three (3) days after the inspection report issued pursuant to Clause 17. 3.2(a) or the Completion pursuant to 17. 3.2 (b) as the case may be.

24. That the Performance Certificate issued under Clause 17. 2 (d) signified the contract administrator’s satisfaction with the works, or the amount which is finally due to the contractor, or both of these things. That the cancellation of the customs bonds did not in any way mark the completion of the project.

25. That the letters from the Ministry dated 20th June 2022 and 4th August 2022 seeking confirmation of consumption of materials (including spare parts, small machine and Hardware & tools) and requesting for cancellation of customs bonds for "Materials" did not include any Machinery, Equipment & Motor Vehicles.

26. The Appellant submitted that the contract period was not yet over and that the Performance Certificate had also not been issued/received in this case. That therefore, the taxes amounting to Kshs. 359,047,353. 00 on Machinery, Equipment & Motor Vehicles so assessed and demanded by the Respondent were not due and payable.

b. Whether the Respondent erred in demanding Kshs. 863,234,745 taxes on Hardware tools & Spares 27. The Appellant submitted that the Respondent misapprehended what completion of the project meant and, in the process, it levied taxes on the importation of hardware tools and spares entered under the C493 regime upon execution of Customs security bonds.

28. The Appellant reiterated it was subcontracted by Moja Expressway Company to construct the Nairobi Express-way with a delivery period of 3 years but the Government requested for early commencement of operations of the Nairobi Express-way despite the project not being fully completed. That the timelines for project completion as per the Contract were set for 31st December 2023 with 1 more year for the defect liability period.

29. That it was exempted from tax on all the materials and consumables by the National Treasury vide a letter dated 26th April 2021. That another letter dated 5th June 2020 also stated that Import duty, VAT and Excise duty on all the materials (excluding fuel and lubricating oils), imported or locally purchased, that will be for direct and exclusive use in the construction of the Nairobi Express-way would be the responsibility of the Government.

30. That VAT on services to the project was equally expressed as a responsibility of the Government and the Railway Development Levy (RDL) and the Import Declaration Fee (IDF) on the contractor's equipment and the construction materials to be used in the implementation of the Project were exempted.

31. The Appellant thus contended that all the consumables and materials, including spare parts, tyres, batteries, hardware & tools, small machines, electric cabinets and mobile lighting were exempted from taxes.

32. That most of the hardware and tools had already been consumed, and the Ministry of Transport sent two requests for the cancellation of customs bond letters.

c. Whether the Respondent erred in demanding Kshs. 5,698,971,927. 00 taxes on Materials consumed in the project that the Government had committed to pay? 33. The Appellant postulated that it had a legitimate expectation that the National Treasury would uphold its intimation of tax exemptions as was stated in Kenya Revenue Authority v Export Trading Company Limited, SC Petition 20 of 2020 [2022] KESC 31 and Article 47 of the Constitution.

34. It also cited the following cases to support its arguments for legitimate expectation:a.Republic v Kenya Revenue Authority; Ex-parte; M-kopa Kenya Limited (2018) eKLR,b.Commissioner of Domestic Taxes v Lewa Wildlife Conservancy Limited (2019) eKLRc.Keroche Industries Ltd v Kenya Revenue Authority and 5 others (2007) eKLR.

35. That as such, the demand of taxes by the Respondent on the materials consumed in the project was unwarranted and violated its right to expeditious and fair administrative active action for which reasons it should not be made to suffer prejudice and also incur financial hardships and tax liability that it was not legitimately and contractually expected to bear.

Appellant’s Prayers 36. The Appellant has prayed for the following orders:a.The Appeal be allowed;b.The decision of the Commissioner for Customs & Border Control and the Commissioner for Investigations & Enforcement be set aside, overturned and/or varied.c.The assessment issued for additional tax by the Respondents be annulled;d.The Appellant’s review decision be upheld;e.The cost of this Appeal be borne by the Respondents.f.Any such further orders as it may deem fit and just.

Respondent’s Case 37. The Respondent’s case is premised on its Statement of Facts dated 25th August 2023 and filed on 28th August 2023 and the written submissions dated 11th March 2024 and filed on 30th March 2024.

38. The Respondent stated that the Kenya National Highway Authority’s Completion Certificate for Contract No. KeNHA/RD/PPP/1002/2019 listed the Appellant as the EPC contractor with the Express-way mainline Ramp, Toll stations and its auxiliary facilities, the operations & maintenance Centre and tolling and surveillance System.

39. That the said Certificate noted that a joint inspection of the works was carried out on 9th May 2022 and the works were captured as completed. That the Completion Certificate stated that the completion date was on 13th May 2022 as further evidenced by a letter reference No: KeNHA/05. C/NE/Bonds/Vol.1/2467 from the Kenya National Highway Authority which indicated that the EPC Contractor was to undertake construction works for a period of 36 months but later revised to 24 months from the date of the commencement order which was issued on 16th October 2019.

40. The Respondent stated that it confirmed that the Nairobi Express-way was in operation after its commissioning on 31st July 2023 as denoted by the Moja Express-way CEO Mr. Steve Zhao who confirmed in a newspaper article dated 7th February 2023 that at least 10 million vehicles had used the Nairobi Express-way for the 6 months after it was commissioned on 31st July 2022 and the project realized a revenue of over 2 billion for the first six months ending December 2022.

41. The Respondent asserted that it was thus right to determine the completion date using the Completion Certificate because revenue generation and commissioning would not be possible without the completion of the project.

42. The Respondent stated that its cancellation of the bond was for materials used in the project including Machinery, Equipment & Motor Vehicles. That the cancellation was not limited to some equipment, spares, hardware and tools as evidenced in the applications.

43. The Respondent stated that although paragraph 3 of the letter from the CS Treasury dated 5th June 2020 granted the project exemption from IDF and RDL on the contractor’s equipment and construction materials to be used in the implementation of the project, the said letter was not an approval for exemption. That it only advised the Cabinet Secretary Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works.

44. The Respondent further asserted that unlike in other aid-funded construction projects, where express remission/exemptions are provided for under the provisions of the EACCMA, there was no legal provision to allow the Appellant to import the equipment, materials, hardware tools and spares and materials, duty, and tax-free for their exclusive use in the Nairobi Express-way Project.

45. The Respondent took the view that the Cabinet Secretary National Treasury and Planning only allowed the Appellant to import the equipment under a customs security bond and that upon cancellation, the duties and taxes would become due and payable.

46. The Respondent stated that it never mentioned any exemption for hardware tools and spares as they are fixed assets found under the plant, property, and equipment section of the balance sheet as opposed to materials which are current assets usually captured under the inventory assets section of the balance sheet and will at some point be consumed in the Nairobi Express-way project.

47. That the letter from the Treasury was clear that the Government of Kenya was only responsible for the materials exclusively used in the construction of the Nairobi Express-way and not the Hardware Tools and Spares which could also be used in projects other than the Nairobi Express-way project.

48. The Respondent asserted that if the Appellant is allowed to enjoy this invalid exemption, then the Appellant would continue to use the hardware tools and spares in other projects without the payment of the appropriate duties and taxes.

49. The Respondent stated that it never demanded the taxes that the National Treasury had undertaken to pay on behalf of the Appellant on various taxes on all materials (excluding fuel and lubricants) imported/purchased for the direct and exclusive use in the construction of the Nairobi Express-way. That it had instead advised the Appellant to follow up on the matter with the National Treasury for the settlement of the undertaking.

50. The Respondent further asserted that at all material times, its actions were guided by the conditions of all the applications and the approvals by the Appellant, National Treasury and Planning, Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works, provisions of the law and relevant customs procedures.

Respondent’s Prayer 51. The Respondent prayed that this Tribunal: -i.Upholds its review decision dated 14th June 2023. ii.Dismisses the Appeal with costs.

Issues for Determination 52. The Tribunal having carefully considered the parties’ pleadings, submissions and documents submitted, is of the view that the Appeal herein distils into one issue for determination: whether the Respondent’s assessment was justified.

Analysis and Determination 53. The genesis of this dispute is the Respondent's demand for the following taxes from the Appellant:a.Kshs 359,047,353 on machines, equipment and motor vehiclesb.Kshs 863,234,745 on hardware tools and sparesc.Kshs 5,5698,971,927 on locally purchased materials consumed in the project

a. On Kshs 359,047,353 on machines, equipment and motor vehicles 54. The Respondent argued under this head that the cancellation of the bonds marked the completion of the project as was confirmed by the Completion Certificate issued which indicated the date of substantial completion as 13th May 2022. That items bought after this date were thus not tax-exempt.

55. The Appellant on its part held the position that Clause 17. 3.2 provides for completion and performance certificates. That the performance certificate signified the contract administrator’s satisfaction with the works.

56. The Tribunal has noted that the basis upon which this assessment was upheld was Section 119 of ECCMA which provides as follows:“(1)Where any goods liable to import duty have been imported, or purchased prior to entry for home consumption, by or on behalf of any person, either free of import duty or at a reduced rate of import duty and such goods are subsequently disposed of in any manner inconsistent with the purpose for which they were granted any relief from import duty, the goods shall on disposal be liable to import duty at the rate applicable to goods of that class or description at the time of disposal:Provided that such duty on disposal shall not be payable (in the case of a natural person) where that person dies and the ownership of such goods is transferred by way of bequest to or inheritance by another person.”

56. It is thus clear from the above-cited law that an assessment can be issued on exempt goods that are subsequently applied in a manner that is inconsistent with the purpose for which the exemption was issued.

57. The Appellant has not disputed the exemption values nor has it asserted that the said machines, equipment and motor vehicles had not been disposed of after the completion of the project.

58. The Appellant could thus not benefit from exemptions in cases where the exempted assets are disposed of and or applied in a manner inconsistent with the purpose of the exempt project.

59. Accordingly, the Tribunal finds that the Respondent did not fall into error in its assessment of Kshs 359,047,353. 00 on machinery, equipment and motor vehicles.

b. On Kshs 863,234,745 on hardware tools and spares 60. The issue in dispute under this head is whether tax exemption applied to the hardware tools and spares.

61. It is clear that the letter from the National Treasury dated 26th April 2021 listed the spares as one of the items to benefit from the exemption in the course of the construction of the express-way. The other exemption letter dated 5th June 2020 excluded duty on all materials excluding fuel and lubricating oils imported or locally purchased. The letter from the State Department for Infrastructure dated 18th May 2020 from which the exemption dated 5th June 2020 was issued provided a master list of the materials approved for exemption. The said master list included hardware tools and spares.

62. The Tribunal has looked at the letter by the National Treasury dated 26th April 2021 and it is clear on the face of it that hardware tolls and spares were included in the list of the items that were exempted from tax.

63. It is also clear to the Tribunal that the exemption was limited to the construction phase of the project.

64. The Tribunal has discerned from the record, that the construction of the Nairobi express-way was completed on 13th May 2022 as evidenced by the completion certificate issued by KeNHA.

65. The fact that the project had been completed was corroborated further by the newspaper article dated 31st July 2023 which was presented by the Respondent and it captured the Moja Express-way CEO Mr Steve Zhao avering that at least 10 million vehicles had used the Nairobi Express-way for the 6 months after it was commissioned on 31st July 2022 and that the project realized a revenue of over 2 billion for the first six months ending December 2022.

66. Related to this the Director General of KeNHA also requested for cancellation of bonds against the exempted project goods through a letter dated 26th April 2021. The said letter did not state that bonds related to hardware tools and spares would remain in force.

67. Subsequently, the State Department for Infrastructure wrote letters dated 20th June 2022 and 4th August 2022 to the Respondent requesting for the cancellation of Customs bonds. The list provided in the two letters included spares and hardware tools.

68. The exemption herein was issued on condition that the Appellant would provide customs security bonds. The request and eventual cancellation of the said bonds was thus a confirmation that the project had been completed and the exemption that came with it had also lapsed.

69. KeNHA also issued its completion certificate for the projects stating that the project had been substantially completed by the 13th May 2022 and it would be open to traffic on 14th May 2022.

70. The Tribunal takes judicial notice of the fact that a completion certificate essentially signifies the completion of a project. The Appellant cannot thus benefit from the fruits of a completion certificate enabling it to commercially use the express-way and also get back its customs bond and at the same time purport to assert that it is still entitled to benefit from the tax exemption benefits which were privileges accorded to it before the project was completed.

71. The date of the assessment in this Appeal was 18th April 2023, which was about eleven months after the project had been certified as completed. The Respondent’s assessment was also premised on the assumption that the project had been completed, customs bonds cancelled and it was now self-sustaining on a commercial basis.

72. However, the Appellant’s basis of objecting to this assessment was that works and consumption of the hardware tools and spares were still ongoing as late as the 16th May 2023. This came out clearly when it stated as follows in its objection letter dated 16th May 2023:“…we wish to emphasize that the project is still ongoing, and all hardware tools and spares are still in use as the project has not been concluded.”

73. The Tribunal has discerned the evidence on record that the Appellant has insisted on continued enjoyment of exemptions despite the fact that the project was completed on 13th May 2022 and customs bonds were also cancelled as shown in the letter dated 4th August 2022 from the State Department for Infrastructure.

74. The fact that the Appellant had cancelled its customs bonds meant that its exemption status had lapsed. It could thus not resort to the defect liability period in the contract to claim or seek for exemption. Had it intended to benefit from this continued exemption during the period of the defect liability period, then it should have left its customs bonds intact.

75. The exemption herein was conditional on the execution of customs bonds. This meant that the release of customs bonds also disenfranchised the Appellant of its tax exempt status. It did not matter at that point that the contract was still subsisting its defect liability period.

76. The assertion by the Appellant that the project was still ongoing and hence entitled to the exemptions was not supported by the law, facts and evidence tabled before the Tribunal as the Nairobi Express way project was certified as completed by 13th May 2023. The Appellant could thus not continue enjoying any exemptions after the completion date.

77. Accordingly, the Respondent did not fall into error when it demanded taxes on hardware tools and spares regarding works that were still ongoing in the projects after the decreed completion date for this project.

c. On Kshs 5,698,971,927 on locally purchased materials consumed in the project 78. The issue in dispute herein relates to the letter by the National Treasury dated 7th December 2020 wherein it undertook to pay various taxes comprising import duty, VAT and Excise duty on all materials excluding fuel and lubricants imported or purchased locally. The total taxes that arose thereof was assessed at Kshs 5,698,971,927.

79. The content of that letter is agreed on between the parties. The point of contention is on as against whom the enforcement of payment of the resultant tax assessment ought to be directed to.

80. The Appellant conceded to this tax liability in its objection letter dated 16th May 2023 when it stated as thus:“We take note of your comments as provided above under KRA’s position and note that there are no taxes payable by Cale in this regard. The taxes are due and payable by the National Treasury, as per the undertaking provided.”

81. The Respondent's review decision dated 14th June 2023 provided as follows in the relevant part:“You are hereby advised to follow up with the National Treasury for the Settlement of the above amounts:

82. The documents in evidence before the Tribunal thus show that the parties in this Appeal are in agreement that the assessed tax amounting to Kshs 5,698,971,927. 00 was indeed due and owing. Save that it was to be paid by the National Treasury that had provided an undertaking to pay it on behalf of the Appellant.

83. This meant that the understanding on the undertaking to pay this specific tax liability was between the Appellant and the National Treasury. The Respondent was hence not a party to this agreement and could thus not be compelled to recover tax from the National Treasury regarding an understanding that it was not privy to and or part of.

84. It is thus not in doubt that whereas the Government had undertaken to pay the debt on behalf of the Appellant, the primary responsibility for tax payment is with the taxpayer unless specifically exempt. In the event that the Government defaults on such payment like it is in this case, then the Respondent is entitled to recover the tax due from the Appellant.

85. The Appellant would thereafter be at liberty to employ appropriate recovery mechanisms to recover the tax paid from the Government that had issued the undertaking. The Respondent can however not be directed to recover the Appellant’s tax liability from the Government as its benefactor for the reason the latter did not offer any taxable service or supply.

86. Accordingly, the Respondent was thus justified to demand taxes amounting to Kshs 5,698,971,927. 00 from the Appellant.

Final Decision 87. Flowing from the above analysis, the Tribunal finds that the Appeal lacks merit and accordingly makes the following Orders: -a.The Appeal be and is hereby dismissed.b.The Respondent’s review decision dated 14th June 2023 be and is is hereby upheld.c.Each Party is to bear its own costs.

DATED AND DELIVERED AT NAIROBI THIS 19TH DAY OF JULY, 2024. ERIC NYONGESA WAFULA - CHAIRMANCYNTHIA B. MAYAKA - MEMBERDR. RODNEY O. OLUOCH - MEMBERDR. TIMOTHY B. VIKIRU - MEMBERABRAHAM K. KIPROTICH - MEMBER