Ennsvalley Bakery Limited v Commissioner of Domestic Taxes [2024] KETAT 33 (KLR)

Ennsvalley Bakery Limited v Commissioner of Domestic Taxes (Tax Appeal 1497 of 2022) [2024] KETAT 33 (KLR) (26 January 2024) (Judgment)

Neutral citation: [2024] KETAT 33 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 1497 of 2022

RM Mutuma, Chair, M Makau, EN Njeru, W Ongeti & BK Terer, Members

January 26, 2024

Between

Ennsvalley Bakery Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a company duly incorporated in the Republic of Kenya and a registered taxpayer. Its core business engagement is bakery activities and other businesses.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, 1995. 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 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 dispute in this Appeal arose when the Respondent rejected the Appellant’s claim for refund on 27th October 2022 for the period January, March, April and May 2017, for VAT for on 1st September 2021 the period March 2020 and January 2021 cumulatively in the amount of Kshs. 7,039,649. 70.

4. The Respondent issued the Appellant with its refund rejection decision on the 27th October 2022.

5. The Appellant being aggrieved by the decision issued by the Respondent, lodged this Appeal, filing its Notice of Appeal dated 25th November 2022 on the 25th November 2022 electronically.

The Appeal 6. The Appellant’s Memorandum of Appeal dated the 8th December 2022 and filed on the 9th December 2022 is premised on the following grounds, that;a.The Respondent was misguided in fact and law in rejecting the application for refund on the grounds that the refund claim application related to the period October 2022 and that as such, the said application was non-compliant with the provisions of Section 31 of the VAT Act.b.The Respondent breached the Appellant’s legitimate expectation by reneging from its representations made on 20th June 2022, 27th July 2022 and 4th October 2022 that it would consider the information furnished by the Appellant in arriving at its refund decision.c.The Respondent erred in fact by disallowing the VAT refund claim in the sum of Kshs. 3,141,837. 00 despite the Appellant providing all the necessary and relevant documentation in support of the refund claim as set out under Section 31 (1) of the Value Added Tax Act, 2013.

The Appellant’s Case 7. The Appellant’s case is premised on the herein under filed documents before the Tribunal, it’s;a.Statement of Facts dated 8th December 2022 and filed on the 9th December 2022 together with the documents attached thereto.b.Witness statement of Kennedy Mutua dated, signed and filed on the 10th July 2023 and admitted on oath as evidence in chief on the 5th September 2023. c.Written submissions dated 19th September 2023 and filed on 20th September 2023. d.Replying Submissions dated 3rd October 2023 and filed on the 5th October 2023.

8. That the Appellant stated that it supplied goods to Nakumatt Holdings Limited during the period between 2016 and 2017, the payments towards the supplies were not made the VAT on the unpaid debt amounted to Kshs. 10,601,501. 00.

9. That the Appellant stated it assessed the likelihood of recovery of the debt from Nakumatt as remote and therefore proceeded to apply for refund of VAT and paid these supplies of Kshs. 10,601,501. 00 as per provisions of Section 31 of the VAT Act.

10. The Appellant averred that it sought to lodge the refund claims on the Respondent’s iTax platform in relation to the months of December 2016, February 2017, April 2017 and May 2017, exercise whereof was not successful prompting it to seek assistance from the Respondent vide the email dated 8th September 2020, to which the Respondent vide the email dated 15th September 2020 responded and indicated to have resolved the issue partially.

11. The Appellant contented that noting that being cognizant of the strict statutory timelines within which to lodge a claim for refund, it lodged a manual application for refund for the sum of Kshs. 3,141,837. 00 for the months of December 2016 and February 2017, vide the letter dated 23rd November 2020 and a duly completed a ‘Form VAT 4’ dated 10th November 2020.

12. The Appellant averred that vide the email dated 29th December 2021, the Respondent requested for certain documents, the same were to be furnished before the 7th January 2022, to which the Appellant provided.

13. The Appellant averred that in a meeting held on 20th June 2022, the Respondent disclosed that it had not considered the application for refund filed manually for the sum of Kshs. 3,141,837. 00 and later vide the email of 4th October 2022 sought for a litany of further documents in support of the refund claim, which the Appellant proceeded to submit on the 7th October 2022.

14. The Appellant averred that the Respondent issued its refund rejection decision on the 27th October 2022 stating that it related to tax period October 2022, it was therefore apparent that the period in question was the months of December 2016 and February 2017 and the Respondent factually misguided itself in claiming that the period is related to October 2022.

15. The Appellant contended that the Respondent in its decision made the following findings; that the VAT refund paid on bad debts related to the period October 2022; the period of refund related to October 2022 while the documents provided were for December 2016 to February 2017, hence inconsistent; the application was made before the lapse of 3 years after the date of supply which the taxes relate to were made.

16. The Appellant asserted that having made supply of goods in the months of December 2016 and February 2017, it made its application for refund in September 2020.

17. The Appellant stated that it goes without saying that the Appellant complied with the provisions of Section 31 (1) of the VAT Act, the refund claim having been lodged on 23rd November 2020.

18. The Appellant averred that the refund rejection was predicated on a factual inaccuracy the Appeal therefore should be allowed.

19. That the Respondent’s refund audit team, in the meeting of 20th June 2022 disclosed to the Appellant that it had not considered the manual application as the same had not been lodged on the iTax portal, however, the team committed to consider the same but nonetheless proceeded to advise the Appellant to formally seek directions in connection thereto.

20. That vide the correspondence dated 27th July 2022, the Appellant sought guidance, assurance and confirmation from the Respondent that it would finalise the audit process in relation to the refund applications including the manual application covering the periods December 2016 and February 2017, the Respondent made its confirmation in an email dated 27th July 2022.

21. The Appellant stated that vide the email dated 4th October 2022, the Respondent called for further documents relating to the manual application, which documents were to be furnished not later than 17th October 2022, which information the Appellant provided on the 7th October 2022.

22. The Appellant asserted that the aforementioned events made it believe that;a.The Respondent would consider the information provided in determining whether or not the refund claim was due and payable to the Appellant.b.That the Respondent was fully seized of the matter and was aware of the period in question as being December 2016 and February 2017 and not any other period.c.Having given the Respondent all the information so requested, the Respondent would in fact consider the evidence tabled before it in arriving at a sound decision guided by the law and the evidence and that it would not decline the refund on such other extraneous issues such as the ones given in the decision subject of this Appeal.

23. That the Respondent by reneging from the representations in its refund rejection decision and the contents therein, the Respondent breached and thwarted the Appellant’s legitimate expectation.

24. The Appellant further stated that it was equally apparent that the debt owed to it by Nakumatt is not in doubt, a debt, and having supported this fact with requisite documents, it was expected that the Respondent would process the refund claim application.

25. The Appellant stated that it provided the Respondent with numerous documents, in responses to requests made by the Respondent, the Appellant outlined some of the documents provided by the email of 7th January 2022, which included;a.The sales ledger.b.The invoices.c.The bank statements.d.Nakumatt Administration’s letter dated 11th July 2018 to Nakumatt’s creditors.e.The Ruling of Justice Mabeya dated 11th July 2021. f.The Appellant’s letter to Nakumatt’s Administrator requesting confirmation as to the amounts owing to the Appellant by Nakumatt.g.The letter dated 6th April 2022 from Nakumatt’s Administrator confirming that Nakumatt was insolvent and that the sum of Kshs. 114,388,615. 00 was owing.h.The Appellant’s Nakumatt’s statement of accounts.

26. During the hearing of the case on the 5th September 2023, the Appellant’s witness while being cross-examined stated that there were numerous attempts and efforts to recover the debt from Nakumatt Holdings Limited prior to it going into receivership.

27. The witness stated that he was aware that there was a creditor’s meeting and the Appellant’s representative attended the meeting, however, there was no evidence to demonstrate the same before the Tribunal.

28. That the official receiver of Nakumatt Holding Limited send a correspondence to the Appellant stating that the debt owing was Kshs. 56,000,000. 00, however, the amount was erroneous. Further the witness confirmed that the Appellant provided a breakdown of the debt to the official receiver and referred the Tribunal to page 836 of the bundle, which breakdown was also provided to the Respondent.

29. Further, the witness referred the Tribunal to its email dated 7th January 2022 on page 21 of the bundle of its documents, in which the Appellant attached the breakdown of the debt.

30. The Appellant in its written submissions raise two (2) issues for determination, namely;a.Whether the Appellant’s refund application meets the requirements of Section 31 (1) of the VAT Act, 2013; andb.Whether the sum of Kshs. 3,141,837. 00 being VAT on bad debts is refundable to the Appellant.

31. The Appellant submitted that the Respondent falsely alleged that its application was made before the lapse of 3-year period and is inconsistent with the provisions of Section 31 (1) of the VAT Act.

32. The Appellant reiterated that its application for refund was lodged manually on 23rd November 2020, which related to goods supplied in the months of December 2016 and February 2017, the period of three (3) years had lapsed but the application was made before the lapse of four (4) years. Further, Nakumatt was declared insolvent and placed under administration in 2018.

33. Further, the Appellant submitted that vide the letter dated 6th April 2022, the Administrator of Nakumatt confirmed that the firm was insolvent and that the debt amounted to Kshs. 114,388,615. 00, the Appellant was therefore properly guided in seeking a refund of the VAT paid on the bad debt.

34. The Appellant asserted that the Respondent was duly aware and ceased of the period in question as it acknowledged in its email of 4th October 2022 being in receipt of the Appellant’s VAT refund claim on bad debt for the period December 2016 and February 2017.

35. Further, it was submitted by the Appellant that the Respondent in it refund rejection decision that the Appellant furnished documents in support of the application relating to the period December 2016 and February 2017.

36. The Appellant contented that it is impossible for the period in question to have related to October 2022, when the application was lodged on 23rd November 2020.

37. The Appellant submitted that it was evident that the Respondent did not consider its documents and as a result claimed that the refund claim related to VAT refund for the period October 2022.

38. The Appellant further submitted that the only legal provisions that require a taxpayer to prove that it had taken all the reasonable steps to recover a debt before declaring the same as bad debt which can be refundable is in the Guidelines on Allowability of Bad Debts – Legal Notice No. 37, which are issued under Section 15 (2) (a) of the Income Tax Act and not the VAT Act and as such are not applicable in the instant case.

39. It was the Appellant’s submission that it had demonstrated all the efforts made by pursuing the Administrator of Nakumatt and that the Appellant had followed to the letter the requirements outlined within the provisions of Section 31 (1) of the VAT Act.

40. The Appellant in its submissions made in rejoinder to those of the Respondent, further submitted that the Respondent placed reliance on Legal Notice No. 37, titled Income Tax (Cap 470) Guidelines on Allowability of Bad Debts, it was therefore improper for the Respondent to rely on guidelines issued under Section 15 of the Income Tax and juxtapose the same against Section 31 (1) of the VAT Act.

41. The Appellant submitted that even if at all the Guidelines on Allowability of Bad Debts were applicable under the VAT, which is denied, the same ought be read with the proper context and cited Paragraph 2 (d) of the Notice which provides;“2. A debt shall be deemed to have become uncollactable under paragraph (1) where;a.……b.……c.……….d.The debtor is adjudged insolvent or bankrupt by a court of law;”

42. The Appellant submitted that it discharged its burden of proof by furnishing the Respondent with the requested information.

43. The Appellant submitted that its Appeal is properly lodged vide the Notice of Appeal dated 25th November 2023 lodged electronically on the same date and submitted a manual copy on the 28th November 2022.

44. The Appellant relied on the following case law;a.Keroche Industries Limited vs. Kenya Revenue Authority & 5 Others Nairobi [2007] eKLR.b.The Kenya Revenue Authority vs. Export Trading Company Limited (Petition 20 of 2020) [2022] KESC 31 (KLR) (Civ) (17 June 2022) (Judgement).c.South Nyanza Sugar Company Limited vs. Commissioner Domestic Taxes [2017] eKLR.d.Republic vs. Kenya Revenue Authority Ex parte Majid Al Futtaim Hypermarkets Limited [2020] eKLR.

Appellant’s Prayers 45. The Appellant made the following prayers to the Tribunal that;a.This Appeal be allowed.b.This Tribunal be pleased to find as a matter of fact that the Appellant’s refund claim for the sum of Kshs. 3,141,837. 00 which is related to the tax period of December 2016 and February 2017 and as consequence thereof, this Tribunal be pleased to vacate the refund rejection decision dated 27th October 2022 in its entirety.c.The Honourable Tribunal be pleased to find that the Respondent breached the Appellant’s legitimate expectation by reneging on its undertakings on 22nd June 2022, 27th July 2022 and 4th October 2022 that it would consider the information submitted by the Appellant in determining the refund claim for the sum of Kshs. 3,141,837. 00 relating to the tax period of December 2016 and February 2017. d.That subsequent to prayer (c) above, this Honourable Tribunal set aside the Respondent’s refund rejection decision dated 27th October 2022 of sum of Kshs. 3,141,837. 00. e.This Honourable Tribunal be pleased to consider the evidence tabled before the Respondent and now adduced before this Tribunal and, pursuant to the provisions of Section 29 (c) (i) of the Tax Appeals Tribunal Act, 2013, be pleased to set aside the Respondent’s decision dated 27th October 2022 issued in relation to the VAT refund claim and a consequence thereof, declare that the refund claims for the sum of Kshs. 3,141,837. 00 in relation to the months of December 2016 and February 2017 are due and refundable to the Appellant.f.That subsequent to prayer (e) above, this Tribunal be pleased to order for the refund of the said amount within thirty (30) days hereof or within such period of time as deemed appropriate by this Honourable Tribunal.g.Any other orders that the Tribunal may deem fit.

Respondent’s Case 46. The Respondent’s case is premised on the herein under filed documents before the Tribunal;a.Statement of Facts dated 6th January 2023 and filed on 11th January 2023 together with the documents attached thereto.b.Written submissions dated and filed on 20th September 2023.

47. The Respondent stated that the Appellant lodged a refund claim under Section 31 of the VAT Act 2013 arising from VAT paid on bad debts for sales made to Nakumatt Holdings Limited that was declared insolvent in 2018.

48. That on the 17th March 2022, the Appellant was informed to provide additional information on the evidence in support of its claim including documents showing invitation of creditors to attend the creditors meetings and bank statements for the period under review.

49. That the Respondent issued the Appellant with an objection decision rejecting the refund claim in totality on the 27th October 2022, since the application did not meet the requirements of Section 31 (1) of the VAT Act and failure by the Appellant to provide documents requested in support of its claim.

50. The Respondent averred that the claim period submitted by the Appellant are for the period January, March, April and May 2017, while Nakumatt Holdings Limited was declared insolvent in 2018.

51. That the Respondent contented that the Appellant had ample time to recover the supply made to Nakumatt before it became insolvent considering that the last supply was in May 2017.

52. That the Respondent asserted that the documentation provided by the Appellant did not show any attempts by the Appellant to recover the debt from Nakumatt Holdings, there was no invitation to attend the creditor’s meeting, the Appellant only supported this through the public notice issued to creditors.

53. That the Respondent avowed the Appellant did not provide any documents to show the payments made by the Administrator of Nakumatt Holdings Limited despite requests to so do.

54. The Respondent reiterated that the Appellant blatantly disregarded its rights to collect its debt at the opportune time and should therefore not be allowed to expense the same as bad debts as equity begets the vigilant not the indolent.

55. That the Respondent averred that the Appellant did not prove to the satisfaction of the Respondent that the debts had become uncollectable after all reasonable steps have been taken and could therefore not be allowed.

56. That no legitimate expectation of the Appellant was breached by the Respondent since the same cannot be enforced without the backing in law.

57. The Respondent stated that the Appellant has violated Section 13 (1) of the Tax Appeals Tribunal Act and it would raise a Preliminary Objection at the earliest opportune moment.

58. The Respondent in its written submissions identified three issues for determination, namely;a.Whether the Respondent erred in disallowing the Appellant’s claim for bad debts against supplies to Nakumatt Holdings Limited.b.Whether the Appellant discharged its burden as required under the law.c.Whether the Appellant’s Appeal is properly before the Tribunal.

59. The Respondent submitted that the Appellant failed to demonstrate that the debts became uncollectable and relied on the case of Republic vs. The Registrar of Trademarks Ex parte Sony Holdings Limited & Another Misc. Appl. No. 165 of 2012. Further, the Respondent placed reliance on Legal Notice No. 37 on the Guidelines for Allowability of Bad Debts.

60. It was the Respondent’s submissions that the Appellant’s refund claim was rejected in totality since the Appellant’s application did not meet the threshold for expensing bad debts housed under Section 31 of the VAT Act.

61. The Respondent submitted that the Appellant did not demonstrate any efforts to try and recover the outstanding debt from the Nakumatt Holdings before writing off the debt.

62. The Respondent further submitted that neither the Appellant’s documentation showed the payments made so far by the Administrator of Nakumatt Holdings, nor did the documents show the efforts made in recovery of the debt.

63. The Respondent relied on Section 56 (1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act, and submitted that the Appellant has failed to provide evidence to demonstrate that the assessment was excessive, erroneous or unlawful as provided therein.

64. That it was the Appellant’s duty and responsibility to keep documents and provide the same upon request for verification by the Respondent as provided for under Section 59 (1) of the Tax Procedures Act.

65. That there was no proper Appeal before the Tribunal for determination as the Appeal was filed out of time without the leave of the Tribunal and contrary to the provisions of Section 13 (1) of the Tax Appeals Tribunal Act.

66. The Respondent submitted that its decision was rendered on 27th October 2022, the Appeal ought to have been lodged within 30 days thereof, that is to say on or before the 26th of November 2022, however, the Appellant lodged the same on 28th November 2022.

67. The Respondent submitted that there is a well laid down procedure on timelines for performing an action under legislation, those affected by the respective legislation have to adhere to the same at all times without default failure to which the law will not come to their rescue.

68. The Respondent relied on the following case law;i.Pevans East Africa Limited & Another vs. Chairman Betting Control and Licensing Board & 7 Others [2017] eKLR.ii.TAT No. 70 of 2017: Afya X-Ray Centre vs. Commissioner of Domestic Taxes.iii.Speaker of the National Assembly vs. James Njenga Karume [1992] eKLR.

Respondent’s Prayers 69. The Respondent prayed to this Honourable Tribunal, that;i.The Respondent’s Objection decision be upheld.ii.This Appeal be dismissed as the same is without merit.

Issues for Determination 70. The Tribunal upon the careful consideration of the pleadings and Statements of Facts made by the parties respectively, was of the view that the issues that recommend themselves for its determination are;a.Whether there is a proper Appeal before the Tribunal.b.Whether the Respondent’s Refund Rejection Decision of 27th October 2022 herein was proper in law and justified.

Analysis and Findings 71. The Tribunal having identified the issues for its determination proceeds to analyse the same as herein under;

a. Whether there is a proper Appeal before the Tribunal. 72. The tax dispute before the Tribunal flows from the refund rejection decision by the Respondent issued to the Appellant on the 27th October 2022.

73. The Appellant contented that it lodged its application for refund claim for VAT for the period December 2016 and February 2017 manually on the 23rd November 2020.

74. That Respondent upon consideration of the application issued it refund rejection decision on 27th October 2022. The Appellant, premised on the dissatisfaction of the decision, lodged the Appeal and filed its Notice of Appeal electronically on 25th November 2022 and later a hard copy on the 28th November 2022.

75. For an Appeal before the Tribunal to be deemed as properly instituted and/or lodged, the Appellant ought to present the Appeal in conformity with the provisions of Section 13 (1) of the Tax Appeals Tribunals Act, which provides;“13 (1) A notice of appeal to the Tribunal shall –a.be in writing or through electronic means;b.be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner”

76. It was the Appellant’s submission that it lodged, its Notice of Appeal dated 25th November 2022 electronically with the Tribunal on the same date and submitted it manually/physically on the 28th November 2022. A perusal of the documentation presented by the Appellant, particularly the Notice of Appeal, the Tribunal noted that although the Appellant dated its Notice of Appeal 25th November 2022, the Appellant filed its Notice of Appeal manually/physically on the 28th November 2022.

77. The Tribunal has further sighted the email dated 25th November 2022 send by the Appellant’s representative on record, to the Tribunal at 11;30 am attaching the Notice of Appeal which was then filed in the instant Appeal, the Notice of Appeal was therefore duly lodged on the 25th November 2022.

78. Accordingly, the Appellant’s Appeal is properly before the Tribunal for its determination.

b. Whether the Respondent’s Refund Rejection Decision of 27th October 2022 herein was proper in law and justified. 79. It was the Appellant’s contention that the Respondent misguided itself while making the refund rejection decision as it dwelled on the period of October 2022, while the proper period which the Respondent ought to have dwelled on was December 2016 and February 2017.

80. Further the Appellant submitted that the Respondent in its decision stated the refund was rejected as its application was made prior to the lapse of three (3) years as provided under Section 31 (1) of the VAT Act.

81. The Respondent submitted that the Appellant’s application was rejected because it did not meet the requirements of Section 31 (1) of the VAT Act. Further, that the Appellant did not provide the requisite documents and that it did not demonstrate the efforts of recovery of debt and how much it received from the Administrator of Nakumatt Holdings.

PARA 82. The refund rejection decision dated 27th October 2022 read, in part;“Reference is made to VAT Refunds Audit carried out on your company and the findings are as follows: The VAT Refunds paid on bad debts was for the period October 2022 where the total of Kshs. 3,141,837 was claimed.

The application related to the period October 2022 while the records provided were or for the period December 2016 to February 2017 hence inconsistent.

The application was made before the lapse of 3 years after the date of supply for which the taxes relate to were made. This contravenes the provisions of Section 31 (1) of the VAT Act, 2013 which provides that;……” 83. From the Appellant’s document on record, the Tribunal observed that the Appellant lodged its application for refund of VAT on bad debts for the period December 2016 and February 2017 manually vide the application dated and acknowledged by the Respondent on 23rd November 2020 for the sum of Kshs. 3,141,837. 00.

84. The Tribunal has not sighted or been referred to any other application for refund for VAT made by the Appellant, save for the one dated 23rd November 2020 or an application for VAT relating to the period October 2022.

85. It is the Tribunal’s view that the Respondent’s refund rejection decision did not address the application placed before it appropriately as it deemed the same to be premised on a different period in regards to the claim for VAT.

86. Section 31 (1) of the Value Added Tax, 2013, provides;“(1)Where a registered person has made a supply and has accounted for and paid tax on that supply but has not received any payment from the person liable to pay the tax, he may, after a period of three years from the date of that supply or where that person has become legally insolvent, apply to the Commissioner for a refund of the tax involved and subject to the regulations, the Commissioner may refund the tax: Provided that no application for a refund shall be made under this section after the expiry of five years from the date of the supply.”

87. Upon further perusal of the Appellant’s application for refund of VAT, the Appellant lodged the application on the 23rd November 2020 relating to supplies made in December 2016 and February 2017, period whereof is over three (3) years but less than four (4) years. The Tribunal is satisfied that the Appellant met that requirement.

88. Further, the Appellant has demonstrated that it did not receive payment from Nakumatt Holdings Limited relating to the period of claim and further demonstrated that Nakumatt Holdings Limited was declared insolvent in 2018.

89. The Respondent relied on the Legal Notice No. 37 on the Guidelines for Allowability of Bad Debts and stated the Appellant’s application for refund did not meet the threshold to warrant the application to be allowed. The Appellant’s counter arguments were that the said Guidelines for Allowability of Bad Debts were anchored on Section 15 of the VAT Act and it is mischievous of the Respondent to seek to apply the Guidelines on a matter of refund of VAT.

90. The Tribunal has perused the Legal Notice No. 37 on the Guidelines for Allowability of Bad Debts, it notes from the Legal Notice that the preamble reads;“PURSUANT to section 15 (2) (a) of the Income Tax Act, the Commissioner-General issues the guidelines set out in the Schedule hereto on allowability of bad debts for tax purposes.”

91. Accordingly, the Guidelines for Allowability of Bad Debts were created and designed pursuant to Section 15 (2) of the Income Tax, had the Respondent intended to have the guidelines apply to the VAT Act, it would have made the indication expressly or generally. The expression made by the Respondent confines and ring fences the application of the guidelines to the relevant tax issues relating to income tax.

92. The Tribunal finds that the Guidelines for Allowability of Bad Debts outlined under Legal Notice No. 37, do not apply to the application for refund under the VAT Act.

93. The Tribunal is therefore satisfied that the Appellant’s application for refund dated and filed on 23rd November 2020, satisfies all the requirements for refund of the VAT in accordance with Section 31 (1) of the VAT Act.

94. Therefore, the Tribunal finds that the Respondent’s refund rejection decision is invariably flawed and the Appellant’s Appeal is merited.

Final Decision 95. The upshot to the foregoing is that the Appeal is merited and the Tribunal consequently makes the following Orders; -a.The Appeal be and is hereby allowed.b.The Respondent’s refund rejection decision issued on 27th October 2020 be and is hereby set aside.c.The Respondent to process the Appellant’s refund application within Ninety (90) days of the date delivery of this Judgment.d.Each party to bear its own costs.

96. It is so ordered.

SIGNED AND DELIVERED AT NAIROBI THIS 26TH DAY JANUARY, 2024ROBERT M. MUTUMA - CHAIRPERSONMUTISO MAKAU - MEMBERELISHAH N. NJERU - MEMBERDR. WALTER ONGETI - MEMBERBONIFACE K. TERER - MEMBER