Fuels and Lubricants Limited v Commissioner of Domestic Taxes [2025] KETAT 210 (KLR)

Fuels and Lubricants Limited v Commissioner of Domestic Taxes (Miscellaneous Application E010 of 2025) [2025] KETAT 210 (KLR) (4 April 2025) (Ruling)

Neutral citation: [2025] KETAT 210 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Application E010 of 2025

CA Muga, Chair, T Vikiru & BK Terer, Members

April 4, 2025

Between

Fuels and Lubricants Limited

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Applicant by way of a Notice of Motion dated 18th March, 2025 and filed on even date sought the following Orders:a.Spent.b.The Applicant be allowed to file its Memorandum of Appeal and Statement of Facts out of time.c.Pending the hearing and determination of the Application and the substantive appeal, the Tribunal to issue orders that the demand notice issued to the applicant be withdrawn and that the applicant be issued with Tax Compliance Certificate.d.Pending the hearing and determination of the Application and the substantive appeal, the Tribunal to issue orders stopping the Respondent from initiating any enforcement action with respect to late objection rejection notices dated 10th May 2022. e.The Application be allowed as the same was brought with reasonable cause and thus has merit.f.The costs be awarded to the Applicant in any case.g.Any other order the Tribunal deems fit and proper to issue.

2. The Application which was supported by an Affidavit sworn by one of the Applicant’s directors, Mr. Nabatkamu Bahdurali Bhanji on the 18th day of March, 2025 was premised on the following grounds:a.That the Applicant is a company registered in Kenya, whose operations are in Mombasa.b.That assessments were issued to the Applicant on 15th November, 2019 which objections were duly lodged on 14th December, 2019. c.That Consequently, late objection rejection notices were sent to the Applicant on 10th May, 2022 with respect to the objections lodged.d.That due to the outbreak of the new wave of COVID -19 pandemic, the Applicant was forced to close its offices and operations to avoid the spread of the virus as most work require physical contacts among employees. Furthermore, one of the directors of the Applicant-the managing director, has been in and out of the hospital since January 2022. Therefore, the Applicant was unable to lodge a notice of appeal at the Tribunal.e.That accordingly, the Applicant was unable to file its Memorandum of Appeal and statement of facts in order to challenge the Respondent’s decision.f.That the Applicant has established that due to statutory timelines, it was however unable to lodge its Memorandum of Appeal and statement of facts with respect to the Respondent’s late objection rejection notices dated 10th May, 2022. g.That the Respondent’s action has hugely affected the business operations of the Applicant in meeting its day to day obligations because the Applicant has been issued with demand notice and cannot get Tax Compliance Certificate.h.That the Applicant thus makes an application before the Tribunal to be allowed to lodge the appeal out of time, the demand notice issued to the applicant be withdrawn, the applicant be given Tax Compliance Certificate and any further enforcement action by the Respondent stopped pending the hearing and determination of this Application and the substantive appeal.i.That the Applicant has satisfied the conditions set out under the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”) and the attendant rules to be allowed to lodge the appeal out of time and there is no inordinate delay in bringing this Application.j.That the Tribunal, allow the Applicant to file its Memorandum of Appeal and statement of facts out of time so as to challenge the assessments before the Tribunal.k.That unless this Application is granted, the Applicant/ Intended Appellant stands to suffer irreparable harm and substantial loss as the Respondent will enforce the taxes which is of substantial amount and cause the Applicant further anguish.

3. The Respondent failed to oppose the Application as directed by the Tribunal on 21st March, 2025 and from that the Tribunal can infer that it is not opposed to the Application.

Analysis And Findings 4. Neither of the parties complied with the Tribunal’s directions on 21st, March, 2025 to file written submissions.

5. The power to expand time for filing an Appeal is donated by Section 13 (3) of the TATA which provides as follows:“(3) The Tribunal may grant the extension of time if it is satisfied that the applicant was unable to submit the documents in time for the following reasons—a.absence from Kenya;b.sickness; orc.any other reasonable cause.”

6. The Tribunal’s power to grant extension of time is discretionary and not a right to be granted to the Appellant. In determining whether to extend time, the Tribunal was guided by the decision of the Court in Charles Karanja Kiiru v Charles Githinji Muigwa [2017] eKLR, where the learned Judge stated as follows:“it is trite that extension of time is not a right of a party. It is an equitable remedy that is only available to a deserving party, at the discretion of the Court. “

7. On the criteria of the issues to be considered when granting an extension to file an appeal out of time, the Tribunal referred to the case of Odek, JJ. A in Edith Gichugu Koine vs. Stephen Njagi Thoithi [2014] eKLR, where the Court laid out the factors as thus:“Nevertheless, it ought to be guided by consideration of factors stated in many previous decisions of this Court including, but not limited to, the period of delay, the reasons for the delay, the degree of prejudice to the respondent if the application is granted, and whether the matter raises issues of public importance, amongst others...”

8. Further, in Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd [2020] eKLR, the court held as follows:“The Court considers the length of the delay; the reason for the delay; the chances of success of the intended appeal, and the degree of prejudice that would be occasioned to the respondent if the application is granted.”

9. The Tribunal, guided by the principles as set out in John Kuria v Kelen Wahito, Nairobi Civil Application No. 19 of 1983 April 10, 1984, referred to by the Judges in the case of Wasike V Swala [1984] KLR 591, Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd (supra) and Section 13 of the TATA used the following criteria to consider the application:a.Whether there is a reasonable cause for the delay.

10. In considering what constitutes a reasonable reason for delay, the court in Balwant Singh v Jagdish Singh & Ors (Civil Appeal No.1166 of 2006), held as follows:“The test is whether or not a cause is sufficient to see whether it could have been avoided by the party by the exercise of due care and attention.”

11. The statutory timelines and provisions to file an Appeal have been clearly set out in the Section 13 (3) of the TATA which provides as follows with regard to the statutory timelines to be adhered to in commencing an appeal process:“A notice of appeal to the Tribunal shall—a.be in writing;b.be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.2. The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal, of—a.a memorandum of appeal;b.statement of facts; andc.the tax decision….”

12. For a taxpayer who has not met the timelines as provided in the above provision of the law, Section 13(4) of the TATA provides the conditions that the taxpayer ought to meet to enable the Tribunal to exercise its discretion to extend time to appeal. The Section provides as follows:“An extension under subsection (3) may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the applicant from giving notice of appeal within the specified period.”

13. Regarding the reasons for delay, the Appellant averred that its director suffered ill health from 4th January, 2022 as evidenced by the medical report that was attached to the Application. The director appears to have a chronic illness according to the medical report since the condition appears to recur and having suffered a medical event, in January, 2022, he was debilitated and unable to respond to the Respondent’s objection decision within the stipulated time frame.

14. Consequently, the Tribunal’s finding is that the Applicant has demonstrated a reasonable cause for delay.b.Whether the Appeal is merited?

15. The Tribunal considered whether the matter under dispute was frivolous to the extent that it would be a waste of the Tribunal’s time, or it was material to the extent that it deserved its day in the Tribunal.

16. The test is not whether the case is likely to succeed. Rather, it is whether the case is arguable. This was the finding in Samuel Mwaura Muthumbi V Josephine Wanjiru Ngungi & Another (2018) eKLR where the court stated as follows:“Looking at the draft Memorandum of Appeal filed, I am unable to say that the intended Appeal is in arguable. Of course, all the Applicants have to show at this stage is arguability- not high probability of success. At this point the Applicant is not required to persuade the Appellate court that the intended or filed appeal has a high probability of success. All one is required to demonstrate is the arguability of the Appeal, a demonstration that the Appellant has plausible grounds of either facts or law to overturn the original verdict. The Applicants have easily met that standard. I believe that the Applicant has discharged this burden.”

17. The Tribunal was further guided by the findings of the court in Kenya Commercial Bank Limited Vs Nicholas Ombija (2009) eKLR where it was held as follows:“An arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court.”

18. Similarly, in Kenya Commercial Bank Limited Vs Nicholas Ombija (2009) eKLR it was stated that “an arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court”. That was also the position held in Stanley Kangethe Kinyanjui Vs Tony Keter & others (2013) eKLR where the court held that “on whether the appeal is arguable, it is sufficient if a single bonafide ground of appeal is raised an arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court: one which is not frivolous.”

19. The Tribunal noted that the Respondent’s confirmation assessment notices in respect to VAT and income Tax were both dated 10th May, 2022 wherein the Applicant’s objections were fully rejected. The Applicant did not file is Notice of Appeal and Memorandum of Appeal and therefore the Tribunal is not able to examine the grounds of appeal of the Applicant to determine whether or not the same require a rebuttal by the Respondent.c.Whether there will be prejudice suffered by the Respondent if the extension is granted?

20. The courts have held that in considering whether to extend time, due regard must be given to whether the extension will prejudice the opponent. In determining this, the Judge in Patrick Maina Mwangi v Waweru Peter [2015] eKLR quoted the finding in United Arab Emirates V Abdel Ghafar & Others 1995 IR LR 243 in finding as follows:“…….a plaintiff should not in the ordinary way be denied an adjudication of his claim on its merits because of a procedural default, unless the default causes prejudice to his opponent for which an award of cost cannot compensate………”

21. The test, therefore, as set out in the case above is whether the Respondent will suffer irreparable prejudice if the application is granted. It is the view of the Tribunal that the Applicant’s recourse to justice lies in an appeal to the Tribunal. Thus, the Applicant will suffer prejudice if it is not granted leave to file its appeal. The Respondent on the other hand will not suffer prejudice since it will still be able to collect the taxes plus interest and penalties should the Applicant be found to be at fault.

22. The Tribunal therefore finds that the Respondent will not suffer prejudice if the extension is granted.

Disposition 23. Based on the foregoing analysis, the Tribunal finds that the Application succeeds and accordingly proceeds to make the following Orders:a.The Application be and is hereby allowed.b.Leave be and is hereby granted to the Applicant to file its Notice of Appeal, Memorandum of Appeal and Statement of Facts out of time.c.The Applicant to file and serve its Notice of Appeal, Memorandum of Appeal, Statement of Facts within 15 days of delivery of this Ruling.d.The Respondent to file and serve its response to the Appeal within 30 days of service on it of the Applicant’s Notice of Appeal, Memorandum of Appeal and Statement of Facts.e.No orders as to costs.

24. It is so Ordered.

DATED AND DELIVERED AT NAIROBI THIS 4TH DAY OF APRIL, 2025. ………………………………….CHRISTINE A. MUGACHAIRPERSON…………………………….. ……….……….……………..DR. TIMOTHY B. VIKIRU BONIFACE K. TERERMEMBER MEMBER