Goldtex Enterprises Limited v Commissioner of Customs & Border Control [2023] KETAT 212 (KLR)

Goldtex Enterprises Limited v Commissioner of Customs & Border Control (Appeal 190 of 2022) [2023] KETAT 212 (KLR) (5 May 2023) (Judgment)

Neutral citation: [2023] KETAT 212 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal 190 of 2022

E.N Wafula, Chair, Cynthia B. Mayaka, Grace Mukuha, AK Kiprotich & Jephthah Njagi, Members

May 5, 2023

Between

Goldtex Enterprises Limited

Appellant

and

Commissioner of Customs & Border Control

Respondent

Judgment

Background 1. The Appellant is a private limited liability company incorporated in Kenya under the Companies Act and engages in the business of the importation and sale of printing papers.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority Act, and the Kenya Revenue Authority is charged with the responsibility of among others, assessment, collection, accounting and the general administration of tax revenue on behalf of the Government of Kenya.

3. On 27th January 2022, the Policy and International Affairs Division of the Respondent sent an Internal Memo to the Risk Management Division of the Respondent requiring them to carry out an audit on products imported under tariff 4802. 56. 00 during the period 2nd August 2018 to 8th February 2022.

4. The Respondent carried out a desk review of imports under tariff 4802. 56. 00 for the period 2nd August 2018 to 8th February 2022.

5. The review revealed a short levy of taxes as a result of the application of a duty rate of 10% instead of 25%.

6. On 8th February 2022, the Respondent sent a demand notice to the Appellant requiring it to pay the short levy in import duty and resultant VAT of Kshs. 1,237,644. 00 within 30 days.

7. On 16th February 2022, the Appellant filed an objection notice to the demand notice.

8. Aggrieved by the decision of the Respondent indicated to be contained in the internal memo dated 27th January 2022, the Appellant lodged a Notice of Appeal dated 21st February 2022 and filed before the Tribunal on 22nd February 2022.

The Appeal 9. The Appeal is premised on the following grounds as stated in the Memorandum of Appeal dated 23rd February 2022 and filed on 25th February 2022:-a)That there is no law which imposed a duty rate of 25% on paper and paperboard products in the period between 2nd August 2018 and 27th January 2022 in view of the fact that:i.The East African Community Council of Ministers have never approved nor formally passed any law imposing a duty rate of 25% on paper and paperboard products imported under H.S Code 4802. 56. 00 since 20th June 2014. ii.No Gazette Notice has ever been published by the East African Community imposing a rate of 25% on paper and paperboard products imported under H.S. Code 4802. 56. 00 since 20th June 2014. iii.The mandate of the Respondent under Section 5 of the Kenya Revenue Authority Act is confined solely to administering and enforcing tax legislations set out in the First Schedule to the said Kenya Revenue Authority Act, and not any other law which is not set out therein.b.That even if it were to be said arguendo that some law exist which imposed a duty rate of 25% on paper and paperboard products imported under H.S. Code 4802. 56. 00 as aforesaid (which is denied); and even if it were to be said arguendo that the Respondent is lawfully entitled to administer and enforce such law (which is also denied); it would still be illegal and unconstitutional for the Respondent to make and/or enforce compliance with the impugned decision or to issue the impugned demand notice on the following grounds:i.It is the Respondent (and not the Appellants nor their clearing agents), who actually applied the duty rate of 10% on all paper and paperboard products imported into the Country under H.S. Code 4802. 56. 00 between 2nd August 2018 and 27th January 2022 by feeding into their Tradex System (otherwise known as Simba system) the duty rate of 10% as the mandatory duty rate that all importers of paper and paperboard products under its code 4802. 56. 00 had to pay before they could get their goods cleared as the system was configured by the Respondent to automatically pick the duty rate of 10% once the H.S. Code 4802. 56. 00 is keyed in. Consequently, the Respondent cannot found a cause of action as against the Appellants from their own actions.ii.It is the Respondent (and not the Appellant nor their clearing agents) who instructed theirICT officers to approve online Form C.17B customs entries that had indicated 10% as the mandatory duty rate for paper and paper board products imported under H.S. Code 4802. 56. 00. Consequently, the Respondent cannot found a cause of action as against the Appellants from their own actions.iii.It is the Respondent (and not the Appellant nor their clearing agents,) who instructed their customs and valuation officers tasked with the responsibility of verifying and approving the correctness of import duty charged and paid with respect to paper and paperboard product imported under H.S. Code 4802. 56. 00 to insist on payment of duty at the rate of 10% before such goods could be allowed to leave the port of entry.iv.The impugned decision as well as the impugned demand notice violates the Appellant's right to fair administrative action, right to property, the right to access justice and the right to protection of law.v.The Appellant had a legitimate expectation that the Respondent would not labour to put in place such expensive and tamper-proof infrastructural technological, administrative, surveillance and monitoring systems as were necessary for purposes of inducing, encouraging and coercing the Appellants into paying customs duty at the mandatory rate of 10% for all paper and paperboard products imported under H.S. Code 4802. 56. 00 only to subsequently change their mind and punish the Appellants for having paid duty at the rate of 10% and not 25% (which the Appellants could not have done even if they wanted at the time because the Simba System would not permit them so to do).vi.It is unconstitutional illegal, unfair, irrational, capricious, in bad faith and abuse of office for the Respondent to encourage, induce and coerce the Appellant into paying duty at the rate of 10% for goods which the Respondent knew - or ought to have known - were meant to be sold out to third parties, only for them to subsequently demand that the Appellants pay duty at 25% long after the goods have been sold and used up by the third party purchasers at which point in time the Appellants cannot recover the uplifted duty from the third party purchasers.vii.The Respondent is institutionally bound by and cannot resile from its previous interpretation of the effect of the purported deletion of Paragraph 2 of Legal Notice No. EAC/69/2018, which interpretation informed its decision to configure the Simba System to pick import duty for paper and paperboard products imported under H.S. Code 4802. 56. 00 at the rate of 10%.viii.The Appellant’s liability to tax cannot be made wholly dependent on the personal idiosyncrasies of the individual occupants of the office of the Commissioner of Customs and Border Control as the Respondent seems to opine. Consequently, the fact that the Respondent hold different views with regards to the effect of the purported deletion of Paragraph 2 of Legal Notice No. EAC/69/2018 from a previous holder of the same office should have no effect whatsoever on the Appellant's tax liabilities.ix.Section 135 of the East African Customs Management Act (EACMA) was intended to deal only with situations where the tax paid is less than what the Respondent honestly, sincerely and for good reasons, believed to be due and payable at the time, and not - as is the case herein - where the tax paid is what the Respondent honestly, sincerely and for good reasons believed to be payable at the time, save for the fact that a different occupant of the same office subsequently hold the view that the previous occupant of the same office should have collected more tax, than he did.x.The Respondent has been guilty of inordinate delay in carrying out the post clearance audit.xi.The Respondent's decision to initiate a post-clearance audit and to issue the impugned notice was actuated by malice, bad faith and improper motive.xii.By initiating a post clearance audit as aforesaid and issuing the impugned demand notice, the Respondent acted unreasonably and took into account improper considerations while at the same time failed to take into account proper considerations.xiii.The Respondent having issued tax compliance certificates to the Appellant is estopped from changing its position and now averring as against the Appellants that they have outstanding taxes.

Appellant’s Case 10. The Appellant’s case is premised on the following:-a.The Appellant’s Statement of Facts dated 23rd February 2022 and filed on 25th February 2022 together with the documents attached thereto.b.The Appellant’s written submissions dated 17th November 2022 and filed on 1st December 2022 together with the legal authorities filed therewith.

11. The Appellant averred that by a Gazette Notice No: EAC/21/2014 dated 20th June, 2014 the Council reduced the tariff rate for paper and paper board products imported under H.S code 4802. 56. 00 (which was previously set on the maximum rate of 25% the middle rate of 10%).

12. That on 30th June 2017 the Council, vide Legal Notice No: EAC/85/2017 renewed and modified the East African Community Common External Tariff to model it along the lines of the 2017 version of the Harmonized Community Description and Coding System version 2012 of the World Customs Organization (WCO). That the purpose of that review was merely to harmonize the commodity description and coding system of theEACCET with that of the 2012 version of the WCO tariff rate. The revised EACCET was christened the 2017 version of the EACCET.

13. That in line with the Legal Notice No: EAC/85/2017 aforesaid, the EAC Secretariat developed and published the 2017 version of the Harmonised Commodity Description and Coding System which was modelled upon the 2012 version of the WCO. That at Page 221 of the 2017 version of theEACCET aforesaid, the EAC Secretariat mistakenly indicated a tariff rate of 25% for paper and paperboard products imported under HS Code 4802. 56. 00 without any approval by the Council and without any publication by the council to that effect through the EAC Gazette Notice.

14. That following the publication of the 2017 version of the EACCETand upon noticing the purported erroneous change in the tariff rate for H.S Code 4802. 56. 00, the Respondent deliberated on the question whether the tariff rate for H.S Code 4802. 56. 00 had been increased from 10% to 25% and resolved to consult theEACSecretariat for clarification on the matter.

15. That the EAC Secretariat clarified to the Respondent that the Council had not increased the duty rate for H.S Code 4802. 56. 00 and that the tariff rate of 25% appearing as against theH.S Code 4802. 56. 00 was caused by a mistake which occurred during the transposition process when they were changing EACCET to make it comply with the 2012 version of the WCO CET.

16. That the clarification by the EAC Secretariat was contained in an email which was circulated by Kenya Revenue Authority Manager for Post Clearance Audit, one Joab Omole to Senior Customs officers in the same organization at 11. 59 AM on 23rd February 2018.

17. That theEAC Secretariat subsequently - albeit erroneously attempted to correct the mistake in the 2017 version of the EACCET in connection with its code 4802. 56. 00 by causing the Council to reduce the rate from 25% to 10%. Consequently, vide paragraph 2 of the Legal Notice No: EAC/69/2018 dated 30th June 2018 the Council purported to reduce the tariff rate forH.S Code 4802. 56. 00.

18. When it later dawned on the EACSecretariat, as well as the Council that Paragraph 2 of the Legal No: EAC/69/2O18 aforesaid was itself published in error since it was purporting to reduce the tariff rate for H.S Code 4802. 56. 00 from 25% to 10% yet the said tariff rate had never been formally increased from 10% to 25% (as erroneously indicated in the 2017 version ofEACCET), the Council responded by publishing a Legal Notice No: EAC/112/2O18 deleting Paragraph 2 of the Legal Notice No: EAC/69/2018.

19. That the deletion of Paragraph 2 of the Legal Notice No: EAC/69/2018 vide the Legal Notice No:EAC/112/2018 did not have any impact at all on the tariff rate for H.S Code 4802. 56. 00 because the tariff rate for H.S Code 4802. 56. 00 had never been formally reviewed since 2014.

20. That being conversant with the foregoing, and influenced thereby, the Respondent configured its Tradex system (otherwise known as Simba System), to collect duty under H.S Code 4802. 56. 00 fed by the Respondent into the Simba system with the result that any person wishing to import any goods under H.S Code 4802. 56. 00 would simply enter theH.S Code into the system whereupon both the duty rate as well as the total tax payable would be given by the Simba System itself in the form of Form C17B Customs Entry.

21. That in these circumstances, it would be dishonest, callous, malicious and in extreme bad faith for the Respondent to allege that the rate of 10% was not the correct rate for H.S Code 4802. 6.00; nor to accuse any clearing agent or importer of applying the wrong rate since the rate of 10% was actually applied by the Respondent who fed it into its Simba System rather than by clearing agents who merely keyed in other details of the goods being cleared, leaving it entirely to the Simba System to give the applicable duty rate as well as the total duty payable.

22. That on 27th January 2022, the Respondent, through a Memo prepared on its behalf by one John Gathatwa instructed Customs officers to immediately conduct a post clearance audit on all goods that were cleared underH.SCode 4802. 56. 00 between 2nd August 2018 and 27th January 2022 purportedly because the Respondent had just discovered first that Legal Notice No EAC/112/2018 had deleted Paragraph 2 of the Legal Notice No EAC/69/2018; Second, that the effect of the deletion was to import the duty rate of 25% forH.S Code 4802. 56. 00; and finally, that clearing agents/importers had been applying the rate of 10% for H.S Code 4802. 56. 00 instead of 25%.

23. That the said Memo epitomized utmost dishonesty, callousness, malice and extreme bad faith to the extent that it purported to assert, on the one hand, that the Respondent was not aware that clearing agents/importers were applying a rate of 10% instead of 25% and on the other hand, curiously instruct Customs officers to update the Customs System with immediate effect for tariff number 4802. 56. 00 to pick import duty at 25% (which actually amounts to an admission that up to that date, the Customs System had been configured for tariff No: 4802. 56. 00 to pick import duty at 10%).

24. That the said Memo further ignored the fact that up to the date of the said Memo, the official position of the Respondent (as confirmed by the information which the Respondent fed into the Simba System), was that the tariff rate since 20th June 2014 when it was set at 10% and consequently the deletion of Paragraph 2 of Legal Notice No:EAC/69/2018 had no effect whatsoever on the duty rate for H.S Code 4802. 56. 00.

25. That following the issuance of the said Memo and in compliance therewith, the Respondent’s Customs Officers rushed to calculate duty rates for all consignments of goods that were cleared by the Appellant under H.S Code 4802. 56. 00 between 2nd August 2018 and 27th January 2022 and proceeded to demand what they felt was the tax short fall together with purported penalties and interest.

26. That the Appellant was thereafter served with a demand notice requiring it to pay a sum of Kshs. 1,237,644. 00 within thirty (30) days from the date of the demand notice.

27. The Appellant submitted that the main question for determination by the Tribunal is:Whether there is any law that fixed the duty rate for paper and paperboard products classified under tariff code 4802. 56. 00 at 25%?

28. The Appellant submitted that although both the parties agree that the duty rate for paper products was set at 10% by the East African Community Council of Ministersvide legal notice No. EAC/21/2014 on 20th June 2014, there is a sharp polarity of opinion between the parties as to whether that rate has ever been increased to 25%.

29. The Appellant submitted that no law has ever been enacted and promulgated, by the Council, increasing the duty rate for paper products from 10% to 25% since 20th June 2014, when the duty for paper products was last set by the Council.

30. That the Appellant's submissions in this regard were anchored on three main truisms: That first every law must be formally enacted; second, that every law that has been duly enacted must be formally promulgated through publication in an official gazette which must also indicate the date of its commencement and finally, that both the enactment as well as promulgation of the law can only be done by the body that has the requisite legal mandate to enact law.

31. That a mere posting of a document on the website of a legislative institution does not elevate that document to the status of a law.

32. That even if it were to be said arguendo (i.e. for the purposes of argument only), that the duty rate for paper products had been increased to 25% (which is obviously not true), it would still be illegal and unconstitutional for the Respondent to issue demand notices upon the Appellant demanding the purported short levied taxes on the following grounds:-a.It is not legally possible for the Respondent to adopt one interpretation of a revenue legislation today and purport to resile from that interpretation and to embrace yet a different interpretation of the same law tomorrow, especially in circumstances where doing so involves imposition of punishment (in the form of new taxes), upon innocent taxpayers. That this is because the doctrine of precedent governs administrative decision­making just as it governs judicial decision-making.b.That the Respondent having configured its digital revenue collection infrastructure to collect duty for paper products at l0% in circumstances that made it impossible for any importer of such products to pay duty at 25% or any other rate (even if he sincerely wanted to), are estopped from alleging that the duty rate should have been 25% instead of l0%. That the Respondent must be presumed to intend the ordinary and natural consequences of its actions and consequently it is unfair, unjust, oppressive and in extreme bad faith for the Respondent to purport to punish the Appellant for the direct consequences of its own actions.c.That since the Respondent is not only a co-participant, but indeed the main player in the clearance process, in the sense no declaration made by a taxpayer can be acted upon nor implemented, unless it has been approved by the Respondent to be the correct declaration in accordance with the law (and each declaration has to be approved by four (4) independent officers).d.That allegations to the effect that the taxpayer made a wrong declaration actually involves an admission that four (4) officers of the Respondent who independently confirmed and certified that the duty rate indicated on the declaration was the correct rate in accordance with the law and whose certifications were accepted by the taxpayer as correct, misled the taxpayer into paying a wrong duty.e.The Appellant submitted that it would be the height of irrationality for the Respondent who confirmed that the correct duty rate for paper products was l0% by instructing clearing agents to use the rate of l0% in their declaration forms, by configuring the Simba System to automatically pick duty at l0% and by instructing all their officers who were involved in the approval process to approve only declarations that use the rate of l0% for such products - to purport to punish the taxpayer for having used the duty rate of 10%.f.That the decision by the Respondent to purport to demand duty at the rate of 25% long after the same Respondent had not only lured - but indeed coerced - the Appellant to pay duty at the rate of 10% and long after the subject goods have been sold to and consumed by third parties who cannot now be asked to pay the additional duty is a clear violation of the Appellant’s right to fair administrative action under Article 47 of Constitution.g.That the mere fact that the Respondent has power under Sections 135, 235, 236 and 249 to conduct post clearance audit and thereafter demand short-levied taxes does not mean that a purported exercise of such power cannot be challenged and invalidated for violation of the right to fair administrative action.

33. The Appellant submitted that as has been held by the Court of Appeal several times, notably in the case of Kenya Revenue Authority v Export Trading Company Ltd (2020) eKLRas well as in the case of Krish Commodities Ltd v Kenya Revenue Authority (2018)eKLR, the mere fact that the Respondent is permitted by Section 135 ofEACCMA to conduct post clearance audit within five (5) years does not mean that it is lawful and proper for it to conduct post clearance audit after four (4) years in the circumstances where it has become impossible for the taxpayer to recover the additional taxes now being demanded because the subject goods have been sold and even consumed by third parties.

34. The Appellant submitted that Legal Notice No. EAC/21 /2014 fixed the duty rate for paper and paperboard products. That no legal notice issued by EAC Council of Ministers and duly gazetted inEACGazette has increased that rate to 25%. That since there has never been any increment of the rate, any legal notice purporting to lower the rate from 25% to 10% or to delete any such previously mentioned legal notice would be of no legal effect.

35. That any statements, proposals, suggestions or other communication posted on EAC website byEAC Secretariat which have not been passed by the EACCouncil of Ministers and which purport to indicate a different duty rate for paper and paper board products have no legal force and cannot be implemented or enforced by the Respondent.

36. That Legal Notice No EAC/85/2017 merely authorized the harmonization of the EACCET with the WCO CET and did not review or change the tariff rate for paper and paperboard products.

Appellant’s Prayers 37. The Appellant prays that the Tribunal:-a.Allows the Appeal,b.Annuls the impugned decision as well as the impugned demand notice.c.Awards the costs of the Appeal to the Appellant.

Respondent’s Case 38. The Respondent’s case is premised on the hereunder filed documents:-a.The Respondent’s Statement of Facts dated 21st March 2022 and filed on 22nd March 2022. b.The Respondent’s written submissions dated and filed on 15th November 2022.

39. The Respondent averred that the dispute arose from a desk review of imports under tariff 4802. 56. 00 for the period 2nd August 2018 to 8th February 2022.

40. That the review revealed a short levy of taxes as a result of the application of a duty rate of 10% instead of 25%. That consequently, the Respondent demanded for the short levied taxes from the Appellant whose liability is Kshs. 1,237,644. 00.

41. That upon receipt of the demand for additional taxes, the Appellant applied for a Commissioner’s review pursuant to Section 229 of the East Africa Community Customs Management Act, 2004 and later filed an appeal at the Tribunal.

42. The Respondent averred that theEAC Notice No. EAC/112/2018 dated 2nd August 2018 deleted item number 2 in the Legal Notice No. EAC/69/2018 dated 30th June 2018. That this effectively reverted the duty rate of items imported under tariff 4802. 56. 00 from 10% to 25%. That this change was not effected in the Customs systems, leading to goods being released at a lower duty rate.

43. That on 27th January 2022, the Policy and International Affairs Division sent an internal memo to the Risk Management Division requiring them to carry out an audit on products imported under tariff 4802. 56. 00. That tariff code 4802. 56. 00 covers:-“Uncoated paper and paperboard, of a kind used for writing, printing or other graphic purposes, and non-perforated punch cards and punch tape paper, in rolls or rectangular (including square) sheets, of any size, other than paper of heading 48. 01 or 48. 03; hand-made paper and paperboard.--Weighing 40 g/m2 or more but not more than 150 g/m2, in sheets with one side not exceeding·435 mm and the other side not exceeding 297 mm in the unfolded state.”

44. That the Customs Post Clearance Audit team conducted a desk review of customs entries of the importers of items under the tariff code for the period 2nd August 2018 to 8th February 2022 pursuant to Sections 235 and 236 of the East African Community Customs Management Act 2004. That among the importers profiled was the Appellant.

45. That pursuant to Section 135 of theEACCMA, the Commissioner issued a demand notice to the Appellant dated 8th February 2022, requiring the taxpayer to pay the short levied taxes of Kshs. 1,237,644. 00.

46. The Respondent averred that Sections 235 and 236 of the EACCMA gives the Respondent powers to call for documents and conduct a post clearance audit on the import and export operations of a taxpayer within a period of five years from the date of importation or exportation.

47. That where the post clearance audit reveals that taxes were short levied, or erroneously refunded, Sections 135 and 249(1) of the EACCMA empower the Commissioner to recover any such amount short levied or erroneously refunded with interest at a rate of two percent per month for the period the taxes remain unpaid.

48. That the Respondent further averred that Section 229 of the EACCMA provides for application for review by any person affected by the· decision or omission of the Commissioner on matters relating to Customs and provides the legal timelines to be observed.

49. That Section 230(1) of the EACCMA provides that a person dissatisfied with the Commissioner's decision after application for review under Section 229 of the Act may appeal to a tax appeals tribunal established in accordance with Section 231 of the Act.

50. That the Tribunal should take judicial notice that the Respondent operates on a self-declaration regime whereby, the taxpayer is required to make declarations and pays taxes on the items that they import themselves or through their agents. That this creates a legitimate expectation that the Appellant will pay the correct taxes.

51. That however, in the event that the taxpayer defaults in this expectation, the law under Sections 135, 235, 236 & 249 of the EACCMA, 2004 allows the Commissioner, within five years of importation, to assess and demand for the short-levied taxes.

52. The Respondent averred that the assessment herein was made within the five-year window provided for by the law and therefore no legitimate expectation on the taxpayer was breached.

53. That further, the Appeal at the Tribunal was premature because the Respondent was yet to give its decision on the Appellant's application for review.

54. That the East African Community Secretariat publishes the EAC Gazette Notices on the EAC website and are available to the public. That these notices usually highlight changes effected by the Council of Ministers to the East African Community Customs Management Act, 2004 and the East African Community Common External Tariff (CET). That the EAC· Gazettes usually indicate the date the Legal Notices come into effect hence the taxpayer's claim that there was no law that imposed a rate of 25% on paper and paperboard products is false.

55. That the Customs Systems were not adjusted until the implementation of the provisions of Gazette EACNotice No. EAC/ 112/2018 dated 2nd August 2018, resulting in short-levied taxes of Kshs. 1,237,644. 00. The taxes were due and payable to the Respondent at the time of importation.

56. That the Appellant does not deny importing consignments comprising of paper products under H.SCode 4802. 56. 00 which attracts a duty rate of 25%.

58. The Respondent submitted that there are four issues for determination by the Tribunal as follows:-a.Whether the Appeal at the Tribunal was premature is on the grounds that the Respondent was yet to give its decision on the Appellant’s application for review.b.Whether the review decision was issued in compliance with the law.c.Whether this Appeal is an Appeal on the review decision dated 15th March 2022. d.Whether the East African Community Customs Act, 2004 as at 2nd August 2018 stipulated the duty payable in respect of H.S Code 4802. 56. 00 as 25%.

59. The Respondent submitted on the four issues as hereunder:-

a. Whether the appeal at the Tribunal was premature on the grounds that the Respondent was yet to give its decision on the Appellants' application for review. 60. The Respondent submitted that the Tribunal had no jurisdiction to entertain this matter when this Appeal was filed. The Tribunal was to have jurisdiction only after the Respondent issued a review decision.

61. The Respondent submitted that Section 229 of EACCMA provides for application for review by any person affected by the decision or omission of the Respondent.

62. That Section 230(1) of EACCMAprovides that a person dissatisfied with the Respondent's decision after application for review under Section 229 of the EACCMA may appeal to the Tax Appeals Tribunal. That Section 230(1) ofEACCMA, 2004 provides that:“A person dissatisfied with the decision of the Commissioner under section 229 may appeal to a tribunal established in accordance with section 231. ”

63. The Respondent submitted that based on the above Section, the Applicant can only appeal after a decision has been issued. That without a decision or lapse of the time provided for making the decision, the Tribunal has no jurisdiction.

64. The Respondent relied on the Supreme Court of Kenya case of Samuel Kamau Macharia & Another v Kenya Commercial Bank Limited &others (2012)eKLR where the court stated that: -“A Court's jurisdiction flows from either the Constitution or legislation or both. Thus, a court of law can only exercise jurisdiction as conferred by Constitution or other written law. It cannot arrogate to itself jurisdiction exceeding that which is conferred upon it by law."

65. The Respondent further reiterated that after an application for review is made under Section 229(1) of EACCMA, an appeal under Section 230 of EACMA is only available to the petitioner after a review decision has been made.

66. The Respondent further submitted that the Tribunal should be reluctant to entertain cases where litigants have not exhausted the available dispute resolution mechanisms. The Respondent relied on the Court of Appeal case of Geoffrey Muthinja Kabiru & 2others v Samuel Munga Henry & 1756 others [2015] eKLRwhere the court held that:“It is imperative that where a dispute resolution mechanism exist outside courts, the same be exhausted before the jurisdiction of the courts is invoked. Courts ought to be for a last resort and not the first port of call the moment a storm brews... The exhaustion doctrine is a sound one and serves the purpose of ensuring that there is a postponement of judicial consideration of matters to ensure that a party is first of all diligent in the protection of his own interest within the mechanisms in place for resolution outside the courts. This accords with Article 159 of Constitution which commands courts to encourage alternative means of dispute."

67. That Section 13 of the TAT Act provides that a tax decision has to be included in the Appeal documents. The Section provides that:-“(1)A notice of appeal to the Tribunal shall­a.be in writing or through electronic means;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.statements of facts; andc.the tax decision.”

68. The Respondent submitted that the Appeal is fatally defective for non-compliance with Section 13(2)(c) of the TATAct. That the Appellant has not attached the decision it is appealing against. Further, the Appeal was made before the Respondent rendered its review decision and therefore it can not purport to be an Appeal on the review decision dated 15th March 2022.

b. Whether the Review decision was issued in compliance with the law. 69. The Respondent submitted that Section 229(4) of EACCMA provides that the Respondent is to issue its decision within 30 days. The Appellant made an application for review on 16th February 2022. The Respondent issued its review decision on 15th March 2022. That is a period of 27 days after the application for review was made. The law provides for not more than 30 days hence the decision was made within the law.

70. The Respondent submitted that the Appellant’s assertions that the review decision is outside the statutory timelines is misplaced. The Appellant conveniently did not attach the application for review which would have helped the Tribunal determine when the application was made and the decision was made.

71. The Respondent submitted that Article 47 of Constitution codifies every person's right to fair administrative action. The Appellant applied for review. A review decision was made within the statutory timelines and no violation of the Appellant's rights happened as claimed.

c. Whether this Appeal is an appeal on the review decision dated 15th March 2022. 72. That this Appeal was filed before the Respondent issued its review decision. The Respondent submitted that the Appeal was premised on the grounds that a review decision was not issued within the provided timelines. On the contrary, a review decision was issued within the provided timelines.

73. The Respondent submitted that this Appeal would only have affected the review decision if the Appeal was issued outside time. That since the review was issued within the required time the review decision remains unchallenged.

d. Whether the East African Community Customs Management Act, 2004 as at 2nd August 2018 stipulated the duty payable in respect of HS Code 480256. 00 as 25%. 74. The Respondent submitted that on 27th January 2022, the Policy and International Affairs Division sent an internal memo to the Risk Management Division requiring them to carry out an audit. That the Customs post clearance audit team conducted a desk review of Customs entries of the importers of items under the tariff code for the period 2nd August 2018 to 8th February 2022 pursuant to Sections 235 and 236 of theEACCMA. That among the importers profiled was the Appellant.

75. That Sections 235 and 236 of the EACCMA give the Respondent powers to call for documents and conduct a post clearance audit (PCA) on the import and export operations of a taxpayer within a period of five years from the date of importation or exportation.

76. That where the Audit reveals that taxes were short levied, or erroneously refunded, Sections 135 and 249(1) of theEACCMA empower the Respondent to recover such amounts with interest at a rate of two percent per month for the period the taxes remain unpaid.

77. The Respondent submitted that there cannot be a breach of legitimate expectation where the Respondent has followed the mandatory statutory provisions. That the Appellant was required to pay the correct taxes.

78. The Respondent relied on the case of Republic v Principal Secretary, Ministry of Transport, Housing and Urban Development Ex Parte Soweto Residents Forum CBO [2019] eKLRwhere the Court held that:“Additionally, statutory words override an expectation howsoever founded. Thus, a decision maker cannot be required to act against clear provisions of a statute just to meet ones expectations otherwise his decision would be outrightly illegal and a violation of the principle of legality, a key principle in Rule of Law. There cannot be legitimate expectation against the clear provisions of a statute."

79. The Respondent submitted that the East African Community Secretariat publishes theEAC Gazette Notices on theEAC website and are available to the public. These notices highlight changes effected by the Council of Ministers to the East African Community Customs Management Act, 2004 and the East African Community Common External Tariff (CET).

80. That theEACGazettes indicate the date when the Legal Notices come into force. That the Appellant's claim that there was no law that imposed a rate of 25% on paper and paperboard products is unfounded.

81. The Respondent submitted that Legal Notice No. EAC/169/2018 dated 30th June 2018 had amended or changed the rate applicable for the H.S Code 48. 02. 56. 00 from 25% to 15%. Item 2 provides that:“HS Code 48. 56. 00, changing the rate of 25% to 15%.”­

82. ThatEAC Notice No. BAC/ 112/2018 dated 2nd August 2018 deleted item number 2 in the Legal Notice EAC/69/2018 dated 30th June 2018. No 2 of the Legal Notice provides that:“A correction is hereby made to the EACGazette Vol. AT.1 dated 30th June, 2018, in Legal Notice No. EAC/69/2018 by deleting item No.2. ”

83. The Respondent submitted that this effectively reverted the duty rate of items imported under tariff 4802. 56. 00 from 10% to 25%. That the Appellant is being dishonest to only recognize the notice which lowered the rates while not recognizing a similar notice by the very institution making correction to the earlier notice.

84. That the Customs Systems were not adjusted until the implementation of the provisions of EAC Gazette Notice No. EAC/ 112/2018 dated 2nd August 2018, resulting in short-levied taxes. That the taxes were due and payable to the Respondent at the time of importation. That the Appellant's products were correctly classified under H.SCode 4802. 56. 00 and subjected to duty at a rate of 25%.

Respondent’s Prayers 85. The Respondent prayed that the Tribunal finds that:-a.The Appeal is filed prematurely.b.This Appeal lacks merit and the same be dismissed with costs.

Issues for Determination 86. Having reviewed the pleadings, documentation and the submissions of the parties, the Tribunal is of the considered view that there are three issues falling for its determination as follows:-a.Whether there is a valid Appeal before the Tribunal.b.Whether there is any law that fixed duty rate for paper and paperboard products of tariff code 4802. 56. 00 at 25% between 2014 and 2018. c.Whether the tax demand vide the Respondent’s demand notice dated 8th February 2022 is due and payable.

Analysis and Findings 87. Having established the three issues for determination, the Tribunal will proceed to analyse the same separately as hereunder:a.Whether there is a valid Appeal before the Tribunal.

88. The Respondent submitted that Section 229 ofEACCMA provides for application for review by a taxpayer affected by a decision or omission of the Respondent.

89. That Section 230(1) ofEACCMA provides that a person dissatisfied with the Respondent's decision after application for review under Section 229 may appeal to the Tax Appeals Tribunal. That Section 230 (1) of EACCMA, 2004 provides that:“A person dissatisfied with the decision of the commissioner under section 229 may appeal to a tribunal established in accordance with section 231. ”

90. The Respondent submitted that based on the above Section, a taxpayer can only appeal after a review decision has been issued by the Respondent. That without a review decision or upon lapse of the time provided for making the review decision, the Tribunal has no jurisdiction.

91. The Respondent submitted that after an application for review is made under Section 229(1) ofEACCMA, an appeal under Section 230 of EACCMAis only available to a taxpayer after a review decision is made.

92. The Respondent submitted that this Appeal is fatally defective for non-compliance with Section 13(2)(c) of the TAT Act. That the Appellant did not attach the decision it was appealing against. Further, that the Appeal was filed before the Respondent rendered its review decision and that therefore it cannot purport to be an Appeal against the review decision dated 15th March 2022.

93. Although the issue of the invalidity of the Appeal was raised in the Respondent’s Statement of Facts, the Tribunal notes that the Appellant chose not to address it in its submissions.

94. The Tribunal notes the following chronology of events in this Appeal.a.The Respondent carried out a desk review of imports under tariff 4802. 56. 00 for the period 2nd August 2018 to 8th February 2022. b.The review allegedly revealed a short levy of taxes as a result of the application of a duty rate of 10% instead of 25%.c.On 8th February 2022, the Respondent sent a Demand Notice to the Appellant requiring it to pay the short levy in import duty and resultant VAT of Kshs. 1,237,644. 00 within 30 days.d.On 16th February 2022, the Appellant lodged a notice of objection to the demand notice.e.The Appellant filed a Notice of Appeal on 21st February 2022. f.The Appellant filed the Appeal on 25th February 2022.

95. In its Memorandum of Appeal, the Appellant indicated that it is appealing against the decision contained in the Internal Memo dated 27th January 2022 and the demand notice dated 8th February 2022. The Appellant attached the Memo and the notice to its Statement of Facts.

96. The Tribunal notes that the Respondent made its review decision on 15th March 2023 which was subsequent to the date of filing of this Appeal. The Tribunal further notes that this review decision has not been challenged by the Appellant.

97. Section 13(1) and (2) of the Tax Appeals Tribunal Act stipulates the procedure and then necessary documents for filing an Appeal to the Tribunal as follows:“(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.”(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.memorandum of appeal;b.statement of facts; andc.the tax decision”

98. From the chronology of events, the Appellant failed to follow due process as there was no review decision from which its appeal would have been anchored on.

99. The Tribunal relies on the case of W.E.C. Lines Ltd v The Commissioner of Domestic Taxes [TAT Case No. 247 of 2020] where it was held at Para. 70 and reiterating the holding inKrystalline Salt Ltd v KRA [2019] eKLR that:“Where there is a clear procedure for redress of any particular grievance prescribed by Constitution or an Act of Parliament, that procedure should be strictly followed. Accordingly, the special procedure provided by any law must be strictly adhered to since there are good reasons for such special procedures”. The relevant procedure here is the process of opposing an assessment by the Commissioner.”

100. The Tribunal notes that in fact the Appellant had filed a Notice of Withdrawal of the Appeal on 20th April 2022 and which for undisclosed reasons it proceeded to cancel vide a Notice of Cancellation of Withdrawal dated and filed on 6th May 2022.

101. Having established that there is no appealable decision in this Appeal, the Tribunal makes a finding that this Appeal was prematurely filed and there is therefore no valid Appeal before the Tribunal.

102. Having found that there is no valid Appeal before it, the Tribunal will not delve into the other issues that fell for its determination as they have been rendered moot.

Final Decision 103. The upshot of the foregoing is that the Appeal is incompetent and unsustainable in law and the Tribunal accordingly proceeds to make the following Orders:-a.The Appeal be and is hereby struck out.b.Each party to bear its own costs.

104. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 5TH DAY OF MAY, 2023. …………………………ERIC N. WAFULACHAIRMAN………………………………CYNTHIA B. MAYAKAMEMBER………………………………GRACE MUKUHAMEMBER……………………….ABRAHAM KIPROTICHMEMBER………………………………JEPHTHAH NJAGIMEMBER