Kenya Breweries Limited v Commissioner of Domestic Taxes [2023] KETAT 975 (KLR)

Kenya Breweries Limited v Commissioner of Domestic Taxes (Tax Appeal 668 of 2022) [2023] KETAT 975 (KLR) (6 October 2023) (Judgment)

Neutral citation: [2023] KETAT 975 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 668 of 2022

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

October 6, 2023

Between

Kenya Breweries Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

Background 1. The appellant is a limited liability company incorporated under the Companies Act of Kenya licensed to manufacture and sell both alcoholic and non-alcoholic drinks.

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 2nd November 2021 the Legal Notice No 217 of 2021 was published providing for new adjustments rates for excise duty and revoked Legal Notice No194 of 2020 and on November 24, 2021, the Legal Notice was approved by the National Assembly.

4. On November 11, 2021 Petition No E491 of 2021 was filed challenging the implementation of the new rates and at the same time the petitioner filed an application seeking conservatory orders stopping the proposed adjustments of the excise duty rates pending the hearing and determination of the matter.

5. On November 19, 2021 the High Court issued orders for the maintenance of the status quo as of November 19, 2021.

6. There was another Petition No E024 of 2021 and it challenged the gazettement and enforcement of the Legal Notice No 217 of 2021. There was also a third petition filed by “KHRC” and the same being E403 of 2021. The three petitions were consolidated on December 15, 2021.

7. On November 24, 2021, the National Assembly approved the Legal Notice as published.

8. On December 20, 2021 the appellant upon filing its November 2021 excise duty returns, noted that the respondent had adjusted the iTax template to implement the new rates as per the Legal Notice No 217 of 2021 whereupon the appellant wrote to the respondent contending that the court had stopped the implementation of the Legal Notice No 217 of 2021.

9. On January 4, 2022 the respondent wrote to the appellant informing it that the Legal Notice was effective and that it should comply with the same and further informed it of the underpaid excise duty for the month of November 2021.

10. On March 21, 2022 the respondent issued the Appellant with an assessment as per its computation on the basis of the provisions of Legal Notice No 217 of 2021 and the appellant objected to the same on April 20, 2022.

11. On May 12, 2022 the respondent confirmed the assessments and issued its objection decision and the appellant aggrieved by the same filed its notice of appeal on June 10, 2022.

The Appeal 12. The appeal is premised on the following grounds as laid out in the appellant’s memorandum of appeal dated and filed on June 23, 2022. i.That the respondent erred and misdirected itself in failing to adhere to the status quo orders issued by the High Court in Constitutional Petition No E024 of 2021 (as consolidated with Petition No E491 of 2021 & Petition No E403 of 2021);ii.That the respondent's demand has no legal basis as it is based on the impugned legal notice, which is void for being enacted contrary to the Constitution;iii.That the respondent erred in finding that the status quo order was ambiguous for providing the effective date of December 20, 2021 whereas the legal notice was in effect on November 2, 2021 when it was the respondent's own Counsel who informed the Court that the effective date of the legal notice was December 20, 2021. iv.That the respondent erred in disregarding or ignoring the status quo order and violated the rule of law enshrined in article 10 of the Constitution.v.That the respondent's demand is unreasonable in the circumstances and violates the appellant's right to fair administrative action provided under article 47 of the Constitution.vi.That the respondent's decision is null and void ab initio, having been made in violation of a lawful court order and in furtherance of an illegality.vii.That the respondent’s demand contravenes the appellant’s legitimate expectation and right to protection of the law guaranteed under article 20, 21, 27 and 50 (1) of the Constitution.

The Appellant’s Case 13. The appellant’s case is premised on the following documents:-i.The appellant’s statement of facts dated and filed on June 23, 2022 together with the documents attached thereto.ii.The appellant’s written submissions dated and filed on December 14, 2022 together with the authorities attached thereto.

14. The appellant argued its case in respect of the different grounds as set out in the memorandum of appeal as hereunder.

15. The appellant averred that the status quo orders issued by the court in Constitutional Petition No E024 of 2021 (as consolidated with Petition No E491 of 2021 & Petition No E403 of 2021) had the effect of freezing the implementation of the rates in Legal Notice 217 of 2021 until the issue of the constitutionality of the impugned legal notice was determined or further orders of the court. That the taxpayers were to continue accounting for excise duty based on the rates in existence prior to the purported adjustment.

16. The appellant stated that the respondent took an erroneous position on the adjusted excise duty rates introduced by the impugned legal notice as operational despite the existence of the status quo orders as issued by the court on November 19, 2021 specifically stating that:-“in view of the fact that the effective date shall be on December 20, 2021, that status quo be maintained as of November 19, 2021”

17. That on December 15, 2021 in the Consolidated Petitions the High Court (Justice Makau) directed as follows:“i.That the petitioners are seeking clarification on the orders issued on 19/11/2021 on status quo.ii.That under order 2 of the order of 19/11/2021 the court clearly stated that in view of the fact that the effective date shall be 20/12/2021 status quo be maintained as of 19/11/2021iii.That this meant as stated by the respondents that the effective date of the Legal Notice No 217 of 2021 is 20/ 12/2021 and not any other date earlier than 20/12/2021. iv.That this is what the court meant when it stated status quo be maintained as of 19/11/2021. v.That any attempt to apply the legal notice before the effective date of 20/12/2021 is therefore improper.Further orders.vi.That the status quo be maintained.”

18. The appellant argued that the effect of the aforesaid orders was that the impugned legal notice was not to be applied. That since the impugned legal notice sought to revoke Legal Notice No 194 of 2020, which contained the excise duty rates prior to the purported adjustment, by virtue of the status quo orders, Legal Notice No 194 of 2020 was still applicable.

19. That the term "status quo" is defined by the Black's Law Dictionary to mean the situation as it exists. That the purpose of status quo orders as considered by Justice Odunga in Republic v National Environment Tribunal,ex-parte Palm Homes Limited &another [2013] eKLR, is as follows:“When a court of law orders or a statute ordains that the status quo be maintained, it is expected that the circumstances as at the time when the order is made or the statute takes effect must be maintained. An order maintaining status quo is meant to preserve existing state of affairs...status quo must therefore be interpreted with respect to existing factual scenario...”

20. That the effect of a status quo order is therefore to leave things as they stand pending further orders of the court.

21. The appellant added that in this case, at order 2 of the orders issued on November 19, 2021, the court expressly identified that the effective date of Legal Notice No 217 of 2021 was December 20, 2021 and on this basis directed that the status quo subsisting as at November 19, 2021 be maintained. That it follows that the Court preserved the existing state of affairs on November 19, 2021 which was defined by the court to be before Legal Notice No 217 of 2021 came into effect on December 20, 2021.

22. The appellant further argued that in view of the foregoing, the interpretation adopted by the Respondent of the status quo order as being the same as ordering the implementation of the impugned legal notice is clearly erroneous as the said interpretation does not accord with what the Court said.

23. The appellant further argued that if the court had intended to direct that the impugned legal notice applies or directing the Respondent to act in any other positive manner, it would have expressly stated so and there would have been no need for issuing a status quo order.

24. The appellant also stated that it is important to note that the orders were issued in relation to the petitions and applications filed by the Petitioners and that the said orders could only have been issued on the basis of the Petitioners' applications then before the Court which are the applications for conservatory orders. That the Respondent did not file any application and did not obtain any orders from the Court capable of enforcement in the manner it is seeking to.

25. The appellant submitted that in any event, the position of the law is that the respondent has a duty to obey a court order and where it finds the order to be ambiguous the recourse available to it is not to ignore the order but to go back to court and seek clarification. That this was the holding in Pevans East Africa Limited v Commissioner of Domestic Taxes (Tax Appeal No 336 of 2018).

26. The appellant further added that the respondent was a party to the proceedings, and that its counsel was present in court when the status quo orders were issued and therefore had knowledge of the existence of the orders. That the respondent had wilfully failed, refused and neglected to obey the Court orders staying the implementation of the impugned legal notice.

27. The appellant argued that in totality the excise duty rates contained in Legal Notice No 194 of 2020 are operational and applicable and consequently the appellant therefore correctly computed excise duty on the basis of Legal Notice No 194 of 2020 and is not liable to pay any additional excise duty computed using the rates in the impugned legal notice.

28. The appellant further submitted that the respondent in amending the iTax platform to implement and administer the excise duty rates in the impugned legal notice and confirming its assessment to the respondent for underpaid tax on account of the appellant applying the rates as per Legal Notice No 194 of 2020 as opposed to the rates in the impugned legal notice, the Respondent has acted in contravention of a lawful order of the Court.

29. That the respondent’s interpretation of the status quo order has been challenged in an application for contempt of court filed by PERAK against the respondent.

30. That the respondent has also filed an application dated January 10, 2022 in court dated January 10, 2022 seeking to set aside the interim orders issued in the petition. That before the determination of this application, the court orders are lawful and valid and ought to be adhered to by all the parties.

31. The appellant also argued that the respondent's averment that the court order contradicted the resolution of the National Assembly acceding to the impugned legal notice is also misconceived. That article 165 (3) (d) of the Constitution clothes the High Court with jurisdiction to hear any question relating to the interpretation of the Constitution. That the court is empowered to invalidate any laws that are inconsistent with the Constitution and therefore cannot be faulted for issuing the status quo orders.

32. The appellant also submitted that the status quo orders were present for the entire period of the assessment, (November 2021 - February 2022) and consequently the impugned legal notice cannot be implemented and taxpayers have to pay excise duty based on the rates that existed before the impugned adjustment.

33. The appellant stated that the respondent's demand was based entirely on the premise that the impugned legal notice was valid. That section 10 of the Excise Duty Act ("EDA") grants the Commissioner power, with the approval of the Cabinet Secretary to adjust the excise duty rates once every year for inflation by way of notice in the gazette. Section 10 provides as follows:“(1)Despite section 8, the Commissioner may, with the approval of the Cabinet Secretary, by notice in the Gazette, adjust the specific rate of excise duty once every year to take into account inflation in accordance with the formula specified in Part 1 of the First Schedule.(2)The notice under subsection (1) shall be laid before the National Assembly within seven days from the date of publication.(3)The National Assembly shall, within twenty-eight sitting days of the receipt of the notice under subsection (2), consider the notice and make a resolution either to approve or reject the notice.(4)The notice shall cease to have effect, if a resolution disapproving the notice is passed by the National Assembly.”

34. That the respondent issued public notices on its website on November 5, 2021 and in the newspaper on November 9, 2021 indicating that the adjusted rates were effective from November 2, 2021.

35. That pursuant to article 94 of the Constitution, Parliament is vested with legislative authority. That article 210 of the Constitution further provides that no taxes may be levied except as provided by legislation. That it is settled law that the Commissioner and the CS do not have legislative power, as legislative power is only vested in Parliament.

36. That the National Assembly only approved the impugned legal notice on November 24, 2021, which means that by applying the rates from November 2, 2021, the Respondent is guilty of retrospective application of tax laws.

37. That the import of the foregoing is that before Parliament approved the notice, the purported application of the adjusted rates from 2nd November 2021 amounted to retrospective application of tax laws.

38. The Appellant argued that in the objection decision, the Respondent averred that the Court order in Petition No E491 of 2021 was ambiguous as it referred to the effective date of the impugned legal notice as December 20, 2021, and which date the Respondent claimed was not accurate. That the Respondent failed to realize that it was its counsel in that Petition who advised the Court that the effective date would be December 20, 2021.

39. That based on the submissions by the respondent's Counsel on 19th November 2021, the Court proceeded to issue the status quo orders that directed that the effective date of the legal notice is December 20, 2021. That the Respondent cannot now purport that the effective date of the impugned legal notice was November 2, 2021. That by issuing and confirming an assessment against the appellant, the respondent is in clear contravention of the status quo orders issued by the Court. That as it is the respondent that provided this date to the Court, it cannot now purport to contravene the status quo orders on the basis that the orders are ambiguous.

40. That the orders made by the Court are clear and the Court relied on the Respondent's submissions in the matter to issue the same on November 19, 2021. That the Respondent cannot rely on its wrongdoing to circumvent the Court order.

41. The appellant argued that the respondent is bound by the provisions of articles 10 and 27 of the Constitution. That article 10 binds all state organs when applying or interpreting any law and article 27(1) guarantees every person the right to equal protection and equal benefit of the law and the respondent, being a state organ is bound by article 10 and is required to uphold the rule of law.

42. That it is a cardinal principal of the rule of law that a party who is aware of a court order has an unqualified obligation to obey the same whether the same is valid or not until the time the said order is set aside and or discharged. That this principle was most emphatically set out in the well-known cases of Hadkinson v Hudkison [1952]2 All ER 567, Wildlife Lodges Ltd v County Council of Narok andanother [2005] 2 EA 344 (HCK), and Alken Connections Limited v Safaricom Limited & 2 others [2013] eKLR.

43. That it is clear from the authorities cited above that once the status quo order was issued, the respondent was under an immediate and mandatory obligation to obey the same. That the court order stopped the implementation of the impugned Legal Notice pending further orders of the court. That if the respondent had any misgivings with respect to the import of the status quo order, its only recourse was to move the court to discharge, vary or set aside the order.

44. The appellant further added that the respondent was clearly aware of the correct legal position because it did in fact file an application dated December 21, 2021 in which it sought clarification. That in that application, the Appellant acknowledged that the effect of the status quo order was to bar the implementation of the impugned Legal Notice.

45. The appellant also averred that the Respondent had also filed an application dated January 10, 2022 seeking to set aside the status quo orders issued by the Court.

46. The appellant also argued that article 47 of the Constitution guarantees the right to fair administrative action that is expeditious, lawful, reasonable and procedurally fair. That the respondent’s actions to amend the rates on iTax and issue an objection decision confirming a tax assessment against the Appellant is unlawful and in clear breach of article 47 as it is in contravention of an existing court order. That the respondent's tax demand for the periods November 2021 to February 2022 is therefore null and void ab initio and ought to be quashed forthwith.

47. The appellant also submitted that article 40 of the Constitution protects the right to property. That under the said provision, the State is prohibited from depriving a person of property of any description or any interest in property unless the deprivation is for a public purpose or in the public interest, in which case, the deprivation must be carried out in accordance with the Constitution.

48. The Appellant averred that the attempt by the Respondent to issue an objection decision in contravention of the status quo orders issued by the Court is intended to take away its property in the form of the monies demanded. That the totality of the foregoing is that in issuing the objection decision, the Respondent has threatened to infringe on the appellant's right to property contrary to the protection guaranteed under article 40 of the Constitution.

Appellant’s Prayers 49. The appellant prayed that:i.The appeal be allowedii.The respondent’s objection decision dated May 12, 2022 demanding Kshs. 513,706,981. 00 be set aside.

The Respondent’s Case 50. The respondent’s case is premised on the following: -a.The respondent’s statement of facts dated July 22, 2022 and filed on September 6, 2022 together with the documents attached thereto.b.The respondent’s written submissions dated January 10, 2023 and filed on January 13, 2023.

51. The Respondent has raised several issues for determination as set out hereunder.

i. Whether The Tribunal Has The Jurisdiction To Interpret The Ruling And Order Of The High Court 52. The respondent averred that the appellant was seeking for the tribunal’s interpretation of the ruling and order of the High Court of November 19, 2021. That further a court’s jurisdiction flows from the Constitution or both as per the Supreme Court’s decision in the case of Samuel Kamau Macharia v KCB & 2 others, Civil Application No 2 of 2011.

53. That the jurisdiction of the Tax Appeal’s Tribunal is provided for under section 12 of the Tax Appeal’s Tribunal Act and section 52 of the Tax Procedures Act and that of importance at this point is section 29 of the Tax Appeals Tribunal Act which provides the nature of the decisions which can be granted by the Tax Appeals Tribunal.

54. The Respondent further stated that what the appellant wanted was that the Tribunal do interpret and explain what the court order of 2022 meant and whether any explanation given can be applied retrospectively.ii.Whether the respondent failed to adhere to the orders of status quo

55. The respondent submitted that vide the subject Legal Notice, it adjusted the excise duty rates for the products listed in the schedule to the Legal Notice pursuant to the powers conferred on it by section 10 of the Excise Duty Act.

56. The respondent added that on November 19, 2021 when the matter (Petition No E024 of 2021) came up for directions before the High Court, the Court directed as follows:“That in view of the fact that the effective date shall be on December 20, 2021, this court directs that status quo be maintained as of today".

57. That the Court did not stay the implementation of the Legal Notice as alluded by the appellant. That status quo means the status of the subject as at that material date and that the status as at November 19, 2021 was that the Legal Notice was effective and was being implemented. That the court's status quo direction is the actual status on the issue at the material time.

58. The respondent also argued that various Court decisions have engaged in the exercise of defining the contours of an order of status quo as to when it ought to issue and the considerations that ought to guide the court in making the order.

59. That the Black's Law Dictionary, Butter Worths 9th Edition, defines status quo as a latin word which means “the situation as it exists".

60. That the purpose of an order of status quo has been reiterated in a number of decisions including the following cases- Republic v National Environment Tribunal,ex-parte Paln Homes Limited & another [2013], TSS Spinning & Weaving Company Ltd v Nic Bank Limited & another [2020] e KLR, and Kenya Airline Pilots Association (KALPA) v Co-operative Bank of Kenya Limited & another [2020] e KLR,

61. That apart from preserving the substratum of the subject matter, the Courts have also found an order of status quo as a case management strategy, where the court is keen to prevent prejudice as between the parties pending the hearing and determination of the main suit.

62. The appellant submitted that from the cases of Saifudeen Abdullali & 4 others in Mombasa High Court Misc Civil Cause No 11 of 2012, Thugi River Estate Limited & another v National Bank of Kenya Limited & 3others (2015] eKLR its shown that status quo orders are very distinct from injunctive orders or conservatory orders. That it is for the counsels to ensure that they are aware of the actual status of the subject matter before they come to court as the orders given by the court are as per the actual status at the material time. That it is evident that an order of status quo is distinct from a conservatory order as the latter serves to suspend the action for which a complaint has been lodged.

63. The appellant further submitted that the status of the subject matter as at November 19, 2021 was that the legal notice was being implemented and that nothing could have stopped the Court if it wanted to give a conservatory order to issue one. That it directed that thestatus quo be maintained, and even if the status quo it had in mind was different, it is the status quo that prevails.

64. That the respondent's demand relates to the months of November 2021, December 2021, January 2022 and February 2022 and that it rightfully demanded excise duty based on the new rates. That the implementation of the Legal notice was not stayed at all. That thus, the appellant's appeal is baseless.

65. That the High Court misdirected itself on the effective date of the Legal Notice to be December 20, 2021 while the Legal Notice came into effect on November 2, 2021. That the Legal Notice was already effective when the High Court issued the interim orders.

66. That section 23 (1) of the Statutory Instruments Act provides that:-“(1)A statutory instrument shall come into operation on the date specified in that behalf in the statutory instrument or, if no date is so specified, then, subject to Subsection(2), it shall come into operation on the date of its publication in the Gazette subject to annulment where applicable.”

67. That the new excise duty rates applied from November 2, 2021 and thus the respondent's demand was justified.

68. The respondent stated that a Legal notice is a statutory instrument and it comes into effect pursuant to the guidelines set and as a result Legal Notice No 217 of 2021 was not illegal. That all necessary steps were followed in coming up with the said notice and the appellant is thoroughly misguided in its assumption that the Commissioner and Cabinet Secretary lack powers that are legislative in nature.

69. The respondent noted that the Appellant in Paragraph 40 of its statement of facts the approval of the Legal notice on November 24, 2021 and as such its application is lawful.

ii. The Respondent erred in finding that the status quo order was ambiguous and legitimate expectation 70. The respondent stated that its statutory obligation is enshrined under articles 210 (1) of the Constitution of Kenya and is to assess and collect taxes on behalf of the Government of Kenya.

71. The Respondent added that the Appellant had not demonstrated by way of evidence how the Respondent violated its Constitutional rights, the dictates of the rule of law, fair administrative action and fair hearing. That the Respondent communicated the tax decision and offered the Appellant opportunity to object and upon reviewing the Appellant's response the Respondent communicated its objection decision timeously within the provisions of tax law.

ii. Whether The Matter Before The Tribunal Is Subjudice. 72. The Respondent argued that the issues raised in the Appeal in relation to Legal Notice No 217 of 2021 are sub judice, since the issues are pending determination and ruling before the High Court in Petition No E024 of 2021 Pubs, Entertainment & Restaurants association of Kenya & anor v The Commissioner General Kenya Revenue Authority & 6 others.

73. The Respondent also stated that it is also not contested that an application is currently pending before the High Court to interpret the Ruling as to what the order of status quo meant and further review the order. That the Tribunal therefore lacks the mandate to give or make a decision whether the ruling was properly applied or not. That the Tribunal should therefore not proceed to interpret the Order but rather await the Ruling of the High Court on the review and interpretation application.

74. The Respondent also submitted that according to Black’s Law Dictionary 9th edition. sub judice means-"before a court for determination..”

75. That the doctrine of res sub-judice prevents a Court from proceeding with the trial of any suit in which the matter in issue is directly and substantially the same with the previously instituted pending before same or another court with jurisdiction to determine it.

76. That the provisions of section 6 of the Civil Procedure Act defines the above principle or doctrine as follows:“No court shall proceed with the trial of any suit or proceedings in which the matter in issue is also directly and substantially in issue in a previously instituted suit or proceeding between the same parties or between parties under whom they or any of them claim litigating under the same title, where such suit or proceeding is pending in the same court or any other court having jurisdiction in Kenya to grant the relief claimed. "

77. The respondent further added that to understand the concept of sub judice in this case, is that an application is pending before the High Court in Petition No E024 of 2021 Pubs, Entertainment & Restaurants association of Kenya & anor v the Commissioner General Kenya Revenue Authority & 6 others. That the order of 19th November was issued by that court and that the appellant is coming before the Tribunal at this point to seek to know whether the respondent mis-interpreted the order, will automatically be sub judice as High Court is the only body clothed with jurisdiction to clarify the correct interpretation of the order. That should the tribunal give an interpretation contrary to that which will be given by the High court, this will lead to a situation which will be a mockery of the judicial system and which the Tribunal is part of.

78. The appellant also submitted that the appeal lacked merit and was brought in bad faith to delay and frustrate the respondent's mandate and that the respondent's actions were well within the law as submitted hereinabove.

The Respondent’s Prayers 79. The respondent prayed that the tribunal do find that:i.The respondent’s objection decision dated May 12, 2022 is proper and ought to be upheld.ii.The appeal be dismissed with costs to the respondent as the same is without merit.

Issues For Determination 80. The tribunal upon due consideration of the pleadings of the parties was of the considered view that the appeal raised three issues for its determination as hereunder:i.Whether the tribunal has jurisdiction to interpret the Ruling and order of the High Court.ii.Whether the dispute before the Tribunal is sub-judice.iii.Whether the respondent’s assessment on the appellant on excise duty was justified.

Analysis And Determination 81. The Tribunal having ascertained the issues for determination as set out above proceeds to deal with them as hereunder.

i. Whether The Tribunal Has Jurisdiction To Interpret The Ruling And Order Of The High Court. 82. The respondent submitted that the appellant is seeking from the Tribunal the interpretation of the High Court’s Ruling and Order of 19th November 2021.

83. The Tribunal upon perusal of the Appellant’s Statement of Facts and its submissions has not been able to construe any prayer or question on the issue of the interpretation of the High Court orders. It is also clear from the pleadings filed by the Appellant that the court had made a clarification on December 15, 2021 of the status quo orders. The clarification was sought by the Petitioners in the Consolidated Petition NoE024 of 2021. The issue of interpretation does not therefore arise.

84. As the issue of interpretation of the High court order is not before the Tribunal the jurisdiction on the same does not arise. The Appellant is seeking orders as to whether the respondent’s assessment on excise duty was justified and the Tribunal has jurisdiction to deal with the same.

ii. Whether The Dispute Before The Tribunal Is Sub Judice 85. The respondent at para.40 of its statement of facts raised the issue that what is before the Tribunal in relation to Legal Notice No 217 of 2021 is sub judice as the same issue is pending before the High Court in Petition No- E024 of 2021 (Pubs, Entertainment & Restaurants Association of Kenya & Another v KRA.

86. The Respondent submitted that the orders of November 19, 2021 were issued by the court. That the Appellant in coming to the Tribunal to seek to know whether the Respondent misinterpreted the order will automatically be sub judice as the High Court is the only body with jurisdiction to clarify the correct interpretation of the order. That should the Tribunal give an interpretation contrary to that which will be given by the High Court, this will lead to a situation which will be a mockery of the judicial system, which the Tribunal is part of.

87. The Tribunal notes that the Respondent made reference to section 6 of the Civil Procedure Act in its definition of what constitutes the doctrine of subjudice. The Tribunal wishes to point out that it is not guided by the Civil Procedure Act and the Rules made thereunder in the determination of the disputes before it.

88. The Tribunal has perused the grounds of appeal in the matter and none of them seeks the interpretation of the court orders issued in the matter. Further the tribunal has noted that the parties in the three petitions which comprise the consolidated High Court matter are not the parties in the present Appeal

89. The Appellant has filed the present matter seeking to have the Respondent’s assessments set aside as the same were issued when the court had issued status quo orders against the Respondent. This is clearly not the same as seeking an interpretation of the court orders.

90. The Tribunal has noted that it is the respondent who is trying to infer on behalf of the Appellant as to what the latter is seeking from the Tribunal. Further to that, the ingredients of the sub judice principle/doctrine have neither been specifically spelt out by the Respondent in reference to the present appeal nor have they been met by the submissions of the respondent.

91. The Respondent has not attached to its submissions the copies of the court petitions pending before the High Court and the application seeking the court’s interpretation of the orders in issue. In the circumstances the Tribunal is not in a position to check out the relief(s) sought in the matters pending in the High Court as against what is being sought from the Tribunal by the appellant.

92. The tribunal, however, is clear on what the appellant is seeking before it and which is whether the respondent’s assessment were justified. That issue is not sub judice.

iii. Whether The Respondent’s Assessment On The Appellant On Excise Duty Was Justified. 93. The assessment in issue refers to the excise duty payable by the Appellant for the period between November 2021 to February 2022.

94. The assessments had been arrived at after the Commissioner General increased the Excise Duty rates for various products by 4. 97% through Legal Notice No 217 of 2021 and the increment aforesaid affected some of the products of the Appellant and their excise duty rates went up.

95. After the publication of the adjustments three petitions were filed in the High Court including Petitions No E491 of 2021 (Mwaura Kabata v The Commissioner General KRA and 2 others); E024 of 2021 (Pubs, Entertainment and Restaurants Association of Kenya (PERAK) v The National Assembly and 4 others and E403 of 2021 (Kenya Human Rights Commission v KRA and 3 others). The matters were consolidated by the court on December 15, 2021 under Petition No E024 of 2021.

96. Simultaneously with the filing of the Petitions, the Petitioners filed an application for conservatory orders stopping the proposed adjustments of the excise duty rates through the impugned Legal Notice pending the hearing and determination of the application.

97. On November 19, 2021 the High Court issued the orders as herein below set out:“in view of the fact that the effective date shall be on 20th December 2021, this court directs that status quo be maintained as of today”.

98. On December 15, 2021 the Court clarified the orders issued on 19th November 2021 as stated below:i.That the Petitioners in these petitions are seeking clarification on the orders issued on 19th November 2021 on status quo.ii.That under order 2 of the order of 19th November 2021 the court clearly stated that in view of the fact that the effective date shall be 20th December 2021 status quo be maintained as of 19th November 2021. iii.That this meant as stated by the Respondents that the effective date of the Legal Notice No 217 of 2021 is 20th December 2021 and not any other earlier than 20th December 2021. iv.That this is what the Court meant when it stated status quo be maintained as at 19/11/2021. v.That any attempt to apply the legal notice before the effective date of 20th December 2021 is therefore improper.

99. The orders of 19th November 2021 are the gist of the dispute between the parties. The Appellant argued that upon the Court issuing the orders herein the Respondent was stopped from implementing the new excise duty rates as per the legal Notice No 217 of 2021 and the Respondent was therefore supposed to calculate the excise duty as per the prior rates. On the basis of this argument the Appellant calculated its due excise duty for November 2021 to February 2022 at the rates prior to the publication of the new tax rates and paid the same to the Respondent.

100. The Respondent on the other hand argued that the applicable rates for the period under review were as per the provisions of Legal Notice No 217 of 2021 and that at the time the status quo orders were given the new rates had already been implemented by the Respondent.

101. The Respondent, consequently, upon the Appellant paying the excise duty as per the old rates, issued the Appellant with its assessment as per the new rates at Kshs. 513,706,981. 00 on 21st March 2022 and the same being the purported underpaid excise duty. The Appellant objected to the same on 20th February 2022 and the Respondent confirmed the assessment through its objection decision dated 12th May 2022.

102. The parties have argued extensively and intensely on the applicability of the orders issued by the Court on 19th November 2021.

103. The Tribunal noted that Legal Notice No 217 of 2021, dated 25th October 2021 and published on 2nd November 2021, sought to adjust, due to inflation, the excise duty rates for various products including the Appellant’s products.

104. The Tribunal further observed that Legal Notice No 217 of 2021 did not expressly specify the commencement date of the inflationary adjustment. The Excise Duty Act provides that the adjusted prices should take effect on 1st October of every year, Legal Notice 217 of 2021 was published on 2nd November 2021, and therefore a commencement date of 1st October 2021 would amount to a retrospective application of the law.

105. The Tribunal also noted that the High Court orders of 19th November 2021, directed that the Respondent to maintain the status quo pending determination of the cases filed by the Petitioners.

106. The Respondent proceeded to implement the new excise duty rates despite the existence of the Court orders of 19th November 2021 and the clarification of the same on 17th December 2021. The clarification was to the effect that the effective date of the Legal Notice was to be 20th December 2021, and the status quo to be maintained was as was at 19th November 2021.

107. The High Court further clarified that this meant as stated by the Respondent that the effective date of Legal Notice 217 of 2021 was 20th December 2021 and not any other date earlier than 20th December 2021 and that any attempt to apply the Legal Notice before the effective date of 20th December 2021 was improper.

108. As a result of the foregoing, the Tribunal is of the view that the status quo orders of 19th November 2021 stopped the operation of Legal Notice No 217 of 2021 thereby maintaining the prior excise duty rate for the Appellant’s products and that the Appellant was therefore entitled to apply excise duty rates existing before Legal Notice No 217 of 2021 came into existence.

109. The assessment of the Respondent on the Appellant therefore based on the impugned Legal Notice above stated is not applicable and the duty payable by the Appellant for the months of November 2021, December 2021, January 2022 and February 2022 is as per rates standing before the implementation of the legal Notice.

110. The Respondent’s assessment therefore based on the legal Notice 217 of 2021 is erroneous and ought to be set aside.

Final Decision 111. The upshot of the foregoing analysis is that the Appeal is merited and the Tribunal accordingly proceeds to make the following final Orders:-a.The Appeal be and is hereby allowed.b.The Respondent’s objection decision dated May 12, 2022 be and is hereby set aside.c.Each party to bear its own costs.

112. It is so ordered.

DATED and DELIVERED at NAIROBI this 6th day of October, 2023ERIC NYONGESA WAFULA - CHAIRMANCYNTHIA B. MAYAKA - MEMBERGRACE MUKUHA - MEMBERJEPHTHAH NJAGI - MEMBERABRAHAM K. KIPROTICH - MEMBER