Mannan Cargo Solutions Limited v Commisioner of Customs & Border Control [2024] KETAT 459 (KLR)

Mannan Cargo Solutions Limited v Commisioner of Customs & Border Control (Appeal E116 of 2024) [2024] KETAT 459 (KLR) (22 March 2024) (Ruling)

Neutral citation: [2024] KETAT 459 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal E116 of 2024

E.N Wafula, Chair, EN Njeru, E Ng'ang'a, AK Kiprotich & M Makau, Members

March 22, 2024

Between

Mannan Cargo Solutions Limited

Appellant

and

Commisioner of Customs & Border Control

Respondent

Ruling

1. Before the Tribunal is an application by way of a Notice of Motion dated the 16th day of February, 2024 and filed by the Appellant under a Certificate of urgency on the 19th day of February, 2024 seeking for the following Orders:-i.Spent.ii.The Tribunal be pleased to grant an order that the following consignment Customs Entry Number 23MBAIM406106319 be released upon payment of self-assessment duty pending the hearing and determination of the Tax Appeal Number E116 of 2024. iii.This Honourable Tribunal be pleased to stand over any attempt by the Respondent to collect taxes under dispute as it is illegal, arbitrary, and erroneous.iv.Any reliefs the Tribunal deems fit to grant.

2. The application which is supported by an Affidavit sworn by Bare Sahal, a Director of the Appellant, on the 16th day of February, 2024, is premised on the following grounds:-i.That the Appellant being dissatisfied with the review decision issued by the Respondent on the 20th day of December 2023 appealed to this Honourable Tribunal on 31st January, 2024 by way of a Notice of Appeal which was duly served on the Respondent on the same date.ii.That on 31st January, 2023, the Appellant further filed a Memorandum of Appeal and a Statement of Facts together with all annexures, which it claims was duly served upon the Respondent.iii.That the Appellant invites the Honourable Tribunal to take notice that the dispute herein relates to the alleged claim of underpayment of customs duty by the Respondent which is inaccurate as the item in question was lawfully settled by the Appellant.iv.That the Appellant asserts that the Respondent has refused and/or blatantly disregarded the urgency to clear the said consignment from the port, and they continue to accrue customs warehouse rent and port charges for the last three (3) months.v.That the Appellant had declared and paid the tax due for subsequent consignments which have all been cleared from the port.vi.That the actions of the Respondent have occasioned the Appellant’s frustrations and will continue to cause the business major losses if the orders sought are not granted.vii.That the Appellant is willing to pay the sums due and payable pending the hearing and determination of this Appeal.viii.That the Appellant stands to suffer prejudice if the Respondent is allowed to continue holding the said consignment at the Port of Mombasa.

3. In opposition to the application, the Respondent through a Replying Affidavit sworn by Catherine Mutisya, an officer under the Investigations and Enforcement Department, on the 27th day of February, 2024 and filed on the even date raises the following grounds in opposition to the application:-i.That on the 24th October, 2023 the Respondent targeted the consignment in issue with an intention to establish the accuracy of the declared descriptions, quantities, tariffs and applicable values of imported cargo.ii.That upon verification on the 15th November, 2023 the Respondent sought for value guidable on the imported goods from its Valuation and Tariff Unit.iii.That the Appellant availed importation documents that did not adequately support the transaction value declared by the Appellant.iv.That based on the value recommended by the Valuation and Tariff Unit, the Respondent assessed extra taxes of Kshs 11,856,287. 00 out of which the Appellant paid Kshs 3,900,771. 00v.That Appellant alleges of a joint Meeting with the Respondent on the 4th April, 2023 that arrived at new tax benchmarks but that the Minutes were not signed by any of the members in attendance.vi.That the methods of valuation are clearly set out in the Fourth Schedule of EACCMA and there is no provision for benchmark in the law.vii.That the Respondent had approved the Appellant’s request for release of the goods on condition the Appellant executes a bank guarantee for the demanded taxes or pays under protest.viii.That the Respondent objects to the application being allowed in the absence of the Appellant furnishing a bank guarantee for the outstanding taxes in the sum of Kshs 7,955,516. 00. ix.That the loss will be occasioned to the Respondent in terms of much needed Government revenue to sustain the economy and provide essential services to Kenyans in the event the Tribunal grants the orders for release of the consignment without the Appellant furnishing security for taxes.x.That the Appellant will be able to recover the taxes in dispute from the Respondent in the event it succeeds in its Appeal at the Tribunal.xi.That the Respondent being the principal revenue collecting agency is not only capable of reimbursing the Appellant but can apply any amount found to have been unduly levied for future taxes of the Appellant, if need arises.xii.That the Tribunal to consider the circumstances of this case and balance the rights of all the parties to the Appeal.xiii.That it is just and equitable for the Honourable Tribunal to allow the Respondent to collect the outstanding taxes as provided by law.xiv.That the application is frivolous, vexatious and an abuse of the Tribunal process and ought to be struck out in limine with costs to the Respondent.

Analysis and Findings 4. In compliance with the directions of the Tribunal to the effect that the application was to be canvassed by way of written submissions, the Appellant filed its written submissions on 28th February, 2024 while the Respondent indicated that it shall entirely rely on its Replying Affidavit filed before the Tribunal. The Tribunal has duly considered the written submissions filed by the Appellant and the factual matters raised in the Affidavits filed by both parties in arriving at its determination in this Ruling.

5. This application is primarily seeking a temporary stay of execution of the Respondent’s objection decision dated 20th December, 2023 which was a confirmation of the Respondent’s demand for additional taxes in the sum of Kshs7,955,516. 00 arising from the re-evaluation of taxes on the Appellant’s consignment pending the hearing and the determination of the Appeal. The Appellant had imported goods under Entry Number 23MBAIM406106319 that it had self-declared custom duty of Kshs 3,900,771. 00 that has since been paid but taxes were reviewed upon the Respondent’s rejection of the declared transaction customs value for the consignment of the goods. The Respondent made a demand for additional taxes in the sum of Kshs.7,955,516. 00 that the Appellant objected to.

6. The Appellant filed the Appeal herein with the Tribunal on 31st January, 2024 challenging the Respondent’s objection decision dated 20th December, 2023 and the matter is now pending hearing and determination of the Appeal.

7. The powers of the Tribunal to consider such applications as filed by the Appellant and to issue stay orders is donated by Section 18 of the Tax Appeals Tribunal Act which provides as follows;“Where an appeal against a tax decision has been filed under this Act, the Tribunal may make an order staying or otherwise affecting the operation or implementation of the decision under review as it considers appropriate for the purposes of securing the effectiveness of the proceeding and determination of the appeal.”

8. In Multimedia University & Another –Vs- Professor Gitile N. Naituli (2014) eKLR the Court of Appeal stated that when an applicant prays for orders of stay of execution the applicant must satisfy the court on both of the twin principles: First, the applicant must present an arguable appeal and second, the intended appeal would be rendered nugatory if the interim orders sought were denied.

9. The court in Stanley Kangethe Kinyanjui vs. Tony Ketter & Others [2103[ eKLR stated that 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. On whether the appeal is arguable, it was held in Damji Pragji Mandavia v Sara Lee Household & Body Care (K) Ltd, Civil Application No. Nai 345 of 2004 that it is sufficient if a single bona fide arguable ground of appeal is raised.

10. It was argued in the case of Habib Bank AG Zurich vs. Eugene Marion Yakub Civil Application Number Nairobi 43 of 1982, by Madan, Law and Potter JJA that probability of success means the court is only to gauge the strength of the plaintiff’s case and not to adjudge the main suit at the interim stage since proof is only required at the hearing stage.

11. The Tribunal has observed from the Memorandum of Appeal filed prior to the filing of the application that the Appellant has raised seven (7) grounds of appeal challenging the Respondent’s manner of re-evaluation of both the transactional value of the goods imported and demand of the additional taxes. While it is not necessary to consider more than one ground, the Tribunal is of the view that the Appellant on the basis of the grounds of appeal as set out in the Memorandum of Appeal has a prima facie case that calls for appropriate rebuttal by the Respondent. In line with the holding in Habib case (supra), the Tribunal can only examine the veracity and relevancy of the arguments on the re-evaluation of the customs value and the demand for the additional taxes during the hearing of the substantive Appeal.

12. The Court in Damji Pragji (supra) observed that in considering such an application the court must not make definitive or final findings of either fact or law at that stage as doing so may embarrass the ultimate hearing of the main appeal. In Reliance Bank Ltd v Norlake Investments Ltd [2002] 1 EA 227 the Court stated that, “the term “nugatory” has to be given its full meaning. It does not only mean worthless, futile, or invalid, but also means trifling. Whether or not an appeal will be rendered nugatory depends on whether or not what is sought to be stayed if allowed to happen will be reversible, or if it is not reversible whether damages will reasonably compensate the party aggrieved.”

13. The Tribunal considered the amount of the taxes claimed by the Respondent to be so substantial that even if the amount was to be refunded in the event that the Appellant was to succeed in its case, the injury caused to the business by withdrawal of the amount would be irreparable as to render the Appeal nugatory.

14. In Industrial Cause No. 7715 of 2011, Elena Doudoladova Korir vs Kenyatta University [2014] KLR at (Nairobi) the Court of Appeal held that;“The High Court’s discretion to order a stay of execution of its order or decree is fettered by three conditions. Firstly, the applicant must establish a sufficient cause, secondly the court must be satisfied that substantial loss would ensue from a refusal to grant stay and thirdly the applicant must furnish security. The application must of course be made without unreasonable delay.”

15. In County Executive of Kisumu vs County Government of Kisumu and 8 others Civil Application No. 3 of 2016 the Supreme Court held that: “Each case has to be determined on its own merit and all relevant circumstances considered.” Similarly, in Butt v Rent Restriction Tribunal [1982] KLR 417 the Court of Appeal while giving guidance on how a court should exercise discretion in an application of stay of execution held that:“The general principle in granting or refusing a stay is; if there is no other overwhelming hindrance, a stay must be granted so that an appeal may not be rendered nugatory should that appeal court reverse the judge’s discretion.……The court in exercising its discretion whether to grant [or] refuse an application for stay will consider the exceptional circumstances of the case and unique requirements. The special circumstances in this case were that there was a large amount of rent in dispute and the appellant had an undoubted right of appeal.”

16. The Tribunal noted that in the present dispute, the Applicant is a going concern and no evidence had been shown of its inability to settle the amount claimed should it fail in its Appeal. Furthermore, the Applicant is a resident company and its directors have not been shown to be a flight risk. Moreover, the Tribunal did not see any prejudice to be suffered by the Respondent if an order was made for the release of the consignment under Entry Number MBAIM406136319 in the interim pending full hearing of the Appeal on its proper merit. It is the Tribunal’s view that the Respondent would still collect from the Appellant the differential in tax should the Appellant fail in its Appeal.

17. It is further the view of the Tribunal that since there is a valid pending Appeal, it is in the best interests of justice that the efficacy of the proceedings in the Appeal is preserved and to avoid further accumulation of costs associated with holding of the consignment of goods at the Port the orders sought ought to be granted to allow the Appeal be heard on its full merits.

Disposition 18. In view of the foregoing analysis the Tribunal makes the following Orders:-i.A temporary order stay of execution of the objection decision by the Commissioner of Investigations and Enforcement to demand and/or to enforce payment for the additional customs taxes in the sum of Kshs7,955,516. 00 as against the Appellant be and is hereby granted pending the hearing and final determination of the Appeal.ii.A temporary order is hereby issued directed at the Commissioner of Customs & Border Control to allow the Appellant’s declaration and clearance of imported consignment of goods under Entry Number 23MBAIM406106319 imported by the Appellant and now lying at the Port of Mombasa, on the basis of the acknowledged payment of the customs taxes of Kshs 3,900,771. 00 pending the hearing and final determination of the Appeal challenging the decision by the Commissioner Investigation and Enforcement delivered on the 20th December, 2023. iii.The Appeal to be heard on priority basis.iv.The Appeal to be mentioned on the 9th April, 2024 for directions on the hearing of the Appeal.v.No orders as to costs.

19. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 22ND DAY OF MARCH, 2024ERIC NYONGESA WAFULA - CHAIRMANELISHAH N. NJERU - MEMBEREUNICE NG’ANG’A - MEMBERABRAHAM K. KIPROTICH - MEMBERMUTISO MAKAU - MEMBER