Multichoice Kenya Limited v Commissioner of Domestic Taxes [2024] KETAT 1434 (KLR)

Multichoice Kenya Limited v Commissioner of Domestic Taxes (Appeal E034 of 2024) [2024] KETAT 1434 (KLR) (27 September 2024) (Judgment)

Neutral citation: [2024] KETAT 1434 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal E034 of 2024

CA Muga, Chair, BK Terer, EN Njeru, E Ng'ang'a & SS Ololchike, Members

September 27, 2024

Between

Multichoice Kenya Limited

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a limited liability company incorporated in Kenya and is part of Multichoice Group which offers a wide range of video entertainment services under brand names such as DStv, GOtv and Showmax.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws. Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 and 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. On 12th October 2023, the Appellant requested for an advance tariff classification ruling from the Respondent in respect of applicable Harmonized Commodity Description and Coding System (HS Code) for Single Low Noise block downconverter (LNB) used for the DStv service.

4. The Respondent on 17th October 2023 issued an advance tariff ruling classifying the DStv Single LNB under HS Code 8529. 10. 00 of the East African Community Common External Tariff (hereinafter “EACCET”).

5. On 7th November 2023, the Appellant made an application for review of the Respondent’s advance tariff ruling citing classifications of the same in Tanzania and Uganda both of which had classified the LNBs under HS Code 8543. 70. 00.

6. In a letter dated 30th November 2023, the Respondent upheld the tariff ruling under HS Code 8529. 10. 00.

7. Aggrieved by the Respondent’s tariff ruling, the Appellant filed its notice of appeal dated 29th December 2023 on 12th January 2024 at the Tribunal.

The Appeal 8. The Appeal was premised on the following grounds as laid-out in the Memorandum of Appeal dated and filed on 12th January 2024;i.That the Respondent erred in relying only on General Interpretation Rules (GIR) 1 and 6 of the EACCET and disregarding the GIR 3 which is the relevant intervening rule thus leading to a misclassification of the DStv Single Low Noise Block downconverter.ii.The Respondent erred in law and fact by finding that the DStv Single LNB downconverter which is used by the Appellant to amplify and convert high frequency signal directed to it by a satellite dish to low frequency signal as a part suitable for use with apparatus of headings 85. 24 to 85. 28 of the EACCET.iii.The Respondent erred in law and fact by failing to apply heading 85. 43 which provides the most specific description of DStv Single LNB and consequently applying heading 85. 29 which is of general description resulting in a misclassification of the DStv Single LNB downconverter.

Appellant’s Case 9. The Appellant’s Statement of Facts was dated 12th January 2024 and filed on even date and supported by the witness statement of Mr. Renay Van Greuning dated 22nd May 2024 which was a reiteration of the statement of facts and was admitted as evidence-in-chief by the Tribunal on 17th July 2024.

10. The Appellant stated that the DStv Single LNB receives the wide block (broadband) of relatively high frequencies, amplifies and converts them to lower frequencies that are sent through cables to a television decoder which restores the compressed satellite signal for viewership on standard TV. Further, that the DStv Single LNB in itself was not a receiver but a combination of low-noise amplifier, frequency mixer, local oscillator and intermediate frequency (IF) amplifier.

11. The Appellant contested the Respondent’s assertion that the DStv Single LNB was a palm-sized device attached to a focal point of a parabolic reflector of the DStv satellite dish as incorrect instead stating that the DStv Single LNB was a device that receives an electric pulse from a set-top box and is placed into the parabolic LNB support arm bracket to align with the focal point of a parabolic reflector panel.

12. Similarly, the Appellant in contesting the Respondent’s assertion, that the parabolic reflector receives television signals broadcast from stationary satellites which are focused onto and picked up by the DStv Single LNB, asserted that the parabolic reflector receives television signals broadcast from stationary satellites which are focused onto the focal point of the parabolic reflector panel and reflected onto the DStv Single LNB.

13. The Appellant opposed the Respondent’s assertion that the DStv Single LNB was specifically designed for use with TV satellite systems and not compatible with any other satellite receiving equipment stating that the DStv Single LNB had universal usage.

14. The Appellant asserted that whereas the satellite dish was not a machine, the DStv Single LNB was a stand-alone and distinct item from satellite dish whose principal function is to amplify and convert high frequency signal to low frequency signal which is an electronic process that utilizes both mechanical and electric power thus the proper tariff classification was 85. 43 that covers electrical machines and apparatus having individual functions and which are not specified elsewhere in Chapter 85 of EACCET.

15. The Appellant opposed the Respondent’s tariff code classification under 8529. 10. 00 of the EACCET which covers “…parts suitable for use with apparatus in broadcasting” asserting that since the principal function of the DStv Single LNB was to amplify weak signals which was an electronic function not covered by any heading, the most appropriate classification was under tariff code 8543. 70. 00 that provides for other machines and apparatus. The Appellant went further to claim that a similar dispute arose with the Tanzanian and Ugandan authorities and they both agreed with the Appellant’s sister entities that that the proper classification for the DStv Single LNB was under the tariff code 8543. 70. 00 of the EACCET.

16. The Appellant addressed the grounds as raised in the Memorandum of Appeal as follows; Firstly that the Respondent erred in arriving at its decision solely based on GIRs 1 and 6 of the EACCET yet GIR 6 can only be understood in the context of intervening GIRs 2,3,4 and 5. That in the instant case, it was not in dispute that DStv Single LNB fell under Chapter 85 of Section XVI to the EAC CET the contention being on heading whether 85. 29 or 85. 43; a deadlock that could be unlocked by GIR 3 which provides as follows:“When by application of Rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows;a.The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.b.Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable.c.When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.”

17. The Appellant stated that the Respondent in the classification decision had no basis in relying on GIR 6 which only deals with classification of subheadings within a heading whereas the issue at hand related to applicable heading for purposes of classification of DStv Single LNB. The cited GIR 6 provides as follows:“For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related Subheading Notes and, mutatis mutandis, to the above Rules, on the understanding that only subheadings at the same level are comparable. For the purposes of these Rules the relative Section and Chapter Notes also apply, unless the context otherwise requires.”

18. Secondly, that the Respondent erred in law and fact by finding that the DStv Single LNB was a part suitable for use with apparatus of headings 85. 24 to 85. 28 of the EACCET and more specifically tariff code 8529. 10. 00 which covers parts for use with aerials and aerial reflectors of all kinds. That it was incorrect from the onset for the Respondent to assert that the DStv Single LNB was a part suitable for use solely with a DStv dish yet LNBs have universal usage that even the Appellant's competitors use.

19. The Appellant was categorical that classification under heading 85. 29 has to be first, a part suitable for use solely or principally with the apparatus of heading 85. 24 to 85. 28 and must be an integral constituent or component without which the article to which it is joined cannot function. Where an item, as in the instance, is meant to improve the operation of a main article, such an item cannot be considered a part of the main article.

20. The Appellant further stated that the DStv Single LNB was a standalone device and performed a totally different function from the satellite dish. That whereas the satellite dish collects low signals from satellites, the DStv Single LNBs role entails amplifying low signals to high frequencies. This functional delineation is independent of each other and the functioning of the satellite dish would not be inhibited by the absence of the DStv Single LNB as the dish would still collect low signals from the satellites meaning that the DStv Single LNB is an apparatus and not a standalone device as such would not fit any of the tariff codes under headings 85. 24 to 85. 28 of the EAC CET.

21. In addressing the third ground, the Appellant averred that the Respondent erred in law and fact by failing to adopt the heading which provided the most specific description of DStv Single LNB resulting in adoption of a general description and ultimate misclassification of the item which would have been important by first appreciating the salient characteristics of the DStv Single LNB. That heading 85. 29 was ambulatory and was general in nature since it covers various parts suitable for use solely or principally with various apparatus under heading 85. 24 to 85. 28 while on the other hand the appropriate heading 85. 43 relates to electrical machines and apparatus having individual functions and which are not specified or included elsewhere under Chapter 85 of EAC CET.

22. In setting out what it means to have ‘individual functions,’ the Appellant relied on Explanatory Note to heading 84. 79 which provides as follows;“For this purpose, the following are to be regarded as having ‘individual functions’…Mechanical devices which cannot perform their function unless they are mounted on another machine or appliance, or are incorporated in a more complex entity, provided that this function:i.Is distinct from that which is performed by the machine or appliance whereon they are mounted or by the entity wherein they are to be incorporated, and,ii.Does not play an integral and inseparable part in the operation of such machine, appliance or entity.”

23. The Appellant asserted that DStv Single LNB was a combination of low-noise amplifier, frequency mixer, local oscillator and intermediate frequency amplifier and that in the Explanatory Notes to heading 85. 43, one of the items listed under that heading is ‘high or intermittent frequency amplifiers which was the precise description of the DStv Single LNB therefore the appropriate tariff code as guided by GIR 3 was 85. 43. 70. 00 instead of the one proposed by the Respondent of 85. 29. 10. 00.

Appellant’s Prayer 24. The Appellant’s made the following prayers to the Tribunal:a.That the appeal be allowed.b.That the Respondent’s decision dated 30th November 2023 be set aside.c.Costs incidental to the Appeal be awarded to the Appellant.

The Respondent’s Case 25. The Respondent replied to the appeal through its Statement of Facts dated 13th February 2024 and filed on even date.

26. The Respondent stated that the DStv Single LNB was a palm-sized device attached to the focal point of parabolic reflector of the DStv satellite dish and imported as part of the DStv dish thus both were classifiable under tariff code 8529. 10. 00 as provided for in 2022 EACCET.

27. In reiterating its review decision, the Respondent asserted that Chapter 85 covers the classification of electrical machinery and equipment and parts thereof, sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles. Further, that heading 85. 29 provides for classification of parts suitable for use solely or principally with the apparatus of heading 85. 24 to 85. 28. Moreover, that the DStv dish was specifically classifiable under 85. 29. 10. 00 that covers aerials and aerial reflectors of all kinds, parts suitable for use therewith.

28. The Respondent asserted that its classification was guided by the GIRs which could not be prejudiced by a ruling made in another country in a different jurisdiction noting that classification was dynamic and rulings were bound to be reviewed as more information was received and knowledge on the subject matter increased with time which was the reason that tariff rulings in Kenya have a time limit of one(1) year.

29. The Respondent averred that classification of goods under GIRs Nomenclature was sequential and that GIR 1 provided that classification shall be determined according to terms of headings and any relative Section or Chapter Notes.

30. The Respondent asserted that the DStv dish could not function without the LNB and that DStv Single LNB was part of the DStv dish and not a standalone device as purported by the Appellant in its appeal.

31. The Respondent averred that the appropriate code was 8529. 10. 00 for both as there is no mention of machines in the heading noting that Heading 85. 29 not only provides for parts of apparatus, but also provides for aerials and aerial reflectors of all kinds and parts suitable for use therewith for parts suitable for use solely or principally.

32. The Respondent contested the Appellant’s classification under heading 85. 43 stating that the said heading provides for classification of electrical machines and apparatus having individual functions not specified or included elsewhere in the Chapter. That since DStv Single LNB function in a DStv dish was specific, the classification was provided for under heading 85. 29 as guided by GIRs of tariff classification in the 2022 EACCET based on facts as determined.

33. The Respondent was emphatic that the appeal herein was unfounded in law and was not supported by evidence since the DStv Single LNB was specified to be a device mounted on and forming part of the DStv dish that receives signals from the parabolic reflector and directs the signals to decoder with the dish considered as an aerial.

Respondent’s Prayer 34. The Respondent made the following prayers to the Tribunal:i.That the Tribunal upholds the review decision dated 30th November 2023 that classified the DStv Single LNB under HS Code 8529. 10. 00; andii.That the Tribunal dismisses the Appeal with costs as the same was devoid of any merit.

Parties’ Written Submissions 35. The Appellant’s written submissions dated 31st July 2024 were filed on even date wherein the Appellant submitted on three issues as hereinunder:i.The Respondent misunderstood the physical and functional attributes of the Single LNB leading to misclassification under EACCET

36. The Appellant submitted that the Respondent inaccurately misclassified the Single LNB under tariff code 85. 29 instead of 85. 43 on the premise that it was part of the parabolic dish contrary to the guidance provided by the World Customs Organization (WCO) and rulings in India, Tanzania and Uganda. Adding that the Single LNB was not attached to the focal point of the parabolic reflector of the parabolic dish as alleged by the Respondent in their 17th October 2023 Ruling but supported by a LNB arm bracket which sets it apart from the parabolic dich at an angle that allows the dish to focus the signals it receives from satellite E36B orbiting at 36,101 km above sea level as physically demonstrated by the Appellant’s witness at the hearing of the Appeal on 17th July 2024.

37. The Appellant stated the DStv service was engineered through sophisticated array of devices each performing unique yet interdependent functions to deliver uninterrupted entertainment to customers and that it was erroneous for the Respondent to aver that the Single LNB was attached to the focal point of the parabolic dish reflector yet the Single LNB was fully detached from the dish and not part of the DStv dish. That it was further illogical for the Respondent to deem the Single LNB as part of the dish and still classify the LNB arm which lies between the Single LNB and the DStv dish under heading 73. 26 [sic] which covers other articles of iron or steel because Single LNB being part of the DStv apparatus/system did not mean it formed part of each and every appliance/device that makes up the DStv apparatus/system.

38. The Appellant submitted that analogous to a computer and a printer which work together when connected, the DStv Single LNB was neither part of the dish nor the decoder but was instead a standalone device capable of its own unique classification under EACCET when imported on its own. That the DStv Single LNB was an electric machine that utilizes electrical energy to independently amplify weak signals a role that is very specific and particular and very distinct from the role performed by the parabolic dish, which was not a machine. Further, the Appellant contested the Respondent’s assertions stating that the DStv Single LNB could actually function without the dish but not at optimal levels. The Appellant relied on Section Note 5 to Section XVI of the EACCET which provides as follows;“For the purposes of these Notes, the expression ‘machine’ means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of Chapter 84 or 85”

39. While submitting that having regard to the tax consequences that follows a tariff classification outcome under the EACCET, the Appellant placed reliance on the locus classicus case of Cape Brandy Syndicate vs I.R.C 1 KB 64 where it was held as follows:“…in taxation, you have to look simply at what is clearly said. There is no room for any intendment; there is no equity about a tax; there is no presumption as to tax; you read nothing in; you imply nothing; but you look fairly at what is said and at what is said clearly and that is the tax.”(ii)Having mischaracterized and misunderstood the physical and functional attributes of the Single LNB, the Respondent misclassified the Single LNB under tariff heading 85. 29 instead of adopting the most specific and appropriate heading of 85. 43

40. The Appellant submitted that the Respondent was clearly trawling in the ocean and clutching on every straw that presents having contended in its pleadings that the Single LNB was classifiable under heading 85. 29 of the EACCET that the Single LNB formed part of the DStv dish yet it never fit the classification based on its physical and functional attributes. Further, that explanatory note (g) to heading 85. 29 of the WCO HS Code which covers ‘parts suitable for use solely or principally with the apparatus of heading 85. 24 to 85. 28’ expressly excludes aerial amplifiers and radio frequency oscillator units from being classified under heading 85. 29 providing as follows:“This heading excludes…(g)Aerial amplifiers and radio frequency oscillator units.”

41. The Appellant asserted that the DStv Single LNB was a unique device used in various satellite system technologies and not solely or principally restricted to apparatus of headings 85. 24 to 85. 28. That based on its amplification and oscillation roles, the DStv Single LNB qualifies as an aerial amplifier and oscillator based on its functions as portrayed and explained in diagrammatic representations in the attached bundle of documents and as explained and demonstrated by the Appellant’s witness during hearing of the matter.

42. That this being the case, and DStv Single LNB having been established as an amplifier, the Respondent had fell in an obvious error in seeking to classify the same under heading 85. 29 which covers ‘Parts suitable for use solely or principally with the apparatus of heading 85. 24 to 85. 28. ’ this is because heading 85. 29 applies for parts suitable for use with apparatus in broadcasting yet the Appellant’s witness had technically provided a description demonstrating that that DStv Single LNB was a standalone device that was not part of broadcasting equipment and was used with other apparatus outside broadcasting. Accordingly, based on the physical and functional attributes as well as guidance from WCO, the most appropriate heading for classification of the DStv Single LNB was heading 85. 43 of the EACCET which covers ‘Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this Chapter.’

43. The Appellant submitted that the Central Board of Excise and Customs of India upheld the classification of DStv Single LNB under Heading 85. 43 thus;“In view of the aforesaid, the Board is of the view that by application of GIRs 1 (Note 2(a) to Section XVI and 6, separately presented LNB down converter (LNB) would be appropriately classifiable in heading 85. 43, more specifically in subheading 85. 43. ”

44. The Appellant affirmed that customs was a global function that cuts across jurisdictions and Kenya could not walk alone in customs matters. Moreover, the Respondent failed to cite changes effected to both heading 85. 29 and 85. 43 since 2013 since similarly, the Appellant had not loaded different technology onto the DStv Single LNB since 2013. The Appellant cited the Tribunal’s holding in the case of Premier Solar Solutions Limited v Commissioner of Customs and Border Control [Appeal No. 984 of 2020] where the Tribunal held as follows:“…a ruling issued in a foreign jurisdiction is a demonstration of how other jurisdictions classify items imported by importers into Kenya.”(iii)The Respondent misapplied the General Interpretation Rules and various sectional, chapter and heading notes in classifying the Single LNB

43. The Appellant submitted that GIRs set down the sacred and immutable principles upon which customs classification was based upon as expressed in the High Court decision in Republic v Commissioner of Customs ex parte Mulchand Ramji &Sons Limited [2010]eKLR as follows:“To ascertain what code is applicable to a particular goods, one has to look at the General Interpretation Rules for the classification of goods, which sets out the principles of interpretation in conjunction with the various chapters describing the goods, the duty due.”

44. The Appellant while asserting that DStv Single LNB was classifiable under heading 85. 43, stated that GIRs prescribe compulsory principles of classification to promote and achieve much desired consistency and predictability at the regional and global level and cited the WCO Guide on understanding the legal basis of classification that;“GIR 1 fully resolves a heading classification when: There is only one heading whose terms encompass the whole good; or

The terms or Notes direct the classification to a specific heading; or

The terms or Notes direct the method of classification

Under these circumstances, the headings or Notes “otherwise require” and GIRs 2,3 and 4 are not usable at heading level”

45. The Appellant submitted that the issue at hand being the classification of DStv Single LNB either under heading 85. 29 or 85. 43, the Respondent erroneously relied on GIR 6 without regard to and consequentially applying GIR 2 to GIR 5 yet in the instant Appeal GIR 3 was the intervening GIR as expressed by the Tribunal in the case of Switchgear Limited v Commissioner of Customs & Border Control [Appeal No. 637 of 2021] where the Tribunal held as follows:“The GIRs are to be applied sequentially and where the earlier rule does not apply the next should be applied as they follow one another.”

46. The Appellant averred that had the Respondent applied the GIRs in a sequential manner as required, the outcome would have been classification of the DStv Single LNB under heading 85. 43 and relied on the holding in the Indian case of Sanwar Agarwal vs Commissioner of Customs (Port), W.P No 496 of 2015 where it was held as follows:“A Heading with a more specific description of the goods in question shall be preferred to and prevail over a Heading with a more general description. Just as a special law in a particular field would prevail over a general law that may be operational in that field, a Heading with a more specific description would prevail over a Heading with a more general description.”(iv)The Respondent erred by failing to consider/appreciate an opinion issued by the World Customs Organization regarding tariff classification of the Single LNB and adopted by other East African Community members in their interpretation of the EACCET.

47. The Appellant submitted that WCO whose membership consisted of 186 counties out of the World’s 196 countries provided the expertise and international standing on customs classification upon which the EACCET borrowed heavily and thus Kenya could not be an exemption. Further, that the WCO’s classification rulings, guidance and advisories were not idle texts a fact that Section 122(6) of the EACCMA recognizes thus:“In applying or interpreting this section and the provisions of the Fourth Schedule due regard shall be taken of the decisions, rulings, opinions, guidelines, and interpretations given by the Directorate, the World Trade Organization or the Customs Cooperation Council.”

48. To further buttress this position, the Appellant relied on the following authorities: Customs and Excise v Export Trading Company Limited [2019]eKLR.

Republic v Commissioner General & Another Ex-parte Awal Ltd[2008]Eklr.

49. In conclusion, the Appellant submitted that the Respondent was consistently and stubbornly refusing to follow partner states i.e. Tanzania and Uganda who when faced with the similar classification matter upheld and agreed with the Appellant’s sister entities that the appropriate classification for DStv Single LNB was 85. 43. 70 yet all the member states subscribed to the same EACCET tariff classification.

50. The Respondent did not file its written submissions as directed by the Tribunal. However, the witness statement of the Respondent, Mr. Sosten Kiprop dated and filed on 27th May 2024 was admitted as evidence-in-chief by the Tribunal on 17th July 2024.

51. The Respondent submitted that the DStv Single LNB was a palm sized device attached to the focal point of the parabolic reflector DStv satellite dish. That the parabolic reflector receives television signals broadcast and focuses it on the LNB which picks the signals that are sent through cables to a decoder. The DStv dish cannot function without the LNB which is imported as part of the dish and not a standalone device as purported by the Appellant and the appropriate classification was heading 85. 29 which provides for classification of parts suitable for use solely or principally with apparatus of headings 85. 24 to 85. 29 as there is no mention of machine in the heading.

52. The Respondent contested the Appellant’s classification under HS Code 8543. 70. 00 stating that it related to classification of electrical machines and apparatus having individual functions not specified or included elsewhere in that Chapter. The Appellant averred that the DStv satellite dish had been specifically provided for and classifiable under heading 85. 29 together with the LNB which was a device mounted on and forming part of the DStv dish.

53. The Respondent submitted that it was guided by the GIRs of tariff classification based on facts as determined and could not be prejudiced by a ruling made in another country more so the Indian case that was more than a decade old and was thus inapplicable in the present case and cited GIR 1 and GIR 6 (supra) to back up this position.

54. The Respondent asserted that its classification of the DStv Single LNB under heading 8529. 10. 00 was correct based on information, belief and to the best of its knowledge.

Issues For Determination 55. The Tribunal having carefully considered the parties’ pleadings documentation adduced before and the Appellant’s submissions notes that the matter distills into a single issue for determination as follows;Whether the Respondent erred in classifying DStv Single LNB under HS Code 8529. 10. 00

Analysis And Findings 56. The Tribunal having established a single issue for determination will proceed to analyze it as follows:

Whether the Respondent erred in classifying DStv Single LNB under HS Code 8529. 10. 00 57. The Tribunal notes that the instant dispute arose from a tariff classification variance for the Appellant’s DStv Single Low Noise block downconverter (LNB) used for the DStv service. On one hand, the Appellant asserted that the DStv Single LNB receives the wide block (broad band) of relatively high frequencies, amplifies and converts them to lower frequencies that are sent through cables to a television decoder having restored the compressed satellite signal for viewership on standard TV. On the other hand, the Respondent asserted that the DStv Single LNB was a palm-sized device attached to a focal point of a parabolic reflector of the DStv satellite dish and imported as part of the dish.

58. It was the Appellant’s assertion that the DStv Single LNB was a standalone electrical machine which had universal usage and was a distinct item from DStv satellite dish which was not a machine; and that further, the DStv Single LNB could actually function without the dish but not at optimal levels. This was in contrast to Respondent’s assertion that the DStv dish was not a standalone device and could not function without the LNB and that this was primarily the reason they were imported together.

59. The Tribunal notes the Appellant’s assertion that the DStv Single LNB in itself was not a receiver but a combination of low-noise amplifier, frequency mixer, local oscillator and intermediate frequency (IF) amplifier that receives an electric pulse from a set-top box and is placed into the parabolic LNB support arm bracket to align with the focal point of a parabolic reflector panel. These assertions were contested by the Respondent who stated that the DStv Single LNB was a palm-sized device attached to the focal point of the parabolic reflector DStv satellite dish and that while the parabolic reflector receives television signals broadcast and focuses it on the LNB, the LNB picks the signals and sends them through cables to a decoder.

60. Further, the Tribunal notes the Appellant’s assertion that the principal function of the DStv Single LNB was to amplify weak signals which was an electronic function not covered by any heading thus the most appropriate classification was under tariff code 8543. 70. 00 that provides for other machines and apparatus and went on to claim a similar ruling had been arrived at by both the Tanzanian and Ugandan authorities when faced with an exact matter. The Respondent contested the classification stating that DStv Single LNB function in a DStv dish was specific and that the appropriate classification was heading 85. 29 since heading 85. 43 provides for classification of electrical machines and apparatus having individual functions not specified or included elsewhere in the Chapter.

61. The Tribunal observes that it was not disputed that the DStv Single LNB and the DStv satellite dish are needed to deliver uninterrupted entertainment to customers. The gist of the matter at hand was the appropriate classification for the two separate parts.

62. The Tribunal notes that the Appellant having requested for advance tariff classification, the product was classified by the Respondent under HS Code 8529. 10. 00 upon which the Appellant appealed stating that both Tanzania and Uganda had classified the product under HS Code 8543. 70. 00. The Respondent upheld the tariff ruling dated 30th November 2023 resulting in the instant Appeal.

63. The Tribunal notes that it was not contested that the product in question (DStv Single LNB) was classifiable under Chapter 85. However, the point of divergence between the parties was in regards to the appropriate heading and conversely the codes with the Respondent asserted that HS Code 8529. 10. 00 which attracts 25% customs duty was the appropriate classification whereas the Appellant insisted the correct HS Code was 8543. 70. 00 which attracts 10% customs duty. The two contesting headings and their respective codes provides as follows:“85. 29 Parts suitable for use solely or principally with the apparatus of headings 85. 24 to 85. 28. V 8529. 10. 00 Aerials and aerial reflectors of all kinds; parts suitable for use therewith.

85. 43 Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this Chapter.8543. 70. 00 Other machines and apparatus….”

64. The Tribunal notes the Appellant’s contention that the Respondent erred in arriving at its decision solely based on GIRs 1 and 6 of the EACCET yet GIR 6 can only be understood in the context of intervening GIRs 2,3,4 and 5. On its part, the Respondent asserted that classification was guided by the GIRs which could not be prejudiced by a ruling made in another country in a different jurisdiction noting that classification was dynamic and rulings were bound to be reviewed as more information was received and that classification of goods under GIRs Nomenclature was sequential.

65. The Tribunal notes that the Appellant asserted that the dish was not a machine and that the LNB was an electrical machine, a position that was contested by the Respondent. The Tribunal notes that The General Interpretation Rule1 (GIR1) for classification of goods in the Nomenclature provides that;“The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions.”

66. The Tribunal notes the Appellant’s assertion that the two parts had functional delineation and were independent of each other and that the DStv satellite dish would not be inhibited by absence of the LNB as demonstrated by the Appellant’s witness at the hearing stage. The Tribunal notes that while the dish collects signals from the orbiting satellite, the DStv Single LNB converts and restores the compressed satellite signal for viewership on standard TV. Thus, the DStv Single LNB performs electrical function whereas the DStv satellite dish receives television signals broadcast from stationary satellites which are focused onto and picked up by the DStv Single LNB.

67. The Tribunal notes that whereas HS Code 8529. 10. 00 provides for “Aerials and aerial reflectors of all kinds; parts suitable for use therewith,” HS Code 8543. 70. 00 provides for “Other machines and apparatus.” The Tribunal notes that even though imported together, at the point of entry, the DStv Single LNB is identifiable as an electrical machine that machine rather than an aerial and aerial reflector its functional relationship with the DStv satellite dish notwithstanding.

68. The Tribunal observes that while classifying the DStv Single LNB, the Appellant cited Tanzanian, India and Ugandan cases to buttress its position which was opposed by the Respondent who submitted that it was guided by the GIRs of tariff classification based on facts as determined and could not be prejudiced by a ruling made in another country more so the Indian case that was more than a decade old and was thus inapplicable in the present case. The Tribunal associates with the holding in the case of Republic-vs-Commissioner General & Another ex-parte Awal Ltd [2008] eKLR, which was quoted in the case of Associated Battery Manufacturers Limited-vs-Commissioner of Customs Services [2020] eKLR, that:-“In the end I must conclude that looking at the material placed before me and the submissions tendered by learned counsels, the Respondents had the statutory duty to impose duty according to the tariff classification provided by law under the Customs and Excise Act and under the Harmonized Commodity Description and Coding System provided by the World Custom Organization explanatory notes in which Kenya is a signatory.”

69. Obtaining from the above is that the Tribunal is convinced the Respondent tariff ruling dated 30th November 2023 was not justified in the obtaining circumstances and the Tribunal’s view is that the appropriate classification for the DStv Single LNBs would be 8543. 70. 00.

70. Consequently, the finding of the Tribunal is that the Respondent erred in classifying DStv Single LNB under HS Code 8529. 10. 00.

Final Decision 71. The upshot of the foregoing is that the Appeal herein is meritorious and the Tribunal accordingly proceeds to make the following Orders:a.The Appeal be and is hereby allowed.b.The Respondent’s tariff ruling dated 30th November 2023 be and is hereby set aside.c.Each party to bear its own costs.

72. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 27TH DAY OF SEPTEMBER, 2024CHRISTINE A. MUGA - CHAIRPERSONBONIFACE K. TERER - MEMBERELISHAH N. NJERU - MEMBEREUNICE N. NG’ANG’A - MEMBEROLOLCHIKE S. SPENCER - MEMBER