No Excuses Limited v Commissioner of Customs and Border Control [2025] KETAT 49 (KLR)

No Excuses Limited v Commissioner of Customs and Border Control (Tax Appeal E070 of 2024) [2025] KETAT 49 (KLR) (31 January 2025) (Judgment)

Neutral citation: [2025] KETAT 49 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E070 of 2024

RM Mutuma, Chair, M Makau, Jephthah Njagi, T Vikiru & D.K Ngala, Members

January 31, 2025

Between

No Excuses Limited

Appellant

and

Commissioner of Customs and Border Control

Respondent

Judgment

Background 1. The Appellant is a Limited Liability Company incorporated in Kenya and a registered Taxpayer whose principal business activity is importation of tyres.

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. The Respondent conducted a post clearance audit on the Appellant’s import consignment in accordance with Section 236 of the East African Community Customs Management Act 2004 (EACCMA). The review revealed that the Appellant has been importing SUV, pickup and off-road tyres for (light trucks) and classifying them under tariff code 4011. 20. 20.

4. Consequently, and in accordance with Section 135 of the EACCMA, the classified the imports under HS Code 4011. 10. 00 wherein the Respondent demanded short levied taxes of Kshs. 3,605,870. 00 vide a demand notice dated 19th October 2023.

5. The Appellant applied for review vide a letter dated 17th November, 2023. The Respondent reviewed the Appellant’s review application and issued a Review Decision dated 11th December, 2023 confirming the short-levied taxes of Kshs. 3,605,870.

6. Dissatisfied with the Respondent’s decision, the Appellant filed lodged this Appeal through vide the Notice of Appeal dated 22nd January 2024 and filed on 23rd January 2024.

The Appeal 9. The Appellant lodged Memorandum of Appeal dated 22nd January 2024 and filed on 24th January 2024 wherein the Appellant raised the following grounds of appeal;a.That the Respondent erred in law and fact in finding that the Custom entries for the import of an assortment of tyres were wrongly classified under Tariff Code 4011. 20. 20 instead of Tariff Code 4011. 10. 00;b.That the Respondent erred in law and fact in finding that the classification of goods imported by the Appellant fell under the East African Community Common External Tariff (EAC/CET) 2022 despite knowing that the relevant period of import was before the Tariffs were promulgated;c.That the Respondent erred in fact and law in failing to take into consideration that the consignment by the Appellant was properly classified under Tariff 4011. 20. 20 and was stripped by the officers of the Respondent upon arrival at the Port of entry and confirmed individually to conform to the classification that had been declared by the Appellant;d.That the Respondent failed to consider various F147’s and payments made upon stripping of the goods in a multi-agency post import audit and in failing and refusing to refer to them;e.That the Respondent erred in law and fact in reclassifying goods imported by the Appellant so as to attract more Import Duty, Value Added Tax and interest under Tariff 4011. 10. 00;f.That consequent to the above Respondent erred in law and fact in attempting to reclassify the Tyres into a category that the tyres were not and a wrong intended usage contrary to that reported by the Appellant but aimed only to suit their own imagination; and,g.That it is also unfair that the Appellant is penalised for the errors of its officers and the system set up by the Respondent and whose control the Appellant does not have, after the Appellant has complied with all its obligations.

The Appellant’s Case 10. The Appellant based its Appeal on its;a.Statement of Facts dated 22nd January 2024 and filed on 24th January 2024 together with the documents attached thereto;b.The witness statement of Raisiangani Narendra signed, dated and filed on 18th 24th April 2024 and adopted as evidence in chief on 12th November 2024. c.Written submissions dated and filed on 18th December 2024.

11. The Appellant averred that it imports tyres of various sizes which it duly declares at the port of entry. The Appellant completes the Single Administrative Document (SAD) Form C.17B and declares the description of the goods and enters the applicable commodity code. The document is usually submitted together with the commercial invoice of the manufacturer with full description of the goods.

12. At the port of entry, unlike other goods, the Appellant stated that its tyres consignment are usually stripped and individually inspected by the Respondent’s employees, servants and/or agents before clearance.

13. The Appellant maintained that it correctly applied the relevant community codes and was charged the applicable Import Duty and VAT for the imported tyres. The Appellant proceeded to pay the demanded taxes.

14. The Appellant stated that on the 19th October 2023, it received a Desk Audit Demand for Kshs. 3,605,870. 00, being aggrieved with the decision of the Respondent it wrote and lodged an objection for review of the decision vide the letter dated 17th November, 2023. However, the Respondent in its letter dated 11th December 2023 rejected the Appellant’s objection.

15. The Appellant maintained that the Respondent wrongfully classified the goods in question under Tariff Code 4011. 10. 00 instead of Tariff Code 4011. 20. 20. The tyres in question are not SUV tyres but bus and lorry tyres as correctly classified by the Appellant in the first instance.

16. Furthermore, the Appellant asserted that all consignments were stripped at the Port of Entry and verifications done by multi agency units in a post clearance audit. In the instances of any misdeclarations F147’s were raised and appropriate taxes paid by the Appellant. It also noted that the Respondent failed and refused to consider and/or refer to the various F147’s raised by the Appellant and payments made upon stripping of the goods in a multi-agency post import audit.

17. According to the Appellant, the Respondent in its decisions incorrectly interpreted the table on the Classification Classes by alleging that the classifications appearing after the heading;“..Of a kind used on buses or Lorries- applies to all subsequent entries under 4011. 20. 20 and 4011. 2020 and thereafter.”

18. The Appellant reiterated that;i.The goods imported were properly classified under Tariff 4011. 20. 20 based on their type;ii.It did not import any goods classifiable under Tariff Code 4011. 10. 00;iii.All the goods were properly declared and paid for;iv.The Respondent’s agents, employees and/or servants individually inspected each consignment at the time of arrival at the Port of Entry and even proceeded to clear the same; and,v.The Respondent greatly erred in attempting to reclassify the goods to suit the intended classification without the examination of the goods in issue.

19. The Appellant also stated that the action by the Respondent in changing and re-classifying the goods despite evidence that the classification by the Appellant was proper and correct is unfair to the Appellant and infringes its right to fair administrative action enshrined in Article 47 of the Constitution.

20. In its written submissions the Appellant raised one issue for identification, namely;

Whether the instant Appeal is merited. 21. The Appellant submitted that in its objection dated 17th November 2023, it stated as follows; In regards to the applied HS Codes;“a)No Excuses Ltd does not invent its own HS Codes for importated tyres. Classification of No Excuses imported tyres is done by the manufacturers based on their own standards and knowledge of the products manufactured.b)HS Code information is further written on commercial documents (bill of landing, invoices, packing lists, COC & Certificate pf Origins) include on sticker on the tyres.c)No Excuses declarations including applied HS Codes has always mirrored the information provided by suppliers on commercial documents. All these documents are filed with the Kenya Revenue Authority.d)HS Codes, documents & all declared information are always verified by multiple Kenya Revenue Authority officers at document processing centers, clearance stations, exit points (BCOs) and further confirmed by our valuation officers.e)All our shipments are subjected to a rapid clearance process involving 100% verifications for confirmation of declared quantities, HS Codes & values. It is not understandable to us how all these shipments were verified, HS Codes and values approved but later your claimed otherwise.f)No Excuses Ltd does not dictate or limit usage of size R-17-R-19 tyres to trucks or cars. We supply quality tyres per manufacture’s specs and classifications leaving customers at liberty to use them on any vehicles as they may wish as there is no known legislation guiding usage of tyres. Customer preferences is guided by their knowledge, financial capabilities and experiences.g)the tyres referred to in your demand were properly classified.”

22. The Appellant submitted that the taxes demanded were exorbitant, which is exhibited by the evidence on record that demonstrated that the Respondent made erroneous calculations and made double entries of all assessments making it impossible for this Tribunal to determine the correct taxes payable, if any.

23. The Appellant submitted that the Respondent remained intent on imposing non-existing taxes by the manner by which the Respondent approached issue, herein as follows;a.Entries were duplicated and cooked to show ‘existence’ of taxes in a bid to provide a basis for the demand subject of this Appeal i.e. entries 4- through 214. This is further espoused under paragraphs 3 to 10 of the Appellant’s further witness statement.b.The Respondent has steered clear of the confirmation that tyres are stripped at the port of entry and individually verified to produce F147’s which form the basis for further payment of taxes before the release of tyres. Instead the Respondent has elected to state that the Appellant has not produced any F147’s to show additional taxes for mis-direction of tariff codes. This begs the question how the Appellant could have provided such F147’s when there was no mis-declaration in the first place.c.On the basis of the physical verification of tyres, there was no need for the Respondent to undertake the so called ‘post clearance audit’.

24. The Appellant submitted that under with regard to ground 7 of the Memorandum of Appeal, it raised the issue that it is penalized for the errors of the officers of officers of the Respondent and the systems set up by the Respondent, the same system that led to the double entries and invited the Tribunal to address the said deceptive practices by rejecting any tax assessment and/or demand for taxes based on such deception.

Appellant’s Prayers 25. The Appellant prayed for the following reliefs;a.That the Respondent’s demand for Import Duty, Value Added Tax and Interest dated 19th October 2023 and Review Decision dated 11th December 2023 demanding Kshs. 3,605,870. 00 be struck out in its entirety;b.That the Respondent’s action to demand for Import Duty, Value Added Tax and Interest dated 19th October 2023 and Review Decision dated 11th December 2023 is based on Regulations that were not in force at the time of declaration and thus be declared arbitrary, unreasonable, unfair and contrary to the right of fair administration action of the Appellant;c.That the Tribunal do find that the classification by the Respondent is not based on actual goods imported and declared by the Appellant;d.That the Respondent, its employees, agents or other person purporting to act on its behalf be barred and or estopped from demanding or taking any further steps towards enforcement or recovery of penalties and interest on the Respondent’'s demand as stipulated above;e.That the costs of this Appeal; and,f.That any other remedies that the Honourable Tribunal deems just and reasonable.

The Respondent’s Case 26. In opposition to the Appeal, the Respondent relied upon its;a.Statement of Facts dated and filed on and filed on 23rd February 2024 and filed on 23rd February 2024 together with the documents attached thereto;b.The witness statement of Janekaren Kigoro signed and dated on 18th April 2024, filed on 22nd April 2024 and adopted as evidence in chief on 12th November 2024; and,c.Written submissions dated and filed on 3rd December 2024.

27. In response the Appeal, the Respondent stated that it conducted a post clearance audit on the Appellant’s import consignment in accordance with Section 236 of the EACCMA. The review revealed that the Appellant has been importing SUV, pickup and off road tyres for (light trucks) and classifying them under Tariff Code 4011. 20. 20.

28. The Respondent averred that Tariff Code 4011. 20. 20 provided that, “4011. 20. 20 - With a rim size of 17 inches and above, under of a kind used on buses or lorries.” However, the correct classification of such car/passenger motor vehicle tyres is Tariff Code 4011. 10. 00 which attracts Import Duty at 25%.

29. It averred that EAC/CET Tariff Code 4011 covers;“40. 11 New pneumatic tyres, of rubber.4011. 10. 00 - of a kind used on motor cars (including station wagons and racing cars)-of a kind used on buses or lorries:10. ---- With a rim size below 17 inches4011. 20. 20--- With a rim of 17 inches and above.”

30. The Respondent averred that the subheading 4011. 10 includes both radial and non-radial tyres which are designed for use on motor vehicles classified under Heading 8703 of the EAC/CET 2017 such as passenger cars, station wagons, four wheeled motor vehicles (SUVS/CUVS, and light trucks such as double cabs etc), specialised transport vehicles and racing cars. Consequently, and in accordance with Section 135 of the EACCMA, the Respondent demanded short levied taxes of Kshs. 3,605,870. 00 vide a demand notice dated 19th October 2023. This prompted the Appellant to apply for review vide a letter dated 17th November 2023.

31. The Respondent alleged that it invited the Appellant for a meeting vide an email dated 22nd November 2023 which meeting was to be held on 4th December 2023 but the Appellant did not show up. Consequently, the Respondent reviewed the Appellant’s review application and issued a Review Decision dated 11th December 2023 confirming the short-levied taxes of Kshs. 3,605,870. 00. The Appellant then filed this Appeal.

32. According to the Respondent, for purposes of verification of the applicable HS Code in the instant case the East African Community Common External Tariff (CET) 2022 version is applicable. It averred that classification of goods in the nomenclature is guided by General interpretative rules (GIRS) as cited in the East Africa Community Common External Tariff (EAC/CET). It noted that according to GIR1 classification is determined according to the terms of the headings and any relative section or chapter notes.

33. It asserted that the subheadings 4011. 20. 10 and 4011. 20. 20 fall under the subheading that covers new pneumatic tyres, of rubber, of a kind used on buses or Lorries, distinguishable by the rim size.

34. The Respondent maintained that there are various physical characteristics that are most relevant in the classification of tyres, which include the rim diameter, load index, load range, speed rating and tread patter that determine the principal use of the tyre. According to the Respondent, the subheading 4011. 10 includes both radial and non-radial tyres which are designed for use on motor vehicles classified under Heading 8703 of the EAC CET such as passenger cars, station wagons, four wheeled motor vehicles, specialised transport vehicles and racing cars. The Respondent alleged that this has no limit on the size of the tyre.

35. The Respondent stated that under entry number 23EMKIM401035453 the Appellant declared a Mazzini brand tyre of size 245/55ZR19 of category ECO607 and a search of the tyre showed it's a summer car tyre that is low profile depicted by number 55 and represent the aspect ratio or measurement of the sidewall height (in mm). The Respondent argued that this is the ratio of the tyre’s cross section to its width so in the above example the tyre that has a height equal to 55 per cent of its width.

36. According to the Respondent, Mazzini has the following sampled car tyres which are declared by the Appellant as Bus/Lorry tyres;All SeasonMazzini Giantsaver A/t (26)SummerMazzini Eco- 607 (52)Mazzini Eco- 307(46)Mazzini Eco605 Plus (42)Mazzini Effivan (19)Mazzini Ecosaver (56)Mazzini Eco606 (10)Mazzini Eco- 605 (58)Mazzini Mz- 838 (8)Mazzini Mz- 8o3(11)Mazzini ECO307 (1)Mazzini Rft (14)Mazzini Varenna So1 (10)Mazzini Ice Ice Leopard (15)Mazzini Supersportchaser Ssc5 (28)Mazzini Ice Leopard Suv (6)WinterMazzini Snow Leopard (39)Mazzini Snow Leopard Lx (13)Mazzini Snow Leopard 2 (21)Mazzini Snow Leopard Van (11)

37. It asserted that the audit focused on entries declared between the period years 2022 to 2023 and that the classification was guided by the EACCET guided by the GIRS. The EAC revises the CET every 5 years in line with the WCO recommendations.

38. The Respondent averred that the claim by the Appellant that the relevant period of import was before the Tariff were promulgated is incorrect and misleading because the CET has been in force from before 2017 and the years indicated after EACCET shows the version of the revision. It asserted that the EACCET in use is the 2022 version, and the tyre tariff code remains unchanged from the previous 2017 version.

39. It added that the audit was conducted pursuant to Section 235 and 236 of the EACCMA, 2004 that allows the Respondent to review declarations retrospectively for compliance for a period of 5 years. Further, it stated that post clearance audit mandate starts post clearance under the WTO Trade Facilitation Agreement under Article 7 release and clearance of goods, paragraph 5 on post clearance audit. It averred that the Post clearance audit unit was introduced under the WTO TFA initiative to help with faster clearance of goods at entry points while substantive issues are dealt with post clearance processes. All customs processes end with a post clearance audit.

40. The Respondent stated that the Appellant has continued to misdeclaremis declare its importations of car tyres despite getting a demand notice in 2021 resulting in an additional assessment for the period 2022 and 2023.

41. Further, the Respondent alleged that the Appellant has not produced any F147/e-slips showing additional taxes for misdeclaration of tariff code. It added that the issue in the demand notice is tariff misdeclaration.

42. According to the Respondent, a sample review shows that the Appellant has a history of non- compliance with respect to valuation of goods before clearance, hence prompting additional assessment on valuation. The demand notice focused on tariff misdeclaration for all items wrongly classified which affects the taxes due to the Respondent.

43. It maintained that classification of goods is in accordance with the provisions of the EAC CET following the GIRS and the items are classified as presented and described by the Taxpayers but in the instant case, the Appellant’s description clearly shows that it imports car tyres but classifies them as bus/ lorry tyres which attract 10% Import Duty advalorem rate to evade tax bracket of 25%.

44. The Respondent alleged that under entry number 22ATNIM400001362, the Appellant imported a Mazzini Brand Chinese tyres size 255/35ZR20 ECO607 but declared it as a bus/lorry tyre. The Respondent added that there are no bus/lorries that use low profile tyres due to load capacity and speed rating.

45. It added that the customs system is a self-declaration and the burden lies with the Appellant to ensure that the correct classification is presented to the clearing agent to allow correct declarations. It asserted that a post clearance audit helps ensure compliance through identifying mistakes that may not have been captured before clearance as a risk management tool.

46. It was the Respondent’s case that all the Appellant’s importations are car tyres and none are classifiable as a bus/lorry tyre. The Respondent insisted that the Appellant import SUV and light truck such as pick-up tyres.

47. It asserted that the end use of the tyre does not negate what is manufactured for due to safety reasons and that one cannot import a car tyre for use on a lorry based on load index and safety measures. The Respondent averred that from a sample of a bus/lorry tyre markings the profile is a high profile and the load index shows it has a higher capacity for loads. This is indicated on load index parameter tables which is standard for all tyre manufacturers.

48. It also stated that each manufacturer has a clear guideline on the principle use of each tyre produced based on catalogues.

49. The Respondent alleged that a Mazzini brand Chinese tyre size 225/35ZR19; ECO607 is a car tyre as opposed to bus and lorry tyres. It stated that they are easily distinguishable by the pattern type, load index and use which was declared under entry number 23EMKIM40429663 as a bus/lorry tyre.

50. It stated that Section 235 and 236 of EACCMA allows the Respondent to conduct a post clearance audit and that the WTO TFA Article 7 paragraph 5 provides for the post clearance audit mandate and guided by the EAC PCA procedure manual. The Respondent therefore, maintained that it is empowered under Sections 135 and 249 of EACCMA, 2004 to demand short levied taxes within 5 years.

51. In addition, the Respondent asserted that GIR 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes. It noted that GIR 6 states that 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 this rule the relative section and chapter notes also apply unless the context otherwise requires.

52. In its written submissions to support its position. In summary, the Respondent submitted that the consignment that the Appellant imported is classifiable under HS Code 4011. 10. 00.

53. The Respondent relied on the case of Republic vs. Commissioner General & Another Ex-parte AWAL Ltd [2008] eKLR; Beta Healthcare International Ltd vs. Commissioner of Customs Services [2010] eKLR; and Commissioner of Customs and Border Control vs. Kenya Breweries Limited [2022] KEHC 14570 (KLR) to interrogate the interpretation of the harmonized system of classification of goods.

54. It also cited the case of Pharmaceutical Manufacturing (K) Co. Ltd & 3 others vs. Commissioner General of Kenya Revenue Authority & 2 others [2017] eKLR to submit that Section 135 of the EACCMA empowers the Respondent to demand for short levied taxes.

55. Consequently, the Respondent asserted that the Respondent’s Review Decision dated 11th December 2023 is proper in law and the same should be affirmed.

Respondent’s prayers 56. The Respondent urged this Tribunal be pleased to find that:a.The Respondent’'s decision to classify the Appellant's imported tyres under HS Code 4011. 10. 00 is proper in law and the same be affirmed; and,b.This Appeal is without merit and the same be dismissed with costs to the Respondent.

Issues for Determination 57. The Tribunal having carefully evaluated parties’ pleadings, the main issues that call for its determination are as hereunder;i.Whether the Respondent erred in Applying (EAC/CET) 2022 instead of (EAC/CET) 2017; and,ii.Whether the Respondent erred in classifying the Appellant’s imports under HS Code 4011. 10. 00 instead of HS Codes 4011. 20. 10 and HS Code 4011. 20. 20.

Analysis and Findings 58. The Tribunal having identified the issues for determination, it shall analyze the same as herein under;

i. Whether the Respondent erred in Applying (EAC/CET) 2022 instead of (EAC/CET) 2017; 59. The Appellant raised this issue under the memorandum of appeal wherein the Appellant stated as follows:That the Respondent erred in law and fact in finding that the classification of goods imported by the Appellant fell under the East African Community Common External Tariff (EAC/CET) 2022 despite knowing that the relevant period of import was before the Tariffs were promulgated.’’

60. It appears that the Appellant took the position that the Respondent ought to have relied on EAC CET 2017. If this is what the Appellant was trying to assert, then the assertion lacks merit for two reasons. First, the Tribunal examined Appellant’s import entries and noted that the Appellant made declarations in 2023 after EACCET 2022 came into force, while some declarations were made before EACCET 2022 took effect. Secondly, with regards to declarations that the Appellant made before EACCET 2022 came into force, the provisions of HS Code 40. 11 and the subheadings thereunder under EACCET 2017 did not change when EACCET 2022 came into force on the 1st July 2022. Therefore, the provisions of Heading 40. 11 under EACCET 2017 and those under EACCET 2022 are still the same to date.

61. Consequently, the Tribunal finds that the Appellant was not prejudiced in any manner as a result of the Respondent applying the EACCET 2022.

ii. Whether the Respondent erred in classifying the Appellant’s imports under HS Code 4011. 10. 00 instead of HS Codes 4011. 20. 10 and HS Code 4011. 20. 20. 62. Heading 40. 11 of EAC CET provides for ‘New pneumatic tyres, of rubber.’

63. HS Code 4011. 10. 00 provides for tyres ‘of a kind used on motor cars (including station wagons and racing cars’ attracts 25% duty. The Respondent argued that the products that the Appellant imported falls under this code.

64. On the other hand, HS Codes 4011. 20. 10 and 4011. 20. 20 provides for tyres that are to be used on buses or lorries as follows:- Of a kind used on buses or lorries:’’4011. 20. 10 --- With a rim size below 17 inches.’’ This attracts 25% as duty.4011. 20. 20 --- With a rim size of 17 inches and above.’’ This attracts 10% duty.

65. Before delving deeper into this issue, it is important to note that General Interpretation Rules (GIR) for the Classification of Goods provides that classification of goods in the Nomenclature shall be governed by a number of principles. In this regard, GIR 1 provides as follows as follows;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.’’

66. Whereas the Appellant asserted that the tyres are classifiable under HS Code 4011. 20. 20, the Respondent asserted that the tyres are classifiable under HS Code 4011. 10. 00. To determine this case, the Tribunal considered the provisions of GIR 3 which provides that;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.’’

67. The Appellant asserted that it did not import tyres used on cars therefore HS Code 4011. 10. 00 was not applicable because it imported tyres to be used on buses and lorries. The Appellant did not mention the rim sizes of the tyres be it in its Statement of Facts, Memorandum of Appeal or witness statement of Narendra yet Hs Code 4011. 20. 10 and 4011. 20. 20 makes specific reference to the rim sizes.

68. The Tribunal examined all declarations that the Appellant filed in relation to the goods that it imported wherein the Tribunal found some of the description of the tyres that the Appellant imported. The Tribunal examined SADs and import declaration forms and noted that the Appellant imported tyres whose size fell below 17 inches classifiable under HS Code 4011. 20. 10 attracting duty at the rate of 25%. The Tribunal also noted that the Appellant imported tyres whose rim size was 17 inches and above classifiable under HS Code 4011. 20. 20 and which attract duty at the rate of 10%. The Respondent did not comment on HS Code 4011. 20. 10 yet some of the tyres that the Appellant imported meets the description of the said code.

69. Pursuant to GIR 3 (a), the Tribunal established that HS Codes 4011. 20. 10 and 4011. 20. 20 provides a clear description of the tyres in terms of their rim sizes. Consequently, it is plausible that the tyres in issue ought to be classified under HS Codes 4011. 20. 10 and 4011. 20. 20.

70. The Tribunal’s finding is also informed by the fact that the Respondent did not deny that it examined the tyres upon import. The Respondent ought to have adduced evidence of what it actually examined upon importation for example by adducing actual photos of the tyres with description to enable the Tribunal determine the most suitable HS Code. However, the Respondent did not do so.

71. Whereas the Respondent filed a number of pictures from one of the manufacturers of the tyres, the samples were of little value if the samples or photos of what the Appellant actually imported was not adduced in evidence. Therefore, comparative analysis of what the Appellant actually imported vis a vis samples from some of the manufacturers was not appropriate.

72. Further, whereas the Respondent referred to samples from Mazzini tyres, upon perusal of the samples, the Tribunal noted that Mazzini has both passenger and light truck tyres and with rim sizes below 17 inches; and rim size of 17 inches and above. This is why it was key for the Respondent to avail information on the tyres that it actually examined when the tyres were imported.

73. Whereas the Appellant has a burden to prove that the Respondent’s decision is incorrect, this does not mean that the Respondent has nothing to prove. Since HS Code Hs Code 4011. 20. 20 and Hs Code 4011. 20. 10 expressly make reference to rim sizes, the Respondent ought to have demonstrated that the tyres that the Appellant imported were not of rim size 17 inches and above therefore, could not be classified under Hs Code 4011. 20. 20. Further, to justify classification under Hs Code 4011. 10. 00, the Respondent ought to have demonstrated that the tyres that the Appellant imported could not be classified under Hs Code 4011. 20. 10 owing to rim sizes. The Respondent did not do so.

74. It has been said time and again that tax laws are to be interpreted strictly as was held in the case of Cape Brandy Syndicate vs. Inland Revenue Commissioner (1920) 1KB 64. Strict interpretation of the laws in issues means that the Appellant’s goods falls under HS Codes 4011. 20. 10 and 4011. 20. 20 as opposed to Hs code 4011. 10. 00 as proposed by the Respondent. The Respondent in an attempt to justify classification under Hs Code 4011. 10. 00, it alluded to tyres categorization under ‘all season’, ‘winter’ and ‘summer’. This categorization is broad and bound to mislead because it means that only vehicles under Hs Code 4011. 10. 00 can be equipped with ‘all season’, ‘winter’ or ‘summer’ tyres. Adopting the Respondent’s line of reasoning would be in contravention of GIR 6 which requires classification of goods to be determined according to terms of those of the subheadings.

75. 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 this Rule the relative Section and Chapter Notes also apply, unless the context otherwise requires.’’

76. Consequently, the Tribunal finds that the Respondent erred in classifying the Appellant’s imports under HS Code 4011. 10. 00 instead of HS Codes 4011. 20. 10 and HS Code 4011. 20. 20, thus the Appeal succeeds.

77. Whereas the Tribunal finds that HS Codes 4011. 20. 10 and 4011. 20. 20 provides a clear description and clear terms of the tyres in terms of their rim size in compliance with GIR 6, it does not mean that the Appellant is off the hook. This is so because the Appellant did not address the issue relating to some of its tyres falling under Hs Code 4011. 20. 10 and that its documentary evidence indicated that it actually declared that some of its tyres fell under Hs Code 4011. 20. 10. The Appellant remained mute as to whether it paid the duty at 25% under HS Codes 4011. 20. 10 therefore, the appeal cannot succeed fully.

78. Bearing in mind the nature of the facts in issue in this case, the Tribunal finds that some of the tyres that the Appellant imported are classifiable under HS Code 4011. 20. 10 while some under HS Code 4011. 20. 20. Pursuant to the foregoing analysis, justice requires that the matter be referred back the Respondent to find out whether the Appellant paid part of the taxes falling under HS Codes 4011. 20. 10.

Determination 79. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal is partially meritedorious and makes the following orders:a.The Aappeal be and is hereby allowed subject to order (b) below;b.The Respondent’s Review Ddecision dated 11th December 2023 is hereby set aside under Section 29 (3) (c) (ii) of the Tax Appeals Tribunal Act to allow the Respondent to establish whether the Appellant paid taxes for goods that were declared under HS Code 4011. 20. 10; and,.c.Each party to bear its own cost.

80. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 31ST DAY OF JANUARY 2025. ROBERT M. MUTUMA - CHAIRPERSONMUTISO MAKAU - MEMBERJEPHTHAH NJAGI - MEMBERDR. TIMOTHY B. VIKIRU - MEMBERDELILAH K. NGALA - MEMBER