Pesapal Limited v Commissioner of Customs and Border Control [2024] KETAT 103 (KLR)

Pesapal Limited v Commissioner of Customs and Border Control (Tax Appeal 1390 of 2022) [2024] KETAT 103 (KLR) (2 February 2024) (Judgment)

Neutral citation: [2024] KETAT 103 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 1390 of 2022

RM Mutuma, Chair, EN Njeru, M Makau, BK Terer & W Ongeti, Members

February 2, 2024

Between

Pesapal Limited

Appellant

and

Commissioner of Customs and Border Control

Respondent

Judgment

Background 1. The Appellant is a limited liability company duly incorporated under the Companies Act of the laws of Kenya, and its principal business activity is the provision of payment services to business and individuals through online payments and onsite payments through its point of sale machines.

2. The Respondent is a principal officer appointed under the Kenya Revenue Authority Act and the Kenya Revenue Authority is mandated with the responsibility of assessing, collecting and accounting for all tax revenue as an agent of the Government of the Republic of Kenya, and is also mandated with the responsibility of the administration and enforcement of the statutes set out under the Schedule to the Act.

3. The Respondent conducted a Post Clearance Audit on the Appellant’s imported Mobile Point of Sale devises (MPOS) and reclassified the same from tariff HS code 8471. 41. 00 to HS code 8470. 50. 00 contending that the same had been misclassified, and consequently issued a demand notice dated 22nd July 2022 for additional tax in the sum of Kshs. 2,837,476. 00 thus giving rise to the dispute herein.

4. The Appellant made an application for review on 22nd August 2022 giving justification why its goods had not been misclassified, and the Respondent issued its review decision on 21st September 2022 whereon it dismissed the Appellant’s application for review, and upheld its initial reclassification, assessment and demand.

5. The Appellant being dissatisfied with the Respondent’s review decision lodged a Notice of Appeal on 3rd November 2022 in the Tribunal, and subsequently filed its Memorandum of Appeal on 17th November 2022 against the review decision of the Respondent.

The Appeal 6. The Appellant filed its Memorandum of Appeal on 17th November 2022 and set out the following grounds of Appeal;i.That the Respondent erred in law and fact by reclassifying the Appellant’s imported MPOS devises from tariff 8471. 41. 00 to tariff 8470. 50. 00. ii.That the Respondent erred in law and fact by imposing additional taxes amounting to Kshs. 2,837,476. 00 on the Appellant’s imported MPOS devises.iii.That the Respondent ‘s demand for additional import duty and VAT on the imported MPOS devises violates the Appellant’s right to legitimate expectation.

The Appellant’s Case 7. The Appellant has set out its case on its;a.Statement of Facts dated and filed 17th November 2022, andb.Written submissions dated 8th August 2023 and filed on 17th August 2023.

8. The Appellant stated that following a desk audit carried out by the Respondent on its business imports, issued a demand notice dated 22nd July 2022 assessing additional taxes amounting to Kshs. 2,837,476. 00 consisting of Kshs. 2,446,261. 30 and VAT of Kshs. 391,214. 70 on the basis that the Appellant was non-compliant with the provisions of the East African Community Common External Tariff, 2017 (EAC CET), having misclassified its imported Mobile Point of Sale devises.

9. The Appellant stated further that the Respondent alleged that the Appellant’s imported MPOS devises were misclassified as automatic data processing machines under tariff 8471. 41. 00 instead of 8470. 50. 00 which attract import duty at 10% and VAT.

10. The Appellant stated that it applied for a review of the Respondent’s assessment on 22nd August 2022, on the basis;a.That the imported MPOS devises did not meet the specifications of tariff 8470. 50. 00 and its WCO explanatory note.b.That the imported MPOS devises were correctly classifiable as automatic data processing machines and met the specifications of tariff 8471. 41. 00.

11. The Respondent issued its review decision on 21st September 2022 and upheld its review decision and demand.

12. The Appellant contended that the Respondent erred in law and fact by reclassifying its imported MPOS devises from tariff 8471. 41. 00 to tariff 8470,50. 00.

13. The Appellant contended that its MPOS devises terminals have been properly classified under tariff HS code 8471. 41. 00 and stated that this applies to;“Automatic data processing machines comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined.”

14. The Appellant also stated that HS Heading 84. 71 broadly defines automatic processing machines as;“Automatic data processing machines and units thereof; magnetic or optical readers; machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.”

15. The Appellant also contended that tariff code 8470. 50. 00 applies to cash registers, and that Heading 84. 70 generally applies to;“Calculating machines and pocket size data recording, reproducing and displaying machines with calculating functions; accounting machines, postage franking machines, ticket issuing machines and similar machines, incorporating a calculating devise; cash registers.”

16. The Appellant further stated that its imported mpos devises that are the subject of this Appeal do not meet the description set out under Heading 84. 70, and are solely used for recording payments.

17. The Appellant also contended that the WCO explanation on Heading 84. 70 provides that;“cash registers include machines which are often combined with a till or drawer in which cash is kept” which functionality the mpos devises do not possess.

18. The Appellant further contended that the above WCO explanation on Heading 84. 70 also implicitly acknowledges that there is a difference between cash registers and automatic data processing machines, which the Appellant contended its imported mpos devises fell under. The WCO explanation above cited further states;“This heading also covers cash registers working in conjunction, online or offline, with an automatic data processing machine and cash registers which use, for example, the memory or microprocessor of another cash register (to which they are linked by cable) to perform the same functions.”

19. The Appellant contended that considering the foregoing explanation, there is a clear distinction between cash registers and automatic data processing machines, hence the two have to work in conjunction with each other, to properly fall within the tariff classification. It stated that there is no such conjunction between its mpos devises terminals and any standalone cash registers, which would render the mpos devises to fall under tariff code 8471. 50. 00.

20. The Appellant stated that in classification, the General Interpretation Rules (GIR) Rule 1 provides that the titles of Sections, Chapters, 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 heading and chapter notes. In essence classification is determined by the words (items) in the headings, and the sections and chapter notes, that apply to them unless the terms of the heading and the notes say otherwise. In other words, if the goods to be classified are covered by the words in a heading and the section and chapter notes do not exclude classification in that heading, the heading applies.

21. The Appellant submitted that in the interpretation of tax statutes e.g, EACCMA, call for a strict interpretation of the language used, citing the authority in the case of Cape Brandy Syndicate vs. Inland Revenue Commissioners I,R,C 1 KB , where Rowlett, J held;“In a taxing Act, one has to look merely 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 a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”

22. The Appellant submitted that its mpos devises have been properly classified under tariff code 8471. 41. 00, which applies to;“Automatic data processing machines comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined.”

23. The Appellant further submitted that Heading 84. 71 broadly defines automatic data processing machines as;“Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.”

24. The Appellant submitted that a strict interpretation of the foregoing classification fully captured the description of its imported mpos devices, which are a mobile payment solution device that enable smartphones to accept payments. The mpos devices is therefore an automatic data processing machine which connects wirelessly to smartphones, and acts as a card reader which accepts swipes, near field communication (NFC)payments and contactless payments.

25. The Appellant further submitted that as set out under Heading 84. 71, its imported mpos terminals have magnetic and optical readers that enable it to read cards that are used to effect payments on it and transcribe that data which is then processed as a payment. The units also have an input and output which enables the cardholder to swipe their cards when making payment, as envisaged under tariff code 8471. 41. 00.

26. In view of the foregoing, the Appellant submitted that its imported mpos devices were properly classified under HS code 8471. 41. 00.

27. The Appellant also contended that at importation of the mpos devices, it was well aware that the import of mpos devices attracts customs duty and VAT at 0 % as it is an automatic data processing machine under tariff 8471. 41. 00.

28. The Appellant stated that being cognizant of the foregoing fact, and that its consignment contained only mpos devices, it did not expect to make payment of any customs duty or VAT upon entry into Kenya, thus creating a legitimate expectation that the consignment will not attract any additional customs duty and or VAT.

29. The Appellant cited the case of Republic vs. Kenya Revenue Authority Exparte M-Kopa Kenya Ltd (2018) eKLR where the court addressed the principle of legitimate expectation as was enunciated in the case of Keroche Industries Ltd vs. KRA & 5 others HC743/2006 (NRB) (2007) KLR 240.

30. The Appellant based on the foregoing contended that its legitimate expectation was thwarted by the Respondent and consequently its demand for import duty and VAT of Kshs. 2,837,476. 00 was erroneous and ought to be set aside.

Appellant’s Prayers 31. By reason of the foregoing submissions, the Appellant prayed that the Respondent’s review decision dated 21st September 2022 be set aside and its Appeal herein be allowed with costs.

The Respondent’s Case 32. The Respondent has set out its case on its;a.Statement of Facts dated 16th December 2022 and filed on 17th December 2022 and the documents annexed thereto; andb.Written submissions dated 29th August 2023 and filed on 31st August 2023.

33. The Respondent stated that the Appellant erred in classifying its mpos devices under tariff code HS code 8471. 41. 00 which is reserved for automatic data processing machines as opposed to HS code 8470. 50. 00 which is reserved for cash registers.

34. The Respondent also stated that the classification of goods in the nomenclature is guided by General Interpretation Rules (GIRs) as set out in the EAC CET, 2017 version.

35. It stated that the EAC/CET ,2017 provides that the automatic data processing machines and units thereof under Heading 8471 shall attract 0 % duty and VAT, while cash registers under Heading 8470 shall attract duty at 10 %.

36. It was further stated that the legal regime guiding the classification of goods in East Africa is the East African Community Common External Tariff as read with the World Customs Organization’s Explanatory Notes.

37. The Respondent stated that according to GIR1, classification shall be determined according to the terms of the Headings and any relative Section or Chapter Notes. The Respondent noted that the rules of classification clearly provide that HS classifications should be read not to distort the true classification but to give it meaning.

38. The Respondent further stated that under GIR Rule 1 (b), when by application of the rule, 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 ….”.

39. The Respondent stated that a point of sale terminal (POS) is a hardware system for processing payments at retail locations. It has a software embedded in the hardware which reads magnetic strips, or chips of credit or debit cards. The MPOS imported by the Appellant is a hardware system for processing contactless/non-contactless card payments at retail locations, and has a software embedded in the hardware which is used for recording of transactions.

40. The Respondent also posited that the mpos devices are used to make payments, either by swiping credit cards/debit cards and other contactless payments such as NFC, and also to record payments.

41. The Respondent also averred that the entries examined revealed that most of the importers of the devices, including the Appellant were classifying the POS terminals under the Tariff code 8471. 41. 00, which covers;“Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.”

42. The Respondent submitted that according to Chapter notes Note 5A to Chapter 84 of EAC /CET the expression“automatic data processing machine” means a machine capable of;“a. storing the processing program or programs and at least the data immediately necessary for the execution of the program.b.Being freely programmed in accordance with requirements of the user.c.Performing arithmetical computations specified by the user; andd.Executing without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run.”

43. The Respondent further submitted that even if the mpos devices have a program for processing payments, it cannot be freely programmed, perform arithmetic computations, neither can it execute without human intervention, a processing program which requires them to modify their execution, by logical decision during a processing run.

44. The Respondent therefore submitted that for the aforesaid reasons, it finds tariff heading 8470 appropriate.

45. Tariff heading 8470 covers: -“Calculating machines and pocket size data recording, reproducing and displaying machines with calculating functions; accounting machines; postage franking machines; ticket issuing machines and similar machines, incorporating a calculating device; cash registers.”

46. It was also the submission of the Respondent that WCO Explanatory Notes to Heading 8470, and more specifically Tariff HS code 8470. 50. 00 in part, pertinent to the issue in question, stated;“this group comprises cash registers whether or not incorporating a calculating device.”

47. It submitted that these machines are used in shops, offices, showrooms, etc. to provide a record of all transactions? (sales, services rendered etc.) as they occur, of the amounts involved, the total of the amounts recorded and, in some cases, the code number of the article sold, quantity sold, time of transaction etc. By the foregoing grouping, the correct tariff- classification of the mpos devices ought to be 8470. 50. 00.

48. The Respondent also submitted that whereas the Appellant took the position that the Respondent erred by undertaking the post clearance audit, reclassifying, assessing and issuing a demand after the goods had been cleared, amounting to a breach of its legitimate expectation, the Appellant has not shown which expression was made to it by the Respondent, and how it relied on the said expression when classifying its consignments, so as to amount to legitimate expectation.

49. The Respondent further submitted that having not made any expression to the Appellant at any point that the correct classification was tariff code 8471. 41. 00, the Appellant misguidedly invoked the doctrine of legitimate expectation.

50. It was a further submission of the Respondent that legitimate expectation can only arise within the confines of the law. It cited the case of Republic vs. KRA Exparte Shake Distributors Ltd [2012] eKLR where it was held:-“Such an expectation arises where a decision maker has led someone affected by the decision to believe that he will receive or retain a benefit or advantage (including that a hearing will be held before a decision is taken.”

51. The Respondent submitted that in the instant case, no expression of was ever made by the Respondent to the Appellant.

52. It was a further submission of the Respondent that legitimate expectation cannot override a clear provision of the law. It stated that being clothed with jurisdiction to carry out post clearance audit and the fact that goods have been allowed to leave the Port at the first instance does not create any legitimate expectation that the declarations made by the importers are correct.

53. The Respondent therefore submitted that no legitimate expectation arose from the acts or expressions of the Respondent to the Appellant, and as such a breach of legitimate expectation could not have thereby arisen.

54. By reason of the foregoing, the Respondent prayed that its review decision dated 21st September 2021 be upheld and the Appellant ‘s Appeal herein be dismissed with costs.

Issues for Determination 55. The Tribunal having considered the parties’ filings and submissions is of the considered view that the Appeal herein distils into two issues for determination as the follows;i.Whether the Respondent in reclassifying the Appellant’s imported goods was in breach of the appellant’s legitimate expectation.ii.Whether the Respondent was justified in classifying the Appellant ‘s imported MPOS devices under tariff HS code 8470. 50. 00 instead of HS code 8471. 41,00.

Analysis and Determination i. Whether the Respondent in reclassifying the Appellant’s imported goods was in breach of the Appellant ‘s legitimate expectation. 56. The dispute herein arose as a result of a post clearance audit conducted by the Respondent on the Appellant’s imported mobile point of sale devices (mpos) following which it reclassified the goods from tariff HS code 8471. 41. 00 to HS code 8470. 50. 00, contending that the tariff entered by the Appellant had been misclassified. Consequently, the Respondent issued a demand notice dated 22nd July 2022 for the additional- tax in the sum of Kshs. 2,837,476. 00.

57. The Appellant submitted that at the point of importation of the MPOS devices, it was well aware of the fact that the importation of the devices attracted Customs duty and VAT at 0 % as the same are automatic data processing devices under Tariff Code 8471. 41. 00.

58. The Appellant further submitted that being cognizant of the foregoing fact, it did not expect to make any payment of Customs duty or VAT upon entry into Kenya, thus creating a legitimate expectation that the consignment will not attract any additional Customs duty or VAT.

59. The Appellant relied on the case of Republic vs. KRA Exparte M-Kopa Kenya Ltd [2018] eKLR where the court addressed the principle of legitimate expectation as was enunciated in the case of Keroche Industries Ltd vs. KRA & 5 others HCCC 743/2006 [2007] KLR 240.

60. The Appellant based on the foregoing contended that its right to legitimate expectation was thwarted and thereby breached by the Respondent and consequently its demand for Import duty and VAT of Kshs. 2,837,476. 00 was erroneous and ought to be set aside.

61. On the hand , the Respondent submitted that whereas the Appellant took the position that the Respondent by undertaking the post clearance audit, reclassifying, assessing and issuing a demand after the goods had been cleared, amounted to a breach of legitimate expectation, it has not shown which expression was made to it by the Respondent making a promise, and how it relied on the said expression when classifying its consignment, so as to amount to legitimate expectation.

62. The Respondent further submitted that having not made any expression or promise to the Appellant at any point that the correct classification was Tariff Code 8471. 41,00, the Appellant misguidedly invoked the principle of legitimate expectation.

63. The principle of legitimate expectation arises within the confines of the law. In the case of Republic vs. Kenya Revenue Authority Exparte Shake Distributors Ltd (2012) eKLR, the court laid down the principle of legitimate expectation as thus:-“What is legitimate expectation? According to Harry Woolf, Jeffrey Jowell and Andrew Le Sueur at page 609 of the 6th ED of De Smith’s Judicial Review,“Such an expectation arises where a decision maker has led someone affected by the decision to believe that he will receive or retain a benefit or advantage (including that a hearing will be held before a decision is taken); It follows therefore that the cornerstone of legitimate expectation is a promise made to a party by a public body that it will act or not act in certain manner. For the promise to hold, the same must be made within the confines of the law. A public body cannot make a promise which goes against the express letters of the law. In the case before me there is no evidence of a written or verbal promise made to the Applicant that its goods would be allowed into Kenya once he obtained the necessary licenses. one may argue that legitimate expectation was based on the understanding that goods from Uganda would be admitted into Kenya at a duty of 0 %. However, that argument cannot hold when one considers the fact that the Respondent has a statutory duty to ensure that all the necessary taxes for goods entering into Kenya have been paid. The Applicant ‘s argument that its legitimate expectation was breached therefore fails.”

64. The Tribunal having carefully reviewed the filings and submissions of the parties notes that there is no single averment that any expression or promise was made by the Respondent, as a public body, to the Appellant.

65. Legitimate expectation can only arise when a public body, by representation or past conduct, within the confines of the law, expresses or promises an expectation that is within its power to fulfill.

66. The Appellant apparently presumed at the point of importing its devices the duty applicable would be 0 %, assuming the devices would be classifiable under HS Code 8471. 41. 00. There was no undertaking or expression made by the Respondent to the Appellant in that respect.

67. A taxpayer, cannot grant itself a legitimate expectation by virtue of the fact that it has been importing under a Tariff that the Respondent later on confirms is not the correct tariff. Legitimate expectation cannot override the clear provisions of the law.

68. In light of the foregoing, the Tribunal finds and holds that the Respondent did not create any legitimate expectation to the Appellant, and that being so, there was no breach of its right to legitimate expectation.

69. Consequently, the Appellant’s claim that its right to legitimate expectation was breached by the Respondent hereby fails.

ii. Whether the Respondent was justified in reclassifying the Appellant’s imported MPOS devices under tariff HS code 8470. 50. 00 instead of HS code 8471. 41. 00. 70. The Appellant averred that it had correctly classified its imported MPOS devices under the tariff for automatic data processing and contended that it was correctly classifiable under Tariff Code 8470:50. 00.

71. The Appellant contended that its MPOS devices were properly classified under Tariff HS Code 8471. 41. 00, and asserted that the tariff applied to;“Automatic data processing machines comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined.”

72. It also submitted that HS Heading 84. 71 broadly defines automatic processing machines as;“Automatic data processing machines and units thereof; magnetic or optical readers; machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.”

73. The Appellant further contended that Tariff Code 8470. 50. 00 applies to cash registers, and that Heading 84. 70 generally applies;“Calculating machines and pocket size data recording, and displaying machines with calculating functions; accounting machines, postage franking machines, ticket issuing machines and similar machines, incorporating a calculating device; cash registers.”

74. The Appellant also asserted that the WCO explanation on Heading 84. 70 provides that:-“cash registers include machines which are often combined with a till or drawer in which cash is kept.” which functionality the MPOS devices lacked.

75. The Appellant also submitted that the WCO explanations on Heading 84. 70 implicitly acknowledged that there is a difference between cash registers and automatic data processing machines which the Appellant contended its imported MPOS fell under. The WCO explanation above cited stated;“This heading also covers cash registers working in conjunction, online or offline, with an automatic data processing machine and cash registers which use, for example, registers which use, the memory or microprocessor of another cash register (to which they are linked by cable) to perform the same functions.”

76. The Appellant further submitted that, in view of the foregoing explanation, there is a clear distinction between cash registers and automatic data processing machines. Hence the two have to work in conjunction with each other, to fall within the tariff classification, and asserted that there is no such conjunction between its MPOS devices terminals and standalone cash registers, which would render the MPOS devices to be classifiable under Tariff Ccode 8471. 50. 00.

77. The Appellant also submitted that a strict interpretation of the GIR classification rules fully captured the description of its imported MPOS devices, which are mobile payment solutions devices that enable smartphones to accept payments. The MPOS device is therefore an automatic data processing machine which connects wirelessly to smartphones, and acts as a card reader which accepts swipes, near field communication (NFC) payments and contactless payments.

78. It was also a submission of the Appellant that its imported MPOS have magnetic and optical readers that enable it to read cards that are used to effect payments on it and transcribe that data which is then processed as a payment. The units also have an input and output which enables the cardholders to swipe their cards when making payment.

79. The Appellant therefore submitted that its imported MPOS devices were properly classified under HS Code 8471. 41,00.

80. On the other hand, the Respondent submitted that a POS is a hardware system for processing payments at retail locations and has a software embedded in the hardware which reads the magnetic strips, or chips of credit or debit cards. It further submitted that the MPOS devices imported by the Appellant are a hardware system for processing contactless/non-contactless card payments at retail locations and have a software embedded in the hardware which is used for recording transactions.

81. The Respondent also averred that the entries examined revealed that most of the importers of the devices, including the Appellant were classifying the POS terminals under the Tariff Code 8471. 41. 00, which covers;“Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.”

82. The Respondent also submitted that according to Chapter Note 5 to Chapter 84 of the EAC/CET , the expression, “automatic data processing machine” means a machine capable of storing the storing program or programs and at least the data necessary for the execution of the program, being freely programmed in accordance with the requirements of the user, performing arithmetic computations specified by the user , executing without human intervention , a processing program which requires them to modify their execution, by logical decision during a processing run.

83. On account of the foregoing, it was the Appellant’s contention that even if the MPOS devices have a program for processing payments, it cannot be freely programmed, perform arithmetic computations, neither can it execute without human intervention, a processing program which requires- them to modify their execution, by logical decision during a processing run.

84. The Respondent submitted that by reason of the forgoing, it found the Heading 84. 70 appropriate for the classification of the MPOS devices.

85. It submitted that WCO explanatory notes to Heading 84. 70, and specifically Tariff Code 8470. 50. 00, stated,“this group comprises cash registers whether or not incorporating a calculating device.”

86. The Respondent equally submitted that these machines are used in shops, showrooms, offices, hotels, factories etc. to provide a record of all transactions (sales, services rendered etc.) as they occur, the amounts involved, the total amounts recorded and, in some cases, the code number of the article sold, quantity sold, time of transaction etc. and contended that by virtue of the foregoing grouping, the correct tariff classification of the MPOS ought to be 8470. 70. 00.

87. The Tribunal has carefully gleaned the arguments advanced by both parties, and notes that the classification of the devices in question is wholly determinable by the extent of their technological functionality as defined in the respective terms of the Heading and the Explanatory Notes.

88. From the evidence submitted by the parties, the Tribunal is left with no doubt that the MPOS devices are a payment solutions device that enable smartphones accept payments and are therefore automatic data processing machines that enable connect wirelessly to smartphones, and also act as card reader to accept debit/credit card swipes, near field communication payments, and other contactless payments. Evidence has also been tendered that the MPOS devices have magnetic and optical readers that enable them to read cards that are used to effect payments on it and transcribe that data which is then processed as a payment. The units also have an input and output which enable the cardholder to swipe the card while making payments.

89. It is noteworthy that Tariff Code HS 8471. 41. 00 applies to devises which are described in the tariff as;“Automatic data processing machines and units thereof; magnetic or optical readers; machines for transcribing data onto media in coded form and machines for processing such data, not elsewhere specified or included.”

90. The Heading 84. 71 applies to devices described as;“Automatic data processing machines comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined.”

91. Tariff 84. 70 which has been proffered by the Respondent as the appropriate tariff covers;“Calculating machines and pocket size data recording, reproducing, and displaying machines; postage franking machines; ticket issuing machines and similar machines, incorporating a calculating device; cash registers.”

92. The Respondent was of the view that these machines used in shops, offices, showrooms, hotels to provide record of transactions (e.g. Sales and services rendered) as they occur, records of the amounts involved, total amounts recorded, code number of the article sold, quantity sold, time of transaction etc. was ejusdem generis applicable to the MPOS devices, and hence the MPOS qualified to be described as cash registers.

93. However, given the technical functionality and specifications of the MPOS devices, and the technical specifications and functionality of cash registers, the Tribunal is satisfied that the MPOS devices cannot be correctly described within the term cash registers, and comes to the inescapable conclusion that the said devices are more appropriately describable under automatic data processing machines as opposed to cash registers.

94. The Tribunal is also alive to the fact that Rule 4 of the General Rules for the Interpretation of the Harmonized System provides that goods which cannot be classified in accordance with the above Rules shall be classified under the heading appropriate to the goods to which they are most akin. Contrasting the goods listed under Tariff Code 8471. 41. 00 and those listed under Tariff Code 8470. 50. 00, it is quite clear that the technical functionality and description of the MPOS devices is most akin to the goods described under Tariff Code 8471. 41. 00, and not those listed under Tariff Code 8470. 50. 00.

95. By reason of the foregoing finding, the Tribunal finds and holds that the Appellant’s imported MPOS devices were correctly classifiable under the Tariff HS Code 8471. 41. 00.

96. In light of the foregoing findings the Tribunal holds that the Respondent was not justified in reclassifying the Appellant’s imported MPOS under tariff HS Code 8470. 50. 00 instead of the tariff HS Code 8471. 41. 00.

97. The upshot of the foregoing is that the Appellant’s appeal herein is merited and therefore succeeds.

Final Decision 98. The Appellant’s appeal having succeeded the Tribunal makes the following Orders;a.The Appeal be and is hereby allowed.b.The Respondent’s review decision dated 21st September 2022 be and is hereby set aside.c.Each party to bear its own costs.

99. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 2ND DAY OF FEBRUARY, 2024. ROBERT M. MUTUMA - CHAIRPERSONELISHAH N. NJERU - MEMBERMUTISO MAKAU - MEMBERBONFACE K. TERER - MEMBERDR WALTER J. ONGETI - MEMBER