Redavia Kenya Asset Limited v Commissioner of Customs & Border Control [2024] KETAT 148 (KLR)

Redavia Kenya Asset Limited v Commissioner of Customs & Border Control (Tax Appeal 1289 of 2022) [2024] KETAT 148 (KLR) (9 February 2024) (Judgment)

Neutral citation: [2024] KETAT 148 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 1289 of 2022

Grace Mukuha, Chair, G Ogaga, Jephthah Njagi, E Komolo & T Vikiru, Members

February 9, 2024

Between

Redavia Kenya Asset Limited

Appellant

and

Commissioner of Customs & Border Control

Respondent

Judgment

Background 1. The Appellant is a company incorporated under the Companies Act, 2015 that deals with providing both off-grid and on-grid solar solutions.

2. The Respondent is a principal officer of the Kenya Revenue Authority, a statutory corporation duly established under the provisions of the Kenya Revenue Authority Act (CAP. 469 of the Laws of Kenya) as the sole agent of the tax for the assessment and collection of all Government revenue. In exercise of his mandate, the Respondent enforces provisions of law set out in the First Schedule to the KRA Act, among them the East Africa Community Customs Management Act, 2004.

3. The Respondent, on 19th April 2022, issued the Appellant with preliminary Post Clearance Audit ("PCA") findings on the misclassification of solar aluminium mountings under tariff code 7610. 90. 00 instead of tariff code 7616. 99. 00. The Respondent's justification for its decision being the presence of a tariff ruling of reference number KRA/C&BC/BIA/THQ/GEN/008/01/2022.

4. The Appellant responded to the findings, disputing the misclassification of the consignments of aluminium solar mountings

5. The Respondent being dissatisfied with the Appellant's response, issued a demand letter for the short levied duty and VAT, for the aluminium solar mounting Kits imported, amounting to Kshs. 7,058,290. 00 inclusive of penalty, dated 2nd August 2022

6. The Appellant made an application to the Respondent to review its decision on 31st August 2022.

7. Respondent issued the Appellant with a review decision on 19th September 2022.

8. Dissatisfied with the Respondent’s review decision, the Appellant lodged a Notice of Appeal on 19th October 2022.

The Appeal 9. The Appeal is premised on the following grounds as stated in the Appellant’s Memorandum of Appeal dated 1st November 2022 and filed on even date:a.That it is trite law that classification is based on the principles set out by the General Interpretative Rules. General Interpretative Rule 1 (" GIR"), provides that, 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."b.That Heading 7610 of the HS CET provides for classification of "Aluminium structures (excluding prefabricated buildings of heading 94. 06) and parts of structures (for example, bridges and bridge-sections, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, balustrades, pillars and columns); aluminium plates, rods, profiles, tubes and the like, prepared for use in structures."c.That in the absence of the definition of the term Structure, from the EACCMA, 2004, its ordinary meaning is adopted. That Black's Law 9th Edition Dictionary defines the term structure as "Any construction, production, or piece of work artificially built up or composed of parts purposefully joined together..." (Emphasis added).d.That by applying the aforementioned definition, the Respondent in its review decision failed to appreciate that a structure is also a piece of work artificially built up or composed of parts purposefully joined together.e.That the explanatory notes in the HS constitute the official interpretation at the international level and are an indispensable complement. That the Respondent erred in its review decision finding that explanatory note do not capture the characteristics of the final article in question.f.That the Respondent stated that the explanatory notes to Heading 76. 10 state that the provisions of the EN to Heading 73. 08 apply mutatis mutandis to this heading without considering that the notes cover complete and incomplete metal structures, as well as part of structures. That for the purpose of this heading, these structures are characterized by the fact that once they are fixed in position, they generally remain in that position.g.That the Constitution of Kenya in Article 47 (1) and (2) as read together with Sections 4 and 6 of the Fair Administrative Actions Act, 2015 ("FAAA'?, require that if a right or fundamental freedom of a person has been or is likely to be adversely affected by administrative action, the person has the right to be given written reasons for the action. That the Appellant is yet to receive the breakdown requested and is hence not in a position to properly defend itself.h.That the Commissioner created a legitimate expectation through publication of tariff ruling reference CUSN&T/RUL/495/2017 in itswebsite.i.That the Respondent misapplied itself by retrospectively applying a tariff ruling provided in 2022. j.That the Respondent misapplied itself in law by alleging to the misclassification of the aluminium parts.

Appellant’s Case 10. The Appellant’s case is also premised on the following documents filed before the Tribunal:-a.Appellant’s Statement of Facts dated 1st November 2022 and filed on the same date and the documents attached thereto.b.Appellant’s Written submissions dated 2nd February 2023 and filed on the same date.

11. The Appellant averred that it was issued with Preliminary Post Clearance Audit findings dated 19th April 2022 notifying it that it had failed to pay Import duty of Kshs. 6,003,122. 00 and VAT of Kshs. 916,771. 00 totaling to Kshs. 6,919,893. 00

12. The Appellant averred that it objected on 25th April 2022 by stating it was advised on a tariff to use referenced 2017/CUS/V&T/TARI/RUL/495 dated 28th December 2017.

13. The Appellant averred that the Respondent issued it with a demand notice of Kshs. 7,058,290. 00 on 2nd August 2022

14. The Appellant averred that it sought details of the consignments the Respondent was questioning and an explanation of the tariff ruling source the Respondent used as justification for the demand as well as reasons for the demand.

15. The Appellant stated that it sought this information in pursuit of its rights as enshrined in the Constitution in Article 47 of CoK Article 47 (1) and (2) of the CoK as read together with Sections 4 and 6 of the Fair Administrative Actions Act, 2015 ("FAAA") which require that if a right or fundamental freedom of a person has been or is likely to be adversely affected by administrative action, the person has the right to be given written reasons for the action.

16. The Appellant averred that the Respondent replied vide its letter dated 18th August 2022 stating that the ruling reference number KRNC&BC/BIA/THQ/GEN/008/01/2022, relates to a private tariff ruling issued to another taxpayer and that it was unable to share with the Appellant another taxpayer's information.

17. The Appellant averred that the Respondent re-iterated that it relied on the following grounds in its decision;a.That Heading 7610 covers classification of aluminium parts used in structures or prepared for use in structures.b.That the solar mounting Kits are not articles prepared for use in structures but intended for mounting solar panels on roofs.c.That, parts of structures are only utilized during construction.d.That, structures are characterized by the fact that once they are put in position, they generally remain in that position.

18. The Appellant submitted that classification is based on the principles set out by the General Interpretative Rules. That General Interpretative Rule 1 (" GIR"), provides that,“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."

19. The Appellant averred that Heading 7610 of the HS CET provides for classification of:-“Aluminium structures (excluding prefabricated buildings of heading 94. 06) and parts of structures (for example, bridges and bridge-sections, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, balustrades, pillars and columns); aluminium plates, rods, profiles, tubes and the like, prepared for use in structures."

20. The Appellant asserted that in the absence of the definition of the term structure, from the EACCMA, 2004, its ordinary meaning is adopted. That the Black's Law 9th Edition Dictionary defines the term Structure as:Any construction, production, or piece of work artificially built up or composed of parts purposefully joined together... "(Emphasis added).

21. The Appellant averred that by applying the aforementioned definition, the Respondent in its review decision failed to appreciate that a structure is also a piece of work artificially built up or composed of parts purposefully joined together.

22. The Appellant averred that the aluminium parts are artificially joined together to create a structure that is then riveted to either the ground or roofs to provide a supporting platform where the solar panels are to be mounted.

23. The Appellant averred that in its application for review, it even provided photos of these structures but the Respondent failed to appreciate that it deals with the provision of large commercial solar panels and therefore, the aluminium structures are needed to provide support, to resist wind loading up to S0ms-1 thereby making sure the panels generally remain in the position they are placed.

24. The Appellant posited that the Respondent's preferred tariff Heading 7616 barely captures the nature and attributes of the complete aluminium solar mounting structure.

25. The Appellant submitted that mere documentation would not be sufficient to guide the Respondent in establishing the applicable classification without actually visiting one of the solar parks set up by the Appellant.

26. The Appellant submitted that to enable the Tribunal better appreciate the attribute of the aluminium solar mounting structure, it attached various photos of the structures in its appeal papers.

27. To buttress its assertions, the Appellant relied on the case of Republic vs the Commissioner of Domestic Taxes and ex parte Unilever Tea Kenya Limited (2017) where the court relying on Tanganyika Mine Workers Union vs. The Registrar of Trade Unions [1961J EA 629, held that“Where the provisions of an enactment are penal provisions, they must be construed strictly and that in such circumstances you ought not to do violence to its language in order to bring people within it, but ought rather to take care that no-one is brought within it who is not brought within it in express language."

28. To counter the Respondent’s insistence that the parts of structures classifiable under Heading 76. 10 should only be those that are to be used for construction, the Appellant relied on the Oxford dictionary’s definition of construction as:“the process or method of building or making something, especially roads, buildings, bridges, etc"

29. That the definition the Respondent is relying on alludes to large structures which is not what is stated in either the explanatory notes or the terms of Heading 76. 10. That in the aforementioned case law the court stated that:“In tax cases therefore the Court is not entitled to attempt a discovery at the intention of the Legislature but must restrict itself to the clear words of the statute."

30. The Appellant averred that the Respondent can therefore not allude to the misclassification of these structures without the dint of terms of heading and explanatory notes to the heading, that there is no room for intendment as the wordings of Heading 76. 10 and EN's to the heading are clear; and do not in any way only allude to the construction of large structures.

31. The Appellant countered the Respondent’s allegation that above explanatory notes do not capture the characteristics of the final article in question by stating that:a.Firstly, and as per the earlier adopted definition of "structure", the solar mounting clearly fits the definition;b.Secondly, these aluminium structures are fixed in one position, either on the roofs or ground, and generally remain in that position.

32. The Appellant averred that as per the above explanation, it was clear that the articles once assembled or put together, satisfy the definition of the word structure and the explanatory notes to Heading 76. 10. That Heading 76. 10 therefore gives the most appropriate classification for the aluminium solar mounting structure at the heading level of the HS.

33. The Appellant submitted that the Respondent's preferred tariff Heading 7616 barely captures the nature and attributes of the complete aluminium solar mounting structure.

34. The Appellant stated that the Respondent directed its energy in justifying why the appropriate Heading is NOT 76. 10 but failed to provide a justification on why the appropriate Heading is 76. 16.

35. The Appellant submitted that in HS classification, there should be reasons for reclassifying the article from one heading to the other. That the terms of Heading 76. 16 states "other articles of aluminium" which means that before going to heading 76. 16 there should be absolutely no doubt that no other heading fits the description of the aluminium articles in question.

36. The Appellant submitted that it was yet to receive a breakdown of the import entries the Respondent is charging short levied duty and taxes on, in order to enable the substantiate the amount of taxes in question. That this contravenes its right enshrined in the Constitution in Article 47 of CoK Article 47 (1) and (2) of the CoK as read together with Sections 4 and 6 of the Fair Administrative Actions Act, 2015 which requires that if a right or fundamental freedom of a person has been or is likely to be adversely affected by administrative action, the person has the right to be given written reasons for the action.

Appellant’s Prayers 37. The Appellant prayed for orders:-a.The review decision dated 31 August 2022 be annulled and set aside in its entirety;b.The Appeal be allowed with costs to the Appellant;c.The Tribunal provide a declaration on the Appropriate HS classification for the aluminium articles in dispute herein.d.Any other remedies that the Tribunal deems just and reasonable.

The Respondent’s Case 38. The Respondent’s case was premised on the following documents filed before the Tribunal.a.The Respondent’s Statement of Facts dated 30th November 2022 and filed on 1st December 2022 and the documents attached thereto.b.The Respondent’s Written Submissions dated and filed on 17th February 2023.

39. The Appellant being dissatisfied with the Respondent's review decision dated 19th September 2022 has preferred this Appeal under Section 230 of the East Africa Community Customs Management Act.

40. The Respondent received an intelligence profile for a tariff ruling of aluminium mounting kits reference KRA/C&BC/BIA/THQ/GEN/008/01/2022 from which a desk review of imports under tariff 76. 10. 90. 00 for the period 2020 to 2021, was carried out. That the review revealed a short levy of taxes as a result of the application of a duty rate of 0% instead of 25%.

41. Consequently, the Respondent conducted an audit pursuant to Sections 235 and 236 of the EACCMA and issued preliminary desk audit findings for the short levied taxes to the taxpayer on 19th April 2022 whose liability at the time was Kshs. 6,919,893. 00

42. The Appellant was requested on 31st May 2022 to furnish the Respondent with the ruling it relied on vide its letter dated 25th April 2022 referenced 2017/CUS/V& TITARI/RUL/495.

43. The Appellant through its tax agent sent an email on 8th June 2022 objecting to the audit findings stating that the tariff ruling used by the Respondent based on its preliminary findings was KRA/CBC/BIA/THQ/ADV/008/01/2022 which was for plastic bottles.

44. The Respondent issued the Appellant with the demand notice based on Section 135 of EACCMA which allows the Respondent to assess and demand short-levied taxes within five years of importation. That this assessment was made within the five-year window provided by the law and therefore no legitimate expectation on the Appellant was breached.

45. The Respondent stated that its reasons for the decision that were also brought to the attention of the Appellant in the review decision were as follows:-a.Classification of goods is done in line with the General Interpretative Rules (GIRs) of the Harmonized System (HS) Nomenclature (hereby attached and marked KRA 6 is a copy of the General Interpretative Rules of the Harmonized System Nomenclature).b.GIR 1 directs that 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 heading and any relative section and chapter notes.c.GIR 6 directs that classification shall be determined according to the terms of those subheadings and any related subheading notes. In addition, the explanatory notes to the HS constitute the official interpretation of the harmonized system at the international level and are an indispensable complement to the system.d.Chapter 76 of the East Africa Community Common External Tariff 2017 provides for the classification of aluminium and articles thereof.e.Heading 76. 10 covers, in pertinent part, classification of "parts of structures (for example, bridges and bridge-sections,• towers, lattice, masts, roofs, frameworks, doors and windows and their framers and thresholds for doors, balustrades, pillars and columns) aluminium plates, rods, profiles, tubes and the like, prepare for use in structures.”

46. The Respondent averred that Article 3 of the World Trade Organization Trade Facilitation Agreement and Section 248A EACCMA, 2004 states that advance tariff rulings are only binding to the party to whom it was issued and the Commissioner, for a period not exceeding 12 months; and that the Appellant ought to have sought an advance tariff ruling in case of any doubt on the tariff code applicable for the aluminium parts used for the construction of the solar mounting unit.

47. That in view of the above, the components of the mounting kit in question are not articles prepared for use in structures but are intended for mounting solar panels on roofs.

48. The Respondent averred that the Explanatory Note to Heading 76. 10 state that the provisions of the explanatory note to Heading 73. 08 apply, mutatis mutandis, to this heading. The note provides that this heading covers complete or incomplete metal structures, as well as parts of the structures. For purposes of this heading, these structures are characterized by the fact that once they are put in position, they generally remain in that position.a.Heading 76. 16 provides for classification of other articles of aluminium.b.In this regard, aluminium mounting kits for solar panels is therefore considered classifiable in HS Code 76. 16. 99. 00 of the EACCMA 2017 which provides for other articles of aluminium as guided by GIRs 1 and 6. The tariff classification is based on sample and material information presented.

49. The Respondent submitted that the classification of goods in Kenya is governed by the EACCMA (EAC CET) which codified and adopted the World Custom Organization Harmonized Commodity Description Coding System and its principles of General Interpretative Rules (GIRs) of classification of goods.

50. To buttress it position, the Respondent relied on the cases of Republic V Commissioner General & Another Ex-Parte Awal Ltd [2008] eKLR and Beta Healthcare International Ltd V Commissioner Of Customs Services [2010] eKLR:

51. That the Respondent conducted a desk audit of the Appellant's customs entries for the period 2020 to 2021 pursuant to Section 236 of the East Africa Community Customs Management Act which states as follows: -“236. The Commissioner shall have the powers to-(a)verify the accuracy of the entry of goods or documents through examination of books, records, computer stored information, business systems and all relevant customs documents, commercial documents and other data related to the goods;(b)question any person involved directly or indirectly in the business, or any person in the possession of documents and data relevant to the goods or entry;(c)inspect the premises of the owner of the goods or any other place of the person directly or indirectly involved in the operations; and(d)examine the goods where possible for the goods to be produced.”

52. That the audit revealed that the Appellant had misclassified the import consignments of aluminium solar system mounting kits under HS code 7610900 whereby the tariff Heading 76. 10 states as follows: -“Aluminium structures (excluding prefabricated buildings of heading 94. 06) and parts of structures (for example, bridges and bridge-sections, towers, lattice masts roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, balustrades, pillars and columns); aluminium plates, rods, profiles, tubes and the like, prepared for use in structures.”

53. It is the Respondent's contention that the aluminium alloys used as part of pv mounting kit are not articles prepared for use in structures but intended for mounting solar panels on roofs. As such, Heading 76. 16 is most appropriate as guided by GIR1 and GIR 6

54. The Respondent posited that the fact that the Appellant contended, in the application for review, that these are parts of mounting system shows that they are part of a support system and does not make them a structure by themselves. That further to this, the same are placed on roofs, as structures to help the solar panels stay in place.

55. It was the Respondent's contention that having considered all the other headings related to articles of aluminium, they do not apply to the Appellant's aluminium mounting kits for solar panels and as such, the most appropriate heading for such unique articles of aluminium is Heading 76. 16. 99. 00.

56. The Respondent asserted that it was important to note that tariff classification is based on sample and material information provided. That in view of the above observations, the demand notice of Kshs 7,058,290. 00 was upheld and remained payable by the Appellant to the Respondent.

57. The Respondent submitted that the Appellant misdeclared the imported solar water heating systems under HS Code 76. 10 instead of HS Code 76. 16.

58. The Respondent submitted that the Kenyan tax system is a self-assessment regime whereby a taxpayer is required to self-assess and submit the correct and applicable taxes to the Respondent.

59. The Respondent submitted that it acted within its power under Sections 235(1) and 236 of EACCMA, 2004 which empowers the Respondent to conduct a post clearance audit within 5 years and seek for documents to verify the correctness of the taxes declared and paid.

60. That Section 135 of the EACCMA, 2004 empowers it to demand for short levied taxes.

61. The Respondent relied on the case of Pharmaceutical Manufacturing (K) Co Ltd & 3 others v Commissioner General of Kenya Revenue Authority & 2 others [2017] eKLR where the Court of Appeal stated: -“Furthermore Section 135 (1) of the East African Community Customs Management Act, 2004 mandated the respondents, where any duty was short levied or erroneously refunded, to demand payment or a refund, as the case may be, from the person who should have paid the amount or to whom a refund was erroneously made. Such a person is required to pay the amount due upon receipt of the demand. The amount due is deemed to be due on the date on which the demand note is served upon him or her. The demand note must be followed by payment within thirty days of the date of such service, failing which a further duty of a sum equal to five percent of the amount demanded would be due and payable by that person by way of a penalty and a subsequent penalty. But no such demand may be made after five years from the date of the short levy or erroneous refund, as the case may be, unless the short levy or erroneous refund had been caused by fraud on the part of the person who should have paid the amount short levied or to whom the refund was erroneously made, as the case may be."

62. The Respondent stated that it did not apply the applicable HS Code retrospectively as the Appellant is required at all times to correctly declare the goods it is importing and subject the same to the applicable HS Code for purposes of charging appropriate taxes. That the Appellant cannot then contend that the application of the applicable HS Code after the audit is retrospective as EACCMA (EAC CET) clearly outlined the applicable HS Code even before the demand notice for the short levied taxes was issued.

63. That furthermore, the Appellant is required under the law to pay all the taxes due to it and the Respondent has the obligation to collect every single tax that is due and collectable. The Respondent relied on the case of Republic vs.Kenya Revenue Authority Ex-parte Bata Shoe Company (Kenya) Limited [2014] eKLR, where the Court expressed itself as hereunder:“This brings me to the role and interpretation of tax laws. Payment of tax is an obligation imposed by the law. It is not a voluntary activity. That being the case, a taxpayer is not obliged to pay a single coin more than is due to the taxman. The taxman on the other hand is entitled to collect up to the last coin that is due from a taxpayer."

64. The Respondent contended that the Appellant cannot claim legitimate expectation on the face of illegality. The alleged legitimate expectation only arises if the Respondent issued guidelines which were relied on by the Appellant to its detriment. However, in the case at hand the inspection report relied on by the Appellant indicated clearly the Respondent's findings. To support its position on legitimate expectation, the Respondent relied on the case of Communications Commission of Kenya & 5 others v Royal Media Services Limited & 5 others [2014] eKLR

65. The Respondent submitted that the alleged legitimate expectation does not arise where the law is clear on the process and what is expected of the parties. The alleged expectation cannot in any way override the law and Appellant's duty to pay taxes.

66. The Respondent further submitted that the tariff classification guidelines is a public document available to all the consumers and it's not a preserve of the Respondent alone. That further, the Appellant was well aware of the goods they were importing and cannot turn around to shift the blame on the Respondent after deliberate under declaration and misclassification of the goods in question. That in any event the Appellant has not demonstrated before this Tribunal that there were guidelines given which it relied on to its detriment.

67. The Respondent submitted that it exercised the Commissioner’s best judgment appropriately in the circumstances thereby arriving at the tax assessment it did.

68. The Respondent asserted that the Appellant had failed to discharge its evidential burden of proof under Section 107 (1) of the Evidence Act in demonstrating that the assessment by the Respondent was in any reasonable manner incorrect or excessive.

69. That in TAT No. 28 of 2018- Joycott General Contractors Limited -VS- Kenya Revenue Authority, the Tribunal in dismissing the appeal held that,“we find that the Appellant seems to forget that it bears the burden of proof, in law, to demonstrate to this Tribunal that the Respondent's assessment was wrong. Especially with regards to the under declarations and variance in respect of VAT and income sales. On the contrary, the Appellant has not bothered to substantially traverse the assessment raised. All it has done is to make sweeping and expansive accusations without substantial support."

70. The Respondent maintained that the applicable HS Code to the Appellant's imported solar mounting units is 76. 16. 99. 00 since the proposed HS code rightly applies to aluminum solar mounting kits.

71. The Respondent submitted that the Appellant having under declared its tax obligations, leading to additional assessment confirmed and having fatally failed to demonstrate the same to be erroneous, then the said assessment and subsequent review decision dated 19th September 2022, remains valid in law, ought to be upheld and the Appeal dismissed with costs.

Respondent’s Prayers 72. The Respondent prayed that the Tribunal:-a.Finds that this Appeal lacks meritb.Upholds the Respondent’s review decisionc.Dismiss the Appeal with costs to the Respondent.

Issue for Determination 73. The Tribunal upon due consideration of the pleadings of the parties was of the considered view that the Appeal raises only one issue for its determination:Whether the Respondent erred in law and in fact in reclassifying the Appellant’s aluminium solar mounting unit from tariff code 7610. 90. 00 to tariff code 7616. 99. 00

Analysis and Determination 74. The Tribunal having ascertained the issue for determination as set out above proceeds to deal with the same as hereunder.

75. The genesis of this Appeal is the review decision made by the Respondent on 19th September 2022 confirming that the Appellant’s aluminium mounting kits should be classified under HS code 7616. 99. 00 and not 7610. 90. 00 as the Appellant had done over the years.

76. Whereas the Appellant had relied on tariff ruling CUS/V&T/TARI/RUL/495/2017 of 28th December 2017 which classified the solar mounting kits in HS code 7610. 90. 00 and was published on the Respondent’s website, the Respondent based its review decision on tariff ruling KRA/C&BC/BIA/THQGEN/008/01/2022 of 2022 which classified the items under HS code 7616. 99.

77. The Respondent argued that Heading 7610 covers classification of aluminium parts used in structures or prepared for use in structures and that the solar mounting Kits are not articles prepared for use in structures but intended for mounting solar panels on roofs. That, parts of structures are only utilized during construction and that structures are characterized by the fact that once they are put in position, they generally remain in that position.

78. The Respondent stated that the reasons for its decision were brought to the attention of the Appellant in the review decision were the relevant provisions of EACCMA and the specific General Interpretative Rules (GIRs) of the Harmonized System (HS) Nomenclature were highlighted.

79. The Appellant submitted that classification is based on the principles set out by the General Interpretative Rules, that GIR 1 provides that,“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."

80. The Appellant averred that Heading 7610 of the HS CET provides for classification of“Aluminium structures (excluding prefabricated buildings of heading 94. 06) and parts of structures (for example, bridges and bridge-sections, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, balustrades, pillars and columns); aluminium plates, rods, profiles, tubes and the like, prepared for use in structures."

81. That in the absence of the definition of the term structure, from the EACCMA, 2004, the Appellant relied on the Black's Law 9th Edition Dictionary which defines the term structure as:“Any construction, production, or piece of work artificially built up or composed of parts purposefully joined together... "

82. The Appellant argued that by applying the aforementioned definition, the Respondent in its review decision failed to appreciate that a structure is also a piece of work artificially built up or composed of parts purposefully joined together.

83. The Appellant stated that its aluminium mountings kits are artificially joined together to create a structure that is then riveted to either the ground or roofs to provide a supporting platform where the solar panels are to be mounted thereby making sure the panels generally remain in the position they are placed.

84. The Appellant averred that as per the above explanation, it was clear that the articles once assembled or put together, satisfy the definition of the word structure and the explanatory notes to Heading 76. 10. That Heading 76. 10 therefore gives the most appropriate classification for the aluminium solar mounting structure at the heading level of the HS.

85. The Appellant averred that although the WCO rulings and the United States Customs and Border Classification Rulings for Heading 7610 are not binding, they demonstrate how other jurisdictions classify the items imported by the Appellant.

86. The Tribunal noted that both parties were in agreement that classification of goods imported into Kenya is governed by the East African Community External Tariff (EAC CET) 2017.

87. The Tribunal looked at the headings of the HS codes in contention as stated in the 2017 East Africa Community External Tariff book and found the following description for Heading 7610:-“76. 10 Aluminium structures (excluding prefabricated buildings of heading 94. 06) and parts of structures (for example, bridges and bridge-sections, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, balustrades, pillars and columns); aluminium plates, rods, profiles, tubes and the like, prepared for use in structures.7610. 10. 00 - Doors, windows and their frames and thresholds for doors.7610. 90. 00 – Other”

88. The following is the description for heading 7616. “76. 16. Other articles of aluminium.7616. 10. 00 - Nails, tacks, staples (other than those of heading 83. 05), screws, bolts, nuts, screw hooks, rivets, cotters, cotter-pins, washers and similar articles.7616. 91. 00 -- Cloth, grill, netting and fencing, of aluminium wire

99. – Other”

89. The General Rules for Interpretation (GRI) of the Harmonized System that govern the classification of goods under the Harmonized Commodity Description and Coding System (HS) give the steps to be followed in classification of goods.

90. General Rule No 1 states that:-“If a provision specifically and completely describes and completely describes a product, then the product should be classified in that provision”

91. After analyzing the submissions, the General Rules of Interpretation and the items classified under the Headings indicated above the Tribunal is of the view that the Appellant’s solar mounting kits for installation of solar panels are classifiable under heading 7610. 90. 00 and not heading 7616,90. 00 as indicated by the Respondent.

92. Further, the Tribunal considered that the Respondent had by its action created a legitimate expectation through publication of tariff ruling reference CUSN&T/RUL/495/2017 in its website and by proceeded to clear the Appellant’s goods over time under Tariff 7610. 90 only to turn back, reclassify the product and demand short-levied taxes.

93. On matters legitimate expectation, the Tribunal is guided by the holding in the case of Keroche Industries Limited vs. Kenya Revenue Authority & 5 Others Nairobi [2007] eKLR where the Court held that:“... legitimate expectation is based not only on ensuring that legitimate expectations by the parties are not thwarted, but on a higher public interest beneficial to all including the respondents, which is, the value or the need of holding authorities to promises and practices they have made and acted on and by so doing upholding responsible public administration. This in turn enables people affected to plan their lives with a sense of certainty, trust, reasonableness and reasonable expectation. An abrupt change as was intended in this case, targeted at a particular company or industry is certainly abuse of power. Stated simply legitimate expectation arises for example where a member of the public as a result of a promise or other conduct expects that he will be treated in one way and the public body wishes to treat him or her in a different way... Public authorities must be held to their practices and promises by the courts and the only exception is where a public authority has a sufficient overriding interest to justify a departure from what has been previously promised."

94. In view of the above, the Tribunal finds that the Respondent erred in law and in fact in reclassifying the Appellant’s aluminium articles from tariff code 7610. 90. 00 to tariff code 7616. 99. 00.

Final Decision 95. The upshot of the above is that the Appeal as filed is merited and the Tribunal accordingly proceeds to issue the following Orders:-a.The Appeal be and is hereby allowed.b.The Respondent’s review decision dated 19th September 2022 be and is hereby set aside.c.Each party to bear its own costs.

96. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF FEBRUARY, 2024. GRACE MUKUHA - CHAIRPERSONGLORIA A. OGAGA - MEMBERJEPHTHAH NJAGI - MEMBERDR. ERICK KOMOLO - MEMBERTIMOTHY VIKIRU - MEMBER