Standard Resource Group Ltd v Attorney General, Commissioner General Kenya Revenue Authority & Commissioner for Customs & Border Controls [2016] KEHC 3002 (KLR) | Fair Administrative Action | Esheria

Standard Resource Group Ltd v Attorney General, Commissioner General Kenya Revenue Authority & Commissioner for Customs & Border Controls [2016] KEHC 3002 (KLR)

Full Case Text

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

PETITION NO.  342 OF 2016

IN THE MATER IF ARTICLE 22(1), 165, 258 AND 259 OF THE CONSTITUTION OF KENYA, 2010

IN THE  MATTER OF ALLEGED  CONTRAVENTION  OF RIGHTS OR  FUNDAMENTAL

FREEDOMS  UNDER ARTICLES  10,27,35(2),40 ,47,50(1)AND 73  (1)

OF THE CONSTITUTION OF KENYA , 2010.

AND

IN THE MATTER OF COMMISSIONER   OF CUSTOMS & BORDER CONTROLS

AND

IN THE MATTER OF THE WRONGFUL IMPOUNDMENT AND DETENTION

OF IMPORTED GOODS UNDER ENTRY NO.  2016 MSA 6030784

AND

IN THE MATTER OF THE EAST AFRICAN COMMUNITY CUSTOMS MANAGEMENT

ACT, 2009 AND THE EAST AFRICAN CUSTOMS   REGULATIONS, 2010

BETWEEN

STANDARD RESOURCE GROUP LTD....................................................PETITIONER

VERSUS

ATTORNEY GENERAL..................................................................1ST RESPONDENT

COMMISSIONER GENERAL

KENYA REVENUE AUTHORITY...................................................2ND RESPONDENT

COMMISSIONER FOR CUSTOMS &BORDER CONTROLS...3RD RESPONDENT

RULING

1. This  ruling  determines  the Notice of Motion  dated  10th August  2016   brought under  certificate of urgency, simultaneous   with the constitutional  Petition dated  the  same day  by the petitioner  Standard  Resource  Group Limited  against the  respondents  who are the Honourable  Attorney General, The Commissioner General of Kenya Revenue Authority  and The Commissioner  of Customs  and Border  Controls.

2. The Notice of  Motion is  expressly brought pursuant  to the provisions  of  Rules  4,23,24  of the Constitution of Kenya( Protection of Rights and Fundamental  Freedom Practice  Procedure Rules, 2013   Section 122(3)  of the East African Community  Customs  Management  Act and  Rule  3  of the High Court  Practice  and Procedure  Rules).

3. The notice of motion seeks for the following orders:-

1. Spent

2. Spent

3. Spent

4. That  this Honourable court be pleased to order  the  3rd respondent  to release   the petitioner/applicant’s  wrongfully impounded  goods   under Entry No. 2016, MSA  6030784   to the petitioner free of  any warehousing demurrage,port plus  VAT   and storage   charges   that would have  accrued on the petitioner depositing  kshs  7,587,604 as security  pending  the hearing and   determination of this petition.

5. That cost of this application be provided for.

4. The application is predicated on 10 grounds namely:

1. That  this court  has the power  to protect  fundamental rights both  during the pendency   of a suit   and  after the fact; the interest of  justice will  be served by an  immediate  release of the petitioner/applicant’s  cargo upon its  furnishing  security, which it is  ready and  willing to  do;

2. Without  the court’s intervention, the  2nd and  3rd respondents have  the power  under Section  122(3) of East Africa Community  Customs  Management  Act  to release  to the owner  imported goods, where a security is  furnished;

3. That  as it had, on previous  occasions of importation of its steel  products  from China, the petitioner’s  duly   licensed  clearing  agent supplied  the  3rd  respondent with the necessary  documentation, customs  duty and VAT  payable   was assessed  based on those  documents; the petitioner  paid the  customs duty  and VAT payable  and it   also paid  the assessed  amounts and its goods    were  released.

4. That on  11th January 2016,  the  petitioner entered into a contract of   supply of  the impounded  imported  goods  under Entry No. 2016  MSA (Hong Kong) Ltd at CF price of USSD  783,750; the  imported goods  arrived  at Mombasa on 26th May  2016  and  customs duty   was assessed  at shs  37,503,713; which  the petitioner duly  paid but  that the 3rd respondent declined to release   the said  goods unless  the petitioner  paid additional  customs duty   and VAT  in the sum of  kshs  31,845. 047 without giving the petitioner  the reasons for this demand and  declined, which  act  was  in contravention of Article  47  and  50  of the Constitution, and therefore  violating the petitioner’s  right to  a chance to correct any  misleading  information whose effect   was adverse   to it under Article 35(2)  of the Constitution and a breach of  its right   to its property  under  Article  40 of the Constitution;

5. That the petitioner  wrote a letter  dated  1st  July 2016   appealing  against that  verbal demand  by  the  3rd  respondent for  an additional   custom  duty and VAT  and on  15th July  2016   two weeks later  purporting to claim that  the  3rd  respondent  had calculated the customs value  based on  a transaction  value under  paid 1(3)  of the Fourth Schedule  to the East Africa Community  Customs  Management  Act  instead of part 1(2)  of the Fourth Schedule  as it had  previously done; but  that it   never gave  reasons   why this particular  transaction  was now  being considered  under Part  1(3)  of the Fourth Schedule  and the reasons    were only  tendered  after the adverse  decision  had been taken.

6. That the  2nd  respondent’s  valuation team had found that the custom  value payable  was   USA $313  per metric  ton for  deformed  steel bars   and despite the fact  that the petitioner  believed that  it had  lawfully  paid the correct  customs duty and VAT, it  agreed  to pay additional custom duty  and VAT in the sum  of shs  7,587,604 under Section 122(3) of the East Africa Community  Customs  Management  Act, 2009  since the  3rd respondent   is  empowered under the Act  to  deliver the imported goods  to the petitioner pending  the resolution  of the dispute   value  of those goods  upon the provision of sufficient  guarantee of surety, a deposit  or some security  which secures  the ultimate  payment of  customs  duties for which the goods  may be liable;

7. That despite the petitioner’s advocates letter dated 19th July 2016 and email reminder of 29th July 2016 the 3rd respondent has failed to respond.  Further, that on  18th July 2016  the petitioner requested  the  3rd  respondent to invoke its  powers under  Section 122(3) to  deliver the goods upon   deposit of  the said sums of money to the  tune of shs 7,587,604  as security  pending the determination of  the custom value  that  was  applicable  to it.

8. That the petitioner/applicant has a prima facie case with a probability of success.

9. That the petitioner/applicant stands to suffer gravely  as it  has to pay the entire contract  sum as per  the contract  dated 11th January  2016  and it stands to  be sued  for breach of contract.

10. That steel is highly perishable  goods  through rusting  thereby losing  its value  by the time  a decision  is taken  on the determination  of the custom value  payable. That   it is in the interest of justice that the conservatory orders sought be granted and that the categories of conservatory orders are not closed.

5. The above grounds are further supported by the supporting affidavit of Mr Wu Jun, the petitioner’s director, provisions of the law as cited and several annextures to the application and the petition.  The supporting  affidavit of  Wu Jun  seeks to rely heavily  on the petition and affidavit  in support   of the petition, and also  reiterates  the grounds  as replicated  in this ruling,  while  also annexing   exhibit  WJ-1 a letter dated  15th July   2016  from Kenya  Revenue Authority  demanding  for taxes on appeal  for steel imported under  Entry No.  2016  MSA  6030784; a pro forma invoice  dated  8th August  2016  for shs  28,020,115. 00  and a letter  dated  18th July 2016….

6. The Notice of Motion  was first  brought during the recess  on 10th August  2016   upon  which the  court certified  the  matter as urgent  and directed  the petitioner  to serve the  respondents  for interpartes  consideration. The petitioner complied  with the directives   of the court  and on 15th August  2016, its advocate   effected  service of the  petition and the application   upon the respondents who have  to date   not filed  any response  to the  application, although they are   ably represented  in court by their counsel Mr Lemiso   who was granted leave to file  a response  on 18th August 2016 within  10 days  but as  at the time of  hearing the application on 31st August  2016,  no such  responses  had been filed.

7. The petitioner avers  that  it is a limited  liability  company duly incorporated  in Kenya  under the repealed  Cap 486  Laws of Kenya  and in the business  of importing  hot rolled  deformed  steel bars and steel plates from the Republic  of China for sale in Kenya  and  intending to open  a steel plant  in Kenya.  That its main customers  are building contractors,  hardware  shops  and other  parties  in the construction industry  thereby necessitating   frequent importation of steel as the  few steel  plants  in Kenya cannot  meet the great  demand  in the said  booming construction  industry.

8. Further, that it obtains from its  suppliers  deformed steel bars under  a 180  days credit  and that in order for  it to meet the 180 days  deadline, its  goods must  be released by the  respondents soon after the customs  duty is  paid so that they are  sold and the purchase  price be paid.

9. In addition, that it  imports the  steel bars  depending  on the orders received  from its customers  and that  this is not  the first importation  that it has  had as the subject consignment is the 6th one  which arrived  at the port  of Mombasa  on 26th  May  2016. It is contended that  the East  Africa Community  Customs  Management  Act   gives the petitioner  only 21 days  within which  to pay customs duty  and secure  a release of the imported  goods  without incurring  any demurrage and  storage charges  and that only  compliance with the law makes  its goods  competitive in the Kenyan market.

10. The petitioner/applicant further avers in the petition that after the 21st day of free storage, the following extra charges are payable:

a. Demurrage  @ $ 2 per ton  per day  for cargo of  2,667-88 tones; total  daily charges  payable  are  2,667. 88 X $ 2 = $ 5,335,76  per day.

b. Port charges at the rate of shs 27 per ton per day for same cargo plus VAT.  Total daily charge is 2,667. 88 x 27 + VAT (16% x 2,667. 88 X 27 = 83, 558. 0016 per day.

c. Customs warehouse rent.

d. Interest on a,b, and c

11. It is further averred that the petitioner/applicant also risks  paying damages  to foreign suppliers  as well as  domestic  customers  besides  the risk of  further losses arising  from the damage  of the deformed  steel bars  whose quality  will be lowered  thereby creating  cash flow  problems.  In addition, the petitioner  averred that the 3rd respondent’s  refusal  to invoke Section 122(3)  of East  Africa Community  Customs  Management  Act  has denied  him the  right  to fair  administrative action  as espoused in Article  47 of the  Constitution  and that it has  also  deprived  the petitioner of the right to  be protected   from  arbitrary deprivation  of property  as enshrined  in Article  40 of the Constitution.

12. Dr Gibson Kamau Kuria, counsel  for the petitioner/applicant submitted,  in addition to the averments and deposition made by the  petitioner/applicant’s director Mr Wu Jun, urging the court  to apply the test set  out in the case of  Gatirau Peter Munya Vs Dickson  Mwenda Kithinji & IEBC, Supreme  court of Kenya App No. 5/2014  on the principles  upon which conservatory  orders  will be  granted and that  in this case, prayer No. 4   is for  a conservatory order, pending the  hearing and  determination of the  petition.

13. On behalf of his clients, Dr Kamau Kuria submitted that his client denied ever understating the value of the imported goods (steel bars).  He maintained that the petitioner was not involved in the process that led to the raising of the duty on the allegations that it had understated the value of the goods, which act is in violation of Article 47 of the Constitution.  Further, that Article  47(2)  of  the Constitution mandates  a public authority  to give reasons  as to why the enjoyment  of a fundamental right has  been interfered  with adversely by an  administrative  action. That the petitioner having  paid  duty of over  37 million as assessed, it had  a right to be involved  in the subsequent  process of assessing  additional duty if any, since the decision by the 3rd respondent was to affect the petitioner/applicant’s fundamental right  of  enjoyment of its property in the imported goods.

14. Further, it was submitted that even assuming that there was an understatement, the petitioner was entitled to reasons that it had understated the value of the goods. Counsel relied on the decision by Majanja  J  in Geothermal Development  Company Ltd  Vs Attorney General & Others (2012) e KLR  where the court  interpreted  the right under Article  47 of the  Constitution  following an agency notice being send to the bank to stop operations of  the petitioner  by Kenya  Revenue Authority, in breach of Article  47 of the Constitution. Counsel further submitted  that the  petitioner    was entitled to the right to be furnished  with public  documents which affected  its enjoyment of the fundamental  right and a right to the correction  of erroneous  decision  or information.  That the petitioner   was confronted  with an oral  demand  and decision  that it had understated  the value of the goods  and even after it wrote denying the  allegations, the  3rd  respondent  took  two weeks to reply by  which time  the goods had been detained and losses incurred which in the petitioner’s view, is arbitrary  deprivation of the right to property which right is guaranteed under Article  40 of the Constitution.

15. The petitioner further took great exception to the 3rd  respondent’s  refusal  to invoke Section  122(3)  of East  African Community Customs  Management  Act  which  was enacted  to  ensure that  economic  commerce  and performance of  East African Community  member countries  do not suffer  where there is  a dispute  over the customs  duty due  and  payable, by empowering the Commissioner of Customs to release the goods upon   a security being  provided for the payment of  the  duty in dispute.

16. It was submitted that in this case, the petitioner offered to give security on realization of the commercial disaster in the offing  but the 3rd respondent   declined  silently  and that is why the petitioner approached  this court for  a remedy.  Further, that the petitioner is still  committed  to providing  security since  the loss which is being incurred  daily is  about 500,000 besides   steel being  a perishable  good once it rusts  thereby  losing its value.  Further, that creditors  who had  given the  petitioner  grace period  of 180 days to pay, and the  local customers to whom the supplies  were intended  will sue for  breach of contract.

17. On what security to give, reliance  was placed  on the case of  African Safari Club Ltd  V Safe Rental, Ltd [2010] e KLR  where the Court of Appeal  considered the  overriding objectives  of the law, to ensure that the petitioner  gets substantive   justice both  at the interlocutory stage and   at the full trial.

18. Further, it was submitted that the court   must therefore be flexible   and balance the relative hardships of each party.  It was submitted that in the instant case, the petitioner has already parted with over 37 million yet it continues to suffer losses.  it was also was  submitted that   conditions for stay  must be  such as to allow parties to  access justice  hence the  conditions must  be fair.  That the court has the power to order for  deposit of security  in cash, bank guarantee or  title  deed into court.

19. Counsel for the petitioner further  submitted that in a case like  this one  where the  respondents have been  served with the necessary documentation,  petition and interlocutory  application but that they have  deliberately  refused  to file any response, the court must take  the view that the facts  presented are not disputed  as was  held in  the Nigerian case   of Punch Nigeria  Ltd &  Another Vs Attorney General & Others CHRD P.46-47.  It  was submitted that the petitioner  had filed a 51 paragraph  affidavit in support of its petition  and the 22 paragraph affidavit  in support of this application but that  none of those  paragraphs have been controverted.

20. Reliance was further placed on the case of Kariuki Gathitu Vs Attorney General Petition No. 1188/2003  O.S. (2013) e KLR  at paragraph  9 and 10  of the decision  by Honourable  Lenaola J.

21. On what  orders this court can make under Article  23  of the  Constitution,  the petitioner’s counsel  submitted that  Article  23 of the Constitution sets  orders such  as injunction, damages  and  conservatory order.

22. It  was further submitted that  the petitioner settled  the  customs  duty of  over 37 million  within 12 days of the 21 days allowed  from the date of importation  therefore all the expenses  incurred are due  to the arbitrary  acts of  the  3rd respondent and that therefore without  a conservatory order, this suit is an academic exercise  which is  a commercial disaster  hence the court  should consider rendering  its decision  expeditiously  in order to  salvage the dire situation.

23. In opposition to the   application, on behalf of the 2nd and  3rd  respondents  Mr Lemiso submitted that  his clients  have issues  with prayer  4 in terms of monies which are payable  to other  persons  and not the 3rd respondent  and that the  3rd respondent had no power to  order 3rd parties to release goods  free of charge. Further, that under Regulations  85  of the East  Africa Community  Customs  Management  Act,  a tax   payer  can apply for waiver  of the amount  for  warehousing  for consideration  by the Commissioner.

24. Further  that under Section 122 (3) of the East  Africa Community  Customs  Management  Act, security  once  declared  to be deposited  has to be  sufficient to secure the  ultimate taxes payable, unlike in the present case where the  security offered  is not sufficient.

25. Counsel for the respondents also  submitted that  the respondents were willing  to  release the petitioner’s goods  if the petitioner pays  to  third parties their demurrage and port handling  charges  and that it should  enhance  security offered to cover the disputed taxes.  Mr Lemiso urged the court not to  disentitle  his clients  the benefit  of reliance  on oral  submissions   and instead invoke  Article  159(2) (d)  of the Constitution  since Petition  1188/2003  relied on by the applicant’s counsel  was  a judgment  unlike in this case  where the respondents  still have  a chance to file  a response to the  petition.

26. In a brief rejoinder, Dr Kamau Kuria for the applicant/petitioner submitted that  the 3rd respondent  has the discretion to ask  for security but it has not and that it had been completely insensitive  to the commercial  urgency of the matter.  Further, that this court  being the guardian  of the Constitution must ensure that each  person’s constitutional rights  are protected. Counsel urged the court to adopt the approach taken  by Honourable  Majanja J in the Geothermal  (supra) case that  the respondent had  new obligations under the Constitution and  that all public   officers are required  under Article  10 of the Constitution  to abide  by the Rule  of Law and  not to arbitrarily  exercise  power  against  the petitioner.

Determination.

27. I have carefully considered the petitioner/applicant’s application by way of Notice of Motion dated  10th August  2016 together with all the supporting documents.  I have also considered the  submissions   by both counsels  for the parties and  the authorities  relied on.

28. The High court has jurisdiction, in accordance  with Article 165 of the Constitution, to hear  and determine applications  for  redress of a denial, violation of infringement of, or threat to, a right or  fundamental  freedom in the Bill of Rights. Pursuant  to  Article  22  of the Constitution, every person, including   a non natural  person like  the petitioner/applicant herein, has  an unfettered  right to  institute court proceedings claiming  that a right  or fundamental freedom in the Bill of Rights has been denied, violated or infringed, or is threatened.

29. And  in determining  proceedings wherein  a person is seeking  to enforce   their  rights under  Article  22  of the Constitution, Clause  3(d)  thereof is emphatic  that the  court,  while observing  the rules of natural  justice shall not be unreasonably restricted  by procedural  technicalities.

30. In the application before hand, which is  supported by the  applicant’s petition, affidavits and documents as exhibits, the petitioner / applicant claims  that its  right to  fair administrative  action has been violated , and that the applicant has also been  denied the right not to be arbitrarily  deprived of property  in the goods  described as Hot Deformed  Steel imported from China , contrary to the  provisions of Article  47 and  40  of the Constitution respectively.

31. Article  47  of the Constitution  as implemented by Fair Administrative  Action Act No. 4 of  2015  is clear that  every person has the  right  to administrative action which  is expeditious, efficient, lawful, reasonable  and procedurally fair( Section 4(1) ). Under Section 4(2) thereof every person has the right to  be given   written reasons for any  administrative  action that is taken against  him. 3) where an administrative action is likely to adversely affect  the right or fundamental  freedoms  of any person , the  administrator    shall give  the person  affected by the decision.

32. The Act further lists other essentials as follows:

a. Prior adequate notice of the nature  and reasons  for the proposed  administrative  action;

b. An opportunity to be heard and to  make representations in that regard;

c. Notice  of a right  to a review  or internal  appeal against   an administrative  decision, where applicable;

d. A statement of reasons.

e. A notice of the right to legal representation, where applicable;

f. Notice of  the right to  cross examine, or  where applicable;

g. Information, materials and evidence to be relied upon in making the  decision or taking  the administrative  action.

33. A person aggrieved  by an administrative  action which  adversely affects or is likely  to affect  the legal rights and interests of that person  may challenge  that action, as provided for  in Section 5 of the  Act, which challenge   includes  instituting  such legal proceedings for such remedies  as may be  available  under any  written law.

34. This matter, I must emphasize, is not  for Judicial Review  application but  a petition  complaining that the petitioner’s  rights  and fundamental  freedom, as stipulated  in Articles  40, 47,35 of the Constitution  have  been violated  or infringed.

35. The dispute that necessitated  these  proceedings  arose  from the complaint  by the petitioner/applicant that whereas it had  imported Hot Rolled  deformed  bars with full description and declaration of their value to the Customs  and Boarder  Control as  required by the East African Community Customs  Management Act, after  which, customs  duty and other charges   were duly   assessed and which charges it settled  in full,  in a record time  of 12 days  from the date  the consignment  arrived  at  the port of Mombasa, that the 3rd  respondent had nonetheless  detained the  said imported  goods  and demanded  extra charges.

36. The applicant complains that the  reasons for such detention  were only communicated  to the petitioner/applicant in writing on 15th July 2016, in response to a  letter of inquiry  written to the  3rd respondent by the petitioner/applicant on 1st July  2016, appealing  against an oral  adjusted  customs  value of the goods. The 3rd respondent’s letter clearly  reads in part

“The transaction value was not accepted on the basis that the accuracy of  your declaration  was doubtful.  The goods description declared   was in tandem with what  was physically verified.  The goods  description in the transaction documents  and the entry  declaration particularly  differed  with what   was physically verified.  The goods  are described  in the documents  as “Hot rolled  deformed  bars” without  specifying the standard  and the grade of the product.  The marks  and numbers found  on the product  indicted the  description  BS 4449-2005  and  steel grade   -B 500B.”  The sticker  found in the shipment  indicted that the manufacturer  as “Hebei Jinxi Iron Sheet  Group  Co. Ltd  while  your documents indicated  a different manufacturer  details.

The aforementioned  inconsistencies  raised doubt  on the accuracy of your transaction value.  The transaction  value   was consequently rejected  in accordance  with Section 12(4)  of East African Community  Management  Act.  The  support documents   did not  satisfactorily demonstrate  the  transaction value.  The transaction  value did not satisfy  the conditions  stipulated in East African Community  Management  Act 4th Schedule  Part   12(1) and  (2).  The goods    customs value   was therefore  determined  in accordance  with the provision of  in East African Community  Management  Act  4th Schedule Part 1(3) -  Transaction Value  of Identical Goods, which reads  “ where the customs  value of  the imported goods  cannot be determined  under the provisions of  paragraph 2,  the customs value shall be  the transaction value of the identical goods sold for export to the partner state   and exported  at or about the same  time as goods   being valued.

The declared value    was adjusted  upwards to FOB-$ 434 per metric  ton.  The extra  taxes payable   were as follows:

Import duty : kshs   16,009,614

VAT: Kshs   12,807,691

RDL : Kshs   960,377

IDF : Kshs   624,413

Total extra taxes payable kshs  31,845,047

Kindly make  arrangements s to pay the above extra charges  promptly  to avoid  further escalation of penalties /interest in accordance  with Section 135(2)  of East African Community  Management  Act.  At the same time present  yourself  for compounding of the  case as provided  for under Section 219  of East African Community  Management  Act.

Yours  faithfully

P. BOIYWO

For Chief Manager- customs  & Boarder Control  MSA  Regional  HQS

Copy:

Commissioner- Customs  & Boarder control Regional Coordinator –Southern Region

Deputy Commissions-Trade  Facilitation

Chief Manager- Valuation & Tarriff  HQS”

37. In its  rebuttal  to the above contents, the petitioner/ applicant  by its  detailed grounds   and supporting  affidavit to the  petition  and to this interlocutory application annexes  documents  showing the  origin, and  destination and description of  the imported goods, together with the transaction documents and value of the goods.

38. I find it essential to make  some comparisons  between the documentation annexed to this application and petition and the  allegations in the above  reproduced  letter in order  for me to determine whether the applicant herein has established  that it has a prima facie  case against  the respondents  and whether the balance  of convenience  tilts in its favour as  per the test   set out in the Supreme Court  Petition in the  Gatirau  Peter Munya   case (supra).

39. Paragraph 36(b)  of the petitioner’s  affidavit in support  of the petition  annexes  a bundle of  tags  which are said to be on the petitioner’s imported goods, giving the  product name, standard, size, weight, Furnace  No. rolling date, steel grade, length, quantity,  Heat No. and Team.  What is common  on those  tags  is the standard  which is  BS 4449: 2005  and steel grade  B 500B.

40. According to the respondents, the goods as described in the transaction  documents and  the Entry Declaration  partially differed  with what  was physically  verified.  They allege that the goods  are described in the “document” as Hot rolled  deformed  bars” without specifying the standard  and the grade of the product.

41. Comparing the above  stickers/tags  with  annextures WJ 8   which is the contract  dated  8th January  2016  between Manton Trading (Hong Kong) Limited  and Avic International Minerals  and Resources  Company Ltd   and wherein the manufacturer  of the steel is stated as Hebei Jinxi Iron and Steel Group Co. Ltd, it shows that the commodity  was  Alloy Deformed Steel Bar, and  the quality  is given  as BS 4449: 2005   B 500B.  Other   descriptions on diameter, length, quantity and price (FOB) are given, including weight tolerance.

42. Although the respondent  claims that  the transaction  documents and  Entry Declarations partially differed  with what  was physically verified and that the goods  are described  in the document  as “ Hot rolled  Deformed bars” without specifying the  standard  and the grade  of the product, no doubt, this court, in the absence of any forensic examiner’s report, is  unable to accept that allegation for reasons that the annextures WJ 8 and WJ -9  being contract documents showing the origin  of the product  and how it reached  the applicant and the port of Mombasa clearly  spells out the  standard – quality of the product  as well as the grade, which is  similar to what is contained on the tags found  on the actual product.

43. Again, the Entry Pass annexture  WJ 10 which is  an East African Community document  at paragraph 40(b) provides the description of goods  as “ 218 bundles of Hot rolled Steel Deformed  Bar, B4449B  DLA 12mm x 12 mm” with a custom  value given as  well as  VAT value and that is where shs  37,503,713 being  grand  totals  of duties, taxes and other charges    were arrived at.  The same information  is at paragraph 41 (b)  of the same document, which gives  the description of the goods as 224  Bundles  of Hot Rolled  Steel Deformed  Bar  B4449 500B and the document  on  page  95 paragraph  41(b) for  270 bundles  of Hot Rolled Steel Deformed Bar.

44. The transaction documents accompany the Entry Declaration Form.

45. The burden of proof lies on the respondents to prove that there  was misdescription of the goods in the transactions document, or in the  documents found on the  verified  goods and  the Entry  Declaration documents.

46. At this  interlocutory stage of  these proceedings, the respondents  have not supplied this court  with any affidavit  or other  evidence  to show such  variance  or partial  differences between the physical verification and the documentation supplied by  the petitioner/applicant.

47. At page  96 of the petition  is a Commercial Invoice  by Avic International  Minerals  and Resources  Company Ltd  to Manton Trading (Hong Kong) Ltd  dated   16th March 2016  showing the  description  of the Alloy Deformed  Steel Bars quality  BS 4449: 2005  B500B, the unit price, total amount , diameter, length, number of bundles, gross weight, and  quantity.

48. If those  descriptions of standard and  grade are  the one  which are  found in the transaction  documents examined above, and are infact the same  as what the respondent  says  “ The marks  and numbers  found  on the product  indicated the description  as Hot  rolled Deformed  Bars, Standard  BS  4449: 2005 and steel  grade B500B,” this court  does not  comprehend  the rationality  for the respondent’s claim that“ The goods  are  described  in the documents  as “ Hot rolled  deformed bars” without  specifying the standard and grade  of the product.”

49. The other accusation leveled against the  Petitioner/applicant is that  the “sticker   found in the shipment  indicated the manufacturer  as “ Hebei Jinxi Iron & Steel Group  Co. Ltd” while  your documents  indicated a different  manufacturer  details.”

50. The question is, what are the particular details that are given in  the applicant/petitioner’s documents concerning  who the manufacturers  of the imported  products are, compared to what was found on the sticker found in the shipment?  The  respondent does not  disclose who  that different  manufacturer  is. However, I have meticulously examined the documentation  annexed  to the petition.  Annexture  WJ 13  is a bundle  of tags/stickers which are said to be affixed to the  petitioner’s  imported  goods, and which  were physically verified by the 3rd respondent .  Those tags  or stickers do not show the  manufacturer’s  name.  The manufacturer’s  name is found on  annextures  WJ9 as  Hebei Jinxi Iron & Steel Group Co. Ltd.  Those  annextures  are contract or transaction documents  between  the seller of the goods being Manton Trading  (Hong Kong)  Limited  and Standard Resource  Group Limited  the petitioner/applicant herein.  It is dated  11th January 2016  and it gives  the full description of the goods, including the standard BS4449: 2005 and grade B500B. It is the same goods and description which  are contained  in the annexture WJ-8 at page  85, being a contract  between  Avic International Minerals  and Resources  Co. Ltd as seller and Manton Trading (Hong Kong) Limited as buyer. The Manufacture’s name is given at page  86 as Hebei Jinxi Iron and Steel Group  Co. Ltd.

51. As of necessity, I must pose the question as to- who is  this  different manufacturer indicated  and which particular document  was submitted by the petitioner/applicant herein to the 3rd respondent that created a cloud  of doubt in the mind of the officials of the 3rd  respondent herein that the declarations were doubtful?  The objective view of this court is that on the material placed before me, prima facie, there is a line of consistency in the transaction documents  descriptive of the imported goods, the tags  on the  goods  and the Entry declaration.

52. Accordingly, there is in my view, absolutely no reason why the transaction  value of the imported documents  was rejected by the 3rd  respondent  in accordance with Section 122(4) of the  East African Community Customs  Management Act.  Furthermore, the Commercial Invoice  clearly  shows the CIF  and  FOB values  which were  used  as the transaction value, and which has not been disputed by the respondents.

53. In the premise, there is absolutely  no justification for the 3rd  respondent to purport to recalculate the  taxes payable  based on a different  provision applicable  to different  goods  since the  transaction value in this  case could  overtly be  determined  under the provisions of Part 1(2)  of the Fourth Schedule of East African Community Customs  Management Act.

54. In my humble view, the action by the  3rd respondent’s  officials  to detain the petitioner/applicant’s imported goods  cannot be  justified  even at  this interlocutory stage in view of the above revelations which are uncontested  facts  and which facts  are documented.  .  It is an action that is calculated to deliberately  and arbitrarily deprive  the petitioner of its property  described  in the transaction documents for  ulterior motives.

55. The petitioner/applicant paid all  the Duty calculated  as within 12 days  of the arrival of its goods when the goods  were detained by the 3rd respondent  on the premise that it entertained doubts  on the transaction value. However, nothing  prevented the respondent  from acting  within the 21 days  of arrival of the goods or the  remainder number of days after the twelfth day when the applicant paid  all duty as assessed,  to carry out   further verifications to  establish  any discrepancy if any  all, between the import documents and the actual  goods.

56. Under Article  23  of the Constitution, this court  has the  jurisdiction  to grant  orders of injunction , declaration, Judicial Review  remedies as well as  damages. The petitioner/applicant is  questioning  the respondent’s exercise of statutory  power  arbitrarily and unreasonably with a  view to  denying it  the rights to  fair administrative  action which is  expeditious, efficient, lawful, reasonable  and  procedurally  fair, in contravention of Article  47  of the Constitution.  In Republic  Vs  Commissioner of  Income Tax  Exparte  SDV Transami (K)  Ltd [2005] A 346,the court  was clear that an aggrieved  tax payer    has every right to seek judicial intervention  where he  or she is  questioning  an exercise  of public  power by a public body.

57. Further, the court  in Mount Kenya Bottlers  Ltd & 3 Others  Vs Attorney General[2012] e KLR  Lenaola J citing  Article   210(1)  of the Constitution  stated that  a tax payer  is not  to be taxed  unless the  word of the  taxing statute  unambiguously imposes a  tax on him.  The Learned  Judge adopted the holding in  R V Devon Council exparte Baker [1999] [1995]  1 ALL  R  73,88-89 where  Simon L.J of the Court of Appeal stated that:

“ These authorities show that  the claimant’s  right will only be  found to be established where there is clear and unambiguous  representation  upon which  it  was reasonable  for him to rely.  Then the administrator  or other public body will  be held  bound in fairness  by the representation made unless  only   its promise or undertaking as to how the power would  be exercised  in inconsistent with the statutory duties imposed  on it.  The doctrine  employed in this sense  is akin to   an estoppel.”

58. In the instant case, the respondents, after assessing the import/customs  duty  and VAT payable, they doubted  the petitioner’s documents  so they proceeded to review the tax.  They however did not call upon the applicant to participate in the process of carrying out that  review expeditiously,  efficiently and reasonably or  even lawfully.  They took their  time as the  21 days  free storage  period  was running out.  And when the petitioner inquired, the 3rd respondent provided verbal reasons and demands for payment of over 31 million as additional tax.  It took the respondents another  14 days  to provide reasons in writing.  Those reasons, from my own analysis of  the documents in support  of the petition, are in my view, and in  the absence of any other  evidence, absurd.  They are vaque and ambiguous.  They do not reflect  the factual situation.  This court  does not  exist to  aid any person to escape  payment  of accurate  taxes to the tax collection agency.  However, from the facts of this  case which  are uncontroverted, I  have no doubt  in my mind  that the respondents  officials  are abusing  their statutory powers  for ulterior motives.

59. Even when the respondent’s counsel appeared  in court  at the hearing of this application, he submitted  that his clients  were  willing to  release the goods but that they  had no  powers over  third parties  who are  owed  money by the petitioner/applicant.  He also submitted that the applicant can apply for waiver of  charges. He did not  submit on whether or not his clients    were justified  in detaining  the goods for the petitioner  and or  whether  the petitioner  was  guilty of any   misfeasance or false declaration  by way of misdescription  of imported  products as alleged in the impugned letter of 15th July, 2016. The question is, why would the applicant apply for waiver of charges which it is not even supposed to pay and which are occasioned by the respondent’s arbitrary action?

60. In my humble view, the respondents  deliberately  avoided to respond to this application and   I can infer the reason to be that they had nothing  to rebut.  In the  persuasive  authority  by the  Federal High Court   in Lagos, Nigeriain Punch Nigeria  Ltd & Another  V Attorney General & Others  reported in [1996] 1 Commonwealth  Human Rights  Division, the Court  in  allowing an application and  awarding  damages held that:

”Where  facts have been proven  which prima facie showed an  infringement, it   was for the person  alleged to have infringed  that right  to justify  such infringement  and in  the absence of  a counter  affidavit, the  averments contained  in the supporting   affidavit  must be taken   as true.”

61. In the instant case, the petitioner/applicant   has demonstrated, prima facie, that  no notice to show cause was  issued to it as  the importer, enumerating  the reasons  for the  stand being   taken by the  customs, soon after paying   the duty, to enable  it make  representation  along with corroborative evidence upon which  the adjudicative/administrative  authority  would be  expected  to follow the principle of natural justice or fair administrative action as stipulated in Article 47 of the Constitution  and give a reasonable  opportunity  to the petitioner/applicant of  being heard  before the decision  is made to charge additional taxes in accordance with the provisions  of the East African Community Customs Management Act and other  enabling provisions of the law.

62. Furthermore, that process must  have some internal appeal  mechanisms.  In the instant   case, I find that the respondents are using the  law for  wrongful  purposes, to exert economic  pressure and  hardship  to the petitioner/applicant so as  to achieve  an end which is  improper.  The court  does not  see any  rationality  connected to either  the claim  that there  was  partial differences  in the documents  in the description of imported goods   as to standard  and grade  or  to the allegations that the  name of the  manufacturer of the imported goods  was   different   and in what sense.

63. In my humble  view, therefore, there is prima facie  evidence that  the respondents have  trampled on the  petitioner/applicant’s  fundamental right  to  fair administrative  action and the right  not to be  arbitrarily deprived  of its  property described in the transactions documents  and as declared in the  import  documents.  There  is also a further  threat  to infringe   on that latter  right  by demanding  additional tax based  on an arbitrary assessment  under  a different  paragraph of the EACCMA.  The above  infringements  and threats  to infringement, in my view, cannot be  reasonably  justified  in the interests of justice and economic   sense  or well being of  the petitioner/applicant.

64. The fact that the  respondents  have avoided  the court  at this interlocutory  stage to challenge the detailed averments and depositions made by the petitioner/applicant is  in my view is also suspect. A case is as important at every stage  whether at its initiation, especially where mandatory orders are being sought pending the hearing and determination of the main claim or petition or at the full trial. In this case, I have no difficulty in finding that the respondents’ avoidance of  filing any opposing averments to the application herein is prima  facie evidence  that they had  no legal  authority for their actions of detaining  the petitioner/applicant’s  goods and  or for demanding for more taxes  on the same goods as described in the  transactions documents, tags, commercial invoice and declaration  forms on entry.

65. The Constitution of  Kenya, 2010, indeed, does not  tolerate  any arbitrary  state  action against  any person  unless such action is  in conformity   with the law.  I am also in agreement   with the  persuasive  decision   of Lenaola J   in Petition No. 1188 of  2003(OS) Kariuki Gathitu V The Attorney General that:

“ It is now trite that although  a party alleging   a fact has  the onus of proof  of that fact, the  opposing  party is at   the very  least  expected to file a response  to those   allegations  of fact.  Where  such a party  actually appears in the proceedings  but neither  in pleadings  nor in  oral evidence  does he  answer  to those facts – then the court  can only  but take it that those facts  are actually uncontested…….”

66. The Learned Judge in the above   case was  persuaded  by the decision in HCC No. 1408/2004  Rumba Kinuthia  Vs Attorney General where the court stated that:

“Unfortunately, the respondent did not treat this case with the seriousness that it deserves.  Despite the fact that the applicant made very serious allegations against the respondent …..

No affidavit was filed in reply so that all the facts deposed   to by the applicant in his affidavit are what the court will take as representing the factual position.”

67. In the instant application, the  respondents   are well aware that   in Constitutional Petitions, where a party seeks  for a mandatory injunction  or conservatory  order, that party  only needs to establish that they have a prima facie  arguable  case against the respondent to warrant  grant of  such orders.  The tests   applicable  is that set out  in the  Locabail International Finance  Ltd V Agro Export  and Others[1986] ALL ER  901andShepherd  Homes Ltd V Shadahu [1971] 1 ch D 34  and as  adopted  in Belle  Maison Limited  Vs Yaya  Towers Ltd HCC  2225/92and Ripples  Limited Vs  Kamau Mucuha  HCC  4522/92and more so  in Kenya Breweries Ltd  & 2 Others  Vs Washington Okeyo[2002] e KLR   where the Court of  Appeal pronounced  that:

“  the test whether  to grant  a mandatory injunctions or  not  is correctly stated in  VOL 24  Halsbury’s  Laws of  England 4th Edition paragraph 948  which reads:

“A mandatory  injunction can be granted  on an interlocutory  application  as well as at the hearing, but, in  the absence of special circumstances  it will not normally be granted.

However,  it the case   is clear and  one which  the court thinks it  ought to be decided at once, or if the act  done is  a simple and summary one which can be easily remedied, or if  the defendant  attempted to steal a match on the  plaintiff…..a mandatory injunction will be granted  on  an interlocutory application”

68. In the Supreme  Court Petition No. 2  of  2013  Gatirau Peter Munya  Vs Dickson Mwenda  Githinji &  2 Othersthe Supreme  Court of Kenya  set a threshold   for the issuance of conservatory  interim orders in a  Constitutional Petition  as  follows:

“………….the  test for  the grant  of conservatory  orders  under the  constitutional  applications must be qualified to take into account  the  premium that the Constitution places  upon the enjoyment of fundamental  rights.  Such premium is to be seen  in the  easy access  to the court   that is  granted to the applicants  in terms of locus standi and  the formality  of documentation ( see  Article  22  of the Constitution).

In such  circumstances  the balance  of convenience  test upon an  arguable  case being  demonstrated  by the applicant  is more appropriate  to preserve  the enjoyment of  rights pending hearing and determination of the petition for breach of  fundamental human rights  and freedoms.

Needless to state in terms of Article  24  of the Constitution, the balance  of convenience  must involve    balancing  the  rights  of the applicant  against the  rights of  others  whose  enjoyment of those or  other rights may be  jeopardized  or  affected by the  enjoyment  by the applicant of the  rights in question”

1. This ruling determines an  interlocutory  application for conservatory  mandatory orders, hence  it does not  make  a definitive  finding of the merits or demerits of the main petition. However, I am satisfied that on the material placed  before me, the petitioner/applicant has satisfied the tests and thresholds set out  in the Gatirau Peter Munya (supra)  and in the decision by Mureithi J in Mombasa  Branch Vs  Mombasa County Council  Constitution  Petition No. 3/2014 where the learned Judge held that:

“ With respect, although  the counsel for  respondents  submitted on the basis of the standard of prima facie  case with  regard to temporary injunctions  in civil cases as established  by  the decision on Giella Vs Cassman Brown  [1973] EA  358, the test  for the grant of conservatory  orders under constitutional applications must  be qualified to take into account  the premium   that the constitution  places upon  the enjoyment of fundamental rights.  such premium  is to be  seen in the easy access  to the court that  is granted  to the applicants  in terms of  locus standi  and the formality  of documentation ( See Article  22 of the Constitution).  In such circumstances the balance of convenience test  upon an arguable  case being  demonstrated by the applicant  is more appropriate to preserve  the enjoyment   of rights  pending  hearing  and determination  of the petition  for breach of  fundamental  human rights  and freedoms.  Needless  to state, in terms  of Article 24   of the Constitution  the balance of  convenience  must involve  balancing  the rights  of the applicant  against  the rights  of others whose  enjoyment  of those  or other rights  may be  jeopardized  or affected  by the  enjoyment by the applicant  of the rights  in question.”

69. The court notes that although the rights complained of are private individual rights, this court must  not lose  site of the investor  contribution to the economic growth  and  economic  development of Kenya through massive job creation and general infrastructure growth.  It therefore follows that any  unlawful, unreasonable and arbitrary  or oppressive actions of the state and its machinery  amounting  to abuse of power geared towards killing investor confidence is prejudicial to the public  good of this country.  The laws of  any country and their implementation must be  with a view to boosting  and inspiring  investor confidence  by creating or facilitating  the creation of an enabling  environment  for ease  of doing business  with the outside  world  as  well.

70. It does not make any economic sense for one to import goods and pay premiums which have the effect of destroying their business ventures. Furthermore, verbal demands for such high amounts of taxes are a panacea for arbitrariness and leeway for engagement in corrupt   practices since no record would show that such sums were demanded and or paid.  It is the taxes that lubricate or sustain the economy of this country and from which all citizens enjoy the  public good provided by the state.  Therefore, a court of law cannot be seen to  be  blocking the way of tax collection. However, the respondents have not  come to court  to explain  the bare minimum  of, for example, what  evidence  they have of what those “identical goods” were  used to get the new  transaction  value imposed on the petitioner/applicant’s goods are.

71. The function of this court is indeed to consider whether the process leading to detention of the goods  was done within  the  respondent’s mandate under the  East African Community Customs  Management Act; whether it  was reasonable and  or complied with Rules of  natural justice.

72. The court acknowledges that the 3rd respondent  is the state’s gate keeper on matters of import  and export tax.  It is  expected to be vigilant to avoid  tax evasion  and economic  sabotage  but it   must not  lose site of  the constitutional imperatives and  the fact that economic   ventures  leave an  indelible marks to our economy.

73. In my humble  view, it is  the arbitrary, oppressive  and unreasonable  actions of the respondents who are the agents of the state  that have caused  delay of the petitioner/applicant’s  goods at  the port of Mombasa, since it had settled  duty assessed  within  the  21 days of  free storage  period.  Any expenses  incurred   after the  21st day are due to the exercise of arbitrary power by  the officials of the 3rd  respondent, who have even  refused to  exercise discretion  under Section 122(3)  of  East African Community Customs  Management Act to demand  for sufficient  security to be  deposited by the petitioner/ applicant, upon  which the goods would be   released to avoid unnecessary  expenses that would  render the  importation of the goods, which  in any case, have  not been said to be  counterfeits, uneconomical.

74. As was held in Keroche Industries V Kenya Revenue Authority  & 5 Others, if a decision is oppressive or unreasonable  it  amounts to an abuse of power.  The respondents  did not  stand  to suffer  any prejudice if they exercised their discretion  under Section 122(3)  of the EACCM Act.  Economic sabotage to a bonafide investor is equivalent to terrorizing them and discouraging other intending investors.  But this is not to say that where tax is due then it should be avoided or at all. Under Article  210 (1) (b),(e), of the Constitution, no tax  or licensing  fee may  be imposed, waived or varied except  as provided by  legislation  and each waiver, and the reason  for it, shall be  reported  to the Auditor General. In the instant case, what the  court  deciphers from the petitioner’s  complaint is that the  additional tax which it is being  asked to settle  is unlawful since it has not been shown   that  it has  breached any  import  regulations  under the  East African Community Customs  Management Act.  The officials of the respondents,  it must not be forgotten, are public officers and are   bound by   the national values  and principles  espoused  in Articles  10 and  232 of the Constitution  which include  the rule of law, good  governance, transparency and accountability  for administrative  acts, efficient, economic   use of resources, responsive, prompt, effective , impartial and equitable  provision of services, transparency  and  provision to the public  of   timely accurate information.

75. In my humble view, if this  court  were to wait until the petition  which has not been responded  to is heard and determined  before granting any conservatory orders, in my humble  view, even where damages are pleaded and can be quantified, such damages  would be  too much an expense to the tax payer to compensate  an individual, the petitioner/applicant and therefore the court would   not have contributed  to the promotion  of those  national values  and principles espoused in Article  10 and   232 especially  on efficient, effective and economic  use of resources.

76. I find that  this is a  case where  on the material presented before the court, a tribunal properly  directing  itself  will conclude that prima facie   there exists  a right which has apparently been infringed or threatened to be infringed  by the opposite  party as to call for an  explanation or rebuttal from the  latter( see  Mrao V First  American  Limited  & 2 Others [2003] KLR.

77. As seen from the transaction documents  which include contracts with the sellers  of the goods  in China, the petitioner/applicant   was expected to settle the  entire CIF value  of $ 783,750 within  180 days after   26th May 2016  when the cargo was received..  That period is quickly coming to an end while the goods are arbitrarily being detained by the 3rd respondent.

78. It is also not denied that the steel  material imported are perishable   with attendant  risk of damage  by human intervention and elements  may  so deteriorate by rusting  thereby  rendering  them worthless or of little value by the time the dispute  herein is heard  and determined on its merits.

79. That being the case, it would be  extremely  oppressive if the petitioner/applicant   were  to eventually   succeed  in its claim only to lose the  whole value of  its goods  on account of their long  detention and attendant  deterioration as  was  held in Republic  Vs Commissioner  of Customs  and Excise  Exparte Abdi  Gulet Olus [2014) eKLR.

80. Albeit the 3rd respondent’s counsel  claimed  that it  has no powers to waive  charges  owed to  third  parties, this  court has not  been shown  who those  third  parties are and  or whether  or not they  are the  agents of  the respondents.  Further, as the detention of the goods  is prima facie  unjustified, arbitrary and  unreasonable on the part of the third respondent which is a public authority, any damages  loss  would be  attributed  to the actions  of the 3rd  respondent.

81. Accordingly, I allow  the petitioner/ applicant’s  application dated  10th August  2016  and make  orders as prayed  for  in prayer  No. 4  save that  the security  deposit  which the  3rd  respondent  prayed that it be  enhanced  shall be so enhanced to the sum of kshs 20,000,000 twenty million Kenya shillings in the  form of a  reputable   Bank Guarantee deposited with the court  and the 3rd respondent  within 7 days  of this ruling.

82. This order does not foreclose the parties’ earlier intentions and efforts to have this dispute resolved amicably.  The parties are implored to explore possible alternative dispute resolution mechanisms as espoused in Article 159 of the Constitution.

83. As there is no agreement as to costs, the 3rd respondent shall bear the costs of this application.

Dated, signed and delivered in open court at Nairobi this 2nd Day of September 2016.

R.E. ABURILI

JUDGE.

In the presence of:

Dr Kamau Kuria Counsel for the Petitioner/Applicant

Miss Amadi Counsel h/b for Lemiso advocate for the 2nd and 3rd Respondents

Court Assistant: Adline