Swami Guards Limited v Commissioner of Domestic Taxes [2025] KETAT 160 (KLR)

Swami Guards Limited v Commissioner of Domestic Taxes (Tax Appeal E093 of 2024) [2025] KETAT 160 (KLR) (30 January 2025) (Ruling)

Neutral citation: [2025] KETAT 160 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E093 of 2024

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

January 30, 2025

Between

Swami Guards Limited

Applicant

and

Commissioner Of Domestic Taxes

Respondent

Ruling

1. The Applicant by way of a Notice of Motion dated 25th September, 2024 and filed on even date sought the following Orders:a.Spent.b.That pending the hearing and determination of this Application and suit, the Respondent by itself, its officers, servants, agents or otherwise howsoever be restrained from executing the present agency notices as against the Applicant by applying for and executing the agency notices pursuant to section 42, of the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”) and executing the same in any manner whatsoever to the Applicant’s detriment.c.Spent.d.That this injunction Application be heard inter parties on such date and at such time as this Tribunal may direct.e.That the costs of this Application be provided for.

2. The Application which was supported by an Affidavit sworn by Mr. Karim Jadvi on the 25th of September, 2024 was premised on the following grounds:a.That the Respondent herein issued a demand notice on 17th September, 2024. b.That further on 18th September, 2024 proceeded to issue agency notices to all banks and copied the Applicant in this matter serving the same on 24th September, 2024 demanding a sum of Kshs. 33,621,660. 87 as the principal amount, Kshs. 12,744,768. 43 as penalties and interest totalling Kshs. 46,366,429. 34. c.That the Applicant was apprehensive that the Respondent embarked on executing the agency notices against it despite its intention to Appeal.d.That there was no delay herein and the Applicant moved the Tribunal with utmost speed.e.That indeed pursuant to the Judgement at paragraph 68 (a) (b) and (c) at page 38 the Court declared the following:i.A declaration is issued that the Respondent is in breach of the TPA and Article 47 of the Constitution of Kenya, 2010 (hereinafter “the Constitution”) and that any actions flowing from the said actions are unconstitutional, unlawful and void.ii.An Order for Certiorari is issued removing into this court and quashing all demand notices issued to the petitions by the Respondent in respect of the tax claims in dispute in these proceedings.iii.The petitioners shall have costs of the proceedings from the Respondent”f.That in the interests of justices, the said agency notice by the Respondent’s ought to be set aside and the appeal be allowed to proceed for hearing and determination.g.That the Respondent’s action was unreasonable, illegal, ultra vires, its powers and authority as the amount demanded was disputed and had not been ascertained to be due and payable as envisaged by section 42 of the TPA.h.That the issuing of the agency notices without following the laid down procedures under the TPA amounted to condemning the Applicant unheard and infringed on its rights to fair administrative action.i.That the enforcement action by the Respondent’s shall adversely affect the Applicant’s ability to meet its financial obligations including basic necessities and statutory obligations to wit, the National Social Security Fund and the National Hospital Insurance Fund.j.That unless the orders herein sought are not [sic] granted the said bankers shall surrender all funds held on behalf of the Applicant to the Respondent which event shall irretrievably lead to the collapse of the Applicant’s business enterprise and interfere with the integrity of the process and the subject matter of the tax dispute that is before this Tribunal.k.That the Applicant objected to the assessment.l.That the said agency notice dated 18th September 2024 was issued on the wrong basis of assumption as the amounts contained therein have not been ascertained and due and payable.m.That it was in the interest of justice for this Tribunal to allow the Application as prayed since the Respondent’s action to issue the agency notice was taken in flagrant breach and disregard for the law and due process and in violation of the Applicant’s constitutional right to property as guaranteed under Article 40 of the Constitution of Kenya, 2010 (hereinafter “the Constitution”).

3. The Respondent opposed the Application through a Replying Affidavit dated and filed 7th October, 2024, sworn by its officer, Ms. Christine Macharia citing the following as the grounds for opposing the Application:a.That upon reviewing the Application served upon the Respondent, the Respondent noted that the Appellant did not annex any pending Appeal before this Tribunal.b.That the Notice of Appeal annexed bore the same date as the Application which were both filed on 25th September 2024 after the Agency notice dated 18th September 2024. c.That the Applicant did not annex any decision by the Respondent or the alleged objection in paragraph 9 of the grounds in the Notice of Motion.d.That the Applicant in paragraph 4 of its supporting Affidavit relied on a Judgement without annexing the said Judgement or giving any reference to the same.e.That upon reviewing the Application served upon the Respondent, the Respondent noted that the Applicant did not provide any reasonable cause for its delay in filing the Appeal.f.That a decision declaring no inordinate delay cannot be passed by the Tribunal without sufficient grounds by the Applicant.g.That the Applicant did not meet the conditions of Section 13(4) of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”) to warrant the exercise of the discretion of the Tribunal in its favour.h.That the Applicant did not demonstrate that it deserves favourable discretion of this Tribunal and the Application should be dismissed with costs to the Respondent.

4. The Tribunal notes that neither party complied with the directions it issued on 3rd October, 2024 to file written submissions and serve the same on each other on or before 14th October, 2024. Accordingly, neither of the parties’ written submissions have been considered.

Analysis And Findings 5. The purport of the orders being sought by the Applicant was a stay of the enforcement of an agency notice dated 18th September, 2024 issued by the Respondent. The Applicant also filed its Notice to Appeal against the demand notice issued by the Respondent and an objection decision dated 20th November, 2023.

6. The Tribunal notes the Applicant in its Notice of Appeal refers to its objection decision dated 20th November, 2023 and upon a review of the Notice of Appeal the Tribunal notes that the Applicant lodged an appeal as it was dissatisfied with the demand notice dated 17th September, 2024. The agency notice was issued on 18th September, 2024, a day after the demand notice was made.

7. Pursuant to the following provisions of Section 51(8) of the TPA, the Respondent has the mandate of issuing an objection decision upon receipt of a validly lodged objection:8. Where a notice of objection has been validly lodged within time, the Commissioner shall consider the objection and decide either to allow the objection in whole or in part, or disallow it, and Commissioner's decision shall be referred to as an "objection decision".

8. The Tribunal notes that other than the Notice of Appeal the Applicant did not file proper record of appeal by omitting its memorandum of appeal and statement of facts pursuant to the following provisions of Section 13(2) of the TATA:“The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal, of—a.a memorandum of appeal;b.statements of facts; andc.the appealable decision; andd.such other documents as may be necessary to enable the Tribunal to decide on the appeal.”

9. Section 18 of TATA dictates as follows:“18. Order to stay or affect the implementation of the decision under reviewWhere an appeal against a tax decision has been filed under this Act [emphasis ours] Tribunal may make an order staying or otherwise affecting the operation or implementation of the decision under review as it considers appropriate for the purposes of securing the effectiveness of the proceeding and determination of the appeal.”

10. The foregoing section provides for the stay of any implementation of the Respondent’s decision only when an appeal has been filed with the Tribunal. From a review and perusal of the evidence of the parties, the Tribunal first did not sight a proper record of Appeal filed by the Applicant and served on the Respondent and in any case, the decision by the Respondent was not an appealable decision.

11. Accordingly, the finding of the Tribunal is that this Application as an interlocutory matter could only have been appropriately entertained after an appeal was properly filed with the Tribunal.

Disposition 12. The upshot of the foregoing, the Tribunal finds that the Application lacks merit and accordingly proceeds to make the following Orders:a.The Application be is hereby dismissed.b.No orders as to costs.

13. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 30TH DAY OF JANUARY, 2025. CHRISTINE A. MUGA - CHAIRPERSONBONIFACE K. TERER - MEMBEREUNICE N. NG’ANG’A - MEMBEROLOLCHIKE S. SPENCER - MEMBER