Judgment - TAT_No_668_of_2022_-_Kenya_Breweries_Limited[1]

Key Facts

Tax Type

Issues

• Whether the dispute before the Tribunal is sub-judice, given that related petitions and an application for court interpretation are pending in the High Court, as per Section 6 of the Civil Procedure Act.
• Whether the Tribunal has jurisdiction to interpret the Ruling and order of the High Court regarding the status quo, as outlined in the consolidated petitions and the Appellant's challenge to the Respondent's assessment.
• Whether the Respondent's assessment of the Appellant's excise duty for November 2021 to February 2022 was justified, considering the status quo orders, the effective date of Legal Notice No. 217 of 2021, and constitutional compliance.

Tax Years

• 2022
• 2021

Holdings

• The Tribunal ruled that the matter before it was not sub judice, as the Appellant sought to determine the validity of the Respondent's assessment rather than interpret the High Court's orders. The Tribunal asserted jurisdiction to adjudicate on the justification of the assessment independently of the pending High Court petitions.
• The Tribunal found that the Respondent's assessment of Kshs. 513,706,981.00 for underpaid excise duty (November 2021–February 2022) was unjustified. The assessment relied on the impugned Legal Notice, which the Court had effectively suspended through the status quo orders. The Tribunal concluded the assessment must be set aside.
• The Tribunal determined that the status quo orders issued by the High Court on 19th November 2021 halted the operation of Legal Notice No. 217 of 2021, thereby maintaining the prior excise duty rates for the Appellant's products. The Appellant was entitled to apply the pre-adjustment rates, and the Respondent's assessment based on the impugned Legal Notice was erroneous and set aside.

Remedies

• The Respondent's objection decision dated 12th May 2022 is set aside. The Tribunal directs that the objection decision be and is hereby set aside.
• Each party to bear its own costs. The Tribunal orders that the costs be borne by the respective parties.
• The Appeal is allowed as it is merited. The Tribunal proceeds to make the following final Orders: The Appeal be and is hereby allowed.

Tax Issue Category

Legal Principles

• The Tribunal applied the principle of the rule of law under Article 10 of the Constitution, holding that the Respondent as a state organ had a duty to obey the High Court's status quo orders issued on 19th November 2021. The Respondent's failure to maintain the status quo by applying new excise duty rates before 20th December 2021 constituted a violation of this constitutional principle.
• The Appellant asserted its legitimate expectation (Articles 20, 21, 27, and 50 of the Constitution) that the Respondent would comply with the High Court's status quo orders. The Tribunal found the Respondent's assessment unlawful under Article 47 (fair administrative action) as it contravened these orders, invalidating the demand for underpaid taxes.

Disputed Tax Amount

Precedent Name

• Thugi River Estate Limited & another vs. National Bank of Kenya Limited
• Saifudeen Abdullali & 4 Others vs. National Bank of Kenya Limited
• Republic vs National Environment Tribunal, Ex-parte Palm Homes Limited & Another
• Wildlife Lodges Ltd vs. County Council of Narok and Another
• Alken Connections Limited vs. Safaricom Limited & 2 others
• Hadkinson vs. Hudkison
• Pevans East Africa Limited vs. Commissioner of Domestic Taxes

Cited Statute

• Constitution of Kenya - Article 27
• Constitution of Kenya - Article 10
• Excise Duty Act - Section 10
• Kenya Revenue Authority Act - Section 13
• Statutory Instruments Act - Section 23(1)
• Civil Procedure Act - Section 6
• Constitution of Kenya - Article 40
• Constitution of Kenya - Article 47

Judge Name

• Cynthia B. Mayaka
• Jephtah Njagi
• Abraham K. Kiprotich
• Grace Mukuha
• Eric Nyongesa Wafula

Passage Text

• 108. As a result of the foregoing, the Tribunal is of the view that the status quo orders of 19th November 2021 stopped the operation of Legal Notice No 217 of 2021 thereby maintaining the prior excise duty rate for the Appellant's products...
• 110. The Respondent's assessment therefore based on the legal Notice 217 of 2021 is erroneous and ought to be set aside.
• 111. The upshot of the foregoing analysis is that the Appeal is merited and the Tribunal accordingly proceeds to make the following final Orders:- a) The Appeal be and is hereby allowed.