Automated Summary
Key Facts
Rubis Energy Kenya PLC (Appellant) disputed the Commissioner of Customs and Border Control's (Respondent) reclassification of K-Lube ATF II-D and III-D from non-lubricating oils (HS Code 2710.19.56) to lubricating oils (HS Code 2710.19.51), resulting in additional duties of Ksh 12,830,887.00. The Appellant argued that the 2019 private ruling classifying the product as non-lubricating oils remained valid despite its 2020 expiration, as there was no change in the product's chemical composition or applicable law. The Respondent relied on website descriptions, laboratory tests, and EACCMA provisions to justify the reclassification. The Tribunal found the Respondent erred in reclassification and duty demands, allowing the appeal and setting aside the February 2024 decision.
Tax Type
Customs Duty and Value-Added Tax (VAT)
Issues
Whether the Respondent erred in re-classifying the Appellant's products under HS Code 2710.19.56 and demanding short levied duties.
Tax Years
- 2024
- 2023
Holdings
- The Tribunal allowed the Appellant's appeal, set aside the Respondent's review decision dated 14th February 2024, and ordered each party to bear its own costs. The Tribunal rejected the Respondent's reliance on website descriptions and expired private rulings to justify the reclassification.
- The Tribunal determined that the Appellant's continued use of the 2019 private ruling classification did not constitute a material breach, as there was no change in the product's composition or legal framework. The Respondent's retrospective application of a new HS Code and duty rate was deemed unreasonable and erroneous.
- The Tribunal found that the Respondent erred in re-classifying the Appellant's products under HS Code 2710.19.56 and in demanding the short-levied duties. The Tribunal emphasized that the material composition of the products could only be established through scientific methodology, and the Respondent failed to provide evidence of any material change in the product's composition or law requiring reclassification.
Remedies
- The Tribunal sets aside the Respondent's review decision dated 14th February 2024, which upheld the reclassification of the Appellant's products under HS Code 2710.19.51 and demanded additional duties.
- The Tribunal allows the Appellant's appeal, granting relief from the Respondent's decision to reclassify the products and demand short-levied duties. The appeal is meritorious, and the Respondent's review decision dated 14th February 2024 is set aside.
- The Tribunal orders that each party bear its own costs associated with the appeal proceedings.
Tax Issue Category
Customs Valuation / Classification
Legal Principles
- The Tribunal applied the Evidence Act (Section 109) to determine that the Respondent bore the burden of proving the reclassification of the product was correct. This shifted the evidentiary responsibility to the Respondent, who failed to provide sufficient proof of a material change in the product's composition or legal basis for the new classification.
- The Tribunal held that the Appellant's continued reliance on a private ruling issued by the Respondent created a legitimate expectation that the classification of the product would remain unchanged unless there was a material change in law or the product's composition. This principle was central to the Appellant's argument that the Respondent's retrospective reclassification violated their reasonable reliance on the prior ruling.
Disputed Tax Amount
12830887.00
Precedent Name
- Car importers Association of Kenya v Kenya Revenue Authority
- Kenya Revenue Authority v Export Trading Company Limited
- Republic v Kenya Revenue Authority Ex-Parte M-Kopa Kenya Limited
- Kenya Nut Company Limited v Commissioner of Domestic Taxes
- Serah Njeri Mwobi v John Kimani Njoroge
- Council of Civil Service Unions v Minister for Civil Service
- Jack Ogolla vs George Onyango Nyamor
Cited Statute
- Kenya Revenue Authority Act
- General Interpretive Rules
- Evidence Act, CAP 80 of the Laws of Kenya
- East African Community Customs Management Act, 2004
- Tax Appeals Act
- Tax Procedure Act
Judge Name
- Oloolchike S. Spencer
- Elishah N. Njeru
- Boniface K. Terer
- Christine A. Muga
- Eunice N. Ng'ang'a
Passage Text
- The Appellant adduced as evidence, its import certificates of analysis for all the products whose classification was disputed and the Respondent did not controvert this evidence.
- The Tribunal finds that the Respondent erred in re-classifying the Appellant's products under HS Code 2710.19.56 and also in demanding the short-levied duties.
- The Tribunal observes that the material composition of this product could only be established through scientific methodology such as a laboratory test or tests.