JUDGMENT-TAT E203 OF 2023-ARGAVE DISTILLERS LIMITED_PANEL 3

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Automated Summary

Key Facts

The Appellant, Argarve Distillers Limited, a spirits and beverages manufacturer, disputed tax assessments totaling Kshs 90,535,200.00 (2020) and Kshs 39,722,516.00 (2023) by the Kenya Revenue Authority (Respondent). The appeal challenged the Respondent's failure to provide reasons for the objection decision, errors in excise duty stamp accounting, incorrect VAT rate application (16% vs 14% from April 2020), and late objection processing. The Respondent argued the appeal was filed by an unqualified tax agent and that the objection was invalidly lodged two years after the assessment. The Tribunal found the objection was outside the 30-day statutory period under Section 51(2) of the Tax Procedures Act, rendering the appeal improperly before the court. The appeal was struck out with each party bearing its own costs.

Tax Type

Excise Duty and Value-Added Tax (VAT)

Issues

  • Whether the notice of objection was validly lodged pursuant to section 51 (2) of the TPA.
  • Whether the objection decision is statutorily time barred.
  • Whether the preliminary objection is properly before the Tribunal.
  • Whether the Appellant discharged its burden of proof pursuant to Section 56(1) of TPA.
  • Whether the Applicable VAT as at 15th April 2020 was 14% or 16%.

Tax Years

  • 2018
  • 2019
  • 2020

Holdings

  • The Tribunal dismissed the preliminary objection, holding that it is not its jurisdiction to determine the validity of the tax agent's certificate. The Respondent raised the objection on grounds that the Appeal was filed by an unqualified person, but the Tribunal ruled this issue improperly before it, as the validity of the tax agent's license falls under the Commissioner's authority under Sections 19, 20, 21, and 22 of the TPA. The decision references the legal principle from Owners of the Motor Vessel 'Lillian S' vs. Caltex Oil (Kenya) Limited, emphasizing that jurisdiction is foundational to proceedings.
  • The Tribunal found the Appellant's notice of objection invalidly lodged under Section 51(2) of the TPA. The objection was filed two years after the assessment (22 April 2022 vs. 12 November 2020), and no evidence of leave to extend the 30-day deadline was provided. The Tribunal emphasized that the word 'may' in the statute implies discretion, not a mandate, and the Respondent lacked authority to accept the late objection. This rendered the objection null and void, making the Appeal moot.
  • The Tribunal concluded the assessment is not an appealable decision under Section 3(4)(a) of the TPA, which defines 'tax decision' as including assessments. Citing Phoenix of E.A. Assurance Company Limited vs. S. M. Thiga t/a Newspaper Service [2019] eKLR, the Tribunal held that the Appeal is improperly before it as the assessment cannot be appealed. This determination rendered all other issues moot, and the Appeal was struck out for lack of merit.

Remedies

  • The Tribunal struck out the appeal, finding it lacked merit and was improperly filed beyond the statutory period.
  • The Tribunal ordered that each party shall bear their own costs associated with the appeal.

Tax Issue Category

Input Vs. Output Vat

Legal Principles

  • The Tribunal emphasized that the Appellant had the burden to prove the Respondent's decision was incorrect or unlawful under Section 56(1) of the Tax Procedures Act. The Appellant's objection, filed two years after the assessment, did not meet this burden. The Tribunal noted the Respondent was not obligated to accept the late objection and had no authority to validate it retroactively, reinforcing the principle of strict adherence to statutory timelines for objections.
  • The Tribunal determined that the Respondent issued an objection decision beyond the statutory 30-day period mandated by Section 51(2) of the Tax Procedures Act. This rendered the objection decision invalid and 'ultra vires' the law, as the Respondent lacked authority to regularize a late objection. The Tribunal cited the principle that 'shall' in statutory provisions denotes mandatory requirements, and the Respondent's failure to invalidate the late objection demonstrated overreach.

Disputed Tax Amount

39722516.00

Precedent Name

  • Phoenix of E.A. Assurance Company Limited vs. S. M. Thiga t/a Newspaper Service
  • Owners of the Motor Vessel 'Lillian S' vs. Caltex Oil (Kenya) Limited
  • Equity Group Holdings Limited vs. Commissioner of Domestic Taxes

Cited Statute

  • Tax Appeals Tribunal Act, No. 40 of 2013
  • Tax Procedures Act, No. 29 of 2015
  • Evidence Act, Cap 80 Laws of Kenya
  • Kenya Revenue Authority Act, Cap 469

Judge Name

  • Boniface K. Terer
  • Christine A. Muga
  • Spencer S. Ololchike
  • Delilah K. Ngala

Passage Text

  • The Assessment order is not an appealable decision. This Appeal is therefore improperly before the Tribunal.
  • The Tribunal finds that in essence, the Appellant did not object within the 30-day statutory period that is required and set under Section 51(2) of the TPA. The purported objection by the Appellant dated 22nd April, 2022 was null and void.
  • The Tribunal is of the view that the determination on whether the tax agent's certificate as issued by the Respondent is valid or invalid does not fall under the jurisdiction of the Tribunal. Accordingly, the Tribunal is the wrong forum within which to raise such a Preliminary objection.