republicofkenya inthetaxappealstribunal atnairobi · 2016. 10. section 72 of the tax p issue a tax...

REPUBLICOF KENYAIN THE TAX APPEALSTRIBUNAL AT NAIROBI

Misc Application No. 6 of 2018

ATT A KENYA LIMITED APPLICANT

AND

COMMISSIONER OF DOMESTIC TAXES RESPONDENT

1. The Applicant is a company incorporated under the Companies ActCap~ ~~,(~

486 and carrying on the business of milling of grain .••2. The Respondent is a State Corporation establish der Section 3 of the

Kenya Revenue Act, a ter 469 Laws of Ken c arged with theresponsibility of asses collection of revenue ya.

3. The Appliescountry 0

could nthe

. ported t f grain which arrived in theand 18th Ju ; ere informed that they

r the same with ax Comp i~e Certificate issued bynt. They wrote t e Respondent with a view to getting

goods or a Compliance Certificate but werewere require ay disputed tax arrears amounting

anded from them vide the Respondents letterrior to issuance of the Certificate. Aggrieved

by the refusal of the R dent to issue the certificate, the Applicantfiled an appeal to this Tribunal to compel issuance of the Tax ComplianceCertificate to enable it to clear the consignment and obtain Form C60which would enable it to pay duties at the rate of 10% instead of 30%.

4. The matter was brought to the Tribunal through a Notice of Motion filedthrough its Advocates, Njagi and Associates, on 13th June 2018 seekingorders that:

i. The matter be certified as urgent and service be dispensed with inthe first instance.

TaxAppeal Tribunal. Miscellaneous Application No.6 of 20181

ii. The Honorable Tribunal be pleased to order the Respondent to givea Tax Compliance Certificate/ provisional Tax ComplianceCertificate to the Applicant for purposes of clearing goods at theport and renewal of a Miller's license.

iii. Consequently, and in the alternative to prayer (ii) above, theHonorable Tribunal be pleased to order the Respondent to clear thegoods at the port without the requirement of a Tax ComplianceCertificate.

iv. The Honorable Tribunal be pleased to grant any other orders it maydeem fit

v. The Cost of this application be in the /

7. The grounds for the a

i. The is'" of back ta he matter is before theT . I for adjudica '

espondent owe Applicant VAT refunds which arele of offsetting the uted tax demand.

in clearing the ds will have the company incurringrrage and st ze charges which start accruing 4

ds have landed.iv. rishable product will go bad due to poor

storage facilities e port and/or any congestion leading tosubstantial loss and may force the business to close once more.

v. Having recovered from the hard-economic times andrestructuring bearing fruit, the action to deny the Applicantclearance/Tax Compliance Certificate will have negative effect onthe Business.

vi. The business supports 200 families and it will be forced to closedown as the company has no grain to mill to sustain the companyand the workers.

5. The Application was based on thesupporting Affidavit of Shahid La ..

6. The Respondent objected to the said applicaaffidavit dated 19th June 2019.


vii. The Respondent will not be prejudiced as they continue to receivetaxes from the Applicant each and every month.

viii. The Respondent is mandated to assist the taxpayers to becompliant as a going concern and their actions will kill theApplicant's business.

Applicant's Arguments

The Applicant argued that:8. They have been paying taxes without fail from April 2018 when the

company was reopened, are compliant the year 2018 and thusentitled to a Tax Compliance Certificate ' e year 2018.

11. Section 18 givewhich is under rev

as defined under the Taxnd they tried to get the

taxes dating back to

9. It is true that a Tax CompliancProcedures Act is issued by the rmssiosame but were unsuccessful due to disputed2016.

10. Section 72 of the Tax Pissue a Tax Compliancconditions he Commithat the pay disputepurp e matter beforet t to conclude th

ct states that the C issioner maythe Applicant fulfillingand that the condition

unrea :,~,e and will defeat theribunal and is a backdoor move bytter without going to trial.

ribunal pow grant orders pending a decisionfore the Tribunal.

12. The Applicant has filed extension of time before the HonorableTribunal and if orders are not granted the sub stratum of the matter willbe lost and they have been advised by their advocates that courts oughtto give effect to hearing a matter on merit rather than on proceduraltechnicalities and that interlocutory orders have been given pending thefiling of an Appeal.

13. The first consignment had already arrived and is already attracting ademurrage of USD 10,000 daily and this demurrage would erode theirmargins and given that they are restructuring and under management,they may be forced to shut down once more leading to irreparable loss.


14. The company had no grain, had been awaiting the consignment andrequired the Tax Compliance Certificate in order to clear theconsignment at the port as well as apply for a C60 from the Ministry ofFinance and Ministry of Agriculture which would enable them clear theconsignment at 10% import duty instead of 30%. If they failed to securethe C60 approval, they would definitely incur production losses as theyawait the consignment and would not compete with other millersleading to total closure, loss of jobs and revenue.

15. The Respondent has not disputed the fact th~it owes the Applicant VATrefunds which are capable of offsetting t > uted tax demand.

Respondent to issue a Taxpliance Certificate and

o be supplied withoutthe alternative it

16. The Applicant prays for an ordeCompliance Certificate/provisiorder to the Ministry of Agricultu to issue athe requirement for a Tax Compliance Certificprays for an order tha be supplied to the App

17. In support of this applicat

i. r of the Applicant

aining the ruling in Director of Publicmau Sistu Mwaura Kamau & 4 others

R).III. eturn Acknowledgement receipts for the period

019.iv. Letter by the er to the Respondent dated 12thJune 2019

seeking a Tax Compliance Certificate.v. A copy of Bill of lading for 5,000 MTwheat ex MV PPSTOM a

addressed to the Applicant.

Respondents Arguments

The Respondents argued that:

18. The Respondents cannot be compelled to issue a Tax ComplianceCertificate as prayed by the Applicant unless the Applicant has compliedwith the conditions provided for under the law for issuance of a TaxCompliance Certificate.

TaxAppeal Tribunal> Miscellaneous Application No.6 of 20184

19. Tax Compliance Certificate is defined under Section 3 of the TaxProcedures Act to mean "a certificate issued by the commissioner ifsatisfied that the person has complied with the tax laws in respect offiling returns and has paid all the taxes due on self-assessment or hasmade arrangement with the commissioner to pay the taxes due. Section72(2) of the Tax Procedures Act provides that the Commissioner mayissue a Tax Compliance Certificate which shall be valid for the periodspecified in the Certificate upon the Applicant fulfilling the Conditionsthat the Commissioner may impose.

20. The Applicant has not provided proconditions imposed by the law forcompelling the commissioner to .

t he has fulfilled all thebe justified to seek a prayerCompliance Certificate.

21. The Tax demand that led to the dispute by ppellants arose fromself-assessments made by the Applicant on P hat did not havecorresponding paym r the period January 2 ecember 2014amounting to Ksh 13,2 which the Respond ed demandletters on 21st February, th July 2017.

did not dispents with no ar to enforce call

bsequently the018 pursuan

or nd issued thus leavingbut to initiate agency notices on 7th

n of the said taxes, but these effortsondent issued a warrant of distresssection 41 of the Tax Procedures

22.

23. The Applicant throug Application dated 19th September 2018moved the Honorable Tribunal seeking to file an Appeal out of time.The Respondent has objected to the Application, but the matter ispending determination before the Tribunal. The Applicant has noAppeal pending before the Tribunal.

24. Unless the Applicants Application for enlargement of time is allowed,which is unlikely, the Respondents demand for Ksh 13,242,656 remainsunchallenged and therefore due and payable. It therefore follows thateven though the Applicant has applied for a Tax Compliance Certificate,it is not eligible to be issued with the same as payment of taxes due is a


precondition for issuance of a Tax Compliance Certificate and theApplicant has neither paid nor made arrangement for payment of thesaid taxes which are due and payable.

25. It is only Appellants who have pending appeals before the Tribunal whocan move the Tribunal under Section 18 of the Tax Appeals TribunalAct. Given that the Applicant has no Appeal before the Tribunal, itcannot move the Tribunal under Section 18 of the TAT Act and itsapplication ought to be dismissed with costs.

26. If the Applicant is aggrieved by the Cornrnf =--, ners decision not to issuea Tax Compliance Certificate, then the edy would be to object tothe decision of the Commissioner a ait an objection Decision onthe same before moving to the T ., ropriately.

i. A copy of art" tract of the Applicants Geii. Letters to the, ,by the Respondent 51093777J

of 27th February nd 13thSeptember 2017.iii. N% of distress r 2018.

27.

TRIBU

28.lJJ';" 1 %j and listening t e submissions of both parties theTribunal must . e whether it ~apply Section 18 on this matter,whether the Res nt can be compelled to issue a Tax ComplianceCertificate and whet ods can be cleared without a Tax ComplianceCertificate.

29. The Respondent has asked the Tribunal to exercise its discretion underSection 18 of the TAT Act and compel the Commissioner to issue a TaxCompliance Certificate while the Respondent on the other hand hasargued that Section 18 would only apply if there is a dispute before theTribunal and there is none. 'Where an appeal against a tax decision hasbeen filed under this Act, the Tribunal may make an order staying orotherwise affecting the operation or implementation of the decisionunder review as it considers appropriate for the purposes of securing theeffectiveness of the proceeding and determination of the appear.

TaxAppeal Tribunal, Miscellaneous Application No.6 of 20186

30. The Tribunal is of the view that there is indeed a dispute on theCommissioners decision to refuse to issue a Tax Compliance Certificate,which decision has prompted the Applicant to seek remedy at theTribunal to enable it to clear goods which are currently at the Port ofMombasa. Furthermore, the Tribunal wishes to separate this disputefrom the other dispute for which the Applicant has requested to file anappeal out of time although the two are connected. This Tribunal findsit inappropriate to delve into the issue of the disputed taxes as this willbe heard exhaustively by the Tribunal subsequently.

31. Having separated the two disputes, ribunal now focuses itsattention to the question of whether t mmissioner can be compelledto issue a Tax Compliance Certifi . Applicant. Section 72(2) ofthe Tax Procedures Act provide t e issioner may issuea TaxCompliance Certificate which sha'/ be valid ' e period specified inthe Certificate upon the Applicant fulfilling t i» nditions that theCommissioner may i Although wide discreti erefore givento the Commissioner 0 mditions the commis ~ may set forissuance these condition unreasonable.in determiningwhether th cision on was unreasonable, The

"Tribunal he test set ou Diplo "W6] UKHL 6; [1976] 3All E , [1977] AC 1014 at 1064 as 'conduct

ing with due appreciation of itso adopt' furthermore as observed

a Revenue Authority Ex-Parte:eKLR "a principle requiring the administrative

iscretionary power is to maintain a properbalance between any ad effects which its decision may have on therights, liberties, or interests of persons and the purpose which it pursues"

32. The Tribunal notes that the Applicant has been a compliant taxpayersave for the dispute. Secondly, the Respondent has already issued awarrant of distress from which it expects to recover the taxes it hasdemanded. Thirdly, the Respondent owes the Applicant in excess of KSh27 Billion VAT credit which can offset the Ksh 13 billion being demanded.The Tribunal finds it unreasonable for the Applicant to be denied anopportunity to clear the grain currently at the port on payment of therequisite taxes.


-

33. The Respondent has in the past been compelled to issue a TaxCompliance Certificate despite pending disputes regarding unpaid taxeswhere the court found that refusal to issue the same was unreasonableor would prevent enjoyment of individual rights. see. Republic v KenyaRevenue Authority Ex parte Tom Odhiambo Ojienda SC t/a TomOjienda & Associates[2017] eKLR Republic v Kenya Revenue AuthorityEx parte Tom Odhiambo Ojienda SC t/a Tom Ojienda & Associates[2017] eKLR, it is to be observed that The Respondent has not shownhow it would be prejudiced if it issued a compliance certificate to enablethe Respondent clear its goods at the por even clear them withoutthe compliance certificate.

34. Furthermore, a compliance certifi . not conclusive evidence ofcomplying with one's tax oblig can be withdrawn uponsufficient evidence to the contr ry see Re' . vs. Kenya RevenueAuthority Ex Parte Tradewise Agencies [2013] < and Republic vs.Kenya Revenue Aut Ex Parte Cooper K-Br imited [2016]eKLR. This means that < ndent can issue the ComplianceCertificate provisionally of clearance of goods andwithdraw iter the prov 3) of the TPA if it indeed

the respond ax after the pendingen determined.

35. ugh th tion to direct the Commissioner toissue a Tax Co ' ce Certificate ding hearing of the dispute, in theinstant case howe e Tribunal is reluctant to issue such a directive tothe Respondent beca oes not want to appear to be substitutingthe discretion of the co sioner with that of its own. This view washeld in JR. Misc. Application No. 477 of 2014: Republic vs. PublicProcurement Administrative Review Board & 2 Others where it was heldthat Courts must be careful not to invade the field of policy entrusted toadministrative and specialized organs by substituting their own judgmentfor that of the administrative authority. In this regard, the Tribunal shall,rather than direct issuance of a Tax Compliance Certificate weigh thelegitimate rights and interests of the Applicant against the Respondent'smandate and seek a more suitable remedy.


36. Ultimately, the Tribunal addressed itself to the issue of whether a TaxCompliance Certificate is necessary for Clearance of goods throughcustoms. It is not clear whether the Respondent has published anydocument declaring that a Tax Compliance Certificate is necessary forclearance of goods and if so, the Tribunal is of the view that this wouldviolate the spirit of the EACCMA and the Kyoto Protocol. The KyotoProtocol, signed under the auspices of the World Customs Organizationin Chapter 3 on Clearance and Other Customs Formalities sets thefollowing standards related to Documents supporting a GoodsDeclaration:

3.76. Standard: In support of the Goorequire only those documents noperation and to ensure thapplication of Customs law3.77. Standard: Where certain supportilodged with the Goods declaration for reasoCustoms, they sh production of thosespecified period.

claration the Customs shally to permit control of the

uirements relating to thelied with.

cuments cannot bemed valid by the

ents within a

37. The Tribundearancnon-t

ws the reqods thro~gh.

rier whlch.rnav'-a and other coun

-, ~ "-red Wltpqut a

nt cOIi\r!tof!1t the port.

ornpliance Certificate fors a ition of unauthorised

repercussions on international trade.; Furthermore, it holds the view thatCompliance Certificate. In any case,

to control movement of goods

38.lt is observed that an i mate delay in clearance of the Applicantsgoods will lead to meaningless and unnecessary escalation of costs andpossible deterioration and diminution of goods which serve no usefulpurpose to either of the parties in this application. It is however not lostto the Tribunal that a Tax Compliance Certificate is essential forcompletion of activities incidental to importation of goods of the naturebeing imported by the Applicant such as processing of licenses and formC60 and issuance of licenses by relevant agencies. In this regard, theTribunal directs that the goods be granted a qualified release.


Orderi. The Tribunal orders that the 5,000 metric tonnes of wheat

aboard MN PPSTOMO (SINGAPORE FLAG) as stipulatedin Bill of Lading No. K3098-02 and 5000 metric tonnes ofwheat aboard MN KEN COLON as stipulated in Bill ofLading No. 27978-04, be released without therequirement of a Tax Compliance Certificate, on paymentof all relevant duties pending the substantive hearing anddetermination of Mise. Application No.6 of 2018.

ii. There shall be no order as to ts.iii. It is so ordered.

DATED and DELIVERED at NAIROJvne.-

ay of-----------------20 19.

MEMBER
