1. The Appellant is a principal officer appointed under the Kenya Revenue Authority Act which Authority is mandated with the responsibility of assessing, collecting and accounting for all tax revenues as an agent of the Government of the Republic of Kenya and is also mandated with the responsibility of administration and enforcement of the statutes set out under the schedule to the Act.
2. The Respondent is a limited liability company duly incorporated in Kenya and its principal business activity is the provision of payment services to businesses and individuals through online payments and onsite payments through its point-of-sale machines.
3. The brief history of the matter is that; the Respondent imported Mobile Point of Sale (MPOS) devises and the Appellant conducted a posts clearance audit on them whereupon it re-classified them from tariff HS Code 8471.40.00 to 8470.50.00. Consequently, the Appellant issued a demand notice for additional tax of kshs 2,837,476.00. The Respondent applied to review that decision but the application was dismissed by the Appellant, prompting the appeal at the Tribunal.
Appeal before the Tax Appeals Tribunal
4. The Respondent (Appellant in the Tribunal) raised the following grounds;
a) The Respondent erred in law and fact by re-classifying the imported MPOS devices from tariff 8471.40.00 to 8470.50.00.
b) The Respondent erred in law and fact by imposing additional taxes amounting to kshs 2,837,476.00 on the imported MPOS devices.
c) The Respondent’s demand for additional import duty and VAT on the imported MPOS devices violates the Appellant’s right to legitimate expectation.
5. The Tribunal found merit in the appeal and gave the following orders;
a) The Appeal be and is hereby allowed.
b) The Respondent’s review decision dated 21st September 2022 be and is hereby set aside.
c) Each party to bear its own costs.
6. Aggrieved by that judgment, the Appellant filed this vide a Memorandum of Appeal dated 27/03/2024, and raised the following grounds;
a) The honorable Tribunal erred in law and fact by finding that the Miura Mobile Point of Sale devices terminals are classifiable under HS 8471 which is reserved for automatic data processing machines as opposed to HS 8470 which is reserved for cash registers.
b) That the honorable Tribunal erred in law and fact in failing to appreciate the Respondent’s Miura Mobile Point of Sale Terminal was appropriately classified under the tariff heading 8470 covers ‘calculating machines and pocket-size data recording, reproducing and displaying machines with calculating functions, accounting machines, postage franking machines, ticket issuing machines and similar machines incorporating a calculating device, cash registers
c) The honorable Tribunal erred in law in ignoring that WCO Explanatory notes on HS 8470 specifically provides that cash registers include terminals for electronic payment by debit of credit card. These terminals use the telephone network to connect to the financial institution for authorization and completion of the transaction and to record and issue receipts indicating the amounts debited and credited which is exactly the Respondent’s Miura MPOS device.
d) The honorable Tribunal erred in law in failing to consider the meaning of the expression ‘automatic data processing machine’ as provided under chapter notes (note 5A) to chapter 84 of the East Africa Community Common External Tariff.
e) That the honorable Tribunal erred in law and fact ignoring the chapter notes (Note 5A) which excludes the MIURA MPOS Terminal devices as it cannot freely perform arithmetic computations and neither can it execute without human intervention a processing program which requires them to modify their execution by logical decision during a processing run. Therefore, it cannot be classified under heading 8471.
f) The honorable Tribunal erred in law and fact in ignoring the technical specifications and functionality of cash registers and automatic data processing machines as envisaged under the applicable EACCET and WCO explanatory notes but rather took a simplistic approach to classify the point-of-sale terminals as automatic data processing machine even when the terminals are specifically provided for under cash registers.
g) The honorable Tribunal erred in law and fact by finding that the MPOS devices are most akin to the goods described under Tariff code 8471.41.00 and not those listed under Tariff Code 8470.50.00 without stating which goods they were making the comparison with.
h) The honorable Tribunal erred in the interpretation of the general interpretation rules to the East African Community External Tariff.
i) The honorable Tribunal erred in law and fact in failing to take into consideration the basic principles of classification of goods as provided for under the Harmonized System Convention (HS) and domesticated through the East African Community Common External Tariff (EAC CET)
7. Directions were given that the appeal be canvassed through written submissions. Consequently, the parties complied and filed their respective submissions.
Appellant’s Submissions
8. The Appellant identified the issue for determination to be whether the Tribunal erred in fact and law in classifying the Respondent’s imported MPOS devices in tariff 8471.41.00 as opposed to tariff 8470.50.00.
9. It was submitted that it is important to understand how the East African Community Common External Tariff is to be interpreted as it is what should have guided the Tribunal to classify the device.
10. As to how the harmonized system is structured, it was submitted that the World Customs Organization (WCO) describes the Harmonized Commodity Description and Coding System generally as "Harmonized System" or simply "HS" is a multipurpose international product nomenclature developed by the WCO. That, the HS is a legal instrument, with binding obligations that are observed by contracting parties. That, the HS Nomenclature comprises more than 5,000 groups of goods each identified by a six- digit code arranged in a legal and logical structure to wit, the first four digits of the code correspond to the relevant HS heading number e.g 32.08, the fifth and the sixth digits identify the HS subheadings at the international level e.g 3208.10, the seventh and eighth digits identify the HS code at regional level e.g 0703.10.10, 0804.50.10.
11. As to what EACC rules say about chapters and sections, it was submitted that the legal regime guiding the HS classification of goods in East Africa is the East Africa Community Common External Tariff as read together with the World Customs Organisation Explanatory Notes. That, the classification of goods in the nomenclature is guided by General Interpretation Rules (GIRs) as cited in the East Africa Community Common External Tariff (EAC/CET). That, the period under classification was the period January 2018 to August 2020 and therefore, the applicable EAC/CET is the East Africa Community Common External Tariff (EAC/CET) 2017 version. Reliance was placed on Republic -vs- Commissioner of Customs & Ex-parte Mulchand Ramii & Sons limited eKLR where it was held as follows:
“To ascertain what code is applicable to particular goods, one has to look at the General interpretation Rules for the classification of goods, which set out the principles of interpretation in conjunction with the various chapters, describing the goods and the duty due”
12. It was submitted that according to the GIRs, classification shall be determined according to the terms of the Headings and any relative Section or Chapter Notes. That, the rules of Classification provide that the HS classifications should be read not to distort the true classification but to give it meaning. Consequently, it was submitted that it was not open for the Tribunal to ignore the sections and explanatory notes and apply its technical analysis to the Chapter Note without considering what the Explanatory Notes state regarding the classification in question.
13. As to what is the most specific description for ‘Point of Sale terminals’, it was submitted that the Tribunal ignored the WCO Explanatory Notes which provided specifically for the classification of Point-of-Sale Terminals. That, applying Rule 2 (a) on the most specific description, A Point-of-Sale Terminal (POS) is a hardware system for processing payments at retail locations. It has software embedded in the hardware which reads magnetic strips, or chips of credit and debit cards. That, the MIURA Mobile Point of Sale Terminal imported by the Respondent is a hardware system for processing contactless/non-contactless card payments at retail locations. That, it has software embedded in the hardware, which is used for recording transactions.
14. It was submitted that the MPOS devices are used to make payments, either by swiping of credit/debit cards or by other contactless payments such as NFC. That, it is also used to record payments. That, Tariff Heading 8470 covers; “machines and pocket-size data recording, reproducing and displaying machines with calculating functions; accounting machines, postage-franking machines, ticket-issuing machines and similar machines, incorporating a calculating device; cash registers.” That, the WCO Explanatory Notes to Heading 8470, and more specifically tariff code 8470.50.00 clearly states that ‘This group comprises cash registers whether or not incorporating a calculating device’. Consequently, it was submitted that it was not open for the Tribunal to use this specification to place, the device outside HS 8470.
15. It was submitted that these machines are used in shops, offices, etc., to provide a record of all transactions (sales, services rendered, etc. as they occur, the amounts involved, the total of the amounts recorded and, in some cases, the code number of the article sold, quantity sold, time of the transaction, etc. That, the Explanatory Note on Cash Registers provides that: “This group also includes terminals for electronic payment by credit or debit card. These terminals use the telephone network to connect to the financial institution for authorization and completion of the transaction and to record and issue receipts indicating the amounts debited and credited.” It was submitted that the MIURA Mobile Point of Sale Terminal imported by the Respondent is a terminal for electronic payment by credit or debit cards hence specifically provided to be under the heading.
16. It was contended that despite the case at the Tribunal being on the WCO explanatory notes, the Tribunal does not mention the Explanatory Note anywhere in is analysis. That, tax statutes are to be interpreted strictly and the court has to look at what is clearly said to ascertain the intention of the Legislature. Reliance was placed on Republic -vs- Kenya Revenue Authority Ex parte Bata Shoe Company (Kenya) Limited [2014]eKLR where it was held;
“In interpreting the tax laws, the plain language of Parliament should be adhered to lest the goods and services which Parliament did not want to tax are taxed as a consequence of the taxman’s misinterpretation of the laws. In order to achieve this purpose, tax statutes must be strictly interpreted.”
17. As to whether the device complies with Chapter Note 5A concerning technical specification for an ‘automatic data processing machine’, it was submitted that Tariff Heading 8471 covers; ‘Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.’ That, according to chapter notes (Note 5A) to Chapter 84 of the EACCET, the expression ‘automatic data processing machine’ means a machine capable of:
-a) Storing the processing program or programs and at least the data immediately necessary for the execution of the program,
b) Being freely programmed in accordance with the requirements of the user,
c) Performing arithmetical computations specified by the user; and
d) Executing, without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run.
18. It was submitted that the Tribunal did not consider the technical specification provided under Chapter Note 5A which is the legal framework for determining the technical specification for automatic data processing machines. That, the Tribunal did not state which goods they undertook the technical specification and functionality analysis to compare with the goods in question and find that indeed the technical specification placed the goods under HS 8471. That, even if the MIURA MPOS devices have a program for processing payments, it cannot be freely programmed, perform arithmetic computations and neither can it execute without human intervention a processing program which requires them to modify their execution, by logical decision during a processing run. And that for these reasons it cannot therefore be classified under heading 8471.
19. It was submitted that the technical specification of the Respondent’s Miura Mobile Point of Sales terminal is that it is a terminal for electronic payment by credit or debit cards hence properly classifiable under HS 8470 which is reserved for automatic data processing machines.
20. It was submitted that the Tribunal applied Rule 4 of the General Interpretation Rules but the device was properly classifiable under Rule 2 (a). Reliance was placed on Mumbai Custom Tribunal in Perfect Aerosol Valves -vs- Nhava Sheva a decision of the Custom , Excise & Service Tax Appellate Tribunal , Mumbai where it was stated that: “From the careful reading of the GIRs, it could be seen that these are required to be followed sequentially”. It was submitted that in all instances the Courts have found that if goods are classifiable under GIR-1, by detailed analysis of the specific customs tariff items under the respective headings, then there is no case for invoking GIR-3(a) arbitrarily. That, in our case, the attempt by the Tribunal, to skip GIR 1 to 3 and go straight to 4 was arbitrary and not proper.
Respondent’s Submissions
21. The Respondent identified the issue for determination to be; Whether the Tribunal erred in fact and law in classifying the Respondent’s imported MPOS devices under tariff 8471.41.00 instead of tariff 8470.50.00.
22. It was submitted that in exercising its appellate jurisdiction, this court will only substitute the Tribunal’s decision with its own conclusions only if the decision of the Tribunal cannot be supported by any evidence.
23. It was submitted that the Appellant reclassified the Respondent’s imported MPOS devices from tariff 8471 to tariff 8470 which encompasses calculating machines and pocket-size data recording, reproducing and displaying machines with calculating functions; accounting machines, postage-franking machines, ticket-issuing machines and similar machines, incorporating a calculating device; cash registers. That, 8470.50.00 specifically is about Cash registers which attracts import duty of 10% and VAT.
24. It was submitted that the imported MPOS devices were correctly classified under 8471 which applies to Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data. That, Code 8471.41.00 specifically relates to automatic data processing machines comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined and it attracts no import duty.
25. It was submitted that HS code 84.70 generally applies to; “Calculating machines and pocket-size data recording, reproducing and displaying machines with calculating functions; accounting machines, postage-franking machines, ticket-issuing machines and similar machines, incorporating a calculating device; cash registers.” It was contended that the imported Mobile Point of Sale (MPOS) devices do not meet this description and are solely used for recording payments.
26. It was submitted that the WCO explanation on HS Code 84.70 provides that cash registers “include machines which are often combined with a till or drawer in which cash is kept.” It was contended that the MPOS devices imported by the Respondent do not possess this functionality.
27. It was submitted that the WCO explanation on HS Code 84.70 also implicitly acknowledges that there is a difference between cash registers and automatic data processing machines, where the imported MPOS devices fall under. That, the WCO implies this by stating that; “This heading also covers cash registers working in conjunction, on-line or off-line, with an automatic data processing machine and cash registers which use, for example, the memory and microprocessor of another cash register (to which they are linked by cable) to perform the same functions.”
28. Consequently, it was submitted that there is a distinction between cash registers and automatic data processing machines, hence the two have to work in conjunction with each other, to properly fall within this tariff classification. It was contended that there is no such conjunction between the Respondent’s MPOS terminal and any stand- alone cash register, which would make the MPOS terminals to fall under tariff code 8470.50.00.
29. It was submitted that Rule 1 of the Tariff Classification General Interpretation Regulations (GIR) provides that the titles of Sections, Chapters and sub-Chapters are provided for ease of reference only. That, for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes. That, the meaning of this is that Classification is determined by the words (terms) in the Headings (the first four numbers) and the Section and Chapter Notes that apply to them unless the terms of the heading and the notes say otherwise. That, if the goods to be classified are covered by the words in a heading and the Section and Chapter Notes do not exclude classification in that heading, the heading applies.
30. It was submitted that interpretation of Tax statutes, i.e. (EACCMA), calls for a strict interpretation of the language used. Reliance was placed on Cape Brandy Syndicate –vs- I.R.C 1 KB 64, 71. Where Rowlatt J stated;
“In a taxing statute one has to look at merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”
31. It was submitted that the imported MPOS terminals have been properly classified under tariff code 8471.41.00 which Tariff code applies to; “Automatic data processing machines comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined.” That, HS Code 84.71 broadly defines automatic data processing machines as; “Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.” It was submitted that a strict interpretation of this classification fully captures the description of the Respondent’s imported MPOS devices.
32. It was submitted that the MPOS devices are a mobile payment solution that enables smartphones to accept payments. That, the MPOS device is an automatic data processing machine which connects wirelessly to smartphones and acts as a card reader which accepts swipes, near field communication (NFC) payments and contactless payments. That, as set out under HS Code 84.71, the imported MPOS terminals have magnetic and optical readers that enable it to read cards that are used to effect payments on it and transcribe that data which is then processed as a payment. That, as envisaged under tariff code 8471.41.00, the MPOS devices have an input and output unit that enables a cardholder to swipe their card when making a payment.
33. Consequently, it was submitted that the Tribunal did not err in law or fact in holding that the imported MPOS devices were properly classified under tariff code 8471.41.00 as Automatic Data Processing Machines.
Duty of Court
34. Section 56(2) of the Tax Procedures Act provides that an appeal to the High Court from the decision of the Tax Appeals Tribunal or to the Court of Appeal is on a question of law only. In John Munuve Mati -vs- Returning Officer Mwingi North Constituency & 2 others [2018] eKLR, the Court of Appeal summarized what amounts to “matters of law” as follows;
“The interpretation or construction of the Constitution, statute or regulations made thereunder or their application to the sets of facts established by the trial Court. As far as facts are concerned, our engagement with them is limited to background and context and to satisfy ourselves, when the issue is raised, whether the conclusions of the trial judge are based on the evidence on record or whether they are so perverse that no reasonable tribunal would have arrived at them. We cannot be drawn into considerations of the credibility of witnesses or which witnesses are more believable than others; by law that is the province of the trial court.”
35. I have carefully considered the record, the grounds of appeal, the statement of facts, the rival submissions . The issue for determination is whether the Tribunal erred in classifying the Respondent’s imported MPOS devices under tariff 8471.41.00 instead of tariff 8470.50.00.
36. In highlighting their submissions Mr. Ochieng for the appellant Submitted that their appeal was against the judgment of the tribunal on the classification of imported POS terminals. That the tribunal arrived at its decision on a technical functionality analysis without considering the laws in totality. He argued that in customs classification you have to consider EACC CET read together with the explanatory notes. He submitted that you have to consider the GIRS in order as they provide that the headings are for reference only. He submitted that the tribunal classified the POS as data processing machines under heading 8471 as opposed to cash register under 8470. He asked the court to consider that GIR 2 says that the most specific description is preferable to the general heading description. That in the rules the question is which is the most specific description? His answer was cash register, 8470. He then went to the explanatory notes on cash register and submitted that it includes terminals for electronic payment by credit /debit card. He argues that a point-of-sale terminal is described, that the Tribunal did not need to carry out a functionality test, that the Tribunal ignored the explanatory notes and he asked the question why can’t we put it under 8471? And referred the court to chapter note 5 A under 8471, on the description of automatic data processing machine and the technical requirements. He adds that the tribunal did its own thing, that note 5 A provides the reason for the classification: that the machine must be capable of storing information, be freely programmed. He referred the court to paragraph 32 (d) of the submissions and read it to out to the court. Argued that the point of sell terminal needs human intervention to function.
37. Mr. Odhiambo for the respondent told the court that they would be relying on their submissions dated 14th of May 2025
Analysis & Determination
Whether the Tribunal erred in classifying the Respondent’s imported MPOS devices under tariff 8471.41.00 instead of tariff 8470.50.00.
38. The Respondent’s device was re-classified from tariff HS Code 8471.40.00 to 8470.50.00 attracting an import duty of 10% and VAT after a post-clearance audit conducted by the Appellant.
39. The tariff HS Code 84.71 covers; ‘Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.’
40. This is to be read together with the chapter notes (note 5A) to chapter 84) of the EACCET as set out herein above, which defines an automatic data processing machine. The appellant posits that even if the MIURA MPOS Devices have a program for processing payments they cannot be freely programmed or perform arithmetic computation or execute the same without human intervention and for that reason cannot be classified under the heading 8471
41. On the other hand, the tariff HS Code 84.70 covers; ‘Calculating machines and pocket-size data recording, reproducing and displaying machines with calculating functions; accounting machines, postage-franking machines, ticket-issuing machines and similar machines, incorporating a calculating device; cash registers.’
42. These read together with WCO explanatory notes to heading 8470.50.00 Which clearly states that this group comprises cash registers whether or not incorporating a calculating device. That the explanatory notes on cash registers provides that
‘ This group also includes terminals for electronic payment by credit or debit card. These terminals use the telephone network to connect to the financial institution for authorization and completion of the transaction and to record and issue receipts indicating the amounts debited and credited’
43. The appellant posits that tariff 8470 .50 .00 provides a more specific description of the device according to the General Interpretation Rules .
44. From the record the respondent argues that the WCO Explanation to 8470 Indicates that it provides that ‘cash registers include machines which are often combined with a till or drawer in which cash is kept’ . That the WCO explanation on HS code 8470 implicitly acknowledges that there is a difference between cash registers and automatic data processing machines. That the WCO states
‘this heading also covers cash registers working in conjunction online or offline with an automatic data processing machine and cash registers which use for example the memory and microprocessor of another cash register to which they are linked by cable to perform the same function
45. Having considered the descriptions of the two disputed tariffs (8470 & 8471), the GIRs and relevant WCO explanatory notes, the question is- what is a cash register:
i. ‘Calculating machines
ii. pocket-size
iii. data recording,
iv. data reproducing and
v. data displaying machines with calculating functions;
vi. accounting, postage-franking, ticket-issuing and similar machines, incorporating a calculating device; cash registers.’
vii. machines combined with a till or drawer in which cash is kept’
viii. cash registers working in conjunction online or offline with an automatic data processing machine
ix. cash registers which use for example the memory and microprocessor of another cash register linked by cable to perform the same function
x. terminals for electronic payment by credit /debit card-using telephone networks, record, issue receipt, indicate amounts debited/credited.
46. I do not think it is possible to understand the distinction between a cash register and an automatic data processing machine without looking at the description of the functions. I deduce from the foregoing that a cash register is first device that has something to do with cash/ money , it may or may not incorporate a calculating device, it could be a calculating machine or machine with a calculating function, or a incorporating a calculating device for the purpose of accounting, postage-franking, ticket issuing . In performing the calculating it may record process or display data, it may work in conjunction with a till or cash drawer, an automatic data processing machine. There is a transaction.
47. Where is it used? In shops, offices etc to record transactions.
48. What are these Automatic data processing machines;
i. magnetic or optical readers,
ii. machines for transcribing data onto data media in coded form
iii. machines for processing such data
49. This ‘automatic data processing machine’ is one that
i. can store the processing program or programs and at least the data immediately necessary for the execution of the program,
ii. can be freely programmed in accordance with the requirements of the user,
iii. can perform arithmetical computations specified by the user; and
iv. can execute, without human intervention, a processing program which requires it to modify its execution, by logical decision during the processing run.
50. This is about data processing. It is not necessarily about cash transactions.
51. What is the respondent’s POS; mobile payment solution devices which allow smartphones to accept payment, automatic data processing machine , connects wirelessly to smart phones, acts as card reader, accepts swipes, NFC payments, contactless payments. Magnetic optical readers, transcribe data, process payments
i. Hardware system, with an embedded software
ii. Processing payments at retail location
iii. Reads magnetic strips/chips of credit/debit cards
iv. Processing contactless/non contactless card payments
v. Make payments by swiping credit/debit cards
vi. Recording transactions
52. From the foregoing, it appears to me that the explanatory notes give clarity to the descriptions given in the headings . True, there is a distinction between a cash register and an automatic data processing machine. One is described as a data processor of sorts , the other processes data that includes cash transactions, including electronic payment by debit or credit cards.
53. What could be clearer than that?
[...truncated]
2. The Respondent is a limited liability company duly incorporated in Kenya and its principal business activity is the provision of payment services to businesses and individuals through online payments and onsite payments through its point-of-sale machines.
3. The brief history of the matter is that; the Respondent imported Mobile Point of Sale (MPOS) devises and the Appellant conducted a posts clearance audit on them whereupon it re-classified them from tariff HS Code 8471.40.00 to 8470.50.00. Consequently, the Appellant issued a demand notice for additional tax of kshs 2,837,476.00. The Respondent applied to review that decision but the application was dismissed by the Appellant, prompting the appeal at the Tribunal.
Appeal before the Tax Appeals Tribunal
4. The Respondent (Appellant in the Tribunal) raised the following grounds;
a) The Respondent erred in law and fact by re-classifying the imported MPOS devices from tariff 8471.40.00 to 8470.50.00.
b) The Respondent erred in law and fact by imposing additional taxes amounting to kshs 2,837,476.00 on the imported MPOS devices.
c) The Respondent’s demand for additional import duty and VAT on the imported MPOS devices violates the Appellant’s right to legitimate expectation.
5. The Tribunal found merit in the appeal and gave the following orders;
a) The Appeal be and is hereby allowed.
b) The Respondent’s review decision dated 21st September 2022 be and is hereby set aside.
c) Each party to bear its own costs.
6. Aggrieved by that judgment, the Appellant filed this vide a Memorandum of Appeal dated 27/03/2024, and raised the following grounds;
a) The honorable Tribunal erred in law and fact by finding that the Miura Mobile Point of Sale devices terminals are classifiable under HS 8471 which is reserved for automatic data processing machines as opposed to HS 8470 which is reserved for cash registers.
b) That the honorable Tribunal erred in law and fact in failing to appreciate the Respondent’s Miura Mobile Point of Sale Terminal was appropriately classified under the tariff heading 8470 covers ‘calculating machines and pocket-size data recording, reproducing and displaying machines with calculating functions, accounting machines, postage franking machines, ticket issuing machines and similar machines incorporating a calculating device, cash registers
c) The honorable Tribunal erred in law in ignoring that WCO Explanatory notes on HS 8470 specifically provides that cash registers include terminals for electronic payment by debit of credit card. These terminals use the telephone network to connect to the financial institution for authorization and completion of the transaction and to record and issue receipts indicating the amounts debited and credited which is exactly the Respondent’s Miura MPOS device.
d) The honorable Tribunal erred in law in failing to consider the meaning of the expression ‘automatic data processing machine’ as provided under chapter notes (note 5A) to chapter 84 of the East Africa Community Common External Tariff.
e) That the honorable Tribunal erred in law and fact ignoring the chapter notes (Note 5A) which excludes the MIURA MPOS Terminal devices as it cannot freely perform arithmetic computations and neither can it execute without human intervention a processing program which requires them to modify their execution by logical decision during a processing run. Therefore, it cannot be classified under heading 8471.
f) The honorable Tribunal erred in law and fact in ignoring the technical specifications and functionality of cash registers and automatic data processing machines as envisaged under the applicable EACCET and WCO explanatory notes but rather took a simplistic approach to classify the point-of-sale terminals as automatic data processing machine even when the terminals are specifically provided for under cash registers.
g) The honorable Tribunal erred in law and fact by finding that the MPOS devices are most akin to the goods described under Tariff code 8471.41.00 and not those listed under Tariff Code 8470.50.00 without stating which goods they were making the comparison with.
h) The honorable Tribunal erred in the interpretation of the general interpretation rules to the East African Community External Tariff.
i) The honorable Tribunal erred in law and fact in failing to take into consideration the basic principles of classification of goods as provided for under the Harmonized System Convention (HS) and domesticated through the East African Community Common External Tariff (EAC CET)
7. Directions were given that the appeal be canvassed through written submissions. Consequently, the parties complied and filed their respective submissions.
Appellant’s Submissions
8. The Appellant identified the issue for determination to be whether the Tribunal erred in fact and law in classifying the Respondent’s imported MPOS devices in tariff 8471.41.00 as opposed to tariff 8470.50.00.
9. It was submitted that it is important to understand how the East African Community Common External Tariff is to be interpreted as it is what should have guided the Tribunal to classify the device.
10. As to how the harmonized system is structured, it was submitted that the World Customs Organization (WCO) describes the Harmonized Commodity Description and Coding System generally as "Harmonized System" or simply "HS" is a multipurpose international product nomenclature developed by the WCO. That, the HS is a legal instrument, with binding obligations that are observed by contracting parties. That, the HS Nomenclature comprises more than 5,000 groups of goods each identified by a six- digit code arranged in a legal and logical structure to wit, the first four digits of the code correspond to the relevant HS heading number e.g 32.08, the fifth and the sixth digits identify the HS subheadings at the international level e.g 3208.10, the seventh and eighth digits identify the HS code at regional level e.g 0703.10.10, 0804.50.10.
11. As to what EACC rules say about chapters and sections, it was submitted that the legal regime guiding the HS classification of goods in East Africa is the East Africa Community Common External Tariff as read together with the World Customs Organisation Explanatory Notes. That, the classification of goods in the nomenclature is guided by General Interpretation Rules (GIRs) as cited in the East Africa Community Common External Tariff (EAC/CET). That, the period under classification was the period January 2018 to August 2020 and therefore, the applicable EAC/CET is the East Africa Community Common External Tariff (EAC/CET) 2017 version. Reliance was placed on Republic -vs- Commissioner of Customs & Ex-parte Mulchand Ramii & Sons limited eKLR where it was held as follows:
“To ascertain what code is applicable to particular goods, one has to look at the General interpretation Rules for the classification of goods, which set out the principles of interpretation in conjunction with the various chapters, describing the goods and the duty due”
12. It was submitted that according to the GIRs, classification shall be determined according to the terms of the Headings and any relative Section or Chapter Notes. That, the rules of Classification provide that the HS classifications should be read not to distort the true classification but to give it meaning. Consequently, it was submitted that it was not open for the Tribunal to ignore the sections and explanatory notes and apply its technical analysis to the Chapter Note without considering what the Explanatory Notes state regarding the classification in question.
13. As to what is the most specific description for ‘Point of Sale terminals’, it was submitted that the Tribunal ignored the WCO Explanatory Notes which provided specifically for the classification of Point-of-Sale Terminals. That, applying Rule 2 (a) on the most specific description, A Point-of-Sale Terminal (POS) is a hardware system for processing payments at retail locations. It has software embedded in the hardware which reads magnetic strips, or chips of credit and debit cards. That, the MIURA Mobile Point of Sale Terminal imported by the Respondent is a hardware system for processing contactless/non-contactless card payments at retail locations. That, it has software embedded in the hardware, which is used for recording transactions.
14. It was submitted that the MPOS devices are used to make payments, either by swiping of credit/debit cards or by other contactless payments such as NFC. That, it is also used to record payments. That, Tariff Heading 8470 covers; “machines and pocket-size data recording, reproducing and displaying machines with calculating functions; accounting machines, postage-franking machines, ticket-issuing machines and similar machines, incorporating a calculating device; cash registers.” That, the WCO Explanatory Notes to Heading 8470, and more specifically tariff code 8470.50.00 clearly states that ‘This group comprises cash registers whether or not incorporating a calculating device’. Consequently, it was submitted that it was not open for the Tribunal to use this specification to place, the device outside HS 8470.
15. It was submitted that these machines are used in shops, offices, etc., to provide a record of all transactions (sales, services rendered, etc. as they occur, the amounts involved, the total of the amounts recorded and, in some cases, the code number of the article sold, quantity sold, time of the transaction, etc. That, the Explanatory Note on Cash Registers provides that: “This group also includes terminals for electronic payment by credit or debit card. These terminals use the telephone network to connect to the financial institution for authorization and completion of the transaction and to record and issue receipts indicating the amounts debited and credited.” It was submitted that the MIURA Mobile Point of Sale Terminal imported by the Respondent is a terminal for electronic payment by credit or debit cards hence specifically provided to be under the heading.
16. It was contended that despite the case at the Tribunal being on the WCO explanatory notes, the Tribunal does not mention the Explanatory Note anywhere in is analysis. That, tax statutes are to be interpreted strictly and the court has to look at what is clearly said to ascertain the intention of the Legislature. Reliance was placed on Republic -vs- Kenya Revenue Authority Ex parte Bata Shoe Company (Kenya) Limited [2014]eKLR where it was held;
“In interpreting the tax laws, the plain language of Parliament should be adhered to lest the goods and services which Parliament did not want to tax are taxed as a consequence of the taxman’s misinterpretation of the laws. In order to achieve this purpose, tax statutes must be strictly interpreted.”
17. As to whether the device complies with Chapter Note 5A concerning technical specification for an ‘automatic data processing machine’, it was submitted that Tariff Heading 8471 covers; ‘Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.’ That, according to chapter notes (Note 5A) to Chapter 84 of the EACCET, the expression ‘automatic data processing machine’ means a machine capable of:
-a) Storing the processing program or programs and at least the data immediately necessary for the execution of the program,
b) Being freely programmed in accordance with the requirements of the user,
c) Performing arithmetical computations specified by the user; and
d) Executing, without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run.
18. It was submitted that the Tribunal did not consider the technical specification provided under Chapter Note 5A which is the legal framework for determining the technical specification for automatic data processing machines. That, the Tribunal did not state which goods they undertook the technical specification and functionality analysis to compare with the goods in question and find that indeed the technical specification placed the goods under HS 8471. That, even if the MIURA MPOS devices have a program for processing payments, it cannot be freely programmed, perform arithmetic computations and neither can it execute without human intervention a processing program which requires them to modify their execution, by logical decision during a processing run. And that for these reasons it cannot therefore be classified under heading 8471.
19. It was submitted that the technical specification of the Respondent’s Miura Mobile Point of Sales terminal is that it is a terminal for electronic payment by credit or debit cards hence properly classifiable under HS 8470 which is reserved for automatic data processing machines.
20. It was submitted that the Tribunal applied Rule 4 of the General Interpretation Rules but the device was properly classifiable under Rule 2 (a). Reliance was placed on Mumbai Custom Tribunal in Perfect Aerosol Valves -vs- Nhava Sheva a decision of the Custom , Excise & Service Tax Appellate Tribunal , Mumbai where it was stated that: “From the careful reading of the GIRs, it could be seen that these are required to be followed sequentially”. It was submitted that in all instances the Courts have found that if goods are classifiable under GIR-1, by detailed analysis of the specific customs tariff items under the respective headings, then there is no case for invoking GIR-3(a) arbitrarily. That, in our case, the attempt by the Tribunal, to skip GIR 1 to 3 and go straight to 4 was arbitrary and not proper.
Respondent’s Submissions
21. The Respondent identified the issue for determination to be; Whether the Tribunal erred in fact and law in classifying the Respondent’s imported MPOS devices under tariff 8471.41.00 instead of tariff 8470.50.00.
22. It was submitted that in exercising its appellate jurisdiction, this court will only substitute the Tribunal’s decision with its own conclusions only if the decision of the Tribunal cannot be supported by any evidence.
23. It was submitted that the Appellant reclassified the Respondent’s imported MPOS devices from tariff 8471 to tariff 8470 which encompasses calculating machines and pocket-size data recording, reproducing and displaying machines with calculating functions; accounting machines, postage-franking machines, ticket-issuing machines and similar machines, incorporating a calculating device; cash registers. That, 8470.50.00 specifically is about Cash registers which attracts import duty of 10% and VAT.
24. It was submitted that the imported MPOS devices were correctly classified under 8471 which applies to Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data. That, Code 8471.41.00 specifically relates to automatic data processing machines comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined and it attracts no import duty.
25. It was submitted that HS code 84.70 generally applies to; “Calculating machines and pocket-size data recording, reproducing and displaying machines with calculating functions; accounting machines, postage-franking machines, ticket-issuing machines and similar machines, incorporating a calculating device; cash registers.” It was contended that the imported Mobile Point of Sale (MPOS) devices do not meet this description and are solely used for recording payments.
26. It was submitted that the WCO explanation on HS Code 84.70 provides that cash registers “include machines which are often combined with a till or drawer in which cash is kept.” It was contended that the MPOS devices imported by the Respondent do not possess this functionality.
27. It was submitted that the WCO explanation on HS Code 84.70 also implicitly acknowledges that there is a difference between cash registers and automatic data processing machines, where the imported MPOS devices fall under. That, the WCO implies this by stating that; “This heading also covers cash registers working in conjunction, on-line or off-line, with an automatic data processing machine and cash registers which use, for example, the memory and microprocessor of another cash register (to which they are linked by cable) to perform the same functions.”
28. Consequently, it was submitted that there is a distinction between cash registers and automatic data processing machines, hence the two have to work in conjunction with each other, to properly fall within this tariff classification. It was contended that there is no such conjunction between the Respondent’s MPOS terminal and any stand- alone cash register, which would make the MPOS terminals to fall under tariff code 8470.50.00.
29. It was submitted that Rule 1 of the Tariff Classification General Interpretation Regulations (GIR) provides that the titles of Sections, Chapters and sub-Chapters are provided for ease of reference only. That, for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes. That, the meaning of this is that Classification is determined by the words (terms) in the Headings (the first four numbers) and the Section and Chapter Notes that apply to them unless the terms of the heading and the notes say otherwise. That, if the goods to be classified are covered by the words in a heading and the Section and Chapter Notes do not exclude classification in that heading, the heading applies.
30. It was submitted that interpretation of Tax statutes, i.e. (EACCMA), calls for a strict interpretation of the language used. Reliance was placed on Cape Brandy Syndicate –vs- I.R.C 1 KB 64, 71. Where Rowlatt J stated;
“In a taxing statute one has to look at merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”
31. It was submitted that the imported MPOS terminals have been properly classified under tariff code 8471.41.00 which Tariff code applies to; “Automatic data processing machines comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined.” That, HS Code 84.71 broadly defines automatic data processing machines as; “Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.” It was submitted that a strict interpretation of this classification fully captures the description of the Respondent’s imported MPOS devices.
32. It was submitted that the MPOS devices are a mobile payment solution that enables smartphones to accept payments. That, the MPOS device is an automatic data processing machine which connects wirelessly to smartphones and acts as a card reader which accepts swipes, near field communication (NFC) payments and contactless payments. That, as set out under HS Code 84.71, the imported MPOS terminals have magnetic and optical readers that enable it to read cards that are used to effect payments on it and transcribe that data which is then processed as a payment. That, as envisaged under tariff code 8471.41.00, the MPOS devices have an input and output unit that enables a cardholder to swipe their card when making a payment.
33. Consequently, it was submitted that the Tribunal did not err in law or fact in holding that the imported MPOS devices were properly classified under tariff code 8471.41.00 as Automatic Data Processing Machines.
Duty of Court
34. Section 56(2) of the Tax Procedures Act provides that an appeal to the High Court from the decision of the Tax Appeals Tribunal or to the Court of Appeal is on a question of law only. In John Munuve Mati -vs- Returning Officer Mwingi North Constituency & 2 others [2018] eKLR, the Court of Appeal summarized what amounts to “matters of law” as follows;
“The interpretation or construction of the Constitution, statute or regulations made thereunder or their application to the sets of facts established by the trial Court. As far as facts are concerned, our engagement with them is limited to background and context and to satisfy ourselves, when the issue is raised, whether the conclusions of the trial judge are based on the evidence on record or whether they are so perverse that no reasonable tribunal would have arrived at them. We cannot be drawn into considerations of the credibility of witnesses or which witnesses are more believable than others; by law that is the province of the trial court.”
35. I have carefully considered the record, the grounds of appeal, the statement of facts, the rival submissions . The issue for determination is whether the Tribunal erred in classifying the Respondent’s imported MPOS devices under tariff 8471.41.00 instead of tariff 8470.50.00.
36. In highlighting their submissions Mr. Ochieng for the appellant Submitted that their appeal was against the judgment of the tribunal on the classification of imported POS terminals. That the tribunal arrived at its decision on a technical functionality analysis without considering the laws in totality. He argued that in customs classification you have to consider EACC CET read together with the explanatory notes. He submitted that you have to consider the GIRS in order as they provide that the headings are for reference only. He submitted that the tribunal classified the POS as data processing machines under heading 8471 as opposed to cash register under 8470. He asked the court to consider that GIR 2 says that the most specific description is preferable to the general heading description. That in the rules the question is which is the most specific description? His answer was cash register, 8470. He then went to the explanatory notes on cash register and submitted that it includes terminals for electronic payment by credit /debit card. He argues that a point-of-sale terminal is described, that the Tribunal did not need to carry out a functionality test, that the Tribunal ignored the explanatory notes and he asked the question why can’t we put it under 8471? And referred the court to chapter note 5 A under 8471, on the description of automatic data processing machine and the technical requirements. He adds that the tribunal did its own thing, that note 5 A provides the reason for the classification: that the machine must be capable of storing information, be freely programmed. He referred the court to paragraph 32 (d) of the submissions and read it to out to the court. Argued that the point of sell terminal needs human intervention to function.
37. Mr. Odhiambo for the respondent told the court that they would be relying on their submissions dated 14th of May 2025
Analysis & Determination
Whether the Tribunal erred in classifying the Respondent’s imported MPOS devices under tariff 8471.41.00 instead of tariff 8470.50.00.
38. The Respondent’s device was re-classified from tariff HS Code 8471.40.00 to 8470.50.00 attracting an import duty of 10% and VAT after a post-clearance audit conducted by the Appellant.
39. The tariff HS Code 84.71 covers; ‘Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.’
40. This is to be read together with the chapter notes (note 5A) to chapter 84) of the EACCET as set out herein above, which defines an automatic data processing machine. The appellant posits that even if the MIURA MPOS Devices have a program for processing payments they cannot be freely programmed or perform arithmetic computation or execute the same without human intervention and for that reason cannot be classified under the heading 8471
41. On the other hand, the tariff HS Code 84.70 covers; ‘Calculating machines and pocket-size data recording, reproducing and displaying machines with calculating functions; accounting machines, postage-franking machines, ticket-issuing machines and similar machines, incorporating a calculating device; cash registers.’
42. These read together with WCO explanatory notes to heading 8470.50.00 Which clearly states that this group comprises cash registers whether or not incorporating a calculating device. That the explanatory notes on cash registers provides that
‘ This group also includes terminals for electronic payment by credit or debit card. These terminals use the telephone network to connect to the financial institution for authorization and completion of the transaction and to record and issue receipts indicating the amounts debited and credited’
43. The appellant posits that tariff 8470 .50 .00 provides a more specific description of the device according to the General Interpretation Rules .
44. From the record the respondent argues that the WCO Explanation to 8470 Indicates that it provides that ‘cash registers include machines which are often combined with a till or drawer in which cash is kept’ . That the WCO explanation on HS code 8470 implicitly acknowledges that there is a difference between cash registers and automatic data processing machines. That the WCO states
‘this heading also covers cash registers working in conjunction online or offline with an automatic data processing machine and cash registers which use for example the memory and microprocessor of another cash register to which they are linked by cable to perform the same function
45. Having considered the descriptions of the two disputed tariffs (8470 & 8471), the GIRs and relevant WCO explanatory notes, the question is- what is a cash register:
i. ‘Calculating machines
ii. pocket-size
iii. data recording,
iv. data reproducing and
v. data displaying machines with calculating functions;
vi. accounting, postage-franking, ticket-issuing and similar machines, incorporating a calculating device; cash registers.’
vii. machines combined with a till or drawer in which cash is kept’
viii. cash registers working in conjunction online or offline with an automatic data processing machine
ix. cash registers which use for example the memory and microprocessor of another cash register linked by cable to perform the same function
x. terminals for electronic payment by credit /debit card-using telephone networks, record, issue receipt, indicate amounts debited/credited.
46. I do not think it is possible to understand the distinction between a cash register and an automatic data processing machine without looking at the description of the functions. I deduce from the foregoing that a cash register is first device that has something to do with cash/ money , it may or may not incorporate a calculating device, it could be a calculating machine or machine with a calculating function, or a incorporating a calculating device for the purpose of accounting, postage-franking, ticket issuing . In performing the calculating it may record process or display data, it may work in conjunction with a till or cash drawer, an automatic data processing machine. There is a transaction.
47. Where is it used? In shops, offices etc to record transactions.
48. What are these Automatic data processing machines;
i. magnetic or optical readers,
ii. machines for transcribing data onto data media in coded form
iii. machines for processing such data
49. This ‘automatic data processing machine’ is one that
i. can store the processing program or programs and at least the data immediately necessary for the execution of the program,
ii. can be freely programmed in accordance with the requirements of the user,
iii. can perform arithmetical computations specified by the user; and
iv. can execute, without human intervention, a processing program which requires it to modify its execution, by logical decision during the processing run.
50. This is about data processing. It is not necessarily about cash transactions.
51. What is the respondent’s POS; mobile payment solution devices which allow smartphones to accept payment, automatic data processing machine , connects wirelessly to smart phones, acts as card reader, accepts swipes, NFC payments, contactless payments. Magnetic optical readers, transcribe data, process payments
i. Hardware system, with an embedded software
ii. Processing payments at retail location
iii. Reads magnetic strips/chips of credit/debit cards
iv. Processing contactless/non contactless card payments
v. Make payments by swiping credit/debit cards
vi. Recording transactions
52. From the foregoing, it appears to me that the explanatory notes give clarity to the descriptions given in the headings . True, there is a distinction between a cash register and an automatic data processing machine. One is described as a data processor of sorts , the other processes data that includes cash transactions, including electronic payment by debit or credit cards.
53. What could be clearer than that?
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